Weekly global protein digest: China to purchase 19% less beef in '23, Australian beef supplies increasing

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news.
calendar icon 16 September 2022
clock icon 11 minute read
Jim Wyckoff Commentary -  TheCropSite

Latest week’s USDA export sales for U.S. pork, beef

After a multi-week absence, USDA today released its weekly U.S. export sales report. Here are the latest week’s figures for pork and beef.

Pork: Net sales of 25,100 MT for 2022 primarily for Mexico (9,900 MT, including decreases of 200 MT), China (4,700 MT, including decreases of 100 MT), Japan (4,700 MT), the Dominican Republic (1,600 MT), and Colombia (900 MT, including decreases of 100 MT), were offset by reductions for Chile (100 MT). Exports of 23,900 MT were primarily to Mexico (11,000 MT), Japan (4,100 MT), China (3,500 MT), South Korea (1,700 MT), and Colombia (1,100 MT).

Beef: Net sales of 15,100 MT for 2022 primarily for South Korea (6,700 MT, including decreases of 1,200 MT), Japan (4,200 MT, including decreases of 300 MT), Mexico (1,700 MT), Ecuador (1,700 MT), and Canada (500 MT, including decreases of 100 MT), were offset by reductions primarily for China (1,000 MT). Net sales of 900 MT for 2023 were for Japan (700 MT) and South Korea (200 MT). Exports of 15,200 MT were primarily to Japan (4,600 MT), South Korea (3,800 MT), China (2,600 MT), Mexico (1,000 MT), and Hong Kong (800 MT).

Update on this week’s China pork sales

China will sell 15,000 MT of frozen pork stocks from state reserves on Sept. 17. We reported the second batch of pork sales yesterday, though no date or tonnage were provided at that time. Last week China sold 37,000 MT of state-owned pork stocks.

US food prices continue to climb

Part of the US consumer price index report shows the past month prices for a range of goods and services remained much higher than a year earlier, the figures show. A jump in grocery prices is pinching consumers. Some food items: Prices for cereals and bakery products rose 1.2% in August and are up 16.4% over the past 12 months. Dairy products rose 0.3% but are still up 16.2% over the past year. Dairy costs had risen 1.7% in both June and July. Beef prices increased 0.8% in August, while the price of eggs rose 2.9% and are up 39.8% over the past year (see charts). Fruits and vegetables rose 0.5%.

China to release additional pork from reserves

China will release a second batch of pork from state-owned reserves, the National Development and Reform Commission (NDRC) said, hoping to temper or stabilize pork prices ahead of holidays. Chinese pork prices were up 0.4% in August compared with July. The agency sold 37,700 tonnes of pork from state reserves on Sept. 8, but there was no tonnage given in media reports about the latest release.

China to purchase 19% less beef from world markets next year

China’s economy continues to struggle under strict Covid-19 prevention measures, USDA said. That’s likely to hit hard meatpackers in Brazil, the top beef supplier to China. Beef markets have been in turmoil since the pandemic disrupted supply chains and sent prices soaring.

China will ensure ‘reasonable’ pork, hog prices

China’s state planner said the country’s supply of hogs was sufficient and would increase toward the end of the year, guaranteeing pork prices would stay in a “reasonable” range. The National Development and Reform Commission also said it would take measures to ensure that hog prices remained reasonable, after they surged in recent months.

USDA reopens comment period on poultry growing tournament systems

The Agricultural Marketing Service (AMS) has briefly reopened the public comment period on its advanced notice of proposed rulemaking (ANPR) covering poultry growing tournament systems that was published June 8. The proposed rule had a comment deadline of Sept. 6, but AMS is reopening the comment period through Sept. 26, according to a notice in the Federal Register. The revision came after AMS received requests from industry organizations for additional time to comment on the plan “citing the breadth and complexity of the questions and concepts presented for comment.”

Australian beef supplies to increase

USDA reports Australian beef supply is forecast to make a substantial step towards recovery in 2023 after falling to the lowest level in decades in 2021 and generating only a marginal improvement in 2022. The Australian cattle industry is expected to continue its strong herd rebuild in 2023 but with female slaughter rates rising. Most cattle producers have for the third successive season experienced great pasture conditions and the forecast in the coming months is for well above-average rainfall. With the support of increased female slaughter it is expected that overall cattle slaughter, beef production, and beef exports will all also rise in 2023.

USDA annual report on China livestock

Report Highlights: In 2023, China’s imports of breeding swine and pork are expected to decline to 5,000 head and 1.85 million metric tons (MMT), respectively, due to lower domestic hog and pork prices. Consumer price sensitivity and competition among producers are expected to constrain pork and hog price increases, squeezing margins. Strong carryover stocks of beef cattle from 2022 into 2023 will support an increase in cattle and beef production to 52.575 million head and 7.4 MMT, respectively. Imports of cattle and beef are forecast to decline to 300 thousand head and 2.5 MMT, respectively, in 2023 on a less optimistic economic outlook, COVID-19 restrictions and uncertainty in the HRI sector, and tight global supplies.

China’s swine production in 2023 is expected to reach 675 million head. The collapse of hog and pork prices in 2021 and the first half of 2022 caused severe losses, especially for large producers with significant investments. However, large producers remained steadfast even as losses mounted and are expected to meet production targets in 2023 to maintain market share. Midsized producers are expected to expand production in 2023 on steady hog and pork prices.

Swine Imports: Imports of live breeding swine in 2023 are estimated at 5,000 head. Imports will be pressured by lower hog and pork prices in 2023. Additionally, higher transportation costs for transporting breeding swine, stringent import quarantine and testing requirements, and ongoing COVID19 restrictions for airline crew entering China are expected to weigh on imports.

Pork Production: Pork production in 2023 is expected to grow and reach 52 million metric tons (MMT), below pre-African Swine Fever (ASF) levels but in line with consumer demand and a less optimistic economic outlook. High feed costs are expected to lower average live hog weights in 2023. The practice of “second fattening” (where standard weight hogs are retained for additional fattening by intermediary producers) is expected to have a minimal impact on overall pork production in 2023.

Pork Imports: Pork imports in 2023 are forecast at 1.85 MMT, an 8 percent decline compared to the revised estimate for 2022. The import estimate for 2022 has also been lowered, by more than half from the previous estimate published in the FAS China semi-annual report. Pork imports in 2023 are expected to decline from strong levels witnessed in the last few years as domestic production and prices stabilize. Additionally, imports are expected to be constrained as global pork prices are less competitive compared to domestic prices.

Cattle Production and Imports: In 2023, production of beef cattle is expected to rise to 52.575 million head. Stronger carryover stocks are expected to increase both beef cattle and beef production. Multiple provincial authorities have allocated resources to increasing the breeding and production of beef cattle. Imports are expected to decline to 300 thousand head due to a ban on New Zealand live cattle exports by sea that is scheduled to enter into force in April 2023. Additionally, South American exports are expected to decline due to tight supplies, exports of beef cattle for breeding over dairy cattle, and strong demand in local markets. Beef Production and Imports: Beef production in 2023 is expected to rise to 7.4 MMT on high cattle inventories reaching maturation and market weight. In 2023, imports of beef are expected to decline to 2.5 MMT on high global beef prices, lower domestic prices, and a weaker economy impacting consumers purchasing decisions of high value products such as imported beef.

China pork imports expected to decline in 2023

USDA’s attaché in China expects the country’s pork production to increase 1 MMT to 53 MMT, which would remain below pre-African swine fever levels but be in line with consumer demand. The attaché forecasts pork imports will decline 8% from this year to 1.85 MMT “as domestic production and prices stabilize. Additionally, imports are expected to be constrained as global pork prices are less competitive compared to domestic prices.” The post expects China’s beef production to rise 300,000 MT to 7.4 MMT. Beef imports are forecast to decline to 2.5 MMT amid “high global beef prices, lower domestic prices and a weaker economy impacting consumers purchasing decisions of high-value products such as imported beef.”

Weekly USDA dairy report

CME GROUP CASH MARKETS (9/9) BUTTER: Grade AA closed at $3.1700. The weekly average for Grade AA is $3.1463 (+0.0703). CHEESE: Barrels closed at $1.9325 and 40# blocks at $1.9175. The weekly average for barrels is $1.9188 (+0.0653) and blocks, $1.8444 (+0.1064). NONFAT DRY MILK: Grade A closed at $1.5750. The weekly average for Grade A is $1.5519 (+0.0069). DRY WHEY: Extra grade dry whey closed at $0.4575. The weekly average for dry whey is $0.4494 (-0.0256).

CHEESE HIGHLIGHTS: In the Northeast, milk is available for cheesemakers to run busy production schedules. Some plant managers in the Northeast and West say labor shortages and supply chain delays are preventing them from running full schedules. Meanwhile in the Midwest, milk is less available than is typical on a short holiday week. Plant managers in the Midwest relay improvements in employee and staffing retention. In the Northeast and West, retail demand for cheese is unchanged this week. Pizzamakers in the Northeast and West are purchasing more mozzarella cheese as they anticipate increased sales to football fans. In the Midwest, cheese curd producers say demand is very busy as inventories continue to move. Stakeholders in the Northeast say cheese inventories are available. Spot availability of cheese barrels and blocks is tightening in the West but remain available.

BUTTER HIGHLIGHTS: In the Northeast and West, cream demand is softening as some Class II cream users are reducing their production. Scheduled maintenance and downtime from some processors around Labor Day have contributed to lower cream multiples in the Central region. Some butter makers in the Northeast are utilizing loads of cream priced at lower multiples. In the West, butter makers are running active churning schedules, though some are limited by tanker availability and labor shortages. Central region butter makers say that most things are unchanged at the operational level. Steady demand for butter is present in the Central and West regions. Some Central region customers are hesitant, but butter sales have been holding steady ahead of the upcoming busy butter season. In the Northeast, butter orders are picking up amid tight butter inventories. Spot butter is tight in the West. Some contacts in the region are, reportedly, paring down the number of load deliveries to customers to help fulfill near-term commitments.

FLUID MILK: For the most part, milk output in the nation is flat to decreasing, seasonally. In the West, particularly, late summer’s hot temperatures are continuing to suppress cow comfort. Class I orders are seasonally active, but in years past, school district orders tend to slow down in or around mid-September, as school pipelines refill and stabilize. Class II and Class III intakes are mixed, but in a rare occurrence this year, there were no spot milk discounts reported from Midwestern cheese producers. Condensed skim supplies are adequate. Some milk handlers in the Midwest say condensed skim was more available as more processors were down for maintenance or the holiday. Cream availability is somewhat mixed, but the holiday time off did put some downward pressure on multiples. F.O.B. cream multiples are 1.32-1.50 in the East, 1.24-1.39 in the Midwest, and 1.10 -1.41 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk prices were mixed in all regions. Customer interest is steady, domestically, but Mexican interest is noted as sporadic. Dry buttermilk prices moved higher in the Central/East regions, while the bottom of the range moved lower in the West. Dry whole milk prices are unchanged, although markets could shift during a seasonal demand uptick near term. Dry whey price ranges contracted in the Central and Western regions, as the Eastern price range edged higher. Condensed whey availability tightened up for some processors in the Midwest, but Chinese importing has notably slowed in recent months. Whey protein concentrate 34% prices decreased at both ends of the range. Lactose market tones are stable, as prices on the top of the range moved higher. Casein prices held steady on very limited availability.

ORGANIC DAIRY MARKET NEWS: Organic feed corn trade activity is moderate to good. Demand is good, with bushels trading 1.17 lower FOB. There has been moderate activity on forward contracting. Organic feed soybean trade activity is light on good demand. Forward contracting activity is reported modest for new crop feed soybeans. Organic food grade wheat trades are light. Feed grade soybean meal and oil is light as well. This week, total organic dairy retail advertisements grew 23 percent from the previous survey report period. Organic milk promotions produced 52 percent of total organic retail ads by commodity, followed by organic yogurt and sour cream at 22 percent. Ad volume for organic 16-ounce sour cream soared 400 percent during post-Labor Day retail store sales events. Meanwhile, organic 16 ounces butter ads jumped 397 percent.

NATIONAL RETAIL REPORT: The number of total conventional dairy ads in the US decreased by 37 percent, while organic dairy ads increased by 23 percent. Conventional ice cream in 48–64-ounce containers was the most advertised dairy item. The weighted average advertised price for the conventional ice cream was $3.21, down 23 cents from last week.


TheCattleSite News Desk

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