Weekly global protein digest: HPAI in France & US, WASDE highlights, US dairy report

Analyst Jim Wyckoff shares an update on the USDA reports and global protein news
calendar icon 11 November 2022
clock icon 13 minute read

Weekly USDA export sales for US beef, pork

Cash hog index continues to decline... The CME lean hog index is down another 82 cents to $89.48 (as of Nov. 8), the first time it has been below $90.00 since Feb. 10. While the cash index continues to fall seasonally, the national direct cash price firmed 48 cents on Wednesday, the second straight daily rise.

The CME lean hog index is down another 60 cents to $90.28 (as of Nov. 7), continuing its string of seasonal price declines. But the national direct cash hog price firmed $2.45 on Tuesday. If direct prices can build on yesterday’s strength it would suggest a short-term low in the index.

Last week’s estimated hog slaughter was 2.577 million head, the highest for the year, though down 1.3% from year-ago. Hog slaughter will continue to rise seasonally but is running right in line with levels suggested by USDA’s September Hogs & Pigs Report. As slaughter levels rise, the cash hog index likely will face more seasonal pressure.

USDA’s latest weekly export sales report for beef, pork

Beef: US net sales of 13,700 MT for 2022 primarily for South Korea (7,100 MT, including decreases of 600 MT), Japan (4,700 MT, including decreases of 300 MT), Taiwan (1,800 MT, including decreases of 100 MT), Mexico (800 MT), and Canada (700 MT, including decreases of 100 MT), were offset by reductions for China (2,600 MT) and Vietnam (100 MT). Net sales of 700 MT for 2023 were reported for South Korea (300 MT), Japan (300 MT), and Canada (100 MT). Exports of 18,100 MT were primarily to Japan (5,300 MT), South Korea (5,100 MT), China (2,600 MT), Mexico (1,200 MT), and Canada (1,000 MT).

Pork: US net sales of 10,800 MT for 2022 primarily for Mexico (9,100 MT, including decreases of 400 MT), South Korea (3,500 MT, including decreases of 500 MT), China (2,400 MT, including decreases of 100 MT), the Dominican Republic (900 MT, including decreases of 100 MT), and Colombia (600 MT, including decreases of 100 MT), were offset by reductions primarily for Australia (3,500 MT), Japan (2,300 MT), and Canada (900 MT). Net sales of 700 MT for 2023 were reported for South Korea (600 MT) and Australia (100 MT). Exports of 28,400 MT were primarily to Mexico (13,500 MT), China (3,900 MT), Japan (3,000 MT), South Korea (2,000 MT), and the Dominican Republic (1,500 MT).

France issues ‘high’ alert for bird flu

France has put the country on “high” alert for bird flu, the agriculture ministry said on Thursday. The “high” risk level means all poultry should be kept inside on farms and additional security measures taken, including for hunting, to avoid a spread of the disease. Between Aug. 1 and Nov. 8, there have been 49 outbreaks of highly pathogenic avian influenza (HPAI) on French farms.

More US commercial poultry operations confirmed with HPAI

USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed highly pathogenic avian influenza (HPAI) in additional commercial poultry operations, a Nov. 6 confirmation of a case in Wright County, Iowa, with 1,022,800 commercial table egg layers and Nov. 8 confirmations in Lehigh County, Pennsylvania, in a commercial turkey meat bird flock of 17,400 and an undetermined number in a commercial turkey breeder hen operation. A commercial upland game producer in Jefferson County, Wisconsin, with 180,000 birds was also confirmed Nov. 7. There have now been 262 commercial flocks affected with HPAI in 2022.

USDA forecasts lower Australian milk production

Milk production in 2023 in Australia is forecast to decline by another two percent to 8.4 million metric tons (MMT), after an estimated six percent fall in 2022 to 8.55 MMT. This decline is expected despite a big increase in farm gate milk prices for 2022/23 to far exceed the previous record, and overall good seasonal production conditions for dairy farmers leading into the forecast year. The shortage of labor has precluded dairy farmers from taking advantage of these factors and will impact 2023 production. Factory use consumption of milk is forecast to decline to 5.535 MMT, from an estimated 5.685 MMT in 2022, pressured by lower milk production and also forecast growth in milk fluid exports in 2023. Australia is continuing to focus its processed milk products towards cheese production, which is set to remain fairly steady in 2023. However, the volume of butter, skim milk powder and whole milk powder production and exports are all forecast to decline moderately in 2023.

China’s meat imports slowed in October

China imported 630,000 MT of meat last month, down 20,000 MT (3.1%) from September and 30,000 MT (5.1%) less than last year. China doesn’t break down meat imports by class in its preliminary data, though the reduction was due to fewer pork imports. Through the first 10 months of the year, China imported 6.03 MMT of meat, down 25.0% from the same period last year.

Pace of decline slows in FAO global food price index

The U.N. Food and Agriculture Organization (FAO) global food price index ticked down 0.1 point in October — the seventh straight monthly decline —though it was 2.7 points (5.5%) above year-ago. Declines in vegoils, meat, dairy and sugar were nearly offset by a rise in cereal grain prices. Compared to year-ago, prices were up 5.7% for meat, 15.3% for dairy and 11.1% for cereal grains, while vegoils dropped 18.8% and sugar declined 8.5%.

Australia offers a preview of how the global dairy industry could crack under the pressure of climate change

The country was once a heavyweight in the business, but milk production has slipped and its share of global dairy trade has dropped from 16% in the 1990s to around 6% in 2018. Difficult business conditions added to a mass exodus from the sector: The number of dairy farms Down Under shrunk by almost three quarters from 1980 to 2020.

USDA’s monthly WASDE report: Livestock, poultry and dairy

The USDA forecast for 2022 red meat and poultry production is raised from last month as higher beef and broiler forecasts for the fourth quarter are partly offset by lower pork and turkey forecasts. Beef production is raised with higher expected cattle slaughter as well as higher carcass weights. Pork production is lowered on a slower expected pace of slaughter. Broiler production is raised on current slaughter and hatchery data. Turkey production is lowered based on tighter bird supplies. Egg production is lowered from last month on recent hatchery data. For 2023, the beef forecast is lowered on tighter supplies of fed cattle and lower cow slaughter. Broiler production is raised on expected growth in broiler flocks. Turkey production is lowered slightly for the first two quarters. Egg production is reduced as slower expected growth in production in late 2022 is carried into the first part of 2023.

Beef imports for 2022 are lowered on recent data, higher expected U.S. cow slaughter, and weaker expected imports from Oceania in the fourth quarter. Exports are lowered on recent data and expected weaker exports to Asian markets. No changes are made to beef trade for 2023.

Pork imports are lowered and exports are raised for 2022 on observed data. Weaker imports are carried through into 2023, but exports are unchanged. Broiler export forecasts for 2022 are raised on recent trade data while 2023 exports are unchanged. Turkey exports are raised for 2022 and 2023 on current trade data.

Cattle price forecasts for 2022 and 2023 are raised on stronger expected demand. The 2022 hog price forecast is raised on prices to date; 2023 prices are unchanged. The broiler price forecast for 2022 is lowered on recent data, but 2023 forecasts are unchanged.

Turkey price forecasts for both 2022 and 2023 are raised with lowered expected production. Egg price forecasts for 2022 and 2023 are raised on recent prices and expectations of continued firm demand. The milk production forecast for 2022 is raised from last month, while 2023 production is unchanged.

The dairy cow inventory for both years is lowered on recent published data but output per cow is raised. Fat and skim-solids basis imports for 2022 are lowered, driven by recent trade data and lower expected imports of cheese and butterfat products. Forecasts for 2023 fat basis imports are lowered on weaker butterfat products, while skim-solids basis imports are raised on cheese. Exports on a fat basis for 2022 are lowered on weaker expected exports of cheese and butterfat products but raised for 2023. Exports on a skim-solids basis are raised in 2022 on higher expected exports of skim milk powders (SMP) and lactose and for 2023 on higher SMP and whey exports.

For 2022, forecasts for butter, cheese, and nonfat dry milk (NDM) prices are lowered on current prices and larger milk supplies. Whey prices are unchanged. Both Class III and WASDE-630-5 Class IV prices are lowered on weaker product prices. For 2023, the price forecast for butter is raised, but lowered for cheese and NDM. Whey prices are unchanged. With lower cheese and NDM prices, Class III and Class IV price forecasts are lowered. The 2022 all milk price forecast is lowered to $25.50 per cwt and the 2023 all milk price is lowered to $22.60 per cwt.

Weekly USDA dairy report

CME GROUP CASH MARKETS (11/4)

BUTTER: Grade AA closed at $2.7725. The weekly average for Grade AA is $2.7390 (-0.4165).

CHEESE: Barrels closed at $1.9750 and 40# blocks at $2.0100. The weekly average for barrels is $1.9645 (-0.0145) and blocks, $1.9835 (-0.0200).

NONFAT DRY MILK: Grade A closed at $1.4000. The weekly average for Grade A is $1.3940 (-0.0280).

DRY WHEY: Extra grade dry whey closed at $0.4675. The weekly average for dry whey is $0.4505 (+0.0165).

CHEESE HIGHLIGHTS: In the Northeast and West, available milk is allowing cheesemakers to run steady production schedules. In the Midwest, milk has tightened slightly this week, and Class III producers are active on the spot market. Some Midwest cheesemakers say customers’ needs are changing and so they are shifting production to other cheese varieties. In the Northeast, spot cheese loads are available for purchasing, while Midwest contacts say inventories are balanced. In the West, stakeholders say cheese barrel and block loads have become more available in recent weeks. In the West, food service and export demands for cheese are steady. In the Northeast, food service sales are steady to lower, and contacts report softening retail sales in the Northeast and West. Midwest cheesemakers say sales are strong, but some process and curd producers say orders have recently slowed. Cheese markets have recently been under bearish pressure as prices pushed lower on the CME throughout last week. Some Midwestern contacts see some potential silver linings to recent changes in the market: lower prices may prompt more sales and the block barrel price spread is no longer inverted.

BUTTER HIGHLIGHTS: Cream is available in the Central region, and contacts in the Northeast and West say cream supplies are becoming more available. In the West, demand for cream is steady for Class II and butter production. Contacts in the Northeast say Class II interest in cream is limiting availability for butter makers. Meanwhile, in the Central region, extra cream has contributed to increased churning in recent weeks. Some churning in the West is limited by labor shortages, but butter makers say they are running busy schedules in the region. Butter makers in the Northeast are focusing their production on fulfilling holiday and baking season contractual needs. 

Retail butter sales are steady to higher in the Northeast, though food service demand is unchanged. Contacts in the Central region say demand is steady to busy as purchasers are making a final push ahead of the holiday season. In the West, some grocers have reportedly purchased the butter they need for the holiday season and are reducing their orders. Spot loads of butter have become more available, in the West, in recent weeks. Bulk butter overages range from 5 to 18 cents above market, across all regions.

FLUID MILK: Overall milk production is steady to higher across the country. In some warmer states, such as Florida and Arizona, temperatures are cooling. In the former, milk output is already trending higher, while contacts are optimistic that milk production will increase soon in the latter. In the Northeast, processing facilities say milk is steadily available to meet their current production needs. In the MidAtlantic, Class I sales are pulling on available milk supplies. Southeast contacts report stable bottling demand. Fluid sales are showing signs of flattening in Florida as retail outlets have satisfied orders that were backed up due to the recent hurricane. In the Midwest, Class I demand is steady and Class III processors are more actively seeking out loads. 

Milk volumes are available for processing in California. In Arizona and New Mexico, milk remains tight, and processors are purchasing loads from other states to meet current production needs. Meanwhile, loads of milk are available in the Pacific Northwest and the mountain states of Idaho, Utah, and Colorado. Some processors in those areas say they are moving loads to other parts of the West region where milk is tighter. In the East and West, demand for cream is steady. Contacts in the West say cream is more available this week; some processors are selling loads of cream at lower prices due to transportation issues. In the Central region, cream is readily available, and multiples are unchanged this week. East region ice cream makers say strong seasonal demand has prompted some to increase their purchasing of condensed skim. Meanwhile in the West, demand for condensed skim is strong and inventories remain tight. Cream multiples for all Classes are 1.34 – 1.41 in the East, 1.23 – 1.30 in the Midwest, and 1.06 – 1.29 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices shifted lower in the Central and East. Meanwhile, the bottom of the West low/medium heat NDM price range and both ends of the mostly price series dropped, but the top of the range moved higher due to prices tied to certain indexes. High heat NDM prices moved lower across the range in the West. In the Central and East regions, the top of the high heat NDM range moved lower, but the bottom was unchanged. Across all regions, dry buttermilk prices slid lower in all facets. Contacts in the Central region say market sentiment for dry buttermilk is generally bearish. Dry whole milk market tones are quiet, and prices were unchanged amid a slow spot trading week. In the Central region, dry whey prices moved higher at the bottom of the range and the top held steady.

In contrast, the bottom of the Northeast dry whey range was unchanged as the top moved higher. West dry whey prices slid lower across the range and mostly price series. Contacts in the Central region say there is some balance between supply and demand, with prices in the low- to mid- $0.40s. Domestic demand in the Northeast region is mixed; stakeholders say there is demand for specific brands, but inquiries for dry whey are down overall. In the West, domestic demand is steady, but export demand is waning as increased COVID restrictions are limiting imports into some Asian countries. Whey protein concentrate (WPC) 34% prices were unchanged across the range, though the bottom of the mostly price series inched higher. Worldwide shortages of infant formula are, reportedly, contributing to some tightness of specific brands of WPC 34% which are being sold at premium prices compared to more interchangeable loads. Spot market activity is steady to slower for lactose and prices are unchanged. Similarly, acid and rennet casein market tones are quiet and prices did not move this week.

ORGANIC DAIRY MARKET NEWS: During September 2022, organic whole milk utilization totaled 17.6 million pounds, up from 14.1 million pounds the previous year. Butterfat content, 3.27 percent, declined 3 percent from a year ago. The utilization of organic reduced fat milk, 17.4 million pounds, increased from 16.2 million pounds a year ago, while butterfat content, 1.35 percent, decreased 5 percent from a year earlier. The October 2022 in-store retail survey of selected supermarkets in twenty-nine U.S. cities shows the retail prices of organic whole milk in the half gallon container. Prices extended from $3.84 in Cincinnati, OH, to $6.49 in Pittsburgh, PA. Retail prices were steady to higher for the majority of cities surveyed, but declines in prices were noted in Miami, Oklahoma City, and St. Louis. Grocers appear to have pulled back on organic dairy weekly specials this period, as the majority of retail dairy commodities show a drop in the number of store ads compared to the previous week. Regionally, most show a decline or absence in organic dairy ads, but in the Southwest grocers’ ads grew 187 percent.

NATIONAL RETAIL REPORT: Retail dairy advertisement totals slipped lower for both conventional and organic items this week, by 16 and 18 percent, respectively. Despite cooler weather, conventional 48 to 64 ounce ice cream was the most advertised dairy item this week, while half gallon milk ads shored up the top spot on the organic side this week. Conventional butter (one-pound packages) ad numbers dropped 34 percent from last week, while organic butter ads dropped 72 percent.

Sarah Mikesell

Editor

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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