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Industry seeks clarity from FDA on pending regulatory changes

September 12, 2014

By Alyssa Mitchell

MADISON, Wis. — A recent letter sent from FDA to cheese industry stakeholders provides an update on the agency’s actions regarding non-toxigenic E. coli in raw milk cheese, but the industry is seeking further clarification on the matter in an increasingly uncertain regulatory environment.

FDA officials met with American Cheese Society (ACS) leaders during the ACS annual conference in late July. ACS had invited FDA to the conference in order to share significant concerns of its membership with the agency, to exchange information and to engage in important dialogue of mutual importance. (See “FDA official speaks to ACS attendees on collaboration” in the Aug. 1, 2014, issue of Cheese Market News.)

Among several topics discussed during the meeting, ACS expressed its concern about FDA’s standard for non-toxigenic E. coli in raw milk cheese outlined in a final Compliance Policy Guide (CPG) published in December 2010.

Nora Weiser, executive director, ACS, notes that while the CPG has been in place since 2010, only recently has ACS been made aware of enforcement of a guideline that calls for all milk products to have less than 10 MPN/g (most probably number per gram) of non-toxigenic E. coli in at least three of five subsamples, with no samples greater than 100 MPN/g.

Weiser notes that this is lower than the amount allowed in the previous compliance program, less than 10,000 MPN/g, and also lowers the amount cited in a 2009 draft version of the CPG, which proposed a limit for raw milk cheese of less than 100 MPN/g in at least three of five subsamples with no samples greater than 1,000 MPN/g.

ACS asked FDA to explain its reasoning for lowering the permissible levels and for removing language specifically addressing raw milk cheese, which had been included in the 2009 CPG draft.
In an Aug. 29 letter response to ACS, FDA says an error in its testing protocol and subsequent interpretation resulted in the change.

“One such course correction is the adjustment of the current testing for non-toxigenic E. coli in raw milk cheese and the applied criteria for considering regulatory action to our findings,” says William A. Correll Jr., director, Office of Compliance, Center for Food Safety and Applied Nutrition, FDA.
Correll notes that FDA is conducting a food sampling pilot aimed at aligning with the goals of the Food Safety Modernization Act.

Upon completion, FDA will have collected and analyzed 1,600 samples to produce a statistically significant data set to help identify potential vulnerabilities and inform the agency’s decision making by identifying short-term and long-term next steps, Correll says. During this pilot process, the agency has been closely monitoring product collections and analysis and stakeholder feedback in an effort to gather lessons learned and make course corrections, if necessary, to meet the goals of the pilot.

Upon re-examining the basis for the non-toxigenic E. coli in cheese compliance policy, the sampling and testing instructions in the fiscal year 2014-15 Surveillance Sampling Program pilot assignment, and the Compliance Program for Domestic and Imported Cheese Products, FDA determined that adjustments to testing and regulatory action information were necessary, Correll notes.

Specifically, FDA had been testing 10 subsamples per sampled product for non-toxigenic E. coli rather than five subsamples using the three-class attributes, he says. FDA also found that, in some instances, a misapplication of the “c” value occurred, a value that denotes a certain number that, although not desirable, can be accepted, Correll adds.

FDA issued updated instructions to its field laboratories to limit testing for non-toxigenic E. coli in raw milk cheese to solely five subsamples and regulatory information that lots exceeding 10 MPN/g and less than 100 MPN/g in three or more subsamples of the five examined are not acceptable, not two or more subsamples as presented in the 2010 CPG, he notes.

“Changes to FDA’s Compliance Program Guidance for Domestic and Imported Cheese Products are underway to reflect this adjustment,” Correll says. “Further, FDA will carefully consider the information on non-toxigenic E. coli levels in raw milk cheese which ACS indicated that it will share with us, as discussed at the meeting.”

He adds that it is important to note that FDA is still collecting 10 subsamples as those are necessary for the pathogen testing for Salmonella, Listeria monocytogenes and E. coli that FDA is conducting under the assignment.

Weiser says ACS is requesting additional clarification from FDA as to what data led to the change in the compliance policy and to gain an understanding of any public health risks of concern to the agency.

“They have thus far sampled 885 raw milk cheeses, with a goal of 1,600 total to be tested,” she says.

“Of the 885 sampled to date, two tested positive for Salmonella, three for Listeria monocytogenes and none for E. coli 0157:H7. All of the positive samples came from imported, not domestically-produced, cheeses. This indicates a pathogen contamination rate of less than 1 percent for raw milk cheeses.

“Raw milk cheeses, made legally and in accordance with good manufacturing practices, have a long track record of safety,” she adds.

Also of concern to the industry is an import alert that FDA placed on some imported raw milk cheeses due to tests of the non-toxigenic E. coli levels.

However, in a statement issued this week, FDA said recent media reports have incorrectly stated that the agency is banning Roquefort and other cheeses.

“Earlier in 2014, nine producers of Roquefort, Tomme de Sovie, Morbier and other cheeses tested above threshold levels set in 2010 for a particular type of bacteria called non-toxigenic E. coli,” FDA says. “While these bacteria don’t cause illness, their presence suggests that the cheese was produced in unsanitary conditions.

“The FDA has been working with the American Cheese Society to learn more about artisanal cheeses and measures that cheesemakers take to ensure their products are safe. After hearing ACS’ concerns about the test results, the FDA adjusted its criteria for taking regulatory action based on them. As a result, 95 percent of the cheese sampled tested below the level at which FDA would take regulatory action, and six of the nine cheese producers placed on Import Alert 12-10 for exceeding bacterial counts have been removed from that list and can resume sales and distribution in the U.S.,” the agency adds.

“The FDA remains dedicated to ensuring a safe and wholesome food supply using the latest science to protect human health, and promoting dialogue with industry, consumers and other interested parties,” FDA says. “The FDA is committed to working and sharing an open dialogue with the artisanal cheesemaking community. Of course, we welcome input from the public at any time and we continue to meet and share information with the artisanal cheesemaking community on this and other topics.”

The Cheese Importers Association of America (CIAA) this week says that in response to FDA’s recent position clarification, the CIAA would like to reinforce its concern that FDA is taking regulatory action without recognizing the historic safety of the cheeses in question.

“We completely agree that food safety is at the forefront of this discussion,” CIAA says. “However, as was done with the wood board aging issue, the FDA is promoting regulation without taking all factors into consideration.”

CIAA notes that the action will be discussed further at the organization’s board meeting and concerns will be communicated to FDA following the meeting.

“The CIAA will continue efforts in partnership with ACS and the International Dairy Foods Association in the weeks to come as we discuss and evaluate this issue,” the group says.

ACS also urges its members to send comments to FDA on the issue by providing information on how businesses may be, or have been, impacted by enforcement of the 2010 CPG; how businesses would be impacted financially if they were no longer able to make raw milk cheese; and the procedures and protocols members use to ensure a safe raw milk product.

In addition, Weiser says ACS’s Regulatory and Academic Committee is developing a Best Practices Guide for Cheesemakers, and FDA has offered to review it and share input.

Weiser notes that providing consumers with a safe product must be everyone’s priority.

“We hope FDA will identify a permissible level for non-toxigenic E. coli in raw milk cheeses that is reasonable and consistently attainable, while protecting human health, and recognizing the difference between pasteurized and raw milk cheeses — such as in their 2009 draft of the policy.”

In the Aug. 29 letter to ACS, Correll says FDA is not rolling back the levels for non-toxigenic E. coli in aged raw milk cheese at this time to those presented in the draft 2009 CPG.

“Given the results shared (in the letter) and the adjustments made, we believe it premature to do so,” he says. “ACS committed to providing comments and further industry information to the 2010 CPG through the docket as stakeholder comments on guidance are always open. We look forward to building upon our mutual goal of safe food, particularly including continued safe production of cheese using traditional methods. The initial results reflect commitment of U.S. cheese producers and international cheese producers to making safe cheese for consumers.”

Manufacturers of raw milk cheeses such as Mateo Kehler, cheesemaker at Cellars at Jasper Hill, Greensboro Bend, Vt., say FDA’s focus non-toxigenic E. coli standards is confusing as they are not a top indicator of the safety of raw milk cheeses.

“It makes more sense for pasteurized dairy products,” he says. “But if you’re talking about natural flora in raw milk, there is some non-toxigenic E. coli there.”

Kehler adds that he has a pathogen control and other programs in place to ensure the safety of the cheeses he makes.

“It never occurred to us that FDA would be so concerned about microbes that aren’t toxigenic,” he says. “It makes more sense to test for pathogens, which is what we do.”

Kehler is quick to add that he is grateful FDA and the cheese industry are able to have a dialogue and work together on the issue.

However, he says the potential impact on the industry is still uncertain, which is the most difficult aspect of the situation.

“This came out of nowhere for us,” he says.

Uplands Cheese, Dodgeville, Wis., recently announced it no longer would be making one of its popular raw milk cheeses — Rush Creek Reserve — due to the current uncertain regulatory environment.

Andy Hatch, owner of Uplands Cheese, last month made the announcement, noting that “food safety officials have been unpredictable, at best, in their recent treatment of soft, raw milk cheeses, and until our industry is given clear and consistent information, we are forced to stop making these cheeses.” (See Uplands opts out of Rush Creek production amid iffy regulations” in the Aug. 22, 2014, issue of Cheese Market News.)


EU-South Africa trade deal could shut out U.S. cheese

September 12, 2014

WASHINGTON — After 10 years of negotiations, the European Union (EU) and the Southern African Development Community (SADC) have signed an economic partnership agreement that includes the 28 member states of the EU, South Africa, Botswana, Lesotho, Swaziland, Namibia, Angola and Mozambique.

Of particular concern for the U.S. dairy industry is the provision that offers the EU protection for geographical indications (GIs), industry stakeholders say.

A recent GAIN report by USDA’s Foreign Agricultural Service (FAS) notes that the deal “would be prohibitive to trade and could affect United States exports.”

“It’s unfortunate that South Africa agreed to the EU’s aggressive agenda on GIs,” says Clay Hough, senior group vice president for the International Dairy Foods Association (IDFA). “The EU’s list includes common cheese names such as feta, asiago, fontina and gorgonzola. These are generic terms and, therefore, should not be granted protection for exclusive use by the EU.”

The Consortium for Common Food Names (CCFN), of which IDFA is a founding member, expressed concern in a recent letter to the South African Ambassador Ebrahim Rasool about the loss of market access opportunities in the South African market for certain cheeses.

“South Africa is not the first nation from which the EU has extracted a commitment that gives EU producers sole right to use such common names as part of one of its ‘free trade’ agreements,” CCFN says in the letter. “This has become a commonplace priority for EU negotiators as a means of gaining an added advantage for its products beyond the customary tariff preferences afforded by FTAs.”

CCFN says that prohibiting U.S. companies and others from using names of global commercial significance that became generic long ago is unacceptable.

The letter also was sent to Ambassador Michael Froman, U.S. Trade Representative, and U.S. Agriculture Secretary Tom Vilsack.

Meanwhile, in its recently released Quarterly Update, CCFN Chairman Errico Auricchio notes there is a renewed interest and energy behind an international system for GIs called the Lisbon Agreement, and the system on the table could be bad news for the use of common food names.

He notes the Lisbon Agreement first was activated in 1966 and is housed within the World Intellectual Property Organization (WIPO). Twenty-eight nations from Europe, Latin America and Africa in addition to a few others have signed on, and about 1,000 appellations of origin have been registered.

“Although these numbers seem sizable, in reality the agreement has not dramatically impacted global trade to date due to its relatively limited membership and product scope,” Auricchio says.

The agreement is a voluntary system where nations that choose to join the Lisbon Agreement add names to the list that they would like protected, and other nations agree to protect those names.

“Sounds fine, except that now the program is being revised and expanded, and there are serious concerns with how those changes will impact the international use of common food names,” Auricchio says.

WIPO hopes to finalize the revisions to the agreement in September and October, Auricchio notes.

“U.S. officials have been voicing objections, but one nation alone can’t tackle a problem of this magnitude,” he says. “CCFN calls on members in other nations to reach out to your governments now and urge them to get involved in fighting these very serious, imminent restrictions.”


USDA increases 2014 milk production forecast

September 12, 2014

WASHINGTON — In its latest “World Agricultural Supply and Demand Estimates” report released this week, USDA raised its milk production forecast for 2014 by 300 million pounds to 206.3 billion pounds based on growth in output per cow, but left the 2014 forecast unchanged at 212.5 billion pounds.

In the report, USDA lowered its 2014 and 2015 export forecasts as higher forecast U.S. prices for butter and cheese make those products less competitive in world markets and sales of a number of other products are limited as well.

Meanwhile, skim-solids and fat-basis import forecasts are raised for both 2014 and 2015, and competing exporters’ supplies are expected to be large while U.S. prices remain relatively high.

Butter and cheese price forecasts are raised for 2014 with strength in both expected to continue into the first part of 2015, the USDA report says. The 2014 cheese price is forecast to average $2.135-$2.155 per pound, up from the $2.050-$2.070 forecast last month, while the butter forecast is $2.170-$2.210, up from $2.040-$2.080 in last month’s report. The 2015 cheese price forecast is raised by 2 cents from last month to $1.690-$1.790, and the 2015 butter forecast is increased by 2 cents to $1.675-$1.805.

Meanwhile, the 2014 nonfat dry milk (NDM) price forecast is lowered to $1.775-$1.795, down from $1.845-$1.865 last month. For 2015, the NDM price is forecast at $1.565-$1.635, down 4 cents from last month’s forecast.

The dry whey forecast for 2014 is unchanged from last month at $0.640-$0.660 and is lowered fractionally for 2015 to $0.560-$0.590.

With these product price forecasts, USDA has increased its 2014 Class III milk price forecast to $22.15-$22.35 per hundredweight, up from $21.25-$21.45 in last month’s forecast. The 2014 Class IV forecast is lowered to $22.30-$22.60, down 5 cents from last month. The 2014 all-milk price forecast is $23.80-$24.00, up 25 cents from last month.

In 2015, USDA forecasts the Class III price at $17.20-$18.20, up 20 cents from last month; Class IV at $18.45-$19.55, down 25 cents from last month; and the all-milk price at $19.40-$20.40, down 35 cents from last month.


Idaho’s request to throw out dairy lawsuit rejected

September 12, 2014

BOISE, Idaho. — A federal judge has denied Idaho’s request to dismiss a lawsuit arguing that the recently passed “ag-gag” law criminalizing surreptitious recording at agriculture facilities is unconstitutional.

U.S. District Judge B. Lynn Winmill says in a ruling issued last week that the case raises First Amendment concerns because it restricts protected speech. However, Winmill added that he is dismissing Gov. C. L. “Butch” Otter as a defendant from the case because Otter does not directly oversee enforcing the law. The law, which lawmakers passed in February, was backed by Idaho’s $2.5 billion annual dairy industry. (See “Animal rights groups sue Idaho over farm anti-spying bill; Rice claims abuse was staged” in the April 4, 2014, issue of Cheese Market News.)

Winmill rejected the state’s argument that Idaho’s law doesn’t implicate constitutional concerns under the First or 14th Amendments. Instead, he found that the claims directly implicate free speech, equal-protection and whistleblower concerns and that the case should proceed to examine those claims.

The ruling notes that even false speech — like misrepresenting oneself on an employment application to gain access to a dairy, which the new law makes a crime — can be protected free speech.

“False statements that do not constitute defamation, fraud or perjury are fully protected speech,” Winmill says.

He also notes that making videotaping a crime can be a restriction on free speech because only those who publish the resulting videos likely would be punished.


The Artisan Cheese Exchange wins ACS awards, introduces Apollo’s Gift

By Kate Sander

SHEBOYGAN, Wis. — This summer’s American Cheese Society (ACS) competition awards ceremony was an exciting time for The Artisan Cheese Exchange, headquartered in Sheboygan, Wis., as company owner and president Chris Gentine headed repeatedly to the stage to accept awards.

At the competition, the company’s Deer Creek The Stag took first in the Cheddar aged 12-24 months class, following up on its blue ribbon in the same contest a year earlier.

In addition, Deer Creek 1 Year Select Wisconsin Certified Double A Grade Cheddar placed third in the same class, while Deer Creek Vat 17 World Cheddar placed first in the Mature Cheddar (aged 24-48 months) class.

“We’re thrilled,” Gentine says. “Last year, Deer Creek Cheddars did very well in the Cheddar category at ACS. To follow that with this year’s wins is truly amazing. Just being on the podium in back-to-back years is incredible considering the tough competition in the Cheddar category.”

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CME butter hits new high
as analysts anticipate correction

September 5, 2014

By Alyssa Mitchell

MADISON, Wis. — Spot butter at the Chicago Mercantile Exchange (CME) reached a new record high price of $2.8450 per pound today. The move came as little surprise to market analysts who have watched the market hit new highs in recent weeks and say $3-per-pound butter is not out of the question this year.

The high-priced market is currently well-supported by steady domestic demand and tight stocks, but as the holiday demand season gets under way, analysts say these lofty price levels can’t hold out forever, especially considering the sizeable gap between U.S. and international prices.

Other than the previous highs seen over the past month, the last time butter reached these record levels was in 1998, when butter prices were reported weekly and hit $2.81 per pound the week of Sept. 19, notes Eric Meyer, president of HighGround Dairy, Chicago.

That same year, butter prices were at $1.2175 per pound by the end of November, he says.
“I’m not saying a collapse like 1998 is inevitable, but it is possible,” Meyer says. “The perfect storm is starting to align, and it’s really a question of timing.”

A Forecast Update released this week by Blimling and Associates, Madison, Wis., notes that while limited inventories likely will keep the butter market nervous through the holiday season, once the holiday pipeline is full, buyers could step to the sidelines, setting up a sharp market correction.

The report notes that, adding further pressure, Oceania spot prices as quoted by USDA are trading at more than a dollar discount to U.S. butter.

“This discrepancy will incentivize marketers of fat — likely in the form of anhydrous milkfat — to move product onto the water, destined for U.S. shores,” the report says. “This could alleviate some demand for cream late in the year and into 2015, freeing up butterfat for the churns, allowing stocks to build at an above-average pace.”

This week’s Global Dairy Trade (GDT) auction in New Zealand also posted weaker average prices for all commodities, with butter averaging near the equivalent of $1.2488 per pound, a steep discount to current U.S. prices. (See article in this issue.)

Indeed, the price discrepancies for U.S. and international butter as well as cheese have raised the likelihood for imports of these products to the United States this year and into next, analysts say.

“The widening chasm between U.S. spot butter prices and those in Europe and New Zealand could encourage imports — a stark contrast to a year ago when U.S. butter prices lagged world prices, causing U.S. exports to jump in the back half of the year,” says the Daily Dairy Report written by Mary Ledman, Sara Dorland, Sarina Sharp and Karen Endres. “Higher prices, which will serve to ration demand, coupled with opportunities to import product and strong milk production, will likely work to rebuild U.S. butter stocks later this year.”

The Daily Dairy Report also notes that price discrepancies in cheese between the United States and New Zealand in September 2012, similar to today’s levels, led to more than 40 million pounds of cheese imports to the United States, primarily from New Zealand, in both November and December.

The GDT Cheddar price this week averaged near the equivalent of $1.4855 per pound, while CME Cheddar barrels and blocks were at $2.325 and $2.35 per pound, respectively, to close out this week.

Dorland this week told Cheese Market News that the future direction of U.S. prices this year will hinge largely on what consumers do with butter prices this holiday season.

“If these prices aren’t high enough to ration demand, we may go even higher,” she says.
However, “come November and Thanksgiving, with the bulk of holiday buying behind us, prices for cheese and butter could begin to ease below $2,” she adds. “I think we could start off 2015 much lower than what we’re seeing today.”

A Research Report also released this week by Blimling notes that theoretically, retail demand for butter could abate some over the holidays due to less aggressive promotional activity.

“Shelf prices have been climbing in most of the stores we frequent,” the report says. “At the same time, history has demonstrated that demand for butter is not all that sensitive to price during the fourth quarter. People buy butter.

“It seems possible that foodservice orders could retreat as restaurant operators lighten up on use in the kitchen or become more stingy table side, but do we expect a wholesale collapse in U.S. demand over the next eight weeks? No,” the report adds.

However, the Blimling report also says it’s not a question of whether the U.S. dairy market will fall — it’s a question of when.

“To say ‘it’s a matter of time’ is not a cop out. In our estimation, it is quite literally — almost measurably — a matter of time before world prices matter to the U.S. market,” the report says.

Brian Rice, principal at Rice Dairy, Chicago, says U.S. cheese and butter are at levels that are unsustainable based on relative dairy fat and protein values.

“Even in the face of this, they both have continued to increase at a frenzied pace,” he says. “Timing is impossible to predict, but I am of the opinion the outcome will be U.S. cheese and butter prices aligning with those other (international) values.”

Meyer notes that nonfat dry milk (NDM) at the CME could be the “canary in the coal mine” as a precursor to where cheese and butter are headed.

CME NDM has weakened in recent weeks, dropping to $1.30 Aug. 22 and increasing to $1.3325 this week.

Meanwhile, recent action by Russia to ban imported products from several nations could further exacerbate the market.

While the ban and recent exceptions do not directly affect U.S. dairy exporters since U.S. dairy exports already have been shut out of the Russian market since 2010 due to unresolved issues related to certification language, the ban is expected to have significant implications on the world dairy market.

“I view this as a dramatic market dislocation,” Rice says. “The reaction was slow for the first couple of weeks following the Aug. 6 announcement; much of Europe was on vacation. But the last week or so have been full of stories of EU product being sold into U.S. export channels at lower prices. There is no telling how long this ban will be in effect, but while it is, I can only view this as very challenging for U.S. exports.”

Dorland agrees that especially short term, the United States will see increased competition until it figures out how product is moving internationally with regard to Russia.

“I think we’ve still got quite a bit of market volatility ahead,” she says.


Kraft Foods, Nielsen pilot new
multi-faceted marketing tool

September 5, 2014

By Emily King

MADISON, Wis. — Nielsen, a global information and measurement company, in partnership with Kraft Foods, has been piloting a multi-touch attribution (MTA) model — a new capability which links consumers’ digital media exposures with their household-level purchases in stores. To do so, MTA tracks how consumers interact with different media and the actions they take after the exposure.

Marketers use attribution models to assign credit to one or more advertisements for driving the user to a desirable action, also known as a conversion, such as making a purchase. Up until the last few years the first or last viewed ads were given full credit for leading a customer to make a purchase, but now these models are seen as obsolete, Nielsen says.

“In the early days, online advertising was considered a transactional experience; a click on an ad would deliver one of two results — a conversion or no conversion,” says Kelly Wrather, senior manager, content marketing, Kenshoo Inc., a global marketing software company. “Accordingly, the prevailing attribution methodology for marketers became crediting the last click before a purchase.

As technology has evolved and data has become more accessible, the digital marketing industry is moving away from crediting the entire value of a conversion against the last ad exposed to the consumer. With the amount of activity that can be tracked and analyzed, an entire shopper journey can be evaluated, rather than just a single session or interaction.”

Nielsen’s marketing product for Kraft uses data provided by the company combined with purchaser information cultivated by Nielsen. The transaction records are then cross-referenced with viewer habits to quantify the efficacy of a digital campaign.

“Today, many savvy marketers have shifted to a multi-touch approach where all, not just the final, touch-points are valued as influencers to action,” Wrather says. “Marketers can apply these MTA models to their campaign performance data to gain better insight into what’s truly driving consumers to engage across channels on the path to purchase.”

With products in 98 percent of North American households, Kraft Foods Group knew that growing its business would require a deeper understanding of what works, as well as greater insight into to how its consumers react, Nielsen says.

MTA is about understanding consumers in a way that allows the company to bring timely messaging to consumers that they want to hear, a Kraft spokesperson says.

MTA uses automated algorithms to calculate return on investment (ROI) in real-time. For example, MTA can show how a consumer — who remains anonymous — who was exposed to a digital banner ad for Kraft Natural Cheese subsequently ran an online search for a recipe involving shredded cheese, which took them to a landing page on Kraft’s website, ultimately resulting in a purchase of Kraft cheese, Nielsen explains.

Additionally, some providers, like Quantcast, a technology company specializing in audience measurement and real-time advertising, say the MTA models that measure and assign value to all touch points and track customer actions can be combined with offline data to make traditional marketing mix models obsolete.

Nielsen says MTA allows marketers to capture real ROIs for multiple marketing touch points, optimize their marketing mix in real time and connect the right messages more precisely to the right consumers, but it is still a work in progress.

“The touch points along the path to purchase have grown into a web of influences and interactions, which marketers must interpret and analyze in order to properly optimize their programs,” Wrather says. “Connecting the dots to properly attribute activity across channels and devices has proven to be an intricate process. At the same time, however, technology is also evolving to help marketers better capture consumer interactions and enable more sophisticated attribution modeling and program optimization.”

Kenshoo Inc. offers advice for marketers, emphasizing that no single attribution model works for every advertiser in every scenario. Each path to conversion is distinctive, built from various touch points and as a result the best attribution models will be adaptive to account for these activities and to assign value accordingly.

“Marketers should understand that there is no ‘right way’ to do attribution or single method that fits every brand and every unique customer. Marketers should be flexible with their approach and continue to test and iterate to strike the right balance,” Wrather adds.

Quantcast also says the answer will differ for each marketer, but the most effective attribution model will align well with causation. Causation establishes how a conversion occurred, with the goal of driving additional conversion by recreating similar purchase paths.

As more digital marketers utilize more channels in their strategy to reach prospects, it is important to understand the growing relationship between those channels. This is true, particularly as strategies shift from tracking clicks to tracking views, and measuring quality instead of quantity, Nielsen says.

“No matter the size of your team or budget, it’s important to align internally around the same incentives, rather than channel-specific goals,” Wrather says. “This will get everyone focused on truly moving the needle for the organization.”


Cheese production up 7.0 percent
from year earlier

September 5, 2014

WASHINGTON — Total U.S. cheese production, excluding cottage cheese, totaled 956.4 million pounds in July, up 7.0 percent from July 2013, according to data released Thursday by USDA’s National Agricultural Statistics Service (NASS). (All figures are rounded. Please see CMN’s Dairy Production chart on page 15.)

July cheese production was up 1.2 percent from June 2014’s 945.3 million pounds (a decrease of 2.1 percent on a daily average basis).

Mozzarella, the most-produced cheese in the United States, saw a 5.9 percent increase from the previous July, climbing to 326.2 million pounds. Total Italian-type production, of which Mozzarella is the largest component, was 408.6 million pounds, a 4.4 percent increase vs. the previous year.

Cheddar production in July totaled 269.5 million pounds, up 9.2 percent from a year earlier. Production of American-type cheeses, of which Cheddar is the largest component, totaled 378.5 million pounds, up 9.5 percent from July 2013.

Wisconsin led the nation’s cheese production with 245.2 million pounds in July, up 4.6 percent from its production a year earlier. California followed with 199.4 million pounds, up 5.7 percent from its production a year earlier.

The next four cheese producing states in July were Idaho with 76.6 million pounds, up 4.5 percent from its production in July 2013; New Mexico with 64.3 million pounds, up 0.9 percent; New York with 60.0 million pounds, up 1.7 percent; and Minnesota with 55.1 million pounds, up 2.0 percent.

NASS reports total U.S. butter production in July was 136.2 million pounds, a 2.6 percent increase vs. a year earlier. July butter production was down 3.0 percent from June 2014’s 140.4 million pounds (a decrease of 6.1 percent on a daily average basis).

California led the nation’s butter production with 44.1 million pounds, a 6.2 percent decline from its production a year earlier.

NASS reports nonfat dry milk production totaled 166.4 million pounds in July, up 42.7 percent from July 2013.


Dairy groups unite in opposition
to Canada-EU deal

September 5, 2014

WASHINGTON — The U.S. Dairy Export Council (USDEC) says it is pleased to support an ad-hoc coalition of 16 dairy companies and organizations fighting a plan to further restrict U.S. access to the already-tight Canadian cheese market.

The coalition — spearheaded by a group of cheese manufacturers, dairy cooperatives and trading companies — was formed to oppose a plan that would sizably reduce U.S. export access to Canada through low-tariff avenues by reserving a much larger slice of access to the Canadian market for the European Union (EU).

In addition to hurting U.S. cheese exports, the organizations say the Canadian plan violates the 1994 General Agreement on Tariffs and Trade, which bars countries from using free trade agreements to restrict trade.

In a mid-August letter to U.S. Trade Representative Michael Froman and Agriculture Secretary Tom Vilsack, the organizations say the Canadian plan, included in a pending Canada-European Union free trade agreement (FTA), would give the EU exclusive access to more than 70 percent of “Canada’s Most Favored Nation” cheese imports.

“The Canada-EU free trade agreement was already problematic because it bars U.S. companies from using several common cheese names on products headed across our northern border,” says Tom Suber, president, USDEC. “And now it is clear that the same FTA would reserve 800 tons of an already low quota for cheese imports for the EU.”

Ken Meyers, president and CEO of MCT Dairies, Millburn, N.J., one of the groups in the coalition, adds that “this is not just bad policy, it flies in the face of what free trade agreements are all about.

They are supposed to open trade, not restrict it.”
Another company active in the coalition expressed optimism about the prospect of garnering additional organizations to join in this effort.

“We expect to pick up support from more U.S. cheese companies as word of Canada’s latest proposal trade restriction gets around,” says Tom Gellert, vice president, Atalanta Corp., Elizabeth, N.J.

In addition to MCT Dairies and Atalanta Corp., other companies and organizations currently in the new coalition include: Darigold, Seattle; Dairy Farmers of America, Kansas City, Mo.; Emmi Roth USA, Monroe, Wis.; Fonterra (USA) Inc., Rosemont, Ill.; Gellert Global Group, Elizabeth, N.J.; International Dairy Foods Association, Washington, D.C.; Kraft Foods Group, Inc., Northfield, Ill.; Land O’Lakes Inc., St. Paul, Minn.; Norseland, Darien, Conn.; Sartori Co., Plymouth, Wis.; Tipico Products, Lakewood, N.J.; Trugman Nash Inc., Millburn, N.J.; U.S. Dairy Export Council, Arlington, Va.; and Wisconsin Cheese Makers Association, Madison, Wis.


USDA launches MPP; open
enrollment is Sept. 2-Nov. 28

August 29, 2014

WASHINGTON — U.S. Agriculture Secretary Tom Vilsack on Thursday announced that starting Sept. 2, farmers may enroll in the new dairy Margin Protection Program (MPP). The voluntary program, established by the 2014 Farm Bill, provides financial assistance to participating farmers when the margin — the difference between the price of milk and feed costs — falls below the coverage level selected by the farmer.

USDA also has launched a new web tool to help producers determine the level of coverage under MPP that will provide them with the strongest safety net under a variety of conditions. The online resource, available at, allows dairy farmers to combine unique operation data and other key variables to calculate their coverage needs based on price projections.

Producers also can review historical data or estimate future coverage based on data projections, USDA notes. The secure site can be accessed via computer, smart phone, tablet or any other platform, 24 hours a day, seven days a week.

“We’ve made tremendous progress in implementing new risk management programs since the farm bill was signed over six months ago,” Vilsack says. “This new program is another example of this administration’s commitment to provide effective safety net programs that allow farmers and ranchers to manage economic risks beyond their control.”

Development of the online resource was led by the University of Illinois, in partnership with USDA and the Program on Dairy Markets and Policy (DMaP). DMaP partners include the University of Illinois, University of Wisconsin, Cornell University, Pennsylvania State University, University of Minnesota, Ohio State University and Michigan State University.

The Margin Protection Program, which replaces the Milk Income Loss Contract program, gives participating dairy producers the flexibility to select coverage levels best suited for their operation.

Enrollment begins Sept. 2 and ends Nov. 28 for 2014 and 2015. Participating farmers must remain in the program through 2018 and pay a minimum $100 administrative fee each year. Producers have the option of selecting a different coverage level during open enrollment each year.

Dairy operations enrolling in the new program must comply with conservation compliance provisions and cannot participate in the Livestock Gross Margin-Dairy (LGM-Dairy) insurance program. Farmers already participating in the LGM-Dairy program may register for MPP, but the new margin program will only begin once their LGM-Dairy coverage has ended, USDA notes

The MPP final rule also was published in today’s Federal Register. USDA’s Farm Service Agency (FSA), which administers the program, also will open a 60-day public comment period on the dairy program. The agency says it wants to hear from dairy operators to determine whether the current regulation accurately addresses management changes, such as adding new family members to the dairy operation or inter-generational transfers. Written comments must be submitted by Oct. 28 at or

Dairy industry stakeholders this week welcomed news of the MPP launch.

“America’s family-run dairy farms are in great need for these kind of risk management tools to help them manage risk that is beyond their control,” says Roger Johnson, president of the National Farmers Union.

“The family farmer provision, included as part of the program, will allow many of this nation’s family-operated dairy farms to breathe a sigh of relief now that they have adequate risk management tools in hand,” Johnson adds.

The National Milk Producers Federation (NMPF) — which worked with USDA on development of the program and its enactment in the 2014 Farm Bill — says it is pleased with the overall provisions of the new program and urges farmers to begin familiarizing themselves with what will be a “valuable tool” to help manage farms’ financial risks in the future.

“Today’s release of the new dairy program’s details is the culmination of five years of work by NMPF, the nation’s dairy cooperatives and other farm groups to create an important new safety net for dairy farmers,” says Jim Mulhern, president and CEO, NMPF. “We applaud the U.S. Department of Agriculture on its hard work during the past six months putting the final touches on the dairy provisions of Congress’ farm bill. While some of the issues we raised could not be fully resolved in the short time available to complete the rulemaking, we’re pleased with the final package.”

Mulhern says NMPF will be working in the coming weeks to help dairy farmers understand the importance of the new safety net program. He notes the organization is updating its website with relevant information for farmers, including a spreadsheet of historical margin trends and an online calculator that will allow farmers to enter pricing and production data to help them select insurance coverage levels in the future.

The MPP allows farmers to protect the margin between milk prices and feed costs. Producers will insure their margins on a sliding scale, and must decide annually both how much of their milk production to cover (from 25 percent up to 90 percent) and the level of margin they wish to protect.

Basic coverage, at a margin of $4 per hundredweight, is offered at no cost. Above the $4 margin level, coverage is available in 50-cent increments, up to $8 per hundredweight. Premiums are fixed for five years but will be discounted by 25 percent in 2014 and 2015 for annual farm production volumes up to 4 million pounds. Premium rates are higher at production levels above 4 million pounds.

NMPF notes that, importantly, USDA agreed with NMPF that the lower premiums will apply to the first 4 million pounds of a farm’s enrolled annual milk production, regardless of the farm’s total production. For example, a farm with an annual production history of 8 million pounds that elects to cover 50 percent of its production history would pay the lower rate on all 4 million pounds enrolled in the program. Farmers will be able to change their coverage (the percentage of milk insured, as well as margin level) on an annual basis, with USDA establishing a 90-day enrollment window of July 1-Sept. 30 each year after 2014.

NMPF notes the MPP’s margin definition is the national all-milk price, minus national average feed costs, computed by a formula NMPF developed using the prices of corn, soybean meal and alfalfa hay. Farms in the program will be assigned a production history consisting of their highest milk production in either 2011, 2012 or 2013. A farm’s production history will increase each year after the farm first signs up based on the average growth in national milk production. Any production expansion on an individual farm above the national average cannot be insured.

When the margins announced by USDA for the consecutive two-month periods of January-February, March-April, May-June, etc., fall below the margin protection level selected by the producer (from $8 per hundredweight down to $4), the program will pay farmers the difference on one-sixth (or two months’ worth) of their production history at the percentage of coverage they elected to insure. Premiums must be paid either in full at signup, or 25 percent by Feb. 1, with the remaining 75-percent balance to be paid by June 1. NMPF had urged USDA to provide greater flexibility on producer premium payment, such as through milk check deductions.

“While USDA advised us they did not have time to set up such a system for the initial launch of MPP, we will continue to work with the department in an effort to modify this feature for future years,” Mulhern says.

“The new Margin Protection Program is more flexible, comprehensive and equitable than any safety net program dairy farmers have had in the past,” Mulhern adds. “It is risk management for the 21st century, and we strongly encourage farmers to invest in using it going forward.”

The 2014 Farm Bill also established the Dairy Product Donation Program, which authorizes USDA to purchase and donate dairy products to nonprofit organizations that provide nutrition assistance to low-income families. Purchases only occur during periods of low dairy margins. Dairy operators do not need to enroll to benefit from the Dairy Product Donation Program.

Mulhern says that USDA’s issuance of rules for the Dairy Product Donation Program is “a positive step as well since it will stimulate demand, help dairy farmers when they need it most, and provide additional food to those in need.”

Johnson says the donation program is smart public policy.

“This is a wonderful example of smart public policy since it allows USDA to help stabilize the milk market while also helping those facing food insecurity,” he says.

For more information, visit


Speakers: Opportunities for
U.S. dairy available in China

August 29, 2014

By Rena Archwamety

MADISON, Wis. — Increased purchasing power, changing tastes among young consumers, and a focus on food safety, quality and nutrition provide great opportunities for Wisconsin and U.S. agricultural exporters, including cheese and dairy exporters, to enter the Chinese market, according to speakers at a Madison International Trade Association (MITA) event this week.

The program, “Food for Thought: E-commerce & Ag Export Opportunities in China,” held here Tuesday at the Crowne Plaza Madison Hotel, featured a panel of food buyers and marketers from China who offered insight into the growing market for U.S. products. The event was sponsored by the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP), the Wisconsin Cheese Makers Association, Madison Region Economic Partnership and M.E. Dey & Co.

DATCP Secretary Ben Brancel, who gave opening remarks, notes that Wisconsin agricultural exports in 2013 increased 25 percent over 2012. In the first two quarters of 2014, Wisconsin has exported $1.9 billion in agricultural products to 128 countries, up 17 percent from the same period last year.

The value of Wisconsin dairy, egg and honey exports to China has topped $35 million in the January-June period, with whey and related milk products topping $32 million — more than double the value of last year’s exports, according to DATCP. Wisconsin cheese and curd exports to China were valued at $614,092 for the first half of this year, up 179 percent from the first half of 2013.

Panelist Roger Zhang, marketing director at SMH International Ltd. based in Shanghai, China, says dairy has been one of the most prosperous sectors of the imported food market in China over the last three years. In 2013, he notes U.S. exports of dairy products to China were valued at $749.1 million, up 141 percent from the previous year.

“Dairy is a huge market for China,” he says, noting that the market for imported dairy has especially grown since the 2008 melamine scandal that rocked Chinese infant formula producers. “For Chinese consumers, there is a lack of confidence in local dairy products and milk. It creates lots of opportunities.”

A wide range of dairy categories are imported by China from overseas suppliers, with milk powder (53.5 percent) and whey products (27.3 percent) leading the share of dairy imports in 2013. Cheese comprised a 3 percent share of dairy product imports. New Zealand leads dairy market imports, Zhang says, while the United States is its second-largest dairy trade partner with a share of 16 percent. The United States has advantages in the supply of whey, powder and cheese products.

Cheese is the youngest entry among all dairy categories on the Chinese market, but consumer awareness and acceptance have led to its significant growth in the last five years, Zhang says. From 2010-2013, cheese has experienced a compound annual growth rate (CAGR) of 19.75 percent. And, as there is almost no domestic production, the Chinese market relies heavily on imports to meet the market demand for cheese.

“Cheese is a non-traditional ingredient, especially for my mom’s generation. In these days, the young generation, they like the cheese flavor,” Zhang says, adding that Italian, Greek, pizza and other Western-style restaurants in China provide a market for imported cheese.

Foodservice is the major channel for cheese, with 80 percent going to Western restaurants, fast food chains and bakeries, and 20 percent going to supermarkets. Popular cheese products in China include cream cheese, Mozzarella, Cheddar, processed cheese, Parmesan, Brie and Gouda, Zhang says. He adds that many retail stores in China now have cheese counters that sell different varieties, and the specialty cheese market is an area that needs to be explored.

Zhang also says consumer education about cheese and dairy products from other countries has helped spark more interest in these products.

“More people are more concerned about health and nutrition,” he says. “The message is that cheese is good for consumers. We think about Wisconsin because it is one of the biggest states for dairy products. This is good timing for the state of Wisconsin to look at and access this market.”


CDFA: Price reform won’t
be pursued in this session

August 29, 2014

SACRAMENTO, Calif. — California Department of Food and Agriculture (CDFA) Secretary Karen Ross this week announced that legislation to reform the state’s dairy pricing, which was introduced last week, will not be pursued this session.

Assembly Bill 2730 was introduced by California Assemblywoman Susan Talamantes Eggman, D-Stockton, and Sen. Cathleen Galgiani, D-Stockton, both of whom chair their respective legislative agriculture committees. The proposed legislation would have allowed dairy processors and producers to enter into pricing agreements outside of the state’s current Class 4a and 4b formulas if certain conditions were met.

These changes were proposed after Secretary Ross met with the Dairy Future Task Force, which is comprised of various producer and processor representatives, to try to reach a consensus on price reform. (See “CDFA seeks dairy industry input on price legislation” in the Aug. 15, 2014, issue of Cheese Market News.)

However, industry members were not fully on-board with the proposed legislation. The Western United Dairymen’s (WUD) board of directors voted last Friday to support the legislation, but only if amendments were included that would enhance the protection of producer interests under the proposal. Meanwhile, the California Dairy Campaign opposed the draft legislation, saying it would lead to the deregulation of Class 4 milk pricing and shift virtually all risk to dairy producers.

WUD CEO Michael Marsh says the last-minute nature of the legislation and the risk on the side of the farmers were very concerning for dairy producers. He also says there had not been any economic analysis done on the proposal by the CDFA secretary.

He adds that while the recent proposed legislation had its problems, the WUD board very much appreciated that Ross recognized that there is a real problem with the pricing of milk that goes into cheese and that it needs to be brought in closer alignment with the market.

“We’re overwhelmingly pleased that she recognized there is a real pricing problem with the 4b formula. We’re committed to finding a better path forward and hope she is committed to the sustainability of dairy farmers,” Marsh says.

Ross says while the timing was not ideal, she was compelled to see if reform could be achieved this year by working with the Dairy Future Task Force on a compromise between the two sides.

“Through this process, a framework came together that would have meant substantial financial relief for producers and flexibility to processors that would have benefited the whole industry,” she says. “Since the Aug. 13 Dairy Future Task Force meeting, a tremendous amount of progress has been made, but not enough, so we will not pursue reform legislation this year.”


Butter stocks are 42 percent
lower than a year ago

August 29, 2014

WASHINGTON — Butter in U.S. cold storage totaled 170.2 million pounds as of July 31, 2014, down 9 percent from June 30, 2014, and 42 percent lower than the 295.8 million pounds of butter in cold storage at the end of July 2013, according to the cold storage report recently released by USDA’s National Agricultural Statistics Service (NASS).

Natural American cheese in cold storage totaled 660.4 million pounds July 31, 2014, up 1 percent from June 30, 2014’s 655.2 million pounds but 6 percent lower than the 702.0 million pounds in cold storage July 31, 2013, according to NASS.

Swiss cheese in cold storage totaled 25.5 million pounds July 31, 2014, down 9 percent from 28.0 million pounds June 30, 2014, and down 22 percent from 32.7 million pounds July 31, 2013.

NASS reports other natural cheese in cold storage totaled 369.7 million pounds at the end of July 2014, down 1 percent from 372.2 million pounds at the end of June 2014 and 10 percent lower than the 411.5 million pounds in cold storage at the end of July 2013.

This brings total natural cheese stocks in cold storage to 1.06 billion pounds as of July 31, 2014, up just 89,000 pounds from June 2014 but 8 percent lower than the 1.15 billion pounds in cold storage at the end of July 2013.


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September 18, 2014

Barrels: $2.4225 (NC)
Blocks: $2.4100 (NC)

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Cheese Production
U.S. Total July
956.359 mil. lbs.

Milk Production
23 State Total July
16.389 bil. lbs.

Guest Columnist

Vietnam: Cheese consumer in the making

Angélique Hollister, vice president, cheese and consumer products, U.S. Dairy Export Council.

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