26 August 2023

9 minute read

By: Sarah Mikesell

Weekly USDA US beef, pork export sales

Beef: Net US sales of 11,400 MT for 2023 were down 25 percent from the previous week and 28 percent from the prior 4-week average. Increases primarily for South Korea (4,200 MT, including decreases of 200 MT), Japan (2,300 MT, including decreases of 100 MT), Hong Kong (1,300 MT, including decreases of 100 MT), China (1,000 MT), and Mexico (800 MT, including decreases of 100 MT), were offset by reductions for Chile (200 MT). Exports of 11,800 MT were down 25 percent from the previous week and 28 percent from the prior 4-week average. The destinations were primarily to South Korea (3,000 MT), Japan (2,500 MT), Mexico (1,600 MT), China (1,400 MT), and Canada (1,100 MT).

Pork: Net US sales of 33,000 MT for 2023 were up 15 percent from the previous week and 40 percent from the prior 4-week average. Increases were primarily for Mexico (18,000 MT, including decreases of 100 MT), South Korea (5,800 MT, including decreases of 500 MT), Colombia (3,300 MT), Japan (1,800 MT), and Canada (1,300 MT). Total net sales of 100 MT for 2024 were for Chile. Exports of 25,200 MT were down 12 percent from the previous week and 5 percent from the prior 4-week average. The destinations were primarily to Mexico (12,100 MT), China (3,100 MT), South Korea (2,300 MT), Japan (1,900 MT), and Canada (1,500 MT).

USDA reports on China hog industry - swine production to decline slightly

Swine production (pig crop) in 2024 is forecast to decline slightly more than one percent to 695 million head due to a lower sow inventory in 2023 compared to 2022. In 2023, low swine and pork prices caused losses across the swine breeding industry. Some large swine breeding companies have high asset to liability ratios and sources report that many companies needed to sell swine to supplement cash flow. Some smaller producers are also accelerating swine sales as they exit the market.

Since early 2023, industry members have been reducing production capacity (i.e., sow inventory)1 and this is expected to last through the third quarter (Q3) owing to weak consumption driven by consumer tendencies such as reducing pork demand in the summer. The average sow inventory in 2023 is expected to be lower than 2022 and Post forecasts even lower swine production in 2024. In 2023, low prices and culling as well as concerns over persistent and endemic animal disease occurrences, including African Swine Fever (ASF), contributed to “panic” sales that resulted in animals going to slaughter before ideal market weights.

The disease situation is expected to persist in 2024 and will continue to influence slaughter numbers and slaughter weights. In 2024, large-scale producers intend to continue vertical integration efforts to manage costs and capture greater profit across the value chain. A “swine cycle2 ” will continue to exist, but with less fluctuation as larger producers smooth out the volatility in the sector created when smaller producers exit or enter the market.

Hog confinement: Question 3 update

On Sept. 6, US pork producers will present their case in front of Senior Judge William Young of the U.S. District Court for the District of Massachusetts regarding the state law regulating sow confinement requirements. This lawsuit was brought by Triumph Foods and other plaintiffs. The hearing comes after the implementation of the Act to Prevent Cruelty to Farm Animals, also known as Question 3, which goes into effect on Aug. 23. Question 3 will make it illegal to sell uncooked whole pork meat that doesn't adhere to the state's sow housing standards and will also prohibit the transshipment of such pork through Massachusetts. Some exceptions are permitted over the next six months during the law's rollout.

Weekly USDA dairy report

CME GROUP CASH MARKETS (8/18) BUTTER: Grade AA closed at $2.7000. The weekly average for Grade AA is $2.7205 (+0.0515). CHEESE: Barrels closed at $1.8075 and 40# blocks at $2.0275. The weekly average for barrels is $1.8135 (+0.0080) and blocks, $2.0150 (+0.0445). NONFAT DRY MILK: Grade A closed at $1.1050. The weekly average for Grade A is $1.0980 (-0.0220). DRY WHEY: Extra grade dry whey closed at $0.2700. The weekly average for dry whey is $0.2645 (-0.0085).

BUTTER HIGHLIGHTS: Cream volumes are tight in the East and Central regions, and some Central region cream users are purchasing loads from the West. Cream output is declining in the West, though contacts in the West say availability is tighter in the southern reaches of the region. Butter makers in the East are utilizing contracted loads of cream, as spot loads are becoming harder to find, and multiples are increasing. Some Eastern butter makers are using butter, which was frozen earlier in the season, for micro-fixing. West region butter production varies as churns at some facilities are not running, while churning is steady at others. Butter makers in the West are working to build inventories ahead of the holiday season. Some contacts in the region indicate inventories of unsalted bulk butter supplies are tightening. In the Central region, butter availability has continued to tighten this week. Retail demand for butter is steady in the West, while food service sales are strong to steady. Demand for butter is strong in the East and Central regions.

CHEESE HIGHLIGHTS: In the East, bottling orders for milk are picking up as students are returning to school from summer vacations. This is contributing to decreased availability of milk for cheesemakers in the region, who say this and labor shortages are contributing to lighter cheese production. Spot milk availability is declining in the Midwest, and cheesemakers in the region say they are using internally sourced or contracted milk volumes to run regular production schedules. Milk is tightening in the West, though cheesemakers say Class III volumes are sufficient for steady cheesemaking. Demand for cheese is steady in the Midwest and West, but western contacts say export cheese sales are on the lighter end. Contacts in the East note steady retail demand but say food service orders of mozzarella cheese are strong. Cheese inventories vary across the Midwest, but an increasing number of contacts report some snugness in their cheese supplies.

FLUID MILK: Milk production is declining in the West and in the southern parts of the Midwest region. Meanwhile in the East, stakeholders say milk output is steady this week. Class I plants in the Northeast and Midwest are operating busy schedules, bottling milk for students returning to school. Class III loads of spot milk are reported from flat to $2.50 over, as cheesemakers say milk offers have grown quiet. Milk volumes are sufficient to meet processors’ needs in the Pacific Northwest and in the mountain states of Idaho, Utah, and Colorado. In the Mid-Atlantic, condensed skim processing is declining as milk is being directed towards bottling. The market for condensed skim is tightening in the Midwest, though contacts note availability varies. Contacts in the West say spot condensed skim volumes are tight. Cream volumes are tight in the East and Midwest, and stakeholders in the West say availability is tightening. Cream multiples are 1.42 – 1.50 in the East, 1.36 – 1.50 in the Midwest, and 1.16 – 1.36 in the West.

DRY PRODUCTS: Prices for low/medium heat nonfat dry milk (NDM) moved in mixed directions in the Central and East regions, while shifting higher in the West this week. Contacts in the Central region note strengthening interest in low/medium heat NDM, though recent demand has been steady to quiet. High heat NDM prices were higher across all regions in most facets this week. High heat inventories are tight in all regions. Prices for dry buttermilk were steady in the Central and East regions but moved lower in the West, while demand remains light in all regions. The price range for dry whole milk expanded this week. Production is limited, and spot inventories are tight. Dry whey prices were steady to higher in the Central and West regions, while the top of the Northeast dry whey price range moved lower. Spot loads of dry whey are adequate to meet current demands in all regions. Prices for whey protein concentrate 34% were unchanged across the range, amid steady domestic demand. Lactose prices moved higher at the bottom of the range. Contacts note an uptick in demand from domestic lactose buyers. Acid and rennet casein prices were unchanged this week.

INTERNATIONAL DAIRY MARKET NEWS: 

WESTERN EUROPE: Milk production is seasonally declining across much of Western Europe, but location has a big effect on year over year comparisons. Hot, dry weather across the southern tier of countries in Europe through much of the summer has quelled milk output there, but cooler, rainy weather has provided adequate soil moisture for crops and ideal cow comfort conditions. Adequate milk supplies and weak dairy product demand have put downward pressure on milk pay prices for farmers. Milk prices have steadily edged lower since reaching all-time highs in late 2022 or early 2023.

EASTERN EUROPE: While Eastern European milk production is declining along seasonal patterns, output in several countries is strong when comparing monthly and year-to-date milk output to last year. Online sources also suggest milk production in Ukraine has been able to grow between 2022 and 2023. Estimated milk production in July 2023 is 741,000 MT, compared to 726,000 MT in July 2022. While still significantly below the 872,000 MT from July 2021, it is a positive signal for dairy production within the region.

OCEANIA OVERVIEW: NEW ZEALAND: During GDT event 338, prices for all commodities, except for cheddar cheese, fell. Industry sources indicate this has contributed negatively on forecasted milk prices for the 2023 - 2024 production season. High inflation, particularly in rural parts of New Zealand, remains a concern in the country. Some contacts in New Zealand are concerned that high input costs and waning milk prices will negatively impact farmers during the 2023 - 2024 production season.

AUSTRALIA: Milk prices in Australia are declining as industry sources indicate exports of dairy products are down compared to one year ago. Declines in both volume and prices received were seen throughout a variety of dairy commodities. The DairyFeedbase programme is receiving additional funds from the Victorian government, who is adding additional funds to minimize the impact on climate change and the environment. The program aims to deliver projects relating to soil health, pasture composition, and reducing methane emissions.

SOUTH AMERICA: Following a long-running La Nina event, now the current concern in the region is what is expected by the El Nino phenomenon. Argentina and Uruguay, particularly, have undergone historically hot and dry weather for the better part of the past three years. Rain and warmer winter weather have arrived. With the mild winter, milk production has improved. But farmers in the region continue to deal with the repercussions of said drought and heat from the recent past on pasture and feed supplies. Some contacts have reported that farmgate milk prices are on par with previous years, but general operational/feed costs have moved higher. Contacts say seasonal milk output growth, typically beginning in July, got a head start this year. Dairy commodities are facing more pressure, due in part to the aforementioned milk output growth in Uruguay and Argentina. Brazil remains a primary destination for dairy powders from Uruguay and Argentina. Contacts and reports relay continued interest from Brazil, albeit slower than in the second half of 2022 and the early months of 2023.

US NATIONAL RETAIL REPORT: The number of conventional dairy ads declined by 10 percent this week, while total organic ads increased by 6 percent. The most advertised conventional dairy product this period was ice cream in 48-64-ounce containers, despite appearing in 6 percent fewer ads than in Week 32. The weighted average advertised price for this item was up 6 cents this week, $3.77. Organic ice cream in 48-64-ounce containers appeared in the Week 33 survey, after being absent last week. The weighted average advertised price for organic ice cream in 48-64-ounce containers was $7.99, providing an organic premium of $4.22.