Weekly global protein digest: US beef sales up, impacts of elevated beef cow culling rates

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news
calendar icon 22 July 2022
clock icon 9 minute read
Jim Wyckoff Commentary -  TheCropSite

Better US beef, pork export sales in latest week

USDA reported Thursday US beef net sales of 23,800 MT for 2022 were up noticeably from the previous week and up 97 percent from the prior 4-week average. Increases primarily for South Korea (7,700 MT, including decreases of 500 MT), Japan (5,800 MT, including decreases of 500 MT), China (3,100 MT, including decreases of 100 MT), Mexico (1,900 MT, including decreases of 100 MT), and Hong Kong (1,600 MT, including decreases of 100 MT), were offset by reductions for the United Arab Emirates (200 MT) and Chile (100 MT). Exports of 19,600 MT were up 14 percent from the previous week and 3 percent from the prior 4-week average. The destinations were primarily to Japan (5,800 MT), South Korea (5,500 MT), China (3,300 MT), Mexico (1,200 MT), and Taiwan (1,100 MT).

US pork net sales of 20,600 MT for 2022 were up 13 percent from the previous week, but down 23 percent from the prior 4-week average. Increases were primarily for Mexico (10,500 MT, including decreases of 400 MT), Japan (2,600 MT, including decreases of 200 MT), China (2,500 MT, including decreases of 300 MT), Canada (1,600 MT, including decreases of 400 MT), and Colombia (1,600 MT, including decreases of 100 MT). Exports of 26,700 MT were up 16 percent from the previous week, but down 5 percent from the prior 4-week average. The destinations were primarily to Mexico (11,300 MT), China (4,400 MT), Japan (4,200 MT), South Korea (2,000 MT), and Canada (1,300 MT).

USDA monthly livestock outlook summary

Beef/Cattle: Conditions continue to elevate beef cow culling rates and placement of calves on feed at a faster-than-expected pace. Lower expected carcass weights in second-half 2022 are more than offset by higher expected fed cattle slaughter in the fourth quarter. This slightly raised projected 2022 production; however, lower weights were carried into first-quarter 2023, marginally reducing next year’s production. Fed cattle prices in third-quarter 2022 were raised on packer demand but unchanged in 2023. Feeder cattle prices are raised on tighter expected supplies. Import projections are unchanged, but exports are raised on Asian demand and stronger demand from smaller markets. Dairy: The all-milk price in May 2022 was $27.30 per hundredweight (cwt), $0.20 higher than April and $8.20 higher than May 2021. The all-milk price forecast for 2022 and has been lowered to $26.15 per cwt (-5 cents), but the 2023 forecast has been raised to $24.15 per cwt (+35 cents). The milk production forecasts for 2022 and 2023 have been decreased as lower expected yield per cow more than offsets steady expected milk cow numbers. Due to higher prices, which should be reflected at retail level, the domestic use for dairy products was adjusted lower for 2022 and 2023.

Pork/Hogs: Inventory changes and breeding expectations reported in the June Quarterly Hogs and Pigs suggest modest adjustments in pork production in the second half of 2022 and the first half of 2023. The pork export forecast for the balance of 2022 is reduced due to weak demand in important importing regions and declining competitiveness of U.S. pork in foreign markets, a result of the ongoing appreciation of the U.S. dollar from increasing U.S. interest rates.

Poultry/Eggs: The broiler production forecast for 2022 has been decreased by 25 million pounds. Broiler export expectations for 2022 were raised. Forecasts for both production and exports in 2023 are unchanged. The annual average forecast broiler price forecast for 2022 has been lowered to 152.9 cents per pound. The 2022 table-egg production forecast is revised up based on recent production indicators. Following the recent sharp price increases, the price (wholesale, New York, Grade A, Large) forecasts for the next four quarters are revised up. The egg and egg product export forecast for 2022 is revised down, while the 2022 import forecast is revised up. Turkey production forecasts for 2022 have been raised slightly on strong poult placements. The 2023 production forecast is unchanged. Turkey ending stocks for 2022 and 2023 are unchanged. The turkey export forecast for 2022 is raised 15 million pounds. Import expectations for 2022 are raised as well. Turkey prices are raised 16 cents for the third quarter and five cents for the fourth quarter of 2022 and for each quarter of 2023. Special article:

Weekly USDA dairy report

CME GROUP CASH MARKETS (7/15) BUTTER: Grade AA closed at $2.9300. The weekly average for Grade AA is $2.9470 (-0.0005). CHEESE: Barrels closed at $2.0700 and 40# blocks at $1.9950. The weekly average for barrels is $2.1375 (-0.0381) and blocks, $2.0765 (-0.0148). NONFAT DRY MILK: Grade A closed at $1.6650. The weekly average for Grade A is $1.7000 (-0.0469). DRY WHEY: Extra grade dry whey closed at $0.4550. The weekly average for dry whey is $0.4690 (-0.0235).

CHEESE HIGHLIGHTS: Milk is available for cheesemaking throughout the country. Contacts in the Midwest report spot trades of milk have slowed this week as high temperatures in the region are impacting milk output. Production is steady in the Midwest and West, while Northeast cheese makers are running active production schedules. Cheese inventories are available in the West and are reportedly growing in the Northeast. In the Midwest, cheese inventories are somewhat balanced with current demand. International demand for cheese is strong in the Northeast and West and contacts report steady domestic demand. Domestic sales of cheese are below the expectations of some contacts in the West.

BUTTER HIGHLIGHTS: Cream availability is tightening in the Northeast and West. Demand for cream is strong in the West. In the Central region, spot cream loads remain available, despite higher temperatures impacting cow comfort and farm level milk production. Butter production is steady to lower in the Northeast. In the Central and West regions, contacts say staffing shortages are preventing them from running at capacity. Throughout the country, domestic demand is softening. Lower butter prices for butter at the July 5th GDT event have, reportedly, contributed to lighter export demand of butter from the West. Bulk butter overages range from 2 to 15 cents above market, across all regions.

FLUID MILK: Milk production is steady to lower through much of the nation as summer heat takes hold. The exception is the Pacific Northwest, where favorable weather has improved cow comfort and temporarily increased milk output. Spot milk loads are available in the Upper Midwest, but purchases and offers are lower than previous weeks. Reported spot milk prices are $3 to $1 under Class III in the Midwest and $6 under Class IV in the mountain states. In the West, some milk is moving from California and the mountain states into neighboring states. Cream availability is steady to tighter and multiples have moved slightly higher. F.O.B. cream multiples for all classes are 1.35-1.43 in the East; 1.26-1.37 in the Midwest; 1.08-1.33 in the West. Condensed skim demand is strong in the West but varies in the East.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices slipped during the trading week. Domestic and export demands have been quiet. High heat NDM prices shifted lower, also. Buttermilk powder prices held steady in all regions, based on limited supplies and slow trading activity, in general. Dry whole milk prices held, based on scant production/availability. Central dry whey prices were steady on slow trading. The Western dry whey price contracted, while prices slid lower in the East. Whey customer interests are limited amid potentially bearish upcoming market tones. The bottom of the lactose price range increased, while all other prices were unmoved. Whey protein concentrate 34% prices were static on slower trading, particularly for loads not meeting certain specifications. Rennet casein prices were steady after last week’s movement up, while acid casein prices moved significantly higher based on continued demand during a very firm market.

ORGANIC DAIRY MARKET NEWS: The May 2022 estimated U.S. sales of total organic milk products was 244 million pounds, up 4.4 fluid product percent from May 2021, but down 2.6 percent year-to -date. Organic whole milk sales, 114 million pounds, were up 5.0 percent compared to a year earlier and up 1.0 percent year-to-date. Reduced fat milk (2%) sales were 80 million pounds, up 6.5 percent from the previous year, but down 4.0 percent year-to-date. Organic flavored whole milk sales, 2 million pounds, increased 13.8 percent from the previous year and increased 7.3 percent year-to-date. Total organic dairy retail advertisements increased 110 percent. Store ads are 34 percent higher than last year for this period. Organic yogurt promotions soared, posting 13 times more ads compared to last week. Meanwhile, organic milk ads, as a whole, increased 89 percent across the country. The biggest change to ads amongst surveyed dairy commodities, by package size, occurred with organic Greek yogurt, 32 -ounce packaging, which saw a 323 percent jump in ads. The national weighted average advertised price rose to $5.22, up 31 percent from last week.

NATIONAL RETAIL REPORT: Total organic dairy retail advertisement totals more than doubled this week, while conventional dairy ad numbers slid by four percent from week 27. Conventional ice cream, in 48-to-64-ounce containers, continues to take the top spot of most advertised dairy item despite a 15 percent drop week over week. Clearly, cultures have changed from one week to the next, as total yogurt ad numbers moved higher week to week. Retailers increased organic yogurt ad totals by 12 times compared to last week.

China’s sow herd increases in June

China’s sow herd at the end of June rose for the second consecutive month, reaching 42.8 million head, according to the country’s ag ministry. While that was up 2% from May, it was still down 6.3% from last year. Current live hog production is at a “normal and reasonable” level, an ag ministry official said. “Live hog and pork production will increase steadily in July and August... the supply of large hogs is guaranteed in the second half of the year,” the official noted.

US pork checkoff rate to drop 12.5%

USDA formally proposed reducing the pork checkoff rate from 40 cents to 35 cents per $100 value for live animals, in line with a vote by National Pork Producers Council delegates. Revenue from the checkoff is anticipated to fall $13.5 million. The amount raised for promotion and marketing in 2021 was $103.6 million, a 41% increase from the year before due to a 47% increase in live hog prices. The proposed reduction is seen lowering the domestic assessment by $12.3 million and the importer assessment by $1.2 million. However, the notice said that even with the reduction, total program funds "will have increased significantly above 2020 levels owing to the ongoing increase in price levels, assuming general market conditions of 2021 persist."

Chinese pork imports remain light

China imported 120,000 MT of pork in June, down 10,000 MT (7.7%) from May and 64.2% less than last year. Through the first half of this year, China’s pork imports at 800,000 MT fell 65.1% from the same period last year.

Chinese pork production surges

China’s second-quarter pork production climbed to 13.8 MMT, the highest level for the period since at least 2015. China’s first-half pork production jumped 8.2% from year-ago to 29.4 MMT amid an 8.4% increase in slaughter. The country aggressively rebuilt its hog herd following the African swine fever outbreak, but producers starting culling sows later last year amid poor margins. China’s overall hog herd as of June 30 contracted by 1.9% compared to year-ago to 430.67 million head.

TheCattleSite News Desk

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