Weekly global protein digest - China’s beef prices plunge, FDA study: Pasteurization kills H5N1 virus in milk

Livestock analyst Jim Wyckoff reports on poultry, pork, beef and dairy news from around the globe
calendar icon 5 July 2024
clock icon 11 minute read

China’s beef prices plunge

Chinese wholesale beef prices have dropped 18% from last year’s peak to around 62 yuan ($8.53) a kilogram as supplies outpace demand. Beijing pushed farmers to increase domestic beef production and also encouraged more imports. But the slowing economy has dragged local prices to a five-year low as supplies pile up in frozen storage.

Butter prices have reached a record high of $7,350 per metric ton

That surpassed the previous peak of $7,086 in 2022, due to limited global supply ahead of the holiday baking season. The latest Global Dairy Trade auction, which helps set dairy prices, showed this sharp increase as demand for cheese has led dairy processors to allocate more milk for cheese production. Butter has seen increased demand since the Covid-19 pandemic, with consumers stockpiling at home. U.S. manufacturers have not expanded butter production capacity, focusing instead on cheese. The tight supply is also pressured by the highly virulent bird flu virus affecting dairy cows. Food and confectionery makers are feeling the pinch as they also face high cocoa prices and inflation in other commodities like orange juice and robusta coffee. Global buyers are paying premiums for immediate delivery due to the tight supply, especially during the Northern Hemisphere summer. However, there may be some temporary relief as butter prices have historically slumped at early July auctions.

USDA plans to amend Federal Milk Marketing Orders (FMMOs)

Key changes include:

· Updating Milk Consumption Factors to 3.3% true protein, 6.0% other solids, and 9.3% nonfat solids.

· Removing 500-pound barrel cheddar cheese prices from the Dairy Product Mandatory Reporting Program survey, using only 40-pound block cheddar cheese prices for monthly average cheese price determination.

· Updating manufacturing allowances to Cheese: $0.2504; Butter: $0.2257; NFDM: $0.2268; and Dry Whey: $0.2653.

· Proposing a butterfat recovery factor update to 91%.

· Setting Base Class I Skim Milk prices at the higher of the advanced Class III or Class IV skim milk prices for the month.

· Adopting a rolling monthly Class I extended shelf life (ESL) adjustment for better price equity for ESL products.

· Updating Class I differential values to reflect increased servicing costs, with county-specific Class I differentials specified.

A 60-day comment period will follow the plan's publication in the Federal Register in early July.

NMPF President & CEO Gregg Doud said: “Based on our initial reading, NMPF is heartened that much of what we proposed after more than two years of policy development, and another year of testimony and explanation, is reflected in USDA’s recommended Federal Milk Marketing Order modernization plan. Crafting an effective milk-pricing system for farmers is complex and requires a careful balance. USDA’s plan acknowledges that complexity and, while not matching our proposal in every detail, looks largely in keeping with the comprehensive approach painstakingly determined by the work of dairy farmers and their cooperatives over the past three years.”

“Our dairy farmers deserve to be fairly compensated for their products and for too long they have felt the economic ramifications of the 2018 farm bill pricing change,” said Sen Kirsten Gillibrand (D-N.Y.). “I look forward to working with USDA to finalize these amendments to support our New York dairy farmers.”

Impact: USDA analysts said if the “higher of” formula had been in use from 2019-23, farmers would have received $4 billion, or 10%, more for fluid milk than they actually were paid. When all the amendments are weighed, the total pool value of milk over the five years would have been $2 billion, or 1.6%, higher than it was. The pool is the combined value of the four classes of milk.

Tyson pulls back on antibiotic-free beef

Tyson Foods Inc. is downsizing its antibiotic-free beef offerings after backing away from chicken raised without antibiotics last year. In moves pointing to a broader shift, the company told a major customer late in 2023 that it wouldn’t be able to keep supplying it with beef raised without antibiotics, according to Bloomberg citing a person familiar with the decision. Tyson also said antibiotic-free beef from its Open Prairie Natural Meats brand would be limited starting in January, according to a document seen by Bloomberg.

FDA study: Pasteurization kills H5N1 virus in milk

Commonly used pasteurization time and temperature requirements are effective at inactivating the H5N1 virus in milk products, an FDA study released Friday confirmed. These results complement FDA’s initial retail sampling study in which all 297 samples of dairy products collected at retail locations were found to be negative for viable H5N1 virus.

USDA hogs and pigs report: hog herd expands more than expected

USDA’s Hogs & Pigs Report estimated the June 1 U.S. hog herd at 74.486 million head, up 935,000 head (1.3%) from year-ago and 347,000 head than the average pre-report estimate implied. The breeding herd declined 198,000 head (3.2%) to 6.008 million head, but the market hog inventory increased 1.134 million head (1.7%) to 68.479 million head. The data implies slaughter will run around 2% above year-ago through summer and then slightly more than 1% higher through the fourth quarter and early 2025.

USDA officially announces additional aid for dairy herds affected by highly pathogenic avian influenza (HPAI)

The information echoes what we reported on Thursday. Dairy producers who have experienced a loss in milk production due to HPAI can now apply for payments under the updated Emergency Assistance for Livestock, Honeybees, and Farm-raised Fish Program (ELAP). The aid is available to those with dairy herds confirmed to have HPAI through positive test results from USDA’s Animal and Plant Health Inspection Service (APHIS) National Veterinary Services Laboratories (NVSL).

The aid covers a 21-day period of no milk production when a cow is removed from the milking herd and an additional seven days when the cow returns to milking but produces only 50% of the normal amount. Payments are based on the monthly all-milk price, national milk production statistics, and a standard number of days with reduced or no production. The deadline to file a notice of loss and application for payment is Jan. 30, 30 days after the end of the prior calendar year.

USDA's Agricultural Marketing Service (AMS) published a proposed rule on Fair and Competitive Livestock and Poultry Markets

The rule in the Federal Register initiates a 60-day comment period ending on August 27. The rule has garnered both criticism and praise within the US agriculture industry. During the Office of Management and Budget (OMB) review, there were four meetings held—two with groups opposing the rule and two with groups supporting it. The forthcoming comments are expected to reflect the issues raised during these meetings.

Weekly USDA dairy report

CME GROUP CASH MARKETS (6/28) BUTTER: Grade AA closed at $3.1250. The weekly average for Grade AA is $3.0840 (-0.0123). CHEESE: Barrels closed at $1.8800 and 40# blocks at $1.9100. The weekly average for barrels is $1.8970 (-0.0505) and blocks $1.8925 (+0.0244). NONFAT DRY MILK: Grade A closed at $1.1825. The weekly average for Grade A is $1.1855 (-0.0133). DRY WHEY: Extra grade dry whey closed at $0.4900. The weekly average for dry whey is $0.4830 (+0.0055).

BUTTER HIGHLIGHTS: Contacts in the East and West say high temperatures at the start of summer have had a negative impact on milk production. This has contributed to cream volumes tightening throughout the country. In the Central region, contacts say spot loads of cream remain within fiscal reach for butter makers. Contacts in the East say butter production is slowing, but butter production is steady in the West. In the Central region, contacts relay butter demand is slightly better than in prior years. In the West, contacts report softening demand for retail and food service butter. Salted butter is available in the West, but contacts say unsalted inventories are tight. Bulk butter overages range from 3.0 to 10.0 cents over market value.

CHEESE HIGHLIGHTS: Cheese production schedules are mixed throughout the U.S. In the East, contacts relay steady cheese production schedules and steady demand from both retail and foodservice customers. Cheese manufacturers in the Central region share steady production schedules. Some contacts have shared they are refraining from purchasing additional spot loads of milk due to the upcoming Independence Day holiday as some cheese production lines may be down for a four-day weekend. Some contacts share continued strong demand for cheese and limited spot inventory, while others have shared demand is steady but has slowed down from recent weeks and months. Lighter milk production through most of the West has contributed to lighter cheese production schedules. Cheese is available for spot purchasers, but inventories are not loose. Retail demand is strong ahead of the holiday next week. The NASS Cold Storage report released earlier this week revealed total natural cheese stocks on May 31st were down slightly from April but were up 4 percent from a year ago.

FLUID MILK: Farm level milk production is mixed. Milk production in the Northeast and upper mountain states is holding steady, while the Southeast, Central, and West regions have had weaker milk output levels in recent weeks. Summer temperatures are reaching the 100-degree mark across the southern tier of states, and storm systems with high humidity moved across the Upper Midwest and Northeast. That combination of heat and humidity has put the squeeze on milk production. Cheesemakers have noticed spot milk offers are less frequent in the past two weeks. However, they expect next week will bring relatively more available milk and cream options, followed by a return of tightening milk supplies in the week following the holiday. Midwest spot milk prices ranged from $1.50-under to Class III this week. Bottling for Class I has eased into a slower summer pace. Demand for all other Classes is holding steady as some processors are slowing production for the coming midweek holiday in July. Condensed skim spot loads are generally available in the East for end users. However, the West has tighter market supplies, and demand has remained steady. Cream supplies are tightening for butter makers, as ice cream makers, who are near peak production, are taking on more of the decreasingly available cream. Cream multiples for all Classes are 1.20 - 1.40 in the East; 1.21 - 1.35 in the Midwest; and 1.05 - 1.30 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices were mixed this week. Condensed skim availability increased according to some suppliers, but NDM production schedules are steady this week and expected to be limited next week with the Thursday holiday. Dry buttermilk prices were steady in the Central/ East regions, while shifting higher in the West. Condensed buttermilk availability is seasonally decreasing. Dry whole milk prices moved higher due to limited manufacturing time and seasonal milk drawdowns. Dry whey prices were steady to higher nationally. Some processors of brand-specific whey say volumes are tight moving into Q3, while interchangeable loads are somewhat available. Whey protein concentrate (WPC) 34% prices were unchanged, as limited demand and lighter production are keeping markets from either bullish or bearish trends. Lactose prices were mixed, as some manufacturers relay volumes are tightening. Acid and rennet casein prices rebounded after a drop during report week 25.

ORGANIC DAIRY MARKET NEWS: Federal Milk Market Order 1 reported utilization of organic whole milk by pool plants in May 2024 was up from the previous year. The AMS reported April 2024 estimated U.S. sale of total organic milk products was up from the previous year and is up year-to-date. The April 2024 European organic milk average pay price increased in Austria compared to March, but decreased in France, Germany, and Bavaria. A large Dutch organic milk processor announced that the guaranteed price for organic farm milk in July 2024 is up from June. Recently released data in the UK showed organic milk production declined in May from the same month a year ago, while 2023/2024 milk year production of organic milk is down from 2022/2023. In the week 26 retail ad survey, the total number of organic dairy ads increased from the previous survey. The most advertised organic dairy commodity this week was milk. The second most advertised organic dairy commodity was sour cream, which also saw the largest percentage growth this week.

MAY MILK PRODUCTION (NASS): Milk production in the 24 major States during May totaled 18.9 billion pounds, down 0.7 percent from May 2023. April revised production, at 18.3 billion pounds, was down 0.4 percent from April 2023. The April revision represented a decrease of 27 million pounds or 0.1 percent from last month's preliminary production estimate. Production per cow in the 24 major States averaged 2,122 pounds for May, 3 pounds below May 2023. The number of milk cows on farms in the 24 major States was 8.89 million head, 52,000 head less than May 2023, but 5,000 head more than April 2024.

MAY COLD STORAGE (NASS): Total natural cheese stocks in refrigerated warehouses on May 31, 2024, were down slightly from April 2024 and down 4 percent from May 31, 2023. Butter stocks were up 5 percent from April 2024 and up 3 percent from May 31, 2023.

MARCH MAILBOX MILK PRICES (FMMO): In March 2024, mailbox milk prices for selected reporting areas in Federal milk orders averaged $19.98 per cwt, up $0.35 from the February 2024 average and down $0.34 per cwt from the March 2023 average. The component tests of producer milk in March 2024 were: butterfat, 4.25%; protein, 3.32%; and other solids, 5.78%.

MAY MARKET SUMMARY AND UTILIZATION (FMMO): During May, 12.9 billion pounds of milk were received from Federally pooled producers. This volume of milk is 4.5 percent lower than the May 2023 volume. Regulated handlers pooled 3.4 billion pounds of producer milk as Class I products, up 0.1 percent when compared to the previous year. The all-market average Class utilization percentages were: Class I = 26%, Class II = 8%, Class III = 59%, and Class IV = 7%. The weighted average statistical uniform price was $19.78 per cwt, $1.54 higher than last month and $1.53 higher than last year.

JUNE RETAIL PRICES (FMMO): U.S. simple average prices are: $4.37 per gallon for conventional whole milk, $4.31 per gallon for conventional reduced fat 2% milk, $4.82 per half gallon organic whole milk, and $4.82 per half gallon organic reduced fat 2% milk.

NATIONAL RETAIL REPORT: Total conventional dairy ads increased 13 percent, while organic dairy ads increased by 11 percent. Conventional cheese was the most advertised dairy commodity. Conventional ice cream in 48–64-ounce containers was the most advertised single item. Organic milk in half-gallon containers was the most advertised single organic dairy item this week. As a commodity, conventional butter ads increased 61 percent from the previous week.

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