Weekly global protein digest: US expands dairy dispute with Canada, egg prices at record high

Weekly global protein digest: US expands dairy dispute with Canada, egg prices at record high
calendar icon 30 December 2022
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US beef exports to East Asia at record pace

US beef exports to East Asia in 2022 are again on record pace after a record year in 2021, according to USDA. Despite economic uncertainties due to the Covid-19 pandemic, continued global supply chain challenges, and a competitive global beef market, US beef exports to East Asia, both in value and volume, were outstanding in the first half of 2022. USDA analysts say East Asia’s relatively robust middle class has supported the demand for high-quality beef, and a developed e-commerce retail sector has provided flexible avenues for suppliers to promote beef products during the pandemic.

USDA Cattle on Feed Report: Placements drop less than expected

USDA estimated there were 11.673 million head of cattle in large feedlots (1,000-plus head) as of Dec. 1, down 312,000 head (2.6%) from year-ago but 24,000 head more than the average pre-report estimate implied. November placements dropped 42,000 head (2.1%), though traders expected a 4.2% decline from year-ago. November marketings were slightly stronger than anticipated at 1.2% above year-ago. There was nothing in the data to greatly move the market. While placements were near the top of the range of trade estimates, they still declined notably from year-ago.

USDA Hogs and Pigs Report: Herd smaller than expected, but signs contraction phase is ending

USDA estimated the Dec. 1 hog herd at 73.119 million head, down 1.327 million head (1.8%) from year-ago and 210,000 head less than the average pre-report estimate implied. The market hog inventory at 68.321 million head declined 2.0%, while the breeding herd at 6.154 million head rose 0.5% from last year. The data should be supportive for winter-, spring and early-summer lean hog futures. Far-deferred contracts could face mild pressure with the data implying the herd contraction phase may be coming to an end.

USDA’s food inflation outlook

USDA held its 2022 food price inflation outlook steady this month, keeping the increases at 9.5% to 10.5% for all foods, 11% to 12% for food-at-home (grocery store) prices and 7% to 8% for food-away-from-home (restaurant) prices. But USDA made revisions within the food categories used for grocery prices, including lowering the outlook for poultry to an increase of 14% to 15% (14.5% to 15.5% prior) and for vegoils to 18% to 19% (18.5% to 19.5% prior), cereal and bakery products to an increase of 12.5% to 13.5% (13% to 14% prior) and for other food to a rise of 12% to 13% (12.5% to 13.5% prior). USDA raised its egg price outlook due to the ongoing highly pathogenic avian influenza (HPAI) situation, with prices now forecast to climb 30.5% to 31.5%.

For 2023, all food prices are predicted to increase between 3.5% and 4.5% (up from 3.0% to 4.0% in November), food-at-home prices are expected to rise between 3.0% and 4.0% (up from 2.5% to 3.5% previously) and food-away-from-home prices are forecast to climb between 4.0% and 5.0% (unchanged). USDA made several increases in 2023 food categories. The ongoing HPAI situation has USDA also raising its forecast for 2023 egg prices, now putting the expected rise at 4% to 5% versus an outlook for 2% to 3% in November. That marks a sizable rise from USDA’s initial outlook for 2023, which was for egg prices to be unchanged — down 0.5% to up 0.5%. Fruits and vegetable prices are expected up 1% to 2% (unchanged to up 1% prior), with USDA noting “elevated prices for wholesale fresh vegetables are expected to place upward pressure on retail prices in the coming months.” USDA sees vegoil prices rising in 2023 by 5% to 6% even though it lowered the level of increase for 2022.

Egg prices are hitting records, driven by an avian-influenza outbreak

Bird flu in the US has killed tens of millions of chickens and turkeys this year across nearly all 50 states. Wholesale prices of Midwest large eggs hit a record $5.36 a dozen in December, according to the research firm Urner Barry. Retail egg prices have increased more than any other supermarket item so far this year. USDA will also update its forecast for food prices today and the HPAI situation is likely to result in an upward adjustment to egg prices which are typically one of the most volatile food price categories.

Meantime, two additional HPAI cases boost total birds affected to 57.8 million. USDA’s Animal and Plant Health Inspection Service (APHIS) announced two additional cases of highly pathogenic avian influenza (HPAI) in commercial operations — a commercial turkey meat bird flock in Hanson County, South Dakota (31,800 birds) and a commercial table egg layer flock in Weld County, Colorado (260,000 birds), bringing the total affected birds to 57.82 million including 303 commercial and 404 backyard flocks. Despite the infections and flock destruction, Emily Metz of the American Egg Board said table egg supplies have been more stable this year compared with prior HPAI outbreaks.

China to investigate ‘excessive’ hog price decline

China’s state planner said on Wednesday it called a meeting of hog industry experts to ensure stable prices after recent excessive declines. According to experts the slump was due to a “temporary” period of weak consumption, it said, adding that there is no oversupply.

Biden team expands dairy dispute with Canada via USMCA

The US is requesting dispute-settlement consultations for a third time over Canada’s dairy quotas, saying it has found more areas of “deep concern” and that the nation’s measures are inconsistent with its obligations under the US-Mexico-Canada Agreement (USMCA). Washington is expanding its challenge to include Canada’s use of a market-share approach for determining the quotas, the Office of the US Trade Representative said in a statement Tuesday. It said Ottawa’s method prohibits eligible applicants — including retailers and food-service operators — from accessing allocations. If there is no eventual solution, the US can request another dispute settlement panel be established.

USDA weekly dairy report

CME GROUP CASH MARKETS (12/23) BUTTER: Grade AA closed at $2.3950. The weekly average for Grade AA is $2.5290 (-0.2570). CHEESE: Barrels closed at $1.7950 and 40# blocks at $2.1225. The weekly average for barrels is $1.7290 (-0.0845) and blocks, $2.0445 (-0.0185). NONFAT DRY MILK: Grade A closed at $1.3300. The weekly average for Grade A is $1.3430 (-0.0080). DRY WHEY: Extra grade dry whey closed at $0.3850. The weekly average for dry whey is $0.3835 (-0.0695).

BUTTER HIGHLIGHTS: Cream is plentiful across all regions, and contacts in the Central and West regions note volumes are being offered at lower multiples this week. Butter makers are actively churning to make use of spot loads of cream available at lower multiples. Contacts note declining demand for butter from purchasers as holiday purchasing has slowed. Butter markets are showing some bearishness, amid softening demand. Prices for butter dropped below $2.50 by mid-week and some stakeholders in the Central region say prices in this range were expected around this time in the year. Butter is available for spot purchasing. In the West, contacts note spot orders of unsalted butter are more difficult to fulfill than salted butter orders.

CHEESE HIGHLIGHTS: Cheesemakers across the country say milk is available, and some contacts in the Midwest and West report purchasing volumes at below Class prices. Some backups have been reported at cheese plants in the Midwest, as milk haulers have been attempting to move up their delivery schedules in anticipation of heavy snow in the back half of the week. In the West, cheesemakers are running busy production schedules, while contacts in the Northeast say output is steady to lighter. In both regions, some plant managers say labor shortages and delayed deliveries of production supplies are preventing them from operating full schedules. In the Midwest, cheese production is steady, but milk backups and other maintenance issues have contributed to some unplanned downtime this week. Domestic demand for cheese is steady to lighter in all regions, though contacts in the West report mixed demands from export customers. In the Northeast and West, loads of cheese are available on the spot market.

FLUID MILK: Milk production is steady to higher in all regions. Overall, Class I sales are stable in the East though orders have been mixed from bottling operations, with some contacts reporting cuts while others report additional orders. In the West, contacts report lighter Class I orders as educational institutions are closed for winter holidays. Extreme winter weather in the Midwest is proving to be a challenge for processors, who are working to put the plentiful milk supplies to use. In some cases, Midwestern spot milk prices were reported from $10 under to Class III. Processors expect most of the milk will be able to be put to use, while some loads may have to be discarded because of delays. Class II demand is steady in the West. Condensed skim demand for fluid use is lower this week due to the holidays, but volumes clearing to Class IV are higher. Cream is widely available. F.O.B. cream multiples are 1.00-1.20 in the East, 0.80-1.14 in the Midwest, and 0.95-1.26 in the West.

DRY PRODUCTS: Dairy powder prices were steady to lower this week. Low/medium nonfat dry milk (NDM) prices were unchanged on the range in the Central and East regions but shifted lower in the West. NDM demand remains light. Dry buttermilk is following a similar trend, with Central and East region prices stagnant as West prices fell. Dry buttermilk demand is light while inventories are abundant. Dry whole milk prices were unchanged, and production is picking up to match demand for Q1 contracts. Dry whey prices on the range were steady in the Central region but decreased in the East and West. Dry whey production is steady across all regions. Whey protein concentrate 34% prices decreased this week, with market demand remaining light. Lactose prices are steady, and some market contacts report many more spot offers than in recent weeks as inventories are replenished. Rennet and acid casein prices were steady, but contacts anticipate the 2023 markets will be mixed.

International Dairy Market News: European dairy market overview

WESTERN EUROPE: Seasonal milk production in Western Europe has turned upwards from the typical low point of the year in November. The consensus from market observers is that milk production is exceeding expectations, even as annual comparisons indicate a weak milk production year to date. Industry sources report the milk pay prices received by farmers are staying near record high levels through the end of the year. However, market observers do not see this as sustainable given falling commodity dairy prices. Faltering demand for dairy ingredients has diminished manufacturers' needs for loads of milk. Spot milk prices have fallen dramatically.

EASTERN EUROPE: Aside from areas directly impacted by the ongoing conflict between Ukraine and Russia, milk production has grown through much of the year in Eastern Europe. Poland has been a leading milk producing country in Eastern Europe. In spite of damage and power outages caused by Russian missile strikes, grain exports resumed in the Black Sea ports opened by a deal reached by Moscow and Kyiv. Turkish officials recently met with leaders of Russia and Ukraine, to negotiate provisions that could help expand trade through the Black Sea.

OCEANIA DAIRY MARKET OVERVIEW: NEW ZEALAND: In New Zealand, warm temperatures have prompted a late peak in pasture conditions as the summer closes in. Although reports suggest the current quality of feed may be somewhat tarnished, sources speculate that plenty of feed is available, as North Island milk producers struggle with lots of rain, amongst concerns of vulnerable maize growth in the area. Notably, in the South Island, milk production is looking promising and suggests that New Zealand's milk production could recover in December.

AUSTRALIA: In Australia, the eastern portion of the country is again experiencing surplus precipitation. Damaging rainfall and flooding have been an enormous challenge for Australia's dairy industry during the months of October and November. While Australia's dairy industry anticipated a drop in seasonal milk production ahead of the flooding, due to the impact of smaller milk producers exiting the industry at a very high rate, market representatives now project lower than anticipated milk production for the 2022-2013 season. Input costs and limited grain availability, with high prices, grouped with labor issues, remain factors.

SOUTH AMERICA DAIRY MARKET OVERVIEW: Drought continues to concern South American contacts regarding crop growth and current/near term farm milk output. Pastures are deteriorating. Farm milk output expectations for Q1 are mixed, but they are mostly down from year to year. Powder trading has slowed in recent months. Brazilian contacts say they are buying, but on a necessity basis because of economic uncertainties. Cheese and dairy powder offers/availability are ample from South American neighboring trading partners.

US NATIONAL RETAIL REPORT: Total conventional dairy ads decreased this week by 8 percent, while organic dairy ads increased by an opposing 8 percent. Conventional cheese appeared in 3 percent fewer ads compared to a week ago. Conventional milk ads decreased 55 percent, while organic milk ads increased 22 percent. Conventional yogurt ads decreased 24 percent, while its organic counterpart had a 453 percent increase in ads this week.

NOVEMBER MILK PRODUCTION (NASS): Milk production in the 24 major States during November totaled 17.5 billion pounds, up 1.4 percent from November 2021. October revised production, at 18.0 billion pounds, was up 1.3 percent from October 2021. The October revision represented a decrease of 18 million pounds or 0.1 percent from last month's preliminary production estimate. Production per cow in the 24 major States averaged 1,956 pounds for November, 17 pounds above November 2021. The number of milk cows on farms in the 24 major States was 8.94 million head, 48,000 head more than November 2021, and 1,000 head more than October 2022.

NOVEMBER COLD STORAGE (NASS): Total natural cheese stocks in refrigerated warehouses on November 30, 2022, were down 1 percent from the previous month but up 1 percent from November 30, 2021. Butter stocks were down 17 percent from last month and down 5 percent from a year ago.

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