U.S. Dairy Farmers’ Concern; What the Cheese is going on in Mexico?

Regulations and New Standards

As part of the current Mexican government’s food and safe security plan, a new set of regulations that aim to protect the consumer have been established for some specific products such as dairy, for which yogurts and cheeses have been caught in the middle of the controversy. As Mexican consumption of imported cheese grows, global suppliers now face barriers as regulations block their entrance into the market.

Two main changes have been already implemented for dairy products in Mexico, which exporters need to comply with:

• Mandatory Conformity Assessment; The Mexican Consumer Protection (Pfrofeco) has established a new mandatory assessment of each of the products, where no miss information on the ingredients is allowed, which means that products that are not actually “100% milk” need to remove the label that says so. Additionally, if the products surpass the quantity requirements of fat, sugar, calories, or sodium, these all need to be announced with a black box on the label.
• Regulation for Non-Origin Statement; Profeco has also established a new procedure of labels for all cheeses that do not have an origin denomination (DOT) granted. In its goal to inform consumers of the type of products they acquire, the Mexican institution mandated to label the product as “Imitation.” Before this, it was allowed to label the product as Ej: “Parmigiano type” to noted that the Cheese does not actually come from Italy.
  

Cheese Package of Imported Cheese with the Mandatory Label and the DOT specification:

For Cheese exporters to Mexico, these new regulation standards represent high-cost testings in origin to ensure the product complies, extra costs in packaging, and handling the product ship to the country, causing a significant increase in their export cost.

U.S Cheese producers worry about their main customer

The new regulations have already affected the export volumes of what goes for 2021. According to the Daily Dairy Report, Mexico imported just 9.6 million pounds of U.S. cheese in January, a nine-year low and 49% less than the previous year. Causing U.S. cheese exporters to redirect their sales to the Asian market, where imports of U.S. cheese jumped by 38% so far this year. As for U.S. Cheese, exports totaled 55.6 million pounds in January 2021, a decrease of 9.9% from a year ago, though Cheddar exports were up 1.9%.

Mexico imported around USD 308 million on cheese in 2020, with the U.S as its main supplier with 47% of the import share. Mexican consumption of cheese was forecasted to reach 569 thousand MT in 2020, up from 548 thousand MT in the previous year. . The consumption in Mexico has outpaced the production, which was estimated to be 454 thousand MT in 2020.

Consumption in Mexico has been increasing consistently since 2010, and because of this, the Mexican cheese import market has been growing at a 5% yearly rate since then. Most of the imported cheeses are Gouda, Mozarella, and Monterrey Jack, which are all comprehended in the Cheddar and other varieties harmonize code. (HT 040690).

   Source: ITC Trade Map, Tridge

More Obstacles to Come for Dairy Trade

In addition to all of the new standards and regulations, Mexico recently informed the U.S. Organic Trade Association that it would begin requiring all U.S. organic exports to Mexico to become certified to Mexico’s organic standards. While in 2020, the Mexican customs authority announced that the organic accreditation given in the U.S. was accepted, it now seems that compliance with Mexican standards might be required after all.

If this latest organic regulation takes effect for organic dairy products, it will cause significant trade disruptions and losses for U.S. exporters. The Organic Trade Organization mentioned that standardized Mexican and U.S. organic certifications could take up to a year, requiring as well a considerable investment.

Sources:

• Agri Pulse. "US dairy pushes back on Mexican plan for cheese trade barriers".
• Capital Press. "Farm groups concerned with Mexico’s growing trade barriers".
  
• El Universal. "Las regulaciones en alimentos más estrictas en el mundo".
  
• Farmers Advance. "Reopening may be “a shock to the supply chain across the country and even globally”.