Weekly global protein digest: food inflation, China & South Korean imports

Market analyst Jim Wyckoff shares highlights from this week's activities in the global protein market.
calendar icon 24 December 2021
clock icon 10 minute read

Food inflation to rise in coming months: USDA

Overall food price inflation forecasts held steady with month-ago levels, said USDA in its latest food price report. However, USDA continues to forecast food price inflation increases for various grocery store items for 2021, but so far has not altered their outlook for all foods, grocery store and restaurant prices for 2021 or 2022.

For all food prices in 2021, USDA expects the increase to be from 3% to 4%, a level of food price inflation that they have forecast since August. For grocery store prices, USDA expects them to rise 2.5% to 3.5% from 2020, an outlook which has not changed since August. For restaurant prices, USDA expects them to increase 4% to 5%, the same for both November and December forecasts.

For 2022, USDA still expects higher prices for consumers compared with 2021, but the rate of increase is seen easing. For all food prices, they are seen up 2% to 3% in 2022 from 2021 levels, while grocery store prices are expected to rise 1.5% to 2.5% versus 2021 and restaurant prices are looked to increase 3% to 4%. All of these forecast levels for 2022 are steady with the marks USDA has forecast since July.

The food-at-home (grocery store or supermarket) CPI increased 0.3% from October 2021 to November 2021 and was 6.4% higher than November 2020. In 2021 thus far compared with 2020, grocery store prices have increased 3.1% percent and restaurant prices have increased 4.2%. The CPI for all food has increased an average of 3.6%. Upward shifts continue in several meat categories. For 2021, USDA now looks for meat, poultry and fish prices combined to rise 6% to 7% compared with 2020, marking the eighth month in a row USDA has raised this forecast level. At this point in 2020, USDA expected meat, poultry and fish prices to be down 0.5% to up 0.5%.

For 2022, USDA sees meat, poultry and fish prices rising 2% to 3%. Within that category, USDA expects prices for meats at the grocery store will have increased 7% to 8% in 2021 compared with 2020. Similarly, this is the eighth monthly increase in forecast meat prices which stood at a forecast level of down 1.5% to up 1.5% in December 2020.

Beef and veal prices in 2021 are now expected to have risen 9% to 10% compared with 2020, a tenth straight monthly increase. In December 2020, USDA expected beef and veal prices to fall from 2.5% to 1.5%.

Pork prices are forecast to have increased 8% to 9% in 2021 compared with 2020, a ninth straight monthly increase. In December 2020, USDA expected pork prices to be down 0.5% to up 0.5%.

For 2022, grocery store prices for meats, beef and veal and pork are expected to increase 2% to 3%.

Poultry prices in 2021 are looked to have risen 4.5% to 5.5% from 2020 levels, the third straight monthly increase. In December 2020, USDA expected 2021 poultry prices to be steady—down 0.5% to up 0.5%.

For 2022, poultry prices are forecast to increase 1% to 2%.

USDA’s explanation for the higher prices for meats has not changed compared with their month-ago remarks. “Prices have been driven up by strong domestic and international demand, labor shortages, supply chain disruptions, and high feed and other input costs,” USDA said. “Concentration and capacity constraints within the meat industry could also affect prices.”

US beef export sales disappointing in latest week

USDA’s weekly export sales report showed US pork net sales of 28,800 MT for 2021 were down 8 percent from the previous week, but up 5 percent from the prior 4-week average. Increases primarily for Mexico (14,000 MT, including decreases of 700 MT), South Korea (7,100 MT, including decreases of 600 MT), Japan (3,800 MT, including decreases of 2,300 MT), Canada (1,600 MT, including decreases of 400 MT), and Nicaragua (900 MT), were offset by reductions for China (300 MT), Australia (200 MT), and Chile (100 MT). Net sales of 7,000 MT for 2022 were primarily for Japan (2,800 MT), Mexico (1,600 MT), Canada (1,600 MT), Colombia (1,300 MT), and the Philippines (600 MT), were offset by reductions for South Korea (2,300 MT). Exports of 32,000 MT were up 6 percent from the previous week, but down 1 percent from the prior 4-week average. The destinations were primarily to Mexico (14,500 MT), Japan (5,100 MT), China (4,500 MT), South Korea (2,000 MT), and Canada (1,700 MT).

Beef: Net US sales of 12,000 MT for 2021 were down 30 percent from the previous week and 23 percent from the prior 4-week average. Increases primarily for China (3,800 MT, including decreases of 300 MT), Japan (3,700 MT, including decreases of 400 MT), South Korea (2,800 MT, including decreases of 1,500 MT), Mexico (700 MT), and Taiwan (500 MT, including decreases of 500 MT), were offset by reductions for Hong Kong (300 MT) and Chile (100 MT). Net sales of 8,100 MT for 2022 were primarily for South Korea (3,200 MT), China (2,400 MT), Taiwan (900 MT), Japan (700 MT), and Hong Kong (500 MT), were offset by reductions for Vietnam (200 MT). Exports of 17,900 MT were down 3 percent from the previous week, but up 3 percent from the prior 4-week average. The destinations were primarily to South Korea (5,400 MT), Japan (4,600 MT), China (3,100 MT), Mexico (1,800 MT), and Taiwan (1,300 MT).

US pork group issues report on pork prices

In a report released Tuesday on US retail pork prices, economists with Iowa State University, North Carolina State University and the National Pork Producers Council (NPPC) found that pork prices, not industry profits, are rising. Prices are rising due to increased transportation costs, supply bottlenecks and delays and increased labor costs throughout the pork chain, the report said. Those factors were either caused or exacerbated by the Covid-19 pandemic, Iowa State’s Dermot Hayes, N.C. State’s Barry Goodwin and NPPC’s Holly Cook said.

South Korea suspends Canadian beef imports after BSE case

South Korea has suspended beef imports from Canada, which reported its first case of bovine spongiform encephalopathy (BSE) in six years, the Canadian Food Inspection Agency said on Wednesday. South Korea, the fourth-largest beef importer in the world, is seeking more information about the case before lifting its suspension, the agency's spokesman Patrick Girard said. He added that no other countries have told Canada, the eighth-largest beef exporter, that they are considering trade action. Canada reported the BSE case in an 8-1/2-year-old beef cow in the province of Alberta, the World Organization for Animal Health (OIE) said on Monday.

USDA: global dairy trade strong despite pandemic challenges

USDA reports that despite the logistical challenges posed by the COVID-19 pandemic, US dairy exports are set to record a stellar year led by shipments of skimmed milk powder (SMP), cheese, and butter. SMP shipments through October have already reached 689,000 tons, accounting for nearly one third of the $6.4 billion of dairy exports already shipped. For the year, SMP exports are forecast to reach a record 887,000 tons – up almost 10 percent – over 2020.

For 2022, growth is anticipated to moderate with exports set to grow by 3 percent to reach 917,000 tons. Global prices of SMP have been rebounding recently as a result of lackluster milk production in Oceania and the EU. SMP prices in these regions are currently hovering around $1.60-$1.65 per pound. While US prices remain competitive, import demand is expected to be tempered as food processors seek more cost-effective substitutes.

One notable trend is that US global market share of SMP among major exporters has been steadily climbing from around 30 percent in 2015 and is forecast to reach 41 percent in 2022. Since 2014, the EU has been the dominant supplier; however, this year US exports of SMP are expected to surpass EU shipments. This trend is likely to persist into next year as U.S. milk production is expected to continue to grow.

Exports of other dairy products such as cheese and butter have also posted strong gains this year. In the case of cheese, shipments this year are expected to grow by 16 percent to reach a record 412,000 tons. US butter has also been highly sought after as it is highly competitive in a tight global market. Recent Oceania prices have been around $2.65 per pound while EU prices have been higher. Exports of US butter this year are expected to more than double from last year to reach 60,000 tons.

In recent months, global prices for major dairy commodities have been rising rapidly due to strong demand and faltering milk production in key producing countries. Month-to-month gains in milk output among major producers has been declining since May 2021. In September, growth was negative and initial production figures for October point to further declines.

In the EU, weather has also negatively impacted output to the extent that milk production is expected to be stagnant in 2021. In the United States, after a strong start in the first half of the year milk output slowed due to unfavorable climatic conditions and the high costs of production. In October, milk production was one-half percent less than the prior year.

In contrast to other major producers, Argentina’s milk production has thus far been expanding and cumulative output through September was up 4 percent year-over-year. However, Argentina typically accounts for less than 5 percent of the global milk supply among major producers. Milk output in Argentina is expected to grow nearly 2 percent in 2022, reaching 12.1 million tons. While this will be the third consecutive year of increasing milk production, the pace of growth is expected to slow from 2021 and 2020. Producer margins remain positive but are increasingly coming under pressure from rising input costs.

In Australia, milk production in 2022 is expected to grow 1 percent to 9.1 million tons as easing travel restrictions in Victoria and New South Wales allow labor availability, which constrained production in 2020, to improve. Furthermore, margins are expected to be supported by continued strong milk prices and further improvement in feed and water availability. Milk production during 2021 is estimated at 9.0 million tons, 1 percent below a year ago, despite improved feed quality and availability and strong milk prices. Production has been hindered by excessively wet conditions during the winter months, leading producers to dry-off animals early. Additionally, extended COVID-19 related lockdowns made securing labor difficult, leading some dairy farms to be fully or partially converted to less labor-intensive cattle operations.

In the European Union, milk production is forecast to expand by 1 percent in 2022 to 146.7 million tons. In a longstanding pattern, the number of milk cows are expected to contract by 1 percent, but this is likely to be offset by a 2 percent increase in milk-per-cow output. In the period from 2016-2020, the number of cows has contracted by an annual average of 1 percent while yields have grown annually by 2 percent. For the current year, the EU milk production forecast is cut by 500,000 tons to 145.7 million tons which represents a marginal rise in output compared to 2020. After a strong start in the spring, milk production in the subsequent months has been uneven due to weather and higher feed costs affecting some Member States. Cumulative milk production through September was virtually unchanged from last year. However, good fodder supplies, and higher farm gate prices are expected to boost production in the last quarter of the year.

China’s pork imports plunged in November

China imported 200,000 metric tons (MT) of pork in November, the same amount as October but down 38.7% from last year. Through the first 11 months of this year, Chinese pork imports at 3.54 million MT fell 10.3% from the same period last year.

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