Weekly global protein digest: Europe reports biggest HPAI epidemic, JBS' US plant-based business closing, Ukraine livestock news

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news
calendar icon 7 October 2022
clock icon 10 minute read

Weekly USDA pork, beef export sales

Beef: Net sales of 16,400 MT for 2022 primarily for South Korea (6,000 MT, including decreases of 700 MT), Japan (2,200 MT, including decreases of 700 MT), Mexico (2,200 MT), China (2,100 MT, including decreases of 100 MT), and Taiwan (900 MT, including decreases of 100 MT), were offset by reductions for Kuwait (100 MT). Total net sales of 100 MT for 2023 were for Japan. Exports of 18,400 MT were primarily to South Korea (4,700 MT), Japan (4,400 MT), China (3,100 MT), Mexico (1,500 MT), and Taiwan (1,100 MT).

Pork: Net sales of 34,300 MT for 2022 primarily for Mexico (16,800 MT, including decreases of 200 MT), China (10,100 MT, including decreases of 200 MT), Canada (1,900 MT, including decreases of 400 MT), South Korea (1,600 MT, including decreases of 200 MT), and the Dominican Republic (1,200 MT), were offset by reductions for Australia (100 MT). Exports of 29,700 MT were primarily to Mexico (13,500 MT), China (5,000 MT), Japan (3,400 MT), Canada (1,700 MT), and South Korea (1,700 MT).

USDA releasing aid for farm, meatpacking workers

USDA announced that 15 groups will get $670 million in funds to farm and meatpacking workers that were negatively impacted during the pandemic, incurring expenses via the outbreak as they were deemed essential workers. The funds would amount to $600 per person and start in the fall, USDA said. $20 million was also earmarked for a pilot program that would recognize the efforts of grocery workers. The aim is to defray some of the costs incurred by workers relative to personal protective equipment, child care, and expenses for testing and quarantining. “Please note that payments are not yet available and each organization may have application periods that begin at different times,” said USDA’s Agricultural Marketing Service. The largest grant, $141.7 million, was awarded to UFCW Charity Foundation to assist farm, grocery and meatpacking workers. The UFW Foundation received $97.8 million, the second-largest grant, followed by $57.4 million to National Migrant and Seasonal Head Start Association.

JBS to shutter US plant-based foods business

JBS announced it would be closing Planterra Foods, its U.S. plant-based foods business, but will continue its efforts in other markets relative to plant-based foods. “JBS USA has made the decision to discontinue operations in its U.S.-based Planterra business unit,” JBS USA said in a statement. “We continue to believe in the potential of plant-based options for consumers and remain committed to the alternative-protein market.” The company launched its Ozo brand in 2020, but sales have failed to live up to expectations. “JBS will focus its efforts on its plant-based operations in Brazil and Europe, which continue to gain market share and expand their respective customer bases,” the firm said.

Europe reports biggest HPAI epidemic

Bird flu cases have been reported from the Arctic islands of northern Norway to southern Portugal this year in the largest epidemic yet seen in Europe of the disease, said the EU food safety agency on Monday. The virus that causes highly pathogenic avian influenza (HPAI) was unusually persistent during the summer and the risk of disease among flocks would increase with autumn migratory season, it said.

Pakistan’s looming food crisis

An estimated 5.7 million people in Pakistan will experience an acute food crisis over the next three months, the United Nations has warned, as the country grapples with the aftermath of months of heavy flooding. According to Pakistani officials, the deluge has impacted 33 million people and killed nearly 1,700. Hundreds of thousands more have been displaced.

USDA reports on Ukraine livestock markets

From January to mid-February of 2022, the Ukrainian cattle and pig populations remained on a slight downward slope. Private households remain responsible for the largest share of livestock and a significant share of the pig population. Milk production remains the main business for Ukrainian cattle farmers, with beef production playing a secondary role. Gradual pig inventory contraction over the last eight years has resulted in decreased pork supply driving the domestic prices up and inspiring imports.

In early 20222, African Swine Fever (ASF) was present in the country, but the number of registered cases remained low and no outbreaks in industrial farms were officially recorded. The Ukrainian livestock industry suffered direct losses from Russia’s invasion on February 24, 2022. Pockets of Ukrainian dairy production in the northern and densely populated eastern parts of the country were occupied by Russian forces in February-March. The operations of the large dairy processors in the south were also interrupted. Some livestock farms came under direct fire losing animals, facilities, feeds, and machinery. Some farms resumed limited operation as Russian forces left the north of Ukraine. The war’s indirect impact on the livestock industry was significant, as well. War-related transport, financial and trade restrictions, population relocation, and a refugee crisis created an extremely hostile and unpredictable market environment.

Broken logistics supply chains were the major crisis factor in the early days of war: farmers were unable to deliver their products or get needed inputs. This was especially critical for dairy farms that delivered their products on daily basis. Some producers reacted by re-opening old on-farm processing facilities, some donated milk to the population, and some disposed of it. Logistics problems and the beef export ban resulted in unexpected beef inflow to the domestic market. A lot of export-destined product was donated to the army and to the refugees. Swine producers reduced production by increasing slaughter, shifting to lower slaughter weights, non-inseminating sows, and distributing piglets among workers and residents in nearby villages.

The livestock market started to stabilize in the early summer of 2022, when major Russian armed forces advances stalled. However, it remains very turbulent. Ukraine was able to resume foreign trade using the remaining border crossing points with the EU and Romanian seaports for exports. The red meat EU transit terms were negotiated in mid-May with some exports resumed in early June. Live animals’ transit terms were agreed upon in mid-August. Production remains depressed by winter-spring shocks and population outflow. Favorable feed prices are the only bright spot. Unlike the rest of Europe, Ukraine did not suffer from the major drought and some positive impact is expected in the rest of 2022 and early 2023. Ukraine’s grain export ability remains restricted despite some progress in the reopening of the Black Sea ports.

The 2023 forecast is extremely fragile and is based on the existing military status quo. In absence of Russian advances and stable export markets, cattle production is expected to slow down followed by shrinking exports of live animals and beef. Pork production will remain depressed, but no major downturn is expected. Pork imports will contract due to a decreased population and lower demand, as the industry return to a sort of “normal” production.

USDA confirms more avian influenza in commercial operations

USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed highly pathogenic avian influenza (HPAI) in three additional commercial poultry operations, with two locations in Sanpete County, Utah, with a total of 163,900 turkey meat birds, and one in Ransom County, North Dakota with 69,100 turkey meat birds. Since Aug. 22, the head count is 5.7 million across 35 complexes, five of which have now been released. So far, 27 of the infected flocks have been turkey meat or turkey breeder operations. The two egg mega flocks account for 4.2 million of the depopulated birds.

Bullish USDA hogs and pigs report

Every category in last week’s USDA’s Hogs & Pigs Reports was under the average pre-report trade estimates, which should trigger corrective buying in lean hog futures. USDA estimated the U.S. hog herd at 73.8 million head as of Sept. 1, down 1.1 million head (1.4%) from year-ago. The breeding herd at 6.152 million head declined 38,000 head (0.6%) from year-ago, while the marketing herd at 67.648 million head fell 1.029 million head (1.5%). All three categories were the smallest inventories since 2017.

Weekly USDA dairy report

CME GROUP CASH MARKETS (9/30) BUTTER: Grade AA closed at $3.1450. The weekly average for Grade AA is $3.1485 (+0.0140). CHEESE: Barrels closed at $2.2000 and 40# blocks at $1.9675. The weekly average for barrels is $2.1980 (+0.0335) and blocks, $1.9885 (-0.0310). NONFAT DRY MILK: Grade A closed at $1.5700. The weekly average for Grade A is $1.5650 (+0.0010). DRY WHEY: Extra grade dry whey closed at $0.4400. The weekly average for dry whey is $0.4445 (-0.0055).

CHEESE HIGHLIGHTS: In the Northeast and West, milk is available for steady cheesemaking. Meanwhile, contacts in the Midwest say milk volumes have been declining over the past few weeks. This decline in milk availability is contributing to some down time at Midwestern cheese plants. Demand for cheese is softening in the East but remains healthy throughout the Midwest. In the West, retail demand for cheese is declining while steady demand for cheese is present in food service markets. Strong international demand persists in the West, as contacts say domestically produced loads of cheese are priced at a discount to loads produced in other countries. Spot purchasers in the Northeast say loads of cheese are available. Cheese barrels are tight in the Midwest but less available than blocks in the West. Some contacts suggest this is contributing to the inversion of the block barrel price relationship on the CME.

BUTTER HIGHLIGHTS: Cream volumes are available to meet production needs in the West. In the Central region, some butter makers say cream loads are being sold at multiples in the middle/upper 1.20s this week. Contacts in the Northeast say some butter makers are opting to sell loads of cream to cream cheese and eggnog producers, in lieu of churning. Some regional butter makers say they are not currently churning. Butter makers in the West are running busy production schedules, though some plants are closed for scheduled maintenance this week. Meanwhile in the Central region, butter makers are operating busy production schedules to try and keep up with the strong regional demand for butter. Demand for butter is building ahead of the holiday season in the Northeast and West.

FLUID MILK: In general, U.S. milk production is trending steady to lower across much of the country. Exceptions are California and the Southeast, where cooler weather and increased cow comfort may be contributing to higher milk output, albeit at levels lower than the previous year. The typical seasonal slide of milk output is at the low point for the year in Florida. In Florida and the Southeast, some bottling plants are expected to close because of Hurricane Ian. The storm has also hindered movements of milk and cream from the Midwest region into the Southeast and Florida. Class I and II demand is steady, except in Florida, where retailers had a surge in consumer purchases before the storm. Condensed skim availability is tight, with solid demand. Cream supplies vary from very tight in the Northeast, to more available in the Midwest and West. Cream multiples for all Classes are 1.35 – 1.52 in the East, 1.26 – 1.45 in the Midwest, and 1.09 – 1.36 in the West.

DRY PRODUCTS: The price range for low/medium heat nonfat dry milk (NDM) moved lower in the West but is steady to higher in the Central and East. Drying facilities are generally not running at full capacity because of lower milk availability, labor shortages, and delayed deliveries of production supplies. For high heat NDM, prices are steady to higher in the Central and East, and the range expanded in the West. Dry buttermilk prices are unchanged in the Central and East. In the West, dry buttermilk prices are unchanged at the top of the range but moved lower at the bottom. Prices moved higher for dry whole milk, as buyers have become more active. Dry whey prices held steady at the top of both the Northeast and Central price ranges but moved lower at the bottom of each range and at both ends of the West price range. Whey protein concentrate 34% prices are unchanged. Prices for lactose are steady with little market activity outside of contracts. Acid casein prices moved lower on the top end of the range. Rennet casein prices moved higher at the bottom of the price range. 

International dairy market news

WESTERN EUROPE: Although European milk outputs are declining along seasonal trends, a few areas have had weekly milk deliveries above the previous year. As recently as week 37, German milk deliveries were 1.2 percent higher, and milk deliveries in France were 0.7 percent higher than that same week in 2021. Some industry contacts suggest higher milk prices may have prompted farmers to push their cows to produce a little more milk. Relief from the intense summer heat and rains that renewed autumn pastures probably did not hurt either.

EASTERN EUROPE: Declining seasonal milk output trends aside, some Eastern European countries have expanded year over year milk production through the first eight months of the year. Poland, for example, has held milk growth at or above 2021 levels in every month of 2022. According to industry sources, preliminary data for August 2022 reveals milk deliveries in Poland are 1.6 percent above August 2021.

NATIONAL RETAIL REPORT: Early autumn has retail dairy advertisements rising. Total conventional dairy item advertisements increased nine percent, while organic ad numbers increased 12 percent. Conventional 48 to 64 ounce ice cream was week 39’s most advertised dairy item. Conventional one gallon milk ads grew by the largest amount, nearly quadrupling last week’s ad output.

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