Weekly global protein digest: Countries move to stop imports of Kentucky poultry, prices higher amid low cold stocks

Market analyst Jim Wyckoff shares highlights from this week's activities in the global protein market.
calendar icon 18 February 2022
clock icon 11 minute read

More countries add restrictions on poultry from Kentucky

Confirmation of highly pathogenic avian influenza (HPAI) in a commercial broiler flock of 240,000 chickens owned by Tyson Foods in Fulton County, Kentucky has prompted additional countries to block imports of poultry, with most of the restrictions added by USDA’s Food Safety and Inspection Service for product from the entire state of Kentucky.

Poultry/products from the county on or after the specified date: Jamaica (Feb. 12, includes Hickman County), Vietnam (Feb. 8). Poultry/products from a 10-kilometer radius as of the specified date: Egypt (Feb. 12), Mauritius (Jan. 22), Morocco (Jan. 22).

Poultry/products from the state of Kentucky on or after the specified date: Benin (Jan. 22), China (Feb. 12), Cuba (Feb. 12), Dominica (Feb. 12), Dominican Republic (Feb. 12), French Polynesia (Tahiti) (Feb. 12), Korea (Feb. 12), Namibia (Jan. 22), South Africa (Jan. 22), St. Lucia (Feb. 12), Tunisia (Feb. 12), Uruguay (Feb. 12).

There has still not been a confirmation from USDA’s Animal and Plant Health Inspection Service (APHIS) relative to a non-negative result reported for another Kentucky location.

USDA confirmation of potential second Indiana bird flu case awaited. The Indiana Board of Animal Health reported a potential case of H5 highly pathogenic avian influenza (HPAI) has been found in a second commercial turkey flock in DuBois County, Indiana, but confirmatory test results are still awaited. The find is in a flock of 26,473 birds in the county and the agency said that depopulation is ongoing.

USDA sends new poultry contracting rules for review

USDA moved toward publishing a proposed new rule regulating “tournament systems” heavily used by poultry companies to pay growers, sending the rule to the White House’s Office of Management and Budget. The proposal would be first in a series of proposed USDA rules to address the White House’s goal of more competition in the livestock and poultry processing industries. Advocates of poultry growers have complained the ranking system poultry firms often use to compensate farmers is opaque and unfair.

Rising food prices drive unrest in Africa

Parts of Africa are contending with a wave of inflation that is, by some measures, even worse than the supply shocks cascading around the rest of the world, the Wall Street Journal reports. Food prices are at their highest levels in over a decade, according to the United Nations’ Food and Agriculture Organization, compounding the plight of some 40 million people thrown into poverty by the impact of the Covid-19 pandemic and its accompanying lockdowns. That is creating a food crisis that threatens to spill over into unrest. In some places, it is already driving people to emigrate. Over the past 12 months, some 100,000 Ugandans — including teachers, accountants and social workers — have migrated to wealthy Gulf states of the Middle East, according to government data. That flow could pick up pace as prices track higher, undermining what had been one of Africa’s economic success stories.

USDA’s monthly livestock report

Poultry/Eggs: The 2022 broiler production forecast was adjusted down from the previous forecast but is still expected to increase by 2 percent over 2021. Broiler ending stocks were lower than expected at the end of 2021, so 2022 ending stocks were also revised down. The broiler export forecast was revised down in 2022 but is still expected to increase slightly from the 2021 total. The annual average broiler price forecast was adjusted up by 1 cent in 2022 on higher expected feed costs. The table egg production for 2022 was revised down across all quarters based on current trends in flock indicators and expectations of higher feed costs, while wholesale egg prices were revised up due to strong trends in January and early February. The egg and egg-product export forecast for 2022 was revised down based on current trade data, while the import forecast was revised up. The 2022 turkey production forecast was adjusted down but is still expected to increase by 1 percent over 2021. Forecast turkey exports were adjusted down by 20 million pounds in 2022. Turkey prices were adjusted up by 1 cent in 2022 on higher expected feed costs.

Beef/Cattle: The total number of cattle and calves on January 1, 2022, was estimated at 91.9 million head, down 2 percent from a year ago. The forecast for 2022 commercial beef production was raised by 210 million pounds from last month to 27.375 billion pounds on higher expected fed cattle slaughter and heavier carcass weights. Fed and feeder steer prices were raised for 2022. December’s beef imports totaled 273 million pounds, up 30 percent from a year ago. The 2022 annual forecast for beef imports was raised 105 million pounds from last month to 3.370 billion pounds. December’s beef exports were up 288 million pounds, 1 percent over the previous year. The beef export forecast for 2022 was unchanged from last month at 3.270 billion pounds. Lamb/Sheep: The estimated total number of sheep on U.S. farms on January 1, 2022, was 5.065 million head, 2.0 percent below the 2021 inventory. Strong prices in the early part of this year lead to upward revisions in the lamb price forecasts for the first two quarters of 2022.

Dairy: The milk production forecast for 2022 has been lowered as fewer milk cows are expected. The forecast for the average number of milk cows has been lowered because of recent declines in milk cow numbers, higher projected feed prices, a low inventory of replacement heifers, and higher expected cull-cow prices. Dairy export forecasts have been lowered as U.S. prices are expected to become less competitive. The all-milk price forecast for 2022 has been raised to $23.55 per hundredweight, $0.95 higher than last month’s forecast.

Pork/Hogs: Price forecasts of live equivalent 51-52 percent lean hogs are raised in each quarter of 2022 on tighter-than-expected supplies of slaughter hog numbers early in the year and expectations of continued strong consumer demand for pork. Strong seasonal factors are expected to amplify first-quarter increases, carrying hog prices higher into the fourth quarter of this year. Quarterly pork export forecasts are reduced on lower-than-expected December trade data and expectations for continued recovery of China’s swine sector from disease problems. Total 2022 pork exports are expected to be 6.8 billion pounds, about 3 percent lower than exports last year.

USDA’s monthly broiler production report

Broiler Production in 2021 Increased Over 2022; Cold Stocks Fell December broiler production totaled 3.691 billion pounds, a decrease of less than 1 percent from last December. This was a result of slight year-over-year declines in both head slaughtered and average live weights. Total 2021 production is estimated at 44.890 billion pounds, an increase of less than 1 percent from 2020. Based on weak preliminary January slaughter data and winter weather that caused multi-day plant shut-downs in early February, the first-quarter production projection was adjusted down by 100 million pounds to 11.15 billion pounds. The outlying quarters of 2022 were adjusted down as higher forecast feed costs temper growth. Total projected production for 2022 is 45.485 billion pounds. This would be a year-over-year increase of just over 1 percent from 2021.

Broiler meat in cold storage fell to 704 million pounds at the end of December as production failed to keep pace with demand. This is a slight decrease from the end of November and 15 percent less than the end of 2020. Breast meat in particular saw a decline in cold storage stocks at the end of 2021, 104 million pounds lower than the end of 2020. Only chicken wings and leg quarters have seen increases in cold storage levels since the end of 2020, but these parts represent a small share of broiler meat in cold storage. With continued slow growth in production in 2022, projected broiler meat in cold storage at the end of 2022 was adjusted down by 30 million pounds to 755 million pounds.

Chicken prices increase with decreasing cold stocks

USDA reports weekly national composite wholesale broiler prices ended an 11-week climb in January, peaking at 134.21 cents per pound in the week ending January 14th. January prices averaged 131.39 cents per pound, a year-over-year increase of 49 cents. However, prices declined from their peak and by the first week of February averaged 124.88 cents per pound. Based on recent prices, the first-quarter broiler price forecast was adjusted down by 1 cent to 127 cents per pound. The outlying quarterly price forecasts were adjusted up to 120 cents per pound in the second quarter, 106 cents in the third, and 98 cents in the fourth. This brings the 2022 average to 113 cents per pound, an increase of 12 cents over last year's average. Some of the most high-demand chicken parts are wings and breasts. Breast meat can be found in sandwiches in various fast-food establishments, and chicken wings are popular additions to major sporting events such as the Super Bowl and March Madness.

Rising wholesale prices for these parts has coincided with low levels in cold storage. Chicken breast meat in cold storage fell from 239 million pounds at the end of January 2021 to 152.6 million pounds at the end of December, a year-over-year decrease of 41 percent from the end of December 2020. In 2021, wholesale prices for boneless/skinless chicken breasts averaged 72 percent above year-earlier levels. The January average wholesale price for boneless/skinless breasts was 230.98 cents per pound, 122 cents above last January, the highest price since this climb began.

For chicken wings, the story is similar. The largest year-over-year increase in wholesale wing prices was in April, coinciding with the largest year-over-year drop in cold storage levels. While wing stocks have recovered, the wing prices decreased but they are still well above year-ago levels. In January, wing prices averaged 267.93 cents per pound, an increase of 24 cents yearover-year, but down 49 cents from the 2021 peak.

China’s sow herd drops in Q4 but still 4% bigger than last year

China’s sow herd fell 2.9% at the end of December compared to the previous quarter, the country’s ag ministry said. But the herd at 43.3 million head was 4% greater than Dec. 31, 2020. China’s pig herd at the end of December was up 10.5% from the previous year, at 449.22 million head and 2.6% bigger than the third quarter.

China targets 15% increase in meat output by 2025

China is aiming for meat production of 89 MMT by 2025, growing by an annual average of 2.8% from the 77.5 MMT produced in 2020, a cabinet document showed on Friday. Under the plan, pork production would be about 55 MMT, with output at 22 MMT for poultry meat, 6.8 MMT for beef and 5 MMT for lamb. The five year plan to modernize agriculture follows a blueprint issued last month for development of the livestock sector over that period.

US pork export sales still lagging, but beef gains

Pork: Net sales of 18,300 MT for 2022 were up 1 percent from the previous week, but down 46 percent from the prior 4-week average. Increases were primarily for Mexico (4,800 MT, including decreases of 900 MT), South Korea (3,400 MT, including decreases of 400 MT), Japan (3,300 MT, including decreases of 1,100 MT), Canada (2,400 MT, including decreases of 400 MT), and the Dominican Republic (1,600 MT). Exports of 31,000 MT were up 2 percent from the previous week, but unchanged from the prior 4-week average. The destinations were primarily to Mexico (14,200 MT), Japan (4,900 MT), China (3,500 MT), South Korea (2,600 MT), and Canada (1,700 MT).

Beef: Net sales of 23,000 MT for 2022 were up 18 percent from the previous week and 38 percent from the prior 4-week average. Increases were primarily for South Korea (10,100 MT, including decreases of 600 MT), Japan (7,200 MT, including decreases of 200 MT), Canada (1,600 MT, including decreases of 200 MT), Mexico (1,200 MT, including decreases of 100 MT), and China (600 MT, including decreases of 1,100 MT). Exports of 16,500 MT were up 13 percent from the previous week and 10 percent from the prior 4-week average. The destinations were primarily to South Korea (4,900 MT), Japan (4,300 MT), China (2,400 MT), Taiwan (1,400 MT), and Mexico (1,200 MT).

US states implement animal welfare policies covering US pork production

USDA reports several US states have passed farm animal welfare regulations restricting the use of gestation crates in pork production over the past two decades. Regulations are concentrated in states with relatively small pork industries; these policies currently cover 3 percent of U.S. pork production. In addition, two states passed retail sales restrictions that will prohibit the sale of pork originating from animals from gestation crate systems. With relatively low pork production but large populations, these states’ regulations are likely to impact pork production in other states.

USDA dairy forecasts for 2022

Due to declines in milk cows in recent months, higher projected feed prices, a low inventory of replacement heifers, and higher expected cull-cow prices, milk cows are projected to average 9.360 million head in 2022, 25,000 lower than last month’s forecast. Milk per cow is projected to average 24,265 pounds per head in 2022, unchanged from the previous forecast. As a result, the milk production forecast for 2022 has been adjusted to 227.2 billion, 0.5 billion pounds lower that last month’s forecast but 0.9 billion pounds above 2021.

With U.S. dairy prices expected to be less competitive in international markets, the 2022 export projections are adjusted downward. Lower exports are expected for whey products, dry skim milk products, butter, and cheese. The forecast for 2022 dairy exports on a milk-fat basis has been adjusted to 11.0 billion pounds, 0.2 billion lower than last month. On a skim-solids basis, the 2022 dairy export forecast has been adjusted to 51.2 billion pounds, 0.6 billion lower than last month’s forecast. Dairy import projections for 2022 have been raised to 6.9 billion pounds on a milk-fat basis (+0.1 billion) and 5.7 billion pounds on a skim-solids basis (+0.1 billion).

Higher imports are expected for butter, milk protein products,5 and several other miscellaneous dairy products. The forecast for 2022 ending stocks on a milk-fat basis is adjusted to 14.1 billion pounds, 0.4 billion lower than the previous forecast, mostly due to lower-than-expected beginning stocks and lower projected milk production. On a skim-solids basis, the forecast for ending stocks is unchanged at 10.6 billion pounds, as the higher-than-expected beginning stocks are largely offset by lower projected milk production during the year.

The projection for 2022 domestic use on a milk-fat basis is 222.2 billion pounds (-0.2 billion). On a skim-solids basis, the forecast for domestic use is 180.8 billion pounds (+0.5 billion). Due to relatively high domestic and international dairy product prices in recent weeks, lower projected milk production, and relatively low beginning stock levels, wholesale price forecasts have been raised.

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