Weekly global protein digest: HPAI, Tyson, China ASF, Biden Adminsistration

Analyst Jim Wyckoff shares an update on global protein news
calendar icon 17 March 2023
clock icon 12 minute read

Minnesota law to help dairy producers may now be hurting farmers

A proposal before the Minnesota state legislature could lead to the repeal of a 56-year-old law that set a floor for grocery store milk prices in hopes of leading to more sales for the state’s dairy farmers. The current law was enacted to help farmers but has led to dairy being at a disadvantage since stores can now price non-dairy milks lower, said Sen. Jordan Rasmusson. He told the Star-Tribune that allowing stores to position dairy milk as a loss leader would help farmers and grocers make more profits in the long run.

Weekly USDA beef, pork export sales

Beef: Net US sales of 17,700 MT for 2023 were up noticeably from the previous week and up 24 percent from the prior 4-week average. Increases primarily for South Korea (5,300 MT, including decreases of 400 MT), Japan (3,200 MT, including decreases of 300 MT), Taiwan (2,600 MT, including decreases of 100 MT), Hong Kong (1,900 MT, including decreases of 100 MT), and China (1,600 MT, including decreases of 100 MT), were offset by reductions for Chile (100 MT). Exports of 15,900 MT were up 22 percent from the previous week and 2 percent from the prior 4-week average. The destinations were primarily to South Korea (4,400 MT), Japan (3,900 MT), China (2,600 MT), Mexico (1,300 MT), and Taiwan (1,000 MT).

Pork: Net US sales of 35,600 MT for 2023 were up 62 percent from the previous week, but down 5 percent from the prior 4-week average. Increases were primarily for Mexico (9,900 MT, including decreases of 300 MT), Japan (6,400 MT, including decreases of 200 MT), China (5,000 MT, including decreases of 100 MT), South Korea (4,100 MT, including decreases of 1,100 MT), and Canada (2,800 MT, including decreases of 400 MT). Exports of 29,800 MT were down 2 percent from the previous week and 1 percent from the prior 4-week average. The destinations were primarily to Mexico (13,500 MT), Japan (3,800 MT), China (3,500 MT), South Korea (2,700 MT), and Canada (1,600 MT).

China's pig farms see surge in African swine fever

Reuters reports a surge in African swine fever infections in China is set to reduce hog output later this year, according to farm managers and analysts. The incurable disease has plagued China for years, with an initial wave during 2018 and 2019 killing millions of pigs and leading to a dramatic decline in meat output that roiled global markets. Chinese farms have significantly improved hygiene and procedures since then to reduce the impact of the virus, but it still circulates constantly, often spiking in winter. Infections this year began to surge relatively late in the season, around the Lunar New Year holiday in January, when millions of people travelled after China had relaxed its COVID curbs, said three managers at pig farming companies and analysts.

USDA reports on Argentina livestock sector

USDA says after three years of dry weather conditions which have challenged the Argentine beef cattle industry, Post estimates that Argentine cattle slaughter and beef production will both drop in 2023, in line with official USDA estimates. If weather conditions begin to normalize in March and April with the end of the La Nina climate pattern, improvements in pasture conditions could permit producers to retain more cattle, potentially leading to higher prices. A reduction in beef output will be reduce both domestic consumption and exports relative to 2022. Post raises its 2023 export estimate to 780,000 tons carcass weight equivalent (CWE), marginally higher than the official USDA number, but 45,000 tons CWE lower than in 2022. China is expected to continue to be the main destination of Argentine beef, accounting for approximately 75 percent of the total.

Tyson to shutter two US poultry plants

Tyson Foods Inc. plans to shut down two of its poultry plants and lay off nearly 1,700 workers as it tries to improve its chicken operations. The company produces about one-fifth of the U.S. poultry meat supply.

PETA invokes bird flu in renewed call for White House to not use real eggs for the Easter egg roll

People for the Ethical Treatment of Animals (PETA) has issued their annual call for the White House not to use real eggs in their Easter egg roll, but this year they are invoking bird flu as a reason. The group called on First Lady Jill Biden to use plastic or wooden eggs or even painted rocks “while families are shelling out nearly 70% more for eggs amid the deadliest avian flu outbreak on record,” and so the event does not “prop up the cruel egg industry.” PETA has for years advocated that the event not use real eggs.

Smithfield Foods CEO defends pork producer’s Chinese ownership

Shane Smith points to sales growth since China’s WH Group acquired the Virginia company. The comments come following growing concerns from lawmakers over Chinese control of U.S. agriculture. 

“We’re as American today as we were in 2013,” he said during an interview cited by the Wall Street Journal at his office overlooking Virginia’s Pagan River. “When you meet with politicians and have those discussions, they seem to understand that.” 

WH’s ownership has helped Smithfield weather an industrywide decline in exports to China and ship more pork products overseas, said Smith. Pork companies mainly export the head, feet and other byproducts of the pig. 

“We’ve been able to collaborate on things like introducing an American-style bacon into China,” he said. “It’s been a really successful relationship.” 

Of note: Smith said Smithfield has discussed contingency plans in the event China escalates efforts to absorb Taiwan, a concern among U.S. leaders. Some lawmakers have called for a ban on Chinese purchases of U.S. farmland. Roughly half of the approximately 350,000 acres of U.S. farmland owned by Chinese entities is represented by Smithfield’s more than 400 company-owned hog farms and 43 plants, according to federal data.

USDA spends $670 million-plus fighting bird flu outbreaks

USDA has spent more than $670 million to contain highly pathogenic avian influenza (HPAI) and to indemnify owners for their losses, the Animal and Plant Health Inspection Service told Ag Insider. Outlays included more $414 million in compensation for “depopulated” birds and eggs, $142 million to cull flocks, dispose of dead birds and activities to kill the virus and $114 million in personnel, state agreements and field costs.

IMF: Global food crisis may persist with prices still elevated after year of war

With two of the world’s largest exporters of wheat and other crucial crops entering a second year of war, many vulnerable countries still face heightened food insecurity. Fragile and conflict-affected states, home to 1 billion people, are at particular risk, writes Jeff Kearns, Managing Editor, IMF Blog.

South American countries form group to tackle bird flu

Representatives of six South American countries — Argentina, Brazil, Bolivia, Chile, Paraguay and Uruguay — created a technical committee to address avian influenza outbreaks. The Southern Cone’s Permanent Veterinary Committee (CVP) is organizing the efforts to create a regional response to bird flu. Several of the countries have reported bird flu cases and a statement creating the group said it appeared the virus was “here to stay.” Peru, Colombia and Ecuador also joined the meeting, the statement said.

Chicken industry may stand in way of vaccinating for HPAI

As the Biden administration mulls vaccinating poultry for highly pathogenic avian influenza (HPAI), the chicken industry could stand in the way. Broiler producers are concerned about trade implications but fears that the virus will mutate or spread to humans may spur a new plan of action, according to a FoodDive article. The U.S. egg industry is more receptive to the idea of vaccinating birds.

USDA Announces >$43M Investment in Meat & Poultry Processing Research, Expansion &Innovation

The U.S. Department of Agriculture (USDA) announced today an investment of more than $43 million in meat and poultry processing research, innovation and expansion in support of its ongoing efforts to transform the food system at every stage along the supply chain. This investment is funded through the American Rescue Plan and the Agriculture and Food Research Initiative (AFRI).

As part of this total investment, the University of Arkansas was awarded a $5 million grant from the AFRI Center of Excellence for Meat and Poultry Processing and Food Safety Research and Innovation (MPPFSRI). In addition, $13.9 million in grants from the Meat and Poultry Processing Research and Innovation – Small Business Innovation Research Phase III – program were awarded to 14 small and mid-sized meat and poultry processors. These grants are administered by USDA’s National Institute of Food and Agriculture.

Additionally, one $25 million Meat and Poultry Processing Expansion Program (MPPEP) grant was awarded to Wholestone Farms for a major plant expansion in Fremont, Nebraska. This grant was administered by USDA Rural Development.

“Farmers rely on technology to become more efficient and profitable,” said Agriculture Secretary Tom Vilsack. “Under the Biden-Harris Administration and through historic funding investments, USDA continues to invest in research processing expansion that will create new and better markets and expand opportunities for small businesses and rural communities. This investment will help enable that vision.”

The AFRI MPPFSRI program promotes novel approaches to meat and poultry processing by implementing pioneering production system technology that assesses risk management and overall enhanced food safety. The University of Arkansas, Center for Scalable and Intelligent Automation in Poultry Processing, will incorporate basic and applied research in meat and poultry processing and food safety to promote technological innovation and decrease industry barriers to safety and processing.”

As part of the MPPFSRI Phase III funding investments, prior Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) awardees with relevant technologies were invited to apply for this funding opportunity. Selected awardees must provide non-restrictive access or non-exclusive licenses to any technologies or related enabling technologies developed under this award to help small and mid-size processors implement the technology.

Weekly USDA dairy market report

CME GROUP CASH MARKETS (3/10) BUTTER: Grade AA closed at $2.3325. The weekly average for Grade AA is $2.3370 (-0.0570). CHEESE: Barrels closed at $1.7700 and 40# blocks at $1.7800. The weekly average for barrels is $1.7015 (+0.1340) and blocks, $1.8325 (-0.0835). NONFAT DRY MILK: Grade A closed at $1.1750. The weekly average for Grade A is $1.1715 (-0.0115). DRY WHEY: Extra grade dry whey closed at $0.4425. The weekly average for dry whey is $0.4410 (-0.0090).

BUTTER HIGHLIGHTS: Cream supplies are ample throughout the country, though contacts in the Central regions report volumes are down, slightly, this week. Lighter production of cream cheese in the East has freed up some cream supplies for butter making. Butter churning is active in the region as some processors are operating seven -day schedules. In the Central region, butter makers are running busy schedules as they source cream from local markets and the West at similar multiples to prior weeks. Western butter makers say they are operating busy production schedules to work through available cream supplies. Demand for butter is steady to lighter in the East and West regions. Meanwhile, in the Central region, demand is trending higher ahead of the upcoming spring holidays. Inventories of bulk butter range from comfortable to tighter in the East. Stakeholders in the West report inventories of unsalted butter remain tighter than salted. Bulk butter overages range from 0 to 10 cents above the market, across all regions.

CHEESE HIGHLIGHTS: Milk is available for cheese making across all three regions. In the Midwest, contacts report loads of milk available for as much as $11 under Class III as milk offers remain abundant. Cheesemakers in the region are operating schedules as full as they can handle, and some plant managers report operating on their typical off days this week. In the Northeast and West, cheesemakers are running busy production schedules. Some cheesemakers in the West say more milk is going into hard-Italian type cheeses and aged cheese production. Demand for cheese is reported to be fair in the Midwest and is steady in the Northeast. Contacts in the West relay steady retail and food service sales, while export demand remains mixed. In the Northeast and West, cheese inventories are available for spot purchasing, though spot barrel inventories are larger than blocks. Midwest cheese storage inventories are at light to medium capacity, amid strong regional demand. FLUID MILK: National milk production is mixed. In the MidAtlantic and southernmost states of the Northeast, winter weather has been mild, and farm level milk output is nearing spring flush volumes. In the Southeast, farm level milk output is steady. Milk output is increasing week over week in the Central states. Some bottling orders have paused due to upcoming spring break weeks for schools. Spot milk loads are moving as low as $12 under Class III. Farm level milk output is steady to lighter in Arizona and steady in New Mexico. In the Oregon, Washington, Idaho, and Colorado, farm level milk output is steady. In California and Utah, farm level milk output is steady to strong. For the most part, cream multiples are steady, settling at 1.20- 1.27 in the East, 1.14-1.25 in the Midwest, and 0.9-1.21 in the West.

DRY PRODUCTS: Powder markets are generally bearish. Low/ medium heat nonfat dry milk prices are steady to lower in all regions. Prices dropped at the low end of both ranges this week. Prices for high heat nonfat dry milk in the West decreased. Domestic demand for nonfat dry milk is steady. Dry buttermilk prices moved lower in the Central and East regions, and demand remains light. In the West, the dry buttermilk price range was unchanged. Demand is light. Dry whole milk demand is quiet, and the price moved lower at the top end of the range. Dry whey demand is firm, with prices in the Central and East moving higher this week. In the West, demand is also noted as steady, and the price increased slightly at the bottom end of the range over last week. Prices for whey protein concentrate are steady to lower, as contacts have relayed that demand is quiet, and some brands are in higher demand than others. Demand for lactose is limited, and prices are under some downward pressure. Rennet and acid casein markets remain quiet, and prices are unchanged.

ORGANIC DAIRY MARKET NEWS: Compared to last period, organic feed corn is seeing light to moderate exchanges, with trades occurring 57 cents lower FOB. Organic feed soybeans are trading 86 cents lower delivered elevator, as markets observe both light demand and trade activity. Forward contracts on organic feed corn and soybeans are limited. Organic soybean meal markets are seeing few buyer/seller contacts being drawn up, but spot trading is rather active. Trades are slow for all other organic grain markets. This week, total organic ads declined 55 percent from last week's survey. Although organic milk ads decreased by 26 percent, they comprised 55 percent of the total number of organic dairy advertisements. Organic cheese advertisements seized 19 percent of all organic dairy ads. Organic milk in gallon containers was the most advertised organic dairy item. Organic gallon milk had a weighted average price of $5.83, up 11 cents from last week. Regionally, the Northeast and Southwest posted the most organic ads. Ad numbers decreased by 28 percent in the Northeast, but ad numbers increased by 45 percent in the Southwest.

US NATIONAL RETAIL REPORT: Total conventional dairy ads increased by 6 percent this week, while the number of organic ads dropped by 55 percent. Ice cream in 48-64-ounce containers was the most advertised conventional dairy item. This had a weighted average advertised price that dropped by 26 cents to $3.67. Total conventional ads for cheese grew by 42 percent this week, though the number of organic cheese ads decreased by 78 percent. Conventional 6-8-ounce packages of shred cheese was the second most advertised dairy item in this week's survey. This had a weighted average advertised price of $2.64, up 3 cents from the prior week. The weighted average advertised price for conventional milk in gallon size containers was $3.91, which was $1.92 cheaper than organic milk in gallon sized containers.

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