Weekly global protein digest: China eliminates tariffs on Brazilian poultry, friendly cold storage report, US dairy report

Analyst Jim Wyckoff reports on protein news from around the globe
calendar icon 1 March 2024
clock icon 11 minute read

Brazil announces China has eliminated tariffs on Brazilian poultry

In 2019, China imposed tariffs ranging from 17.8% to 34.2% on Brazilian poultry imports to prevent "dumping" on its market. To address concerns about pricing, Brazilian poultry firms signed "price commitments" with the Chinese government. However, President Luiz Inácio Lula da Silva stated on social media that the tariffs have now dropped to zero. Brazil's Foreign Ministry confirmed that the tariff expired on Feb. 17, signaling improved competitiveness for Brazilian poultry in the Chinese market.

China authorizes pork imports from three Russian enterprises

China’s customs service authorized three Russian enterprises to ship pork to the country from Feb. 28, Russian agricultural watchdog Rosselkhoznadzor said. Pork products packaged after that date of registration will be allowed for delivery into China.

USDA begins trial allowing higher swine line speeds until 2025

USDA's Food Safety and Inspection Service (FSIS) has initiated a new time-limited trial (TLT) allowing certain slaughter facilities to operate at swine line speeds up to 1,106 head per hour (hph) and higher speeds until Jan. 15, 2025. The trial involves on-site visits, worker interviews, and observations of plant operations to assess safety and efficiency. Participating establishments must meet original TLT criteria and provide relevant data. Worker safety agreements with unions or representatives remain mandatory, with documentation required quarterly. Results from the study will inform potential rulemaking on line speeds. The TLT was launched in November 2021 following legal actions regarding the New Swine Slaughter Inspection System (NSIS). However, a third-party evaluation found insufficient data on the impact of faster line speeds on worker safety, leading to a 90-day extension granted in November 2023.

Americans are adapting their eating, shopping and lifestyle habits in response to record food inflation

A Wall Street Journal article highlighted this trend, prompting hundreds of reader responses. Individuals are implementing new strategies such as reducing dining out, relying on coupons, purchasing items in bulk, and decreasing consumption of packaged food, meat, and organic vegetables. While some consumers feel healthier due to these changes, others are facing challenging sacrifices.

USDA cold storage report friendly compared to seasonal tendencies

USDA’s cold storage report showed US beef stocks declined contra-seasonally during January, while pork stocks rose less than average. Frozen beef stocks at the end of January totaled 475.4 million lbs., down 4.9 million lbs. from December, whereas the five-year average was a 2.9-million-lb. increase during the month. Beef stocks fell 59.8 million lbs. (11.2%) from January 2023 and were 40.1 million lbs. (7.8%) below the five-year average. Pork stocks rose 40.6 million lbs. during January to 468.0 million pounds. The five-year average was a 48.6-million-lb. increase during the month. Pork stocks declined 51.1 million lbs. (9.8%) from January 2023 and were 51.8 million lbs. (10.0%) lower than the five-year average.

USDA announces updates to the US Dairy Margin Coverage (DMC) program

Beginning Feb. 28, 2024, dairy producers can enroll in the 2024 Dairy Margin Coverage (DMC) program. This program aims to assist producers by offering price support to offset disparities between milk and feed prices. The enrollment period for the 2024 DMC coverage will run until April 29, 2024, with payments potentially commencing as early as March 4, 2024, for any eligible payments triggered in January 2024.

The Farm Service Agency (FSA) has revised the DMC regulations, allowing eligible dairy operations to make a one-time adjustment to their established production history. This adjustment involves combining previously established supplemental production history with DMC production history for dairy operations that participated in the Supplemental Dairy Margin Coverage in prior coverage years. Additionally, the authorization for DMC has been extended through calendar year 2024, following a 2018 Farm Bill extension that mandated regulatory changes to the program.

The program, proven by the issuance of over $1.2 billion in payments to producers in 2023, offers a relatively affordable risk management tool, with coverage available for as low as $0.15 per hundredweight for $9.50 coverage.

Details: DMC functions as a voluntary risk management program, providing protection to dairy producers when the margin between the all-milk price and average feed price falls below a certain dollar amount chosen by the producer. In 2023, DMC payments were triggered in 11 months, including two months where the margin fell below the catastrophic level of $4.00 per hundredweight, marking a significant development for the program.

For the 2024 DMC coverage, adjustments have been made to extend coverage retroactively to January 1, 2024, and to offer adjustments to production history for smaller dairy operations with less than 5 million pounds of production. Furthermore, dairy producers can establish one adjusted base production history through DMC for each participating dairy operation.

Various coverage levels are available under the DMC program, including an option that is free for producers, with only a $100 administrative fee. This fee is waived for dairy producers who are considered limited resource, beginning, socially disadvantaged, or military veterans. Producers can use the online dairy decision tool to determine the appropriate level of DMC coverage for their operations.

DMC payments are calculated using updated feed and premium hay costs, reflecting actual dairy producer expenses. Moreover, USDA offers other risk management tools for dairy producers, such as the Dairy Revenue Protection (DRP) plan and the Livestock Gross Margin (LGM) plan, both offered through the Risk Management Agency.

Farm groups urge USDA Action on milk pricing issue

Top farm groups, including the American Farm Bureau Federation (AFBF) and National Farmers Union (NFU), are urging USDA to expedite an interim rulemaking process to address a milk pricing issue stemming from the 2018 Farm Bill. This change, supported by the farm groups, aims to revert the Class I milk pricing formula to its pre-2018 version, known as the "higher of" formula.

Background. The current formula, implemented since May 2019, averages the prices of Class III and Class IV milk, whereas the previous formula paid farmers based on the higher of the two prices. The farm groups argue that the current formula has resulted in significant revenue losses for dairy farmers, amounting to over $1 billion since its implementation.

The groups emphasize the need for an expedited return to the previous formula, especially given ongoing market dynamics and persistent losses faced by dairy farmers. They highlight that waiting for the full rulemaking process could prolong these losses and threaten farmers' livelihoods.

To address this issue promptly, the farm groups urge USDA to issue an interim final decision to expedite the change to the Class I milk pricing formula. They suggest that this could speed up implementation by six months or more, providing much-needed relief to dairy farmers facing financial challenges.

China’s sow herd liquidation continues

China’s sow herd totaled 40.67 million head at the end of January, down 1.8% on a monthly basis and 6.9% below year-ago, according to ag ministry data. Hog slaughter jumped 28.6% from year-ago during January to 37.25 million head, though that was down 6.4% from the previous month.

USDA set to announce an additional rule under the Packers and Stockyards Act (P&SA)

The announcement follows completion of the Office of Management and Budget's review of a final rule from USDA's Agricultural Marketing Service (AMS). This rule, titled "Inclusive Competition and Market Integrity Under the Packers and Stockyards Act," supplements recent revisions in regulations outlining criteria for determining undue or unreasonable conduct by packers, contractors, or live poultry dealers. Aimed at providing essential clarity, the rule defines violations of the P&SA, irrespective of their impact on competition.

USDA acknowledges industry division regarding the inclusion of specific prohibited conduct examples. Additionally, two proposed rules under review at OMB address unfair practices, preferences, competition harm, and poultry grower payment systems. While USDA's regulatory agenda targets February for the release of the proposed rule on unfair practices and January for the poultry grower payment system, no timeline is specified for final rules.

Two populist US senators oppose meatpacking riders

Two farm-state senators, Jon Tester (D-Mont.) and Chuck Grassley (R-Iowa), asked their colleagues to oppose riders on the USDA funding bill that would prevent the agency from enforcing new rules promoting competition in the meatpacking industry. In a letter, the senators oppose weakening the Packers and Stockyards Act to protect family farmers and consumers. They emphasize the Act's role in ensuring fair practices in the meat industry and highlight concerns about big ag consolidation. Tester and Grassley previously introduced the Meatpacking Special Investigator Act and advocating for producers impacted by anti-dumping duties.

US, Mexico, and Canada meat groups sign agreement on trade and animal disease issues

The North American Meat Institute, the Canadian Meat Council (CMC), and Consejo Mexicano de la Carne (COMECARNE) signed a Memorandum of Understanding (MOU) to collaborate on enhancing trade, reducing regulatory barriers, and improving information sharing among the three countries. The MOU was signed during the COMECARNE annual convention in Mexico.

Additionally, the groups have finalized a joint statement of coordination to address foreign animal diseases, sustainability, and non-tariff trade barriers. These barriers include challenges related to packaging, labeling policies, and burdensome regulations affecting meat production and processing efficiency. The documents have been submitted to regulatory agencies in the US, Mexico, and Canada to convey the groups' perspectives and priorities.

Weekly USDA dairy report

CME GROUP CASH MARKETS (2/23) BUTTER: Grade AA closed at $2.8500. The weekly average for Grade AA is $2.8031 (+0.0791). CHEESE: Barrels closed at $1.6150 and 40# blocks at $1.5500. The weekly average for barrels is $1.6100 (+0.0235) and blocks, $1.5219 (-0.0096). NONFAT DRY MILK: Grade A closed at $1.2000. The weekly average for Grade A is $1.1963 (+0.0235). DRY WHEY: Extra grade dry whey closed at $0.5225 The weekly average for dry whey is $0.5144 (-0.0076).

BUTTER HIGHLIGHTS: Retail and food service demands are seasonally steady to stronger. Cream for butter makers is plentiful throughout most of the country. Slower ice cream production, in some parts of the country, remains a factor in abundant cream availability for butter makers. Manufacturers are running busy at-or-near capacity production schedules. Unsalted butter loads for spot buyers are somewhat tight. Some contacts say overall butter supplies are tighter compared to the last couple years. Bulk butter overages range from 4 to 15 cents above market, across all regions.

CHEESE HIGHLIGHTS: Eastern cheese plant managers share seasonally steady production schedules. Retail demand is noted to be seasonally strong. Foodservice demand is steady to lighter. Inventories are comfortable. Buying interest for cheese remains quiet in the Central region. Some contacts share orders outside of contracts have been sparse in recent weeks. Cheddar inventories have been growing slowly. Barrel producers say their orders are steady to stronger. Spot barrel loads are selling above market prices. Spot milk prices are being reported from $0.50-under to $0.50-over Class III prices. Western contacts share Class III spot milk load availability varies from area to area. Cheese production schedules are noted to be steady. Contacts relay steady demand from international buyers. Spot cheese inventories are said to be tight.

FLUID MILK: Milk production at the farm level is variable throughout the U.S. The first NASS Milk Production report of 2024 listed a 0.9 percent decrease in January 2024 when compared to January 2023 (in the 24 selected states). Milk production is steady throughout the East region. Condensed skim demand remains strong in the Northeast, and contacts shared above Class prices for spot milk loads once again. Cream availability remains ample in the Northeast. Some Class I bottling orders were lower than anticipated due to President's Day school closures. In the Central region, week to week milk production is largely steady. Many contacts anticipate lighter spring flush milk supplies than last year. Cheesemakers in the region note spot milk offers have quieted, with some spot trades reported at $0.50-under to $0.50-over Class III. Cream supplies remain strong and spot loads are being reported at market. California milk production continues to grow week over week and is above February 2023 volumes thus far. In Arizona, milk outputs at the farm level are noted to be steady to stronger. Handlers note spot milk loads are tighter than this time last year and that Class III demand is stronger. Milk production is trending higher in New Mexico, and processors note spot milk availability is tight. Farm level milk outputs are stronger in the Pacific Northwest and are steady to stronger in Idaho, Utah, and Colorado. Cream is generally available throughout the region, and demand is steady. F.O.B. cream multiples are 1.05- 1.20 in the East, 1.00-1.27 in the Midwest, and 0.90-1.21 in the West.

DRY PRODUCTS: Low/medium nonfat dry milk (NDM) prices moved lower in all regions. Domestic demand is steady to weaker. High heat NDM prices moved lower in the West and higher on the bottom of the range in the Central and East region. A few manufacturers noted production is being slotted in only upon request and price agreement. Aside from a downward movement to the bottom end of the Central and East range, dry buttermilk prices were unchanged. Load availability for spot buyers is loosening. Dry whole milk prices held steady. Dry whole milk inventories remain tight. Dry whey prices moved higher on both ends of the range in the Northeast and West regions, and lower on the bottom end of the range in the Central region. Some processors note their volumes are either snug or simply unavailable for anything but fulfilling contractual needs. Whey protein concentrate 34% prices moved higher on both ends of the range. Loads sought out directly from processors are snug. Lactose and casein prices held steady. Some lactose processors say they are very tight moving into Q2. Brokers/contacts say that some buyers are looking to lock up casein supply contracts for as far out as the rest of 2024.

ORGANIC DAIRY MARKET NEWS: The USDA National Agricultural Statistics Service (NASS) recently released the results of the 2022 Census of Agriculture. The 2022 results showed that total organic products sales reached $9.585 billion in 2022, up from $7.277 billion in 2017, while the average sales per farm increased from $400,603 in 2017 to $553,380 in 2022. The National Organic Standards Board (NOSB) will meet in Milwaukee, WI from April 29 - May 1, 2024. The Agricultural Marketing Service (AMS) reported December 2023 estimated fluid product sales. The U.S. sale of total organic milk products was 245 million pounds, up 6.8 percent from the previous year, and down 0.3 percent year-to date.

NATIONAL RETAIL REPORT: Conventional dairy retail advertisement totals increased nine percent from last week, while organic ad totals climbed by 43 percent compared to week seven. Conventional ice cream in 48-to-64-ounce containers was the most advertised single item this week, while organic half-gallon milk ads remained atop the leaderboard for organic retail entries. The weighted average advertised price of organic half-gallon milk is $4.29, $.17 higher than last week's price and $1.87 higher than its conventional counterpart's price this week.

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