Weekly global protein digest: HPAI in California, egg prices down

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news
calendar icon 19 August 2022
clock icon 12 minute read

Bird flu in California

Highly pathogenic avian influenza was confirmed in a backyard flock of birds in Sacramento County, making California the 39th state where the viral disease has been discovered since early February.

US egg prices are coming down

Midwest large eggs, the benchmark for commodity price, closed at $2.16 a dozen on Friday, down about 37% from late July’s record high, according to commodity researcher Urner Barry. That will provide relief for consumers, who saw egg prices jump 47% at U.S. grocery stores last month during the worst period of food inflation since 1979. Retail rates generally follow commodity prices, so consumers should see a “significant” drop by more than a dollar per dozen in the next 30 days, said John Brunnquell, chief executive officer of Egg Innovations, one of the biggest U.S. producers of free-range eggs.

USDA adjusts US poultry line speed policy

USDA’s Food Safety and Inspection Service (FSIS) will sunset current poultry line-speed waivers and launch a new study on line speeds and worker safety. Plants currently having line-speed waivers will be able to participate in the study but must apply for the program. If approved, they can maintain line speeds of up to 175 birds per minute. Those participating will have to submit worker-safety related information monthly and agree to on-site visits. Establishments have until Sept. 1 to apply and have until Sept. 30 to submit initial worker safety information. Those not participating will see their line speed waiver terminated and will have 60 days to return to the maximum line speed of 140 birds per minute.

US pork export sales down, beef up in latest reporting week

USDA Thursday reported US pork net export sales of 13,600 MT for 2022 were down 37 percent from the previous week and 43 percent from the prior 4-week average. Increases primarily for Mexico (7,100 MT, including decreases of 300 MT), Japan (2,600 MT, including decreases of 300 MT), South Korea (900 MT, including decreases of 600 MT), Colombia (700 MT, including decreases of 300 MT), and Canada (600 MT, including decreases of 400 MT), were offset by reductions for Honduras (200 MT), Guatemala (100 MT), and Indonesia (100 MT). Exports of 25,600 MT were down 6 percent from the previous week and 4 percent from the prior 4-week average. The destinations were primarily to Mexico (11,600 MT), China (5,000 MT), Japan (3,400 MT), South Korea (1,700 MT), and Canada (1,500 MT).

US beef: Net export sales of 18,900 MT for 2022 were up 29 percent from the previous week and unchanged from the prior 4-week average. Increases primarily for China (7,400 MT, including decreases of 100 MT), Japan (5,300 MT, including decreases of 200 MT), South Korea (1,900 MT, including decreases of 400 MT), Mexico (1,300 MT, including decreases of 200 MT), and Indonesia (900 MT), were offset by reductions for Chile (100 MT). Total net sales of 100 MT for 2023 were for Japan. Exports of 19,000 MT were down 9 percent from the previous week and 4 percent from the prior 4-week average. The destinations were primarily to South Korea (5,600 MT), Japan (4,700 MT), China (3,800 MT), Taiwan (1,100 MT), and Mexico (1,100 MT).

China’s pork imports unchanged in July but well below year-ago

China imported 120,000 MT of pork in July, unchanged from June but down 65.1% from last year. Through the first eight months of this year, China imported 930,000 MT of pork, also down 65.1% from the same period last year.

US schools and milk

Advocates say emphasis on cow’s milk in American school lunches represents “dietary racism” given the prevalence of lactose intolerance among children of color, and they are pressing USDA to change its policies, according to The Hill.

Where’s the long-delayed Cattle Price Discovery and Transparency Act action in the Senate?

Sen. Chuck Grassley (R-Iowa) says the legislation is out of committee and on the Senate calendar. While optimistic the bill will receive support, Grassley adds he’s not confident Senate Majority Leader Chuck Schumer (D-N.Y.) will add it to the agenda. Grassley made the comments in a meeting at the Iowa State Fair Monday morning.

USDA seeking comments on information collection required under proposed regulations for poultry

USDA is proposing new regulations under the Packers and Stockyards Act to clarify rules under the law relative to poultry dealers. USDA’s Agricultural Marketing Service wants comments on the scope of information that would be required of live poultry dealers on “certain disclosures to poultry growers in advance of entering into production contracts.” AMS is proposing that live dealers could use the USDA Live Poultry Dealer Disclosure Form or they could develop their own cover page to meet the requirement.” AMS estimates it would impact 89 businesses due to the annual reporting requirements.

US labeling practices that help drive food supply chains may be in for an overhaul

Some US grocery stores are reducing their use of labels such as “best by” and “sell by,” the Wall Street Journal reports, as they try to reduce food waste and leave it to consumers to determine which products are the freshest. Retail executives say the labels cause confusion and lead to consumers tossing food that may still be good to eat. Several supermarket chains in the U.K. have abandoned various date labels on certain foods. That may help grocers keep products on shelves longer, buying them additional time for goods like produce to travel to stores and to consumers, and cutting their costs. The U.S. has no federal law on date labels for food other than baby formula, making for a hodgepodge of state laws and guidance while prompting calls for national standards. Bottom line: U.S. food-safety regulators plan to phase in over two years new transportation and tracing requirements that take effect in January.

Court delays enforcement of US state law banning sale of pork from animals not housed according to certain standards

A U.S. federal court judge for the District of Massachusetts on Thursday signed a court order approving an agreement to delay enforcement of a state law that would have banned the sale of pork that comes from animals not housed according to the state's prescriptive housing standards. A coalition led by the National Pork Producers Council (NPPC), with the National Restaurant Association, and several New England restaurant and hospitality associations filed suit seeking to stop the law’s impeding implementation. The suit also asks the court to find the law unconstitutional.

NPPC comments: “This is a significant outcome as NPPC continues to push to preserve the rights of America’s pig farmers to raise hogs in the way that is best for their animals and maintains a reliable supply of pork for consumers,” said Terry Wolters, NPPC president and owner of Stoney Creek Farms in Pipestone, Minnesota. “The impact of Question 3 would have been particularly harmful to those in surrounding New England states who did not have a vote in the 2016 Massachusetts referendum, nor any notice of the dramatic steps that activists had taken trying to force these harmful initiatives on voters in other states.”

Details: The state law, known as Question 3 (Q3), was a 2016 Massachusetts ballot initiative set to go into effect on Aug. 15, 2022. Q3 is similar to California’s Proposition 12, which is currently being reviewed by the U.S. Supreme Court and would ban any uncooked whole pork meat sold in the state that does not meet specific sow housing requirements, regardless of where it was produced. Going further than Prop 12, the Massachusetts law would not allow the transshipment of whole pork through the state jeopardizing an estimated $2 billion worth of pork that moves into neighboring New England states.

The office of Massachusetts Attorney General Maura Healy and the coalition came to a “commonsense agreement” that the Q3 rule prohibiting sales of non-compliant pork should be put on hold at least until 30 days after the U.S. Supreme Court issues a ruling in the lawsuit brought by NPPC and American Farm Bureau Federation to Proposition 12. This agreement is limited to only the pork sales provision of Q3, and producers located in Massachusetts are still required to comply with the in-state housing standards.

OMB receives food traceability final rule

FDA’s final traceability rule was sent on Aug. 8 to the Office of Management and Budget (OMB). FDA intends to meet a consent decree deadline under which the agency committed to publish the rule by Nov. 7. The rule sets traceability requirements under the Food Safety and Modernization Act (FSMA) and establishes new recordkeeping requirements for foods FDA designates as “high risk” under its Food Traceability List. It mandates companies capture Key Data Elements throughout the food supply chain. Groups like the National Grocers Association (NGA) argue it adds new and unneeded costs into the supply chain. OMB can take up to 90 days to review rules that agencies send forward.

US food prices rose 1.1% in July and are up 10.9% over last year

Groceries that families take home rose even faster at 1.3% for the month, or 13.1% over the past 12 months. Some are already saying food prices will ebb in coming weeks following the recent decline in commodity prices, but history shows it may take a while since inflation expectations are now built into the supply chain.

Democrats are blaming major food producers for passing along inflation to consumers while recording profits

That’s a strategy Democrats hope can blunt the political impact of rising prices ahead of the midterm elections. Their strategy was underlined in an analysis from left-leaning watchdog Accountable.US on Wednesday, which pointed to positive financial results for food companies including Sysco, Kellogg, Starbucks, Kraft Heinz, and Chipotle Mexican Grill in recent months. Those results came even as consumers faced food prices that climbed 10.9% compared to a year ago, the most since 1979, according to inflation figures released last week.

USDA weekly dairy report

CME GROUP CASH MARKETS (8/12) BUTTER: Grade AA closed at $2.9350. The weekly average for Grade AA is $2.9625 (-0.0655). CHEESE: Barrels closed at $1.8875 and 40# blocks at $1.8450. The weekly average for barrels is $1.8740 (+0.0550) and blocks, $1.8220 (-0.0050). NONFAT DRY MILK: Grade A closed at $1.5175. The weekly average for Grade A is $1.4945 (-0.0900). DRY WHEY: Extra grade dry whey closed at $0.4450. The weekly average for dry whey is $0.4420 (+0.0100).

CHEESE HIGHLIGHTS: Milk output is declining in the Northeast and West, but contacts in these regions say milk is available for cheese makers to run busy production schedules. In the Midwest, milk availability varies by location and timing. Cheese inventories are available for spot purchasing across all regions. Demand for cheese is softening from both retail and food service customers in the Northeast and West. In the Midwest, cheese demands have been varying from week to week, but stakeholders say they have been consistent this week. Some Midwestern cheese contacts say the drop in cheese prices in recent weeks has encouraged some increased purchasing, while others note that sales are seasonally slower.

BUTTER HIGHLIGHTS: Cream supplies are tightening across the country. In the Northeast and West, high temperatures are contributing to reduced milk output and cream volumes. Some butter makers in the Northeast and West say higher cream multiples have made selling cream more advantageous than churning. Butter production is steady to lower in the Northeast and West. Labor shortages and high temperatures are contributing to some reduced butter making in the West. Micro-fixing has increased in the Central region, despite the increased number of employees required and staffing shortages at production facilities in the region. Demand for butter is trending higher in the Central region as some customers are preparing their fall inventories. In the Northeast, overall butter demand is stable. Some butter shoppers in the region say higher market prices have made them wary of taking on extra loads. Food service and retail demand for butter are declining in the West, though bulk butter demand is strong. Bulk butter overages range from 2 to 16 cents above market, across all regions.

FLUID MILK: Throughout most of the country milk volumes are trending lower, following seasonal trends. Milk producers say high temperatures, high humidity, and dry weather are contributing to reduced output. Contacts report milk volumes are available to meet production needs in many areas. In some parts of the country, processors are sourcing loads of milk from outside of their immediate geographic area to meet their production needs. Class I demand is increasing in the East and Central regions, due to uptick in educational purchasing. In the West, demand for Class I is mixed, ranging from steady to increasing. Condensed skim inventories are tightening in the West amid strong demand from contract and spot purchasers. Meanwhile, demand for condensed skim is moderate in the East. Cream inventories are tightening. Contacts in the West report strong demand and declining production; some say they are selling cream due to high cream multiples and labor shortages. Ice cream makers continue to pull on cream supplies in the East and Midwest, though contacts in the latter say cream cheese producers are also having an impact on availability. Cream multiples for all Classes are 1.45 – 1.60 in the East, 1.30 – 1.55 in the Midwest, and 1.10 – 1.41 in the West.

DRY PRODUCTS: Prices for low/medium heat nonfat dry milk (NDM) fell across both the range and mostly price series in the West. The top of the low/medium heat range was unchanged in the East and Central regions, while all other price points moved lower. High heat NDM price changes matched low/medium heat in each region. Spot trading of low/medium heat was limited in the East and Central regions, and contacts in the West say demand is softening. Dry buttermilk prices slid lower across both the range and mostly price series in the West. In the East and Central regions prices held steady at the bottom of the range, while the top moved lower. A slow trading week for dry whole milk contributed to steady prices. Dry whey prices slid lower in the Northeast and West, while only the prices at the bottom of the range and top of the mostly price series declined in the Central region. Demand for dry whey is softening in the Northeast and Central regions. The price range for whey protein concentrate 34% held steady at the top while the bottom moved lower. Demands for WPC 34%, outside of infant formula and high value applications, is lackluster. The price range for lactose expanded this week, though market tones are steady. Prices for both acid and rennet casein are holding steady.

ORGANIC DAIRY MARKET NEWS: Trading is moderate on very good demand for organic feed corn. The market shows bushels trading 16 cents higher delivered to the elevator. Forward contracts were for Q3 2022 through Q2 2023, with the bulk of the contracted volume to deliver Q4 2022. Meanwhile, total organic dairy retail advertisements decreased 9 percent from the previous retail survey report period. The volume of store ads are 16 percent higher than last year for this period, as the majority of ads this week resulted mostly from organic milk retail store promotions. Organic milk, in half gallon containers, had the largest volume of organic dairy ads by item, increasing promotions 57 percent over the previous week survey. Compared to the conventional half gallon milk weighted average advertised price of $1.95, the organic premium is $2.86, 21 cents higher than last week.

NATIONAL RETAIL REPORT: Total conventional dairy ad totals are down 14 percent, while organic ads are down 9 percent. Conventional ice cream, in 48-to-64-ounce containers, is once again the top advertised dairy item this week. The national weighted average advertised price for conventional ice cream in 48-64-ounce containers is $3.48, up 21 cents. The number of total conventional cheese ads increased 8 percent this week. Conventional milk ads decreased by 68 percent, and organic ads declined by 24 percent from the previous week.

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