Weekly global protein digest: France's BSE designation, Prop 12, USDA dairy report

Analyst Jim Wyckoff shares an update on the global protein market
calendar icon 23 June 2023
clock icon 12 minute read

California postpones Prop 12 implementation date

California pushed back the implementation date for its Proposition 12 law by six months to Jan. 1, 2024. National Pork Producers Council CEO Bryan Humphreys said, “It is welcome news to America’s pig farmers and consumers that California recognized the challenging situation the July 1 Proposition 12 implementation date will have on our industry and food supply. Granting six months of additional relief for products in the supply chain allows grocery stores to remain stocked so the 40 million Californians have uninterrupted access to affordable, safe and nutritious pork products, especially with rising food prices... While this temporary solution does not solve the challenges and uncertainty California Proposition 12 brings to our industry, NPPC looks forward to working with Congress to find a permanent solution to this problem.”

Meat recall in US

Over 42,000 pounds of Johnsonville sausages have been recalled due to possible contamination with thin black plastic strands. The affected product is the brand's "Beddar With Cheddar" pork links. The USDA cautions that consumers might still have the recalled items in their refrigerators or freezers and advises against consumption. Instead, the product should be thrown away or returned to the place of purchase. The 14-oz. packages have a "best by" date of July 11, 2023, and were shipped to retailers in Colorado, Iowa, Kansas, Missouri, Nebraska, North Dakota, Oklahoma, and Texas.

Second-largest pork producing state in Mexico has concerns over California Proposition 12's impact

Sonora state in Mexico is worried about its pork exports to the U.S. This is because their swine production system doesn't align with the guidelines of the new California regulation. As an exporting state to Japan and the U.S., Sonora would be negatively affected economically because it provides approximately 10,000 tons of pork annually to the U.S. This equates to over $43 million in income and could be at risk due to Prop 12.

Support from state governors on legislation to override Prop 12

Republican governors from 11 states representing 54% of US pork production have shown support for the Exposing Agricultural Trade Suppression (EATS) Act, legislation that seeks to override California's Proposition 12. They claim that Prop 12 imposes expensive and unscientific requirements on pork producers, potentially leading to billions of dollars in additional expense. It remains unclear whether the EATS Act will garner enough support to become law, but finding a "must-pass" legislative vehicle could be key.

Meanwhile, Kitty Block, president and CEO of the Humane Society of the United States, said: “The EATS Act presents a shocking threat to animals, consumers, workers, the environment and states’ rights.”

Sara Amundson, president of Humane Society Legislative Fund said, “It’s not California that’s trying to foist its standards on the rest of the country. It’s the pork industry’s trade association that’s trying to force every state to accept the terms of any other state that chooses not to ensure humane treatment, food safety, environmental rules, child labor protection or other standards.

Says one observer: “If they can’t see the irony in these statements, there’s not much hope of a conversation with these people.

Taiwan fully opens market to Canadian beef

Taiwan’s government agreed to fully open its market to imports of Canadian beef, lifting a stumbling block as Taipei works to sign a bilateral trade deal with Ottawa. Taiwan had previously banned imports of Canadian beef slaughtered more than 30 months earlier due to concerns about bovine spongiform encephalopathy (BSE).

US Senate panel advances bill for new feed additive category

The Senate Committee on Health, Education, Labor and Pensions this week advanced a bill that would establish a new pathway at the U.S. Food and Drug Administration (FDA) for novel feed additives to increase livestock efficiency and production. The Innovative Feed Enhancement and Economic Development (FEED) Act of 2023 (S1842) by the Senate Committee on Health, Education, Labor and Pensions aims to establish a new pathway at the U.S. Food and Drug Administration (FDA) for novel feed additives that increase livestock efficiency and production.

The FEED Act sets out to modernize the Federal Food, Drug, and Cosmetic Act, paving the way for innovative products to reach the market and advance improvements in food safety. The National Grain and Feed Association (NGFA) has expressed strong support for this bill, highlighting its potential to promote products with novel benefits, such as environmental improvements and reduced human foodborne illness.

The lawmakers who introduced the bill cite examples from Europe, Asia, and South America where feed products have demonstrated increased efficiency in meat production, as well as byproduct and waste reduction. The FDA has also acknowledged that some animal food products do not fit clearly within its existing categories and could use updated regulations.

The Innovative FEED Act would allow products with substantiated claims to be approved as feed additives, offering a more efficient and predictable process compared to the current system that classifies them as animal drugs. To ensure that this new pathway is safe and effective, the bill also establishes guardrails for product eligibility.

California Prop 12 Updates

In response to California’s Proposition 12, Sen. Roger Marshall (R-Kan.) is introducing the Ending Agricultural Trade Suppression (EATS) Act today. This bill aims to prevent states from enacting laws that impact agricultural production in other states. The law has attracted co-sponsors including Republican Senators Chuck Grassley, Joni Ernst, John Cornyn, Tom Cotton, Deb Fischer, Kevin Cramer, Eric Schmitt, and Ted Budd. The EATS Act seeks to preserve states' rights by limiting their ability to impose agricultural regulations on other states.

Proposition 12 requires pork sold in the state to be produced under specific conditions, which has caused concerns for pork-producing states, with potential nationwide implications on food costs and producers' ability to comply. Proponents of the EATS Act argue that such regulations unfairly burden other states and their agricultural industries, while opponents claim that the Act would undermine states' rights and give multinational conglomerates an unfair advantage.

Despite the support for the EATS Act, some believe that the bill is unlikely to pass Congress, as some food companies and retailers are already advocating for better living conditions for animals. The pork industry itself is divided, with several companies having adopted the California standards and reducing the use of gestation crates. The National Pork Producers Council and other agricultural organizations have supported the EATS Act, hoping to protect farmers and ranchers from burdensome regulations.

USDA is considering implementing higher standards for meat products marketed as "humanely raised" or antibiotic-free. This effort aims to respond to criticism that these claims are often exaggerated to justify higher prices. USDA's Food Safety and Inspection Service (FSIS) is under pressure to tighten oversight of marketing claims on packaged food, as consumers often pay a premium for such products based on perceived benefits such as health, environmental impact, or animal welfare.

Recent studies from animal welfare groups and science journals reveal that the USDA's rules for allowing such claims may be too lax. A report from the Animal Welfare Institute found that the USDA could not substantiate animal-raising claims on many meat products that carried related labels. Similar investigations found issues with incomplete or inaccurate label applications and antibiotics in meat that was labeled antibiotic-free.

In response, USDA wants to reduce fraudulent claims and plans to revise guidelines for companies providing documentation about animal-raising claims. They are strongly encouraging the use of third-party certification to verify these claims. Additionally, the FSIS and USDA's Agricultural Research Service plan to assess antibiotic residues in cattle and revise labeling requirements based on the results.

California Proposition 12 update (based on several sources):

  • Proposition 12 has led to significant changes in the pig production industry. U.S. producers are currently losing around $40 per pig, while Ukrainian producers are making a profit of $100 per head, making their country possibly the most profitable for hog production globally.
  • Strict enforcement of Prop 12 isn't occurring at the moment, and pork already in the pipeline won't face penalties. However, starting Jan 1, 2024, third-party inspection and certifications will be required, along with yearly renewals. Distributors must register with the CDFA by July 1, 2023.
  • As a result of Prop 12, only 8% of U.S. sow housing can currently meet the new standard, which is inadequate to fulfill California's pork demand. Producers have identified a decrease in conception rates on compliant farms as a major issue, with one solution being to double the amount of food provided to sows during the first 30 days of gestation, but this comes with added expense.
  • Major processors believe they will gradually meet California's pork demand, which is approximately 13% of total U.S. pork consumption. However, the types of pork products consumed in the state, such as bacon and ribs, might shift towards more hams and loins.

USDA supports BSE negligible risk designation for France

USDA’s Animal and Plant Health Inspection Service (APHIS) published a notice endorsing the World Organization for Animal Health (WAOH)'s assessment that France is a negligible risk country in relation to BSE, based on their review of supporting information. Public comments on the U.S. position must be submitted by Aug. 14.

Weekly USDA dairy report

CME GROUP CASH MARKETS (6/16) BUTTER: Grade AA closed at $2.3650. The weekly average for Grade AA is $2.3670 (-0.0075). CHEESE: Barrels closed at $1.5250 and 40# blocks at $1.3750. The weekly average for barrels is $1.5400 (-0.0420) and blocks, $1.3965 (-0.0650). NONFAT DRY MILK: Grade A closed at $1.1575. The weekly average for Grade A is $1.590 (-0.0035). DRY WHEY: Extra grade dry whey closed at $0.2750. The weekly average for dry whey is $0.2760 (+0.0030).

BUTTER HIGHLIGHTS: Plenty of cream is available for processing needs. A few butter manufacturers report taking on less outside cream, as scheduled major equipment maintenance is set to start. Although ice cream makers are drawing on more cream volumes, supplies remain ample for butter producers. Churns are busy, with some reports of plant managers keeping seven-day manufacturing schedules. Food service and retail demand is strong to steady. Loads are available to accommodate current demand, and some stakeholders indicate inventories are slightly heavy. However, comparatively tighter unsalted bulk butter supplies are noted as well. Bulk butter overages range from 0 to 10.75 cents above market, across all regions.

CHEESE HIGHLIGHTS: Cheese market tones continue to meet bearish impediments. There are notes from Western contacts pointing to looser block inventories, as those prices continue to depreciate on the CME daily cash call. Demand is mixed throughout the country, but food service activity is reportedly slower as schools break for the summer. Retail demand notes are generally steady. Milk remains widely available in the upper Midwest. Spot prices reported this week ranged from $12 to $3.50 under Class III. There were some cheesemakers in the Midwest relaying a stabling milk market, but clearly there is plenty of milk available for cheesemakers there. Production levels are mostly active with the notable milk amounts, particularly in the Midwest and West regions.

FLUID MILK: Milk production is mixed. Milk production is trending seasonally lower in the central region. Higher temperatures and precipitation in Arizona and California have reduced output. Favorable weather conditions in Idaho and Utah kept farm level production strong. The remainder of the country held steady milk production. Milk supplies are available throughout the country, with some continued disposal reported in the upper Midwest. In Arizona, handlers indicated some open processing capacity was filled with out of state volumes. Class I demand is lighter overall as many educational facilities have started summer breaks. Ice cream manufacturing has contributed to heavier Class II demand. Class III and IV demand is steady. Class III spot milk prices reportedly reached $12 under in the central region. Although a dry stretch helped upper Midwest farmers get plantings in, current precipitation levels are yielding possible growing concerns in the central and eastern regions. Additionally, more eastern region areas could be classified as in drought if near term precipitation is absent. Cream multiples for all Classes are 1.22-1.30 in the East, 1.20-1.29 in the Midwest, and 1.00- 1.26 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices moved down in the west and held steady elsewhere. Market tones are relatively firm compared to the more bearish pressure on dry whey and dry buttermilk. High heat NDM price ranges expanded or held firm within regions. Tightening high heat NDM inventories are noted. Dry buttermilk prices moved lower. Some off-spec loads are being sold into feed channels below the reported price ranges. Dry whole milk prices are steady. Contacts say drying time is primarily focused on condensed skim intakes. Dry whey prices in the central and northeast regions slid lower, while west dry whey prices are steady to higher. Some feed processors are finding loads of edible grade whey at similar prices to off-spec loads. Higher end whey protein concentrate 34% prices decreased. Demand is weak, and supplies are readily available. Lactose prices held steady. Most spot activity is in response to low prices or near-term need. Lower acid and rennet casein prices declined. Acid and rennet processing has picked up since early 2023.

ORGANIC DAIRY MARKET NEWS: Organic Dairy Support. The US Department of Agriculture through the Organic Dairy Marketing Assistance Program will make available to qualified producers a one-time payment to cover at least 75 percent of a farms’ projected marketing costs. Further, the program provides support for organic dairy farmers to meet the challenges of increased feed prices and other production costs. Producers must certify to pounds of 2022 milk production and have obtained a USDA organic certification. Applications are being accepted through July 26, 2023. To find out more go to https://www.fsa.usda.gov/news-... usda-offers-assistance-to-help-organic-dairy-producers-coverincreased -costs. Organic Cow Auction Prices. In a recent report from a Pacific Northwest livestock auction, organic cull cows traded somewhat lower than conventional cull cows. The average price for the top 10 organic cows auctioned was $101.85 per hundredweight, compared to the average price of $116.18 per hundredweight for auctioned top 10 conventional cows.

NATIONAL RETAIL REPORT: Total dairy retail advertisements declined on the conventional aisle by 5 percent, and organic dairy ad totals declined 3 percent, both compared to last survey. As a percentage of total dairy ads by commodity, cheese for both conventional and organic were highest, 30 and 37 percent, respectively. Ice cream in the 48-64 ounce container was the most advertised conventional dairy retail item, while half gallon milk was the most advertised organic dairy retail item.

SUPPLY AND DEMAND (WAOB): Milk production for 2023 is forecast lower than last month on slower growth in milk-per-cow than previously expected. Milk production for 2024 is unchanged from last month. For 2023, commercial exports are lowered on both fat and skim[1]solids bases. Fat basis exports are lowered on recent data and primarily lower projections for butter. Skim-solids basis exports are lowered on recent data and as weaker whey and lactose shipments are expected to more than offset higher exports of nonfat/skim milk powders. For 2024, exports are unchanged on a fat basis but are lowered on a skim-solids basis. Imports for 2023 on a fat basis are raised on stronger expected demand for butter partly offset by weaker cheese imports.

Sarah Mikesell


Sarah Mikesell grew up on a five-generation family farming operation in Ohio, USA, where her family still farms. She feels extraordinarily lucky to get to do what she loves - write about livestock and crop agriculture. You can find her on Twitter or LinkedIn.

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