Weekly global protein digest: Inflation chickens, Walmart, Biden's agenda

Analyst Jim Wyckoff shares global protein news
calendar icon 16 June 2023
clock icon 13 minute read

Weekly USDA US beef, pork export sales

US Beef: Net sales of 12,800 MT for 2023 were unchanged from the previous week, but down 23 percent from the prior 4-week average. Increases primarily for China (4,700 MT, including decreases of 100 MT), Japan (3,200 MT, including decreases of 400 MT), Mexico (1,200 MT), Taiwan (1,200 MT, including decreases of 100 MT), and South Korea (1,100 MT, including decreases of 700 MT), were offset by reductions for the United Kingdom (100 MT). Total net sales of 200 MT for 2024 were for Japan. Exports of 16,000 MT were up 4 percent from the previous week, but down 3 percent from the prior 4-week average. The destinations were primarily to South Korea (4,200 MT), Japan (4,000 MT), China (2,200 MT), Mexico (1,300 MT), and Taiwan (1,300 MT).

US Pork: Net sales of 26,700 MT for 2023 were up 5 percent from the previous week, but down 2 percent from the prior 4-week average. Increases were primarily for Mexico (10,700 MT, including decreases of 300 MT), Japan (4,700 MT, including decreases of 600 MT), Australia (1,900 MT, including decreases of 100 MT), China (1,900 MT, including decreases of 300 MT), and Canada (1,600 MT, including decreases of 500 MT). Exports of 36,000 MT were up 44 percent from the previous week and 7 percent from the prior 4-week average. The destinations were primarily to Mexico (14,400 MT), China (5,100 MT), Japan (3,900 MT), South Korea (3,200 MT), and Canada (1,800 MT).

Walmart to construct beef packing plant

Walmart revealed plans to construct a $257 million beef packaging and distribution facility in Olathe, Kansas. This is part of Walmart’s goal to establish a full Angus beef supply chain. The facility, a first-of-its-kind "case-ready" beef facility for Walmart, is set to open in 2025. Once operational, the Olathe facility will distribute Angus cuts from Sustainable Beef LLC to Walmart stores across the Midwest. Walmart had acquired a minority stake in the rancher-owned, premium beef company last August, which has also enabled the opening of a $325 million processing facility at the Nebraska headquarters. Walmart’s aim in building an end-to-end supply chain for Angus beef, first announced in 2019, is to answer customer demand for a more transparent supply chain. This will be the first time the retail giant has owned and operated a case-ready beef facility.

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).

Biden administration's spring regulatory agenda outlines potential timeline for several livestock-related actions

Among these is a Notice of Proposed Rulemaking (NPRM) for cell-based meat labeling, expected by the end of the year. There are also plans under the Packers and Stockyards Act: a) an NPRM for poultry grower payment systems and capital improvement systems in July, b) a final rule for transparency in poultry grower contracting and tournaments, expected this month (June) but not sent to the Office of Management and Budget for review yet, c) an NPRM on revised regulations concerning conduct that could violate the Act in November, and d) a final rule on inclusive competition and market integrity targeted for September. Additionally, USDA plans to release a final rule in August outlining organic livestock and poultry standards.

The Biden administration's spring regulatory agenda proposes two key actions for the meat industry. The first revolves around allowing beef imports from Paraguay by the Animal and Plant Health Inspection Service (APHIS), with a final decision targeted for March 2024. However, the actual date is still subject to change based on APHIS evaluation of public comments. The second action pertains to "Product of USA" labeling, where the Food Safety and Inspection Service (FSIS) plans to release a final decision in May 2024. FSIS proposed that the "Product of USA" and "Made in USA" labels to be used for meat products from animals that were born, raised, slaughtered, and processed in the U.S. In the meantime, FSIS is reviewing comments on the proposed rule. Additionally, APHIS is expected to release a final rule on cattle ID tags requiring both visual and electronic readability by February 2024. The Product of USA labeling effort is being monitored by Canada and Mexico to assess potential impacts on them.

National Milk Producers Federation (NMPF) outlines priorities for the 2023 Farm Bill

The group addressed measures related to commodities, conservation, trade, and nutrition. Key proposals include continuing and improving the Dairy Margin Coverage (DMC) risk management program, and updating milk pricing formulas under the Federal Milk Marketing Order (FMMO). For conservation, NMPF seeks policies supporting the dairy industry's goal of reaching net-zero greenhouse gas emissions by 2050 and emphasizes feed and manure management. In terms of trade, the NMPF prioritizes increased funding for trade promotion provisions and protecting the use of common food names. Nutrition-wise, the NMPF aims to enhance federal nutrition programs such as SNAP by promoting the purchase of dairy products and endorsing the SNAP Dairy Nutrition Incentives Program, which expands healthy milk options for beneficiaries.

US beef industry hearing

The House Judiciary Subcommittee will hold a hearing on Tuesday, titled "Where's the Beef? Regulatory Barriers to Entry and Competition in Meat Processing." The hearing aims to explore the impact of government regulations on the meat industry, particularly how these regulations create barriers for small- and medium-sized businesses. Witnesses include representatives from various farms and councils.

The focus of the hearing is expected to be the Processing Revival and Intrastate Meat Exemption Act (PRIME Act), which would enable individuals states to permit intrastate distribution of custom-slaughtered meat, has been introduced in both the House and Senate.

The North American Meat Institute (NAMI), however, argues that such a measure would jeopardize food safety and undermine consumer confidence.

This week, livestock owners are required to obtain prescriptions from veterinarians to purchase medically important antibiotics for their animals, as per the FDA's announcement. As a step in a multiyear campaign to preserve antimicrobial efficacy for human disease treatment, these new restrictions have been put in place.

Background. Over a two-year transition period, drug companies have voluntarily changed the marketing status of the affected antibiotics or removed them from over-the-counter sales. GFI No. 263, which came into effect in June 2021, impacted 4% of sales of these types of antibiotics for food-bearing and companion animals. GFI No. 213 had already been implemented in 2017, putting an end to using these antibiotics for weight gain in cattle, hogs, and poultry. The drugs are still available for disease prevention and treatment in livestock, under veterinary supervision. Farmers and ranchers can still access appropriate antimicrobials for their animals by consulting a licensed veterinarian.

As consumer habits change, the food-delivery industry is facing difficulties in adapting

Grubhub, a Chicago-based takeout pioneer, is laying off about 15% of its workforce to reduce costs and stay competitive amidst well-funded rivals and declining demand. Sales for food-delivery companies had surged during the early stages of the Covid-19 pandemic, but they have since plateaued due to customers returning to dine-in experiences. Grubhub, which used to be the market leader, has now fallen to third place behind DoorDash and Uber Eats. Other food businesses are facing similar challenges, with DoorDash cutting around 1,250 employees (6% of its workforce) last year, and Blue Apron laying off 10% of its workforce in December and selling its logistics assets in the past month. Wall Street Journal.

Drive-throughs at White Castle, McDonald’s, Wendy’s and Dunkin’ are testing chatbots that employ conversational-style AI algorithms to take orders. One advantage for the employer: The robots are never shy about encouraging add-ons. As for customers, some request human intervention—but others say they are sick of cranky fast-food workers who can’t hear their orders through defective speaker boxes and are ready for a robot revolution.

Fast-food restaurant owners in California are facing challenges as they battle against unions and Democratic legislators. After qualifying for a referendum to overturn the FAST Act, introduced to establish a 10-member council with the authority to rule on wages and working conditions, the joint-employer provision is now being reintroduced by Democrats in retaliation. The legislation, supported by the powerful Service Employees International Union (SEIU), aims at making corporations legally liable for their franchisees' labor violations, which could potentially disrupt the franchise business model. While SEIU believes this legislation is necessary, the majority of California restaurant franchises strongly oppose the bill, fearing it would interfere with their freedom to operate independently. The joint-employer legislation is seen as an attempt to silence businesses opposing progressive one-party rule in California.

How Tractor Supply’s ‘inflation chickens’ are ruling the backyard roost

When inflation drove the price of eggs up this year, some consumers took the issue into their own hands by raising chickens. Tractor Supply, America’s largest seller of live poultry, could top the all-time record it set in 2020, when it cleared 11 million birds, according to a Forbes’ article.

Tractor Supply has experienced a significant increase in the sale of live poultry, with a 60% rise in foot traffic in the category over the last five years, selling 50 million birds in that time. Factors such as inflation, with egg prices increasing, and people migrating from big cities have contributed to the demand. Good egg-laying hens can produce 250-300 eggs a year, making them an attractive alternative for those looking to avoid high egg prices.

Millennials, who have moved out of big cities during the pandemic, are among Tractor Supply's best new customers, often investing in backyard hobbies like raising chickens and gardening. People generally start with 4-6 birds, but the average customer eventually has around 14.

While the revenue from selling chicks might not be substantial, Tractor Supply gains additional income from related purchases like brooders, food and water dispensers, feed, and coops, turning the poultry business into a large part of their overall operation.

Weekly USDA dairy report

CME GROUP CASH MARKETS (6/9) BUTTER: Grade AA closed at $2.3625. The weekly average for Grade AA is $2.3745 (-0.0743). CHEESE: Barrels closed at $1.5700 and 40# blocks at $1.4225. The weekly average for barrels is $1.5820 (+0.0782) and blocks, $1.4615 (+0.0159). NONFAT DRY MILK: Grade A closed at $1.1600. The weekly average for Grade A is $1.1625 (-0.0019). DRY WHEY: Extra grade dry whey closed at $0.02750. The weekly average for dry whey is $0.2730 (+0.0080).

BUTTER HIGHLIGHTS: Cream is readily available in the Central and West regions. Contacts in the East note cream has tightened some this week, as hot weather and increased demand from ice cream makers are reducing availability. Despite this, butter makers in the region are running active schedules with some continuing to churn seven days a week. In the Central region, some butter makers have downtime scheduled this week, though overall production is active. Butter production schedules have picked up some in the West, following the recent holiday weekend. Demand for butter is strong in western food service and retail markets, while contacts note softer demand from bulk buyers. In the East, food service sales of butter are somewhat quiet, while retail demand is steady. Contacts in the Central region report butter sales are meeting seasonal expectations. Bulk butter overages range from 0 to 10.75 cents over market value.

CHEESE HIGHLIGHTS: Milk is plentiful for cheesemaking throughout the country, and contacts in the Midwest report volumes being traded from $11 to $4 under Class. Cheesemakers are operating busy production schedules in the Midwest and West. In the Northeast, contacts note strong production of American-type cheese. Retail demand for cheese is steady in the Northeast, as inflationary pressure is contributing to lighter food service sales. Domestic demand is unchanged in the West, though stakeholders say export demand varies from moderate to softer. Midwestern cheesemakers report demand is trending higher, as some say they are seeing at least slight improvements from prior weeks. Cheesemakers say most of their near[1]term cheese inventories are spoken for. Inventories of Swiss and Italian -type cheese are steady in the Northeast. Contacts in the West report block cheese inventories are slightly looser this week.

FLUID MILK: Milk production varies across the country as seasonally warmer temperatures come into play. The Northeast region is seeing steady milk production. Midwest milk output tightened in the southern portion of the region, while warmer temperatures moving toward the upper Midwest is expected to impact cow comfort levels there as well. In the West, farm level milk production is mostly steady. Meanwhile, cooler temperatures in portions of the mountainous states have led to stronger milk output. Class I milk sales are seasonally slower for most of the country, aligning with the sluggish demand from educational institutions. Heavy amounts of spot milk are being taken in by Midwest cheesemakers, reported from $4 - $11 under Class III. The regional cream supplies are readily available to satisfy increasing ice cream production and other Class II and Class IV cream[1]based manufacturing needs. F.O.B. cream multiples for All Classes range 1.22-1.30 in the East; 1.20-1.28 in the Midwest; and 1.00-1.27 in the West.

DRY PRODUCTS: The low/medium heat nonfat dry milk (NDM) price in the Central, East, and West regions ranges steady to higher. Spot demand is light to moderate. Heavy condensed skim volumes are prompting active NDM production. Export interest varies. High heat prices are steady in the Central and East, while steady to higher in the West. High heat spot markets are quiet. Dry buttermilk prices in the Central and East are steady to higher, while prices are unchanged in the West. In general, demand is sluggish as supplies increase throughout the regions. Dry whole milk prices went unchanged this week. Production is limited due to active dryer use from condensed skim processing. Dry whey prices are lower in both the West and Northeast, but prices are steady to higher in the Central region. Supplies are plentiful from strong cheese production. Export interest is moderate. The whey protein 34% market is unchanged at the bottom, but lower at the top of the price range. Inventories are more than adequate, as spot demand remains lackluster. Production is steady to light. Lactose prices are unchanged on light interest. Production is steady. Acid and rennet casein prices are lower this week.


EUROPEAN OVERVIEW: WESTERN EURPOE: While a number of market observers convey a sentiment that the European milk production peak has passed, some other sources suggest that peak production may linger and be slow to decline. In either case, milk volumes are significant. Manufacturing of most dairy commodities is heavy, and inventories are significant. Industry contacts report demand is lukewarm for most commodities. The exception to this case is cheese.

EASTERN EUROPE: Less favorable weather may slow milk production from northeast Germany into Poland and the Baltic States. Earlier this week, the EU commission extended the trade measures that allow Ukrainian agricultural products to enter the EU without tariffs. The waiver of tariffs and quotas was extended for one year. The governing body also extended the ability of 5 neighbors to Ukraine (Bulgaria, Hungary, Poland, Romania, and Slovakia) to restrict the domestic sales of selected crops while allowing those crops to enter the country for export into other countries.

OCEANIA OVERVIEW: NEW ZEALAND: In New Zealand, the month of May has typically been defined as one of the most active months for exporting. However, the pace of China's recovery has disrupted New Zealand shipping volumes, as well as the global economies. Dairy commodity processors point to China's lack of demand with impacting short term price movement, relative to the New Zealand farmgate milk price.

AUSTRALIA: In Australia, milk production trends remain below a year ago levels in most production regions. However, due to weak dairy product demand, dairy farmers stand to lose as processors released their farmgate milk price offerings for the upcoming season. Farmgate milk price offerings are set to decline as much as 10 percent from last season.

SOUTH AMERICA OVERVIEW: Weather has improved throughout the dairy concentrated areas in the Southern Cone region. Rainfall, which was detrimentally low for as long as three years, has been more regularly reported by contacts in the area since April/May. Soil health, crop expectations, and subsequently milk production have all shown some marked improvements. Lingering effects from the drought are still expected to keep markets in flux.

US NATIONAL RETAIL REPORT: Total conventional and organic retail dairy advertisements decreased by 9 and 19 percent, respectively, this week. Conventional ice cream in 48 to 64 ounce containers was the most advertised dairy item, despite a 28 percent slide from last week's ad totals. Milk in half gallons were the most advertised organic item this week, despite a seven percent downtick from week 22. The weighted average advertised price for organic half gallon milk was $4.17, compared to $2.05 for conventional half gallon milk, resulting in an organic premium of $2.12.

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