Weekly global protein digest: August US milk production up 1.7 percent

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news.
calendar icon 23 September 2022
clock icon 11 minute read
Jim Wyckoff Commentary -  TheCropSite

Weekly USDA beef, pork export sales

Beef: Net sales of 15,200 MT for 2022 were primarily for China (6,200 MT, including decreases of 200 MT), Japan (3,200 MT, including decreases of 500 MT), South Korea (1,200 MT, including decreases of 700 MT), Mexico (1,100 MT), and Canada (800 MT). Net sales of 300 MT for 2023 were for Japan. Exports of 18,600 MT were primarily to South Korea (4,600 MT), China (4,300 MT), Japan (4,300 MT), Mexico (1,500 MT), and Canada (1,000 MT).

Pork: Net sales of 29,000 MT for 2022 were primarily for Mexico (15,500 MT, including decreases of 600 MT), Canada (2,300 MT, including decreases of 500 MT), China (2,200 MT, including decreases of 200 MT), Japan (2,200 MT, including decreases of 200 MT), and South Korea (2,100 MT, including decreases of 100 MT). Exports of 26,500 MT were primarily to Mexico (12,500 MT), Japan (3,200 MT), China (3,100 MT), South Korea (2,200 MT), and Canada (1,700 MT).

China to sell more pork stocks

China will release another 14,400 MT of frozen pork from state-owned reserves on Sept. 23, continuing its recent sales onto the domestic market to ensure adequate supplies amid rising prices as the country heads into its extended holiday season. In total, China plans to sell around 200,000 MT of pork from state-owned reserves.

USDA’s annual report on China’s poultry industry

In 2023, poultry production in China is expected to remain stable at 14.3 million metric tons. White feather broilers’ share of overall chicken production is expected to increase, while yellow feather broiler production is expected to decline. In 2023, imports (excluding paws) are expected to reach 750 thousand MT from lower 2022 rates. China currently restricts imports of select U.S. poultry and poultry products from several locations based on concerns over highly pathogenic avian influenza. China’s exports in 2023 are expected to increase 5 percent to 575 thousand MT as demand resumes in mature and new markets.

FAS China estimates for 2022 chicken meat do not vary from USDA Official estimates for production, supply, and distribution.

Production: In 2023, chicken production is expected to remain steady at 14.3 million metric tons (MMT). Demand for affordable chicken products, particularly white broiler meat, is expected to grow in 2023. Consumers’ shift towards a more diverse protein diet will drive demand for white broiler products and drive increases in production. Yellow broiler production will be negatively affected by consumer price sensitivity and China’s ongoing COVID-19 restrictions.

Consumption: In 2023, demand for poultry products, particularly white broiler products, is expected to increase from the institutional and retail sectors to reach 14.475 MMT, a 1 percent increase over 2022.

Imports: In 2023, imports of chicken meat (excluding paws) are projected to reach 750 thousand MT after declining in 2022. In 2022, highly pathogenic avian influenza (HPAI) outbreaks limited imports from multiple countries, including the United States – the second largest exporter of poultry products to China.

Exports: In 2023, exports of poultry products from China to Hong Kong, Japan and other markets are expected to grow by 5 percent to 575 thousand MT as demand by consumers in other countries returns to normal.

China pork imports rose in August

China imported 140,000 MT of pork in August, up 20,000 MT from July but still 50% less than last year. For the first eight months of the year, China imported 1.07 MMT of pork, down 63.6% from the same period last year.

US pork producers list industry priorities

The National Pork Producers Council (NPPC) held its fall Legislative Action Conference Wednesday and Thursday last week, meeting with their members of Congress to discuss pork industry priorities. Over the two-day event, NPPC said its producers asked lawmakers to:

  • Trade policy: Press the Biden administration to join the 11-nation Comprehensive and Progressive Trans-Pacific Partnership and to negotiate an Indo-Pacific Economic Framework trade deal that addresses market access for and non-tariff barriers to U.S. products.
  • Expand the H-2A visa program to year-round agricultural workers, including packing plant employees. Currently, the visa only allows for temporary, seasonal farm laborers.
  • Pass the “Beagle Brigade Act,” authorizing a training center for dogs that can detect animal and plant diseases and pests at the country’s points of entry. Only the Senate must approve the measure; the House passed the bill earlier this year. Producers also asked that the Bureau of Customs and Border Protection agricultural inspection program be fully funded.
  • Next farm bill: Fund in next farm bill the National Annual Vaccine and Veterinary Countermeasures Bank, the National Animal Health Laboratory Network, the National Animal Disease Preparedness and Response Program, and the National Veterinary Stockpile. Producers also asked for an increase in funds to help reduce the population of feral swine, which can carry foreign animal diseases.
  • Trade promotion: Reauthorize and fund — also through the farm bill — the Market Access and the Foreign Market Development programs to promote U.S. agricultural exports and authorize a USDA catastrophic risk insurance program to help mitigate risks for pork producers.

August US milk production up 1.7 percent

US milk production in the 24 major States during August totaled 18.2 billion pounds, up 1.7 percent from August 2021. July revised production, at 18.4 billion pounds, was up 0.6 percent from July 2021. The July revision represented an increase of 53 million pounds or 0.3 percent from last month's preliminary production estimate. Production per cow in the 24 major States averaged 2,041 pounds for August, 37 pounds above August 2021. The number of milk cows on farms in the 24 major States was 8.93 million head, 11,000 head less than August 2021, but 8,000 head more than July 2022.

Chinese pork prices surge

China’s ag ministry says the price of pork in the country averaged 30.69 yuan ($4.43) per kilogram for the week ended Sept. 9, up 1.2% from the previous week and 69.4% higher than last year. China will release a record 200,000 MT of pork from state reserves this month to boost supplies and stabilize prices.

Weekly USDA dairy report

CME GROUP CASH MARKETS (9/16) BUTTER: Grade AA closed at $3.1325. The weekly average for Grade AA is $3.1845 (+0.0382). CHEESE: Barrels closed at $2.0900 and 40# blocks at $2.0600. The weekly average for barrels is $2.0510 (+0.1322) and blocks, $2.0265 (+0.1821). NONFAT DRY MILK: Grade A closed at $1.5700. The weekly average for Grade A is $1.5725 (+0.0206). DRY WHEY: Extra grade dry whey closed at $0.4600. The weekly average for dry whey is $0.4760 (+0.0266).

CHEESE HIGHLIGHTS: Cheesemakers in the Northeast and West say milk volumes are declining, but sufficient for their current processing schedules. In the Midwest, contacts note prices for milk are at Class or slightly over. In the Northeast cheese inventories are available, but contacts report inventories are tightening in the Midwest and West. Some barrel producers say they are concerned with current production capacity and if they will meet end-of-year holiday demands. Pizzamakers are purchasing more mozzarella cheese in the Northeast and West. Overall food service demand is mixed in the Northeast. Some restaurants in the region are operating reduced hours due to labor shortages, while others are reportedly limiting their menu offerings. Export demand is strong. Contacts in the West say domestically produced loads of cheese are priced competitively to other countries, contributing to increased international demand.

BUTTER HIGHLIGHTS: In the Northeast and West, cream demand is strong and spot availability is limited. Butter makers in these regions say this is contributing to reduced butter production. Meanwhile in the Midwest, cream volumes are tightening, and higher multiples are preventing some butter makers from purchasing additional loads. Midwestern butter makers are focusing their time on micro-fixing. Spot butter inventories are tight, and contacts in the Northeast and Central regions are concerned about butter availability as retailers are preparing for the Q4 holidays. Demand for butter is strengthening in Western retail markets as some grocers are increasing their orders ahead of the baking season. In the Northeast region, some purchasers are concerned that record high butter prices will cause retail demand to soften.

FLUID MILK: Milk production in some areas of the nation continues to trend lower or hold steady, primarily due to hot and/or humid summer weather conditions. On the other hand, exceptions to the trend can be seen in Northeast, Midwest southern and middle portions, Pacific Northwest, and the mountainous states, where cooler temperatures are advancing milk production volumes. Fluid milk demand is active as bottling facilities across the country continue to refill school and university milk pipelines. Bottlers in the Southeast observed a solid increase in sales this week. Manufacturers’ postholiday milk supplies are in balance in most areas of the country, but some plants are able to fit in maintenance activities, resulting from lighter milk intakes. Cream supplies are available, but fairly limited due to the active Class II output and seasonally low butterfat component levels. Growing demand from cream cheese operations pulls heavily on supplies this week, as western butter makers maintain their strong interest in cream. Contract sales of tight condensed skim supplies pressured cash trades in the East, prompting 12 to 14 cents over spot transactions. For all Classes, the f.o.b. cream multiple ranges 1.35-1.50 in the East; 1.30-1.40 in the Midwest; and 1.10-1.40 in the West.

DRY PRODUCTS: Regional prices for low/medium heat nonfat dry milk (NDM) are steady to higher in the East and Central, but mixed in the West. nonfat dry milk prices are steady in the Central and East, but higher in the West. The buttermilk powder prices are steady in the Central and East, but steady to lower in the West. Contracts are driving production, while buttermilk powder demand from spot buyers is fairly relaxed ahead of the baking season. The whole milk powder price is stable in a somewhat quiet buyers’ market. A seasonal uptick is anticipated in the near term. Dry whey prices are mixed. The range prices are steady in the Central, but high to lower in the West and Northeast. End-user spot interest is growing in domestic markets, with steady demand in global outlets. Whey protein concentrate 34% prices remained the same this week. Production is fairly steady. While the lactose price is mostly steady, the bottom of the mostly series did adjust higher. Inventories are heavy.

INTERNATIONAL DAIRY MARKET NEWS: EUROPEAN OVERVIEW: WESTERN EUROPE: Western European milk output has continued the normal seasonal decline. Production typically reaches the annual nadir in October or November depending on location. Within pockets of Europe, the summertime heat and drought have eased, but milk production is still weak and milk components are low. According to CLAL data made available to USDA, EU cows' milk delivered to dairies January - July 2022 is estimated at 86,623,000 MT, down 0.5 percent when compared to January - July 2021 EU milk production. The industry is trying to work through the uncertainty of a market driven by weak supply and weak demand. In an effort to help protect their milk production supply, at least one European processing company will be issuing a supplemental payment to its farmer owners to ease some of the impacts of higher production costs. EASTERN EUROPE: Like their Western European counterparts, Eastern European dairies are experiencing the normal seasonal decline in milk output volumes. However, some countries have seen year over year milk growth in 2022.

OCEANIA OVERVIEW: NEW ZEALAND: A couple of months into the new seasonal milk production period, New Zealand continues to face milk supply challenges, as volumes fall behind initial industry projections. From weather to labor issues and feed costs, a number of adverse conditions are making it difficult for the country to reach its milk production goals. In general, limitations in the milk volumes are pushing an increase in dairy commodity prices and consequently the value of New Zealand exports of those dairy commodities. With the conclusion of July 2022, sources report that the export value of milk powder, butter, and cheese increased, $2.8 billion to $18.8 billion, compared with the year ended July 2021.

AUSTRALIA: While Australia has benefitted from recent rain over a wide swath of dairy regions, drier weather can now be seen in Western Australia, where sunny skies and soil moisture favor and help maintain good winter crop prospects. The result is decent stocks of feed and good growth of new season feed and hay. Dairy producers have benefitted by lower need to move feed some distance to remain stocked. Some farmers, in an effort to maintain their livelihoods, have banded together to create their own local milk brand, as sources suggest that with continued low production and supply shortfalls expected in Australia, the competition at the farm and processor levels has picked up.

SOUTH AMERICA OVERVIEW: Reports continue to be mixed for milk output in the region, but the general outlook is and has been somewhat bearish on milk production in South America. Although feed prices have stabilized, machinery, upkeep, hauling/fuel and labor costs continue to hamper production at the farm level (and at the processing level.) All that said, there are some contacts who expect a stronger push in the coming months, as springtime looms. Demand remains hearty for milk, though, as processors vie for limited farm milk loads.

US NATIONAL RETAIL REPORT: Total conventional dairy ads grew by 29 percent and organic dairy ads increased by 47 percent this week. Despite appearing in 11 percent fewer ads this period, conventional ice cream in 48–64-ounce containers was the most advertised dairy item. The number of ads for conventional yogurt increased by 27 percent, while organic yogurt ads numbers grew by 195 percent. Total conventional milk ads grew by 282 percent this week, while organic milk ads increased by 49 percent.


TheCattleSite News Desk

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