Weekly protein digest: ASF in Dominican Republic, US beef exports down, USMCA concerns

Market analyst Jim Wyckoff shared protein market highlights from around the world, including USDA's latest dairy market report.
calendar icon 30 July 2021
clock icon 8 minute read
Jim Wyckoff Commentary -  TheCropSite

USDA confirms ASF in Dominican Republic

USDA has confirmed African Swine Fever (ASF) in samples from pigs in the Dominican Republic via a cooperative surveillance program, USDA announced Wednesday. According to the Animal and Plant Health Inspection Service (APHIS), pork and pork products are already banned from entering the U.S. due to restrictions linked to classical swine fever, and the Department of Homeland Security’s Customs and Border Protection (CBP) is “increasing inspections of flights from the Dominican Republic to ensure travelers do not bring prohibited products” into the U.S. APHIS also said that CBP will also be “ensuring that garbage from these airplanes are properly disposed of to prevent the transmission of ASF.” USDA said it has offered more testing support and will consult with the country on any additional steps of actions to “support response and mitigation measures.” USDA has offered similar help to Haiti, which shares a border with the Dominican Republic.

China still working to stabilize hog prices

China’s cabinet on Wednesday said it would step-up emergency adjustments of its pork reserves and take steps to stabilize hog prices, according to state media reports cited by Reuters. A surge in marketing of heavy hogs late-winter and into spring caused Chinese hog and pork prices to tank, raising concerns about producer margins and their ability to remain in business. The country is still working to rebuild its hog herd after ASF and to control the virus. Recent flooding in key producing areas has added to concerns about producers’ ability to stay in business as well as the spread of disease.

Canada dairy, Mexico biotech issues key concerns after the first year of USMCA

Canada’s inadequate implementation of new market access for US dairy, Mexico’s foot-dragging on ag biotech approvals, and the lack of a chief ag negotiator nominee were some of the key ag-related issues that surfaced during a Senate Finance Committee hearing Tuesday (July 27) held to mark the first anniversary of the U.S.-Mexico-Canada Agreement (USMCA).

U.S. dairy industry and biotech officials said more aggressive action is needed to make sure Canada and Mexico uphold their commitments under the pact. Witnesses from environmental and labor groups and lawmakers also stressed the need for enforcement in areas including agreed Mexican labor reforms and environmental provisions of the agreement.

Canada dairy market access, exports. Canada’s alleged circumvention of new dairy market access commitments under USMCA through its implementation of dairy tariff rate quotas (TRQs) drew concern from lawmakers. Asked by Sen. Mike Crapo (R-Idaho) to detail the issue, Northwest Dairy Association and Darigold Board of Directors Chair Allan Huttema said Canada’s allocation of a majority of the TRQs through dairy processors is thwarting the ability of U.S. dairy exporters to export higher value products to the Canadian market. The Biden administration is pursuing a complaint under USMCA dispute settlement mechanisms, finalizing an action that was signaled by the Trump administration. Besides dairy TRQs, Huttema said another major issue he would like the U.S. Trade Representative (USTR) to tackle Canadian exports of milk protein isolates and skim milk powders. “There are caps put in place, and they are creating products to circumvent that agreement as well,” he detailed, explaining the issue is negatively impacting U.S. exports to other markets.

Sen. Chuck Grassley (R-Iowa) said “it looks like Mexico will not work with us in good faith effort to resolve the issue,” both on biotech approvals and “its recent decree to phase out GMO corn.” He asked what enforcement steps need to be taken, prompting McMurry-Heath to respond, “We really think it's time for the USTR to begin taking enforcement action by appointing an agricultural negotiator,” a comment referencing that the Biden administration has yet to offer a chief ag trade negotiator nominee at USTR.

USDA: US pork exports remain robust, beef down

USDA Thursday morning reported US pork net sales of 38,500 MT for 2021 were up 57 percent from the previous week and 43 percent from the prior 4-week average. Increases were primarily for Mexico (25,100 MT, including decreases of 800 MT), Chile (3,300 MT, including decreases of 100 MT), Japan (3,200 MT, including decreases of 200 MT), Honduras (2,300 MT), and Colombia (2,000 MT, including decreases of 100 MT). Total net sales for 2022 of 400 MT were for Chile. Exports of 29,900 MT were down 3 percent from the previous week, but up 1 percent from the prior 4-week average. The destinations were primarily to Mexico (12,300 MT), China (5,700 MT), Japan (4,000 MT), South Korea (2,100 MT), and Canada (1,700 MT).

US Beef: Net sales of 22,500 MT reported for 2021 were down 11 percent from the previous week, but up 28 percent from the prior 4-week average. Increases were primarily for South Korea (8,200 MT, including decreases of 500 MT), Japan (6,100 MT, including decreases of 600 MT), and China (4,500 MT, including decreases of 100 MT). Exports of 19,100 MT were down 11 percent from the previous week, but up 4 percent from the prior 4-week average. The destinations were primarily to South Korea (5,100 MT), Japan (4,400 MT), China (3,100 MT), Taiwan (1,700 MT), and Mexico (1,500 MT).

USDA secretary predicts moderation in food inflation

USDA Secretary Tom Vilsack predicted the jump in US food prices in June will quickly moderate despite rising concern about inflationary risks in the economy. “There are certain selective items in the grocery store folks may see for a period of time increased costs,” Vilsack said last Friday in an interview on Bloomberg Television’s Balance of Power with David Westin. “We think this will even out as we begin to recover, as we begin to get the supply and demand in better balance.”

US food prices jumped 0.8% in June from May, double the pace of the prior two months. Meat and poultry prices surged 2.5% last month, according to the US Department of Labor’s consumer price index. Still, food costs are up just 2.4% from a year earlier, while overall inflation was 5.4% for the period.

Vilsack also said USDA would soon announce proposed regulations to provide more protection to livestock producers in their dealings with the highly consolidated meatpacking industry. President Joe Biden’s executive order on competition instructed the USDA to consider stronger regulations. “I think we will see significant action on that in the very near term,” Vilsack told Bloomberg Television.

USDA’s latest dairy market report

FLUID MILK: US milk production is slightly decreasing throughout the United States. Milk supplies are beginning to fall more in line with end usage immediate needs and storage capacities. Class I sales are mixed. Bottling orders in the Southeast and South Central are starting to increase. With K-12 classes scheduled to restart beginning in late July in some locations, the pipeline for that market segment is starting to refill. There are reports spot prices are in the $5 to $3 under Class III range this week in the Midwest. Discounts are still pervasive, but the $6 under Class prices of recent weeks have disappeared. Condensed skim markets are fairly soft in areas of the U.S. Some manufacturers are heavy with condensed skim volumes. Cream markets are mixed. In general, many market participants note cream remains available during the mid-summer season. Cream multiples for all Classes: 1.23 - 1.37 in the East, 1.22 – 1.36 in the Midwest, and 1.15 – 1.28 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices are mixed this week. Buying demands are slowing. Low/ medium heat NDM market tones are somewhat unsettled. High heat NDM prices are steady to lower. High heat NDM markets are flat. Dry buttermilk prices are to steady to slightly lower. Market participants’ demands are fairly steady in domestic and international markets. The dry whole milk price range has tightened. Dry whole milk markets are holding steady. Dry whey prices are mixed. Dry whey markets are mixed. Some buyers/traders are not purchasing additional spot loads at this time. The market tone has weakened. Whey protein concentrate 34% prices are mostly unchanged. Market participants note buying demands are a bit stronger for loads that meet certain end user requirements. Lactose prices are steady to higher. Spot market activities are slightly quiet. Pricing for both acid casein and rennet casein are unchanged. Customer interest is beginning to increase.

INTERNATIONAL DAIRY MARKET NEWS: WESTERN EUROPEAN OVERVIEW: Markets for dairy products are quiet as much of the continent is on summer holidays. Common for this time of year, sales transaction volumes are lower, and retail demand is subdued. While food service demand for dairy products has increased thanks to restaurants reopening, increased COVID cases in some locations has infused the market with a lingering feeling of uncertainty. Buyers are hesitant to take on more dairy product inventories for fear of new lockdowns or weakened export opportunities.

EASTERN EUROPEAN OVERVIEW: With increasing volumes of milk used in cheese making, Belarus and Poland are growing their export capacity for dairy products. Exports of cheese and butter from Belarus are finding their way into many Eastern European countries, especially Russia, while significant amounts of Polish cheese are moving into other EU countries. Both Poland and Belarus have increased the shipments of whey powder to China.

OCEANIA OVERVIEW: AUSTRALIA: At only a few weeks into the new Australian milk season, it is hard to tell what the year will hold. But that said, industry participants expect stable domestic dairy demand and relatively supportive global fundamentals in the first half of the year will get the milk season off to a good start. If food service demand can return to pre-pandemic levels, the domestic sales may help further support market prices. In the previous weeks, some dairy cooperatives and processors increased the offering prices made to farmers to assure the supply of milk will be sufficient to meet processing needs.

NATIONAL RETAIL REPORT (DMN): Total conventional dairy advertisements are down 10 percent, while total organic dairy ads increased 8 percent from week 28. Both conventional and organic butter ads each increased by over 300 percent. The national weighted average advertised price for conventional 1-pound butter is $2.58, down 89 cents from last week. The national weighted average advertised price for organic 1-pound butter is $5.20, up 21 cents from last week.

TheCattleSite News Desk

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