Weekly global protein digest: Canada's dairy TRQ, livestock disaster asssistance

Market analyst Jim Wyckoff shares highlights from this week's activities in the global protein market.
calendar icon 11 February 2022
clock icon 8 minute read
Jim Wyckoff Commentary -  TheCropSite

USDA to begin sending out livestock disaster assistance by March

USDA is expected to begin providing the initial phase of $750 million in livestock disaster assistance payments by March, Sen. John Hoeven (R-N.D.) announced. According to USDA, Phase 1 will: Use existing Livestock Forage Program (LFP) data. Require no or minimal additional paperwork from producers. Distribute at least half of the $750 million by the end of March.

“Our livestock producers have been hit by drought and other natural disasters over the last year, which has really taken a toll on their operations,” said Hoeven. “That’s why we worked to set-aside $750 million in disaster assistance specifically to help our ranchers weather the challenges of 2021. We’ve been pressing USDA to get these funds out as soon as possible, and USDA now expects this aid to begin flowing to producers by March. This is good news, and we’ll continue working to ensure the assistance is provided as effectively and efficiently as possible.”

More aid ahead. The $750 million for livestock producers is part of $10 billion in disaster aid, with an additional $9.25 billion in disaster funding to extend WHIP+ to aid producers who suffered losses due to droughts, hurricanes, wildfires, floods and other qualifying disasters in calendar years 2020 and 2021. USDA announced it will provide that assistance in a two-phase approach as well, beginning this spring.

No announcement on Canada dairy TRQ situation

Last week was the deadline for Canada to indicate how it will bring its tariff rate quota (TRQ) system for dairy products in line with a ruling handed down under dispute settlement procedures under the U.S.-Mexico-Canada Agreement (USMCA). Politico reported that Canada has submitted a proposal to the U.S., but the Canadian official would not indicate what was contained in that proposal. While the U.S. can hit Canada with retaliation in the dispute, indications are that U.S. officials are not wanting to push forward on that front just yet. Resolution on this matter is key as it will provide a glimpse into how effective the dispute-settlement provisions of USMCA will be. While they have a much shorter timeline for a resolution to be found than multilateral routes like the WTO, if there are not changes to provisions found in violation, it will dampen the effectiveness of those provisions — one of the areas that many touted as being a key advancement under USMCA.

USDA’s latest weekly US dairy market report

CME GROUP CASH MARKETS (2/04) BUTTER: Grade AA closed at $2.5000. The weekly average for Grade AA is $2.4855 (-0.1280). CHEESE: Barrels closed at $1.8950 and 40# blocks at $1.9000. The weekly average for barrels is $1.8325 (+0.1200) and blocks, $1.8695 (+0.1085). NONFAT DRY MILK: Grade A closed at $1.8325. The weekly average for Grade A is $1.8160 (+0.0215). DRY WHEY: Extra grade dry whey closed at $0.8575. The weekly average for dry whey is $0.8550 (+0.0330).

CHEESE HIGHLIGHTS: The persistent narrative of supply chain limitations and labor shortages continues to burden cheese manufacturers across the United States this week, as an end in sight regarding these perplexities is unclear. What is clear is that cheese plants that are active are running fairly busy schedules, with balanced to available milk supplies. Spot milk prices in the Midwest ranged from $2 under Class to flat market. Compared to last year, spot milk prices during week five of 2021 were $8.50 to $5 under Class. Cheesemakers' relay retail demand is generally healthy. Food service demand is somewhat quieter, and recent winter storms affecting school districts and restaurants are not expected to aid in more purchasing. Contacts also contend that teetering market prices have not enticed customers to take on anything outside of their short-term needs. This week, though, market prices have exhibited some steadily bullish resiliency.

BUTTER HIGHLIGHTS: Cream is readily available across the Central and West regions, which is helping to fuel active butter production. In the East, where heavy post-snowstorm bottling pulls are moderating milk flows to balancing operations, butter production is steady to lower. Across all regions, some manufacturers continue to face labor pool issues, supply chain issues, and transportation delays. Availability remains limited for bulk butter inventories. Food service demand is softening. Retail sales are steady to slower. Strong export interest is present. Across the country this week, bulk butter overages range from 7 to 15 cents above market.

FLUID MILK: During a week of harsh winter weather and storms in many areas, Midwest milk production may resolve lower, with the rest of the country steady to higher. In the East and West regions plant staffing shortages have led to reduced production schedules. Driver shortages are also reported. Some milk produced in the West is being sent to Canada. Spot milk prices ranged from $2 under to Class III. Some cheese plant managers say bids of $3 under or lower were not being met any more. F.O.B. cream multiples are 1.20-1.35 in the East, 1.20-1.30 in the Midwest, and 1.00-1.25 in the West. Transportation snags continue to plague condensed skim. There is condensed skim available in the Midwest pushing against transportation difficulties, including moving it to the west where there is buying interest. Cream availability is looser in the Midwest. Cream is steady elsewhere.

DRY PRODUCTS: Central and East prices for low/medium heat nonfat dry milk showed strength. The West was steady at the top of the range, but the bottom moved lower. High heat NDM prices are steady. International SMP prices are cited as helping sustain U.S. NDM pricing. Domestic NDM production continues to struggle with labor and driver shortages. Dry buttermilk prices strengthened. Buying demand is bidding for somewhat tight supplies. Global buttermilk pricing is also helping pull U.S. buttermilk prices higher. Dry whole milk prices are higher. Production is focused on contracts. Spot sales are stymied by scarce supplies. Pricing for dry whey moved higher. Supplies are tight and that is generating price strength. Whey protein concentrate 34% prices are higher. Supplies are tight. This is compounded by added demand for WPC 34% as a value substitute for other dairy proteins. Lactose pricing is steady to slightly lower at the bottom of the price range. Most U.S. production is staying in the U.S. due to export logistics challenges. Even so, inventories are staying steady. Acid and rennet casein prices increased. Constrained production and increased demand are driving pricing.

International Dairy Market News

WESTERN EUROPEAN OVERVIEW: Seasonal milk output increases in the largest dairy producing country in Europe, Germany, are inching up slowly. The persistently stifled milk production from dairy farms reflects various underlying factors. Dairy cow numbers continue to decline, according to German sources. No single factor seems to be driving this reduction. Slaughter cow prices firmed last year, which motivated some herd reductions. Also pushing this outcome was higher farm operating costs chipping away at net dairy farm earnings. Costs include feed, diesel fuel, fertilizer, energy, as well as environmental and social costs, such as environmental and animal welfare factors.

EASTERN EUROPEAN OVERVIEW: Current conditions in Ukraine and surrounding countries has led to increased discussion about where or if dairy factors may be affected, if at all. In the larger context of all of Europe, Western Europe plays a relatively minor role. But within Eastern Europe, there is substantial cross border dairy trade. AUSTRALIA: Brushfire warnings in Western Australia are generating some concern. This contrasts with recent monsoon activity which brought flooding to other areas. Extremely heavy rain from cyclone Tiffany, which caused flooding, left parts of Western Australia, South Australia and Northern Territory road and rail lines cut off.

NEW ZEALAND: The continuing strength in New Zealand WMP prices has resulted in some increases in seasonal milk price forecasts. A large New Zealand coop increased the forecast $0.50 to $8.70 - $9.50/ kgMS. Another New Zealand dairy organization shifted higher to $9.16- $9.42/kgMS. Either way, increasingly more economists are speaking about the potential for end of season milk prices setting a record if global milk supplies continue to tighten. SOUTH AMERICA: The near term outlook for milk production in Latin America is far from assured. The dryness associated with La Nina patterns is beginning to raise more concerns across the continent. Dairy farmers' yields have yet to be noticeably affected due to the dry, hot summer conditions.

Weekly US dairy retail report

The total number of conventional dairy ads grew by 6 percent last week. Organic ad numbers decreased 8 percent. Even during the cold of February, conventional ice cream in 48 – 64-oz containers is the second most advertised product/ size. The weighted average advertised price, $3.17, is $0.05 lower than last week. Ads for conventional half gallons of milk increased 70 percent. Organic milk half gallon ads increased 22 percent. Conventional half gallon milk has a national weighted average advertised price of $1.58. Organic half gallons have a national weighted average advertised price of $4.22, resulting in a $2.64 organic milk price premium.

USDA weekly US chicken retail report

USDA reports the US chicken retail feature activity and activity index continued to dwindle during this ad cycle and opportunities for shoppers to find a bargain were decreasing as well. Bagged roasters and Cornish hens do the leg work in increasing whole birds’ volume; prices are on the rise. Overall white parts move higher which can be attributed in part to the increase in B/S breasts offered in any size. Dark parts take a fall from glory as their volume is cut in half; leg quarters, thighs, and drumsticks are asking for more money. Frozen items lose some ad space, but wings are more visible in preparation for the Super Bowl parties to come. Prepared foods continue to maintain a steady presence in the deli case, offering shoppers a variety of choices. Specialty items are readily available while organics take the backseat.

TheCattleSite News Desk

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