Weekly global protein digest: HPAI in Scotland, China pork prices bounce higher

Analyst Jim Wyckoff shares an update on USDA reports and global protein news
calendar icon 8 July 2022
clock icon 7 minute read

Avian influenza confirmed in Scotland

Highly pathogenic avian influenza H5N1 was confirmed at a premises near Birsay, Orkney Islands in Scotland Wednesday. The government statement does not include details on the species or number of birds impacted. A 3-km protection zone and a 10-km surveillance zone have been declared. The zones, which took effect yesterday evening, restrict the movement of poultry, carcasses, eggs, used poultry litter and manure in order to prevent any further spread of disease. This is the first reported AI outbreak in Scotland since 30 May.

China calls on hog sector to ensure steady supply as prices surge

China’s state planner urged hog producers to ensure steady supplies after prices surged in recent months. Hog prices in the world’s top pork producer are up 50% since early May, driven in part by tighter supplies following a reduction in the breeding herd. But the main reason is “irrational reluctance to sell and secondary fattening in the market,” the National Development and Reform Commission (NDRC) said. Secondary fattening refers to farmers buying market-ready hogs and raising them to heavier weights to benefit from high margins.

Germany finds new cases of ASF

Two more case of African swine fever (ASF) have been confirmed on hog farms in Germany, the country’s ag ministry announced. One was in the western state of Lower Saxony, which was previously free of the disease and the other was in the eastern state of Brandenburg where the disease has been found before. Lower Saxony is Germany’s largest hog production area with about 6.4 million head, Germany’s national statistics office says.

China hog futures prices surge

Live hog futures traded in Dalian have surged to their strongest in a year, while wholesale prices are at a six-month peak. Higher costs look set to linger as the latest virus outbreak is brought under control and meat consumption rebounds. And supply issues around China’s favorite meat, which has the biggest weighting among foodstuffs in the consumer price index, could mean that pork prices are at the start of a longer-lasting, cyclical upswing that poses an inflation risk to the wider economy, according to Ming Ming, chief economist at Citic Securities Co.

China adjusts sow herd data for May

China’s ag ministry said its sow herd fell more than 8% in May compared with a year ago, more than the almost 5% decline previously estimated. But total size of the breeding herd at 41.92 million head did not change, according to data on the ministry website.

China’s pork prices surge

For the week ended July 1, the pork price in China was 26.25 yuan ($3.91) per kilogram, up 14.9% from the previous week, according to the ag ministry. The ministry attributed the jump in price to declining hog supplies in the northern part of the country and “reluctance to sell” by producers. The National Development and Reform Commission said earlier this week it will take timely measures and tighten market oversight to prevent sharp increases in pork prices.

USDA’s latest weekly dairy report

CME GROUP CASH MARKETS (7/1) BUTTER: Grade AA closed at $3.0100. The weekly average for Grade AA is $2.9755 (+0.0342). CHEESE: Barrels closed at $2.2050 and 40# blocks at $2.1725. The weekly average for barrels is $2.1795 (+0.0151) and blocks, $2.1590 (+0.0615). NONFAT DRY MILK: Grade A closed at $1.8025. The weekly average for Grade A is $1.7910 (-0.0103). DRY WHEY: Extra grade dry whey closed at $0.5000. The weekly average for dry whey is $0.4905 (+0.0030).

CHEESE HIGHLIGHTS: Milk is available for cheese production across all regions, with stakeholders in the Midwest relaying prices as low as $6 under Class III for spot loads this week. Contacts in the Northeast say that milk production is declining, but availability is balanced by decreased bottling demand. Spot cheese inventories are available in the Northeast and West and contacts in these regions say that domestic demand is declining. In the Midwest, demand for mozzarella and provolone has been steady while seasonally strong curd demand is present. Contacts in the Northeast report that cheese produced in the US is being priced competitively compared to loads produced in other countries, contributing to strengthening export demand. In the West, stakeholders say that strong export demand is present and that they continue to hear from purchasers in Asian markets looking for loads to ship in Q1 of 2023.

BUTTER HIGHLIGHTS: The 4th of July holiday weekend is impacting cream availability and demand across all regions as some production facilities have planned down time. Contacts in the West say they expect demand to remain strong following the holiday. Increased cream availability in the Central region enabled churning to pick up in the first half of this week. Meanwhile, butter production is steady in the West and declining in the Northeast. Butter inventories vary in the Northeast; stakeholders say holdings are slowly growing but are down when compared to 2021. Meanwhile in the West, contacts report that spot inventories of butter are tight. Sales of butter in both food service and retail markets have been noted to be softer in the Northeast and West, though bulk butter demand is increasing in the latter. Central region butter demand is quieter, seasonally, but meeting industry expectations. Across all regions, bulk butter overages range from 4 to 16 cents above market.

FLUID MILK: Across much of the United States, milk production is trending lower along seasonal declines. Summer heat is impacting cow comfort. An exception, this week, is the Pacific Northwest, where pleasant weather has helped give production a lift, even if still below last year’s volumes. Demand from manufacturers is steady to lower as some plant managers are planning to take an extra day or two off for the long holiday weekend. Milk spot loads are available, and Midwestern cheesemakers report prices at $6 to $1 under Class III. Condensed skim demand is weaker ahead of the holiday weekend. Cream supplies are down due to seasonal declines in milk components, but that also matches a decrease in demand ahead of the summer holiday weekend. Some contacts expect demand to pick up following the holiday as butter makers are keen to build inventories of butter. Cream multiples for all Classes are 1.32 – 1.43 in the East, 1.26 – 1.38 in the Midwest, and 1.05 – 1.33 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk prices are lower across the country. Lukewarm demand is present as buyers are expecting, and patiently waiting for, possible price declines. High heat nonfat dry milk prices are unchanged in the Central and Eastern U.S., but lower in the West. Dry buttermilk prices moved lower at the top of the Central and eastern price range, but otherwise are unchanged. National dry whole milk market tones remain quietly steady, and prices are unchanged this week. Prices for dry whey are largely lower as availability is trending higher and demand is trending lower. Animal feed whey prices are also steady to lower, mirroring the edible grade whey tones. Whey protein concentrate 34% prices are mostly stable, but moved up slightly at the top of the range. Prices for lactose are steady to higher. Some manufacturers think that shipping logistics may be slowly improving. Acid and rennet casein prices are unchanged.

ORGANIC DAIRY MARKET NEWS OVERVIEW: Federal Milk Market Order 1, in New England, reports utilization of types of organic milk by pool plants. During May 2022, organic whole milk utilization totaled 14.4 million pounds, down from 18.7 million pounds the prior year. Meanwhile, butterfat content, 3.26 percent, fell .03 percent from last year. Utilization of organic reduced fat milk, 16.1 million pounds, declined from 18.3 million pounds a year ago, but the butterfat content, 1.35 percent, increased .05 percent over last year. The June 2022 in-store retail surveys of selected supermarkets in twenty-nine U.S. cities show the retail prices of organic whole milk in the half gallon container. The prices range from $3.64 in Seattle, WA to $6.49 in Pittsburg, PA. The simple average price for June 2022 is $4.63, up 13 cents from the previous month. Total organic dairy retail advertisements increased 108 percent over the previous survey period. As a whole, retail stores increased organic milk ads 103 percent and organic yogurt ads 18 percent. Organic milk was able to capture 64 percent of the total organic dairy ads by commodity, while organic sour cream trailed with 16 percent of total ads by commodity, almost 12 times more retail ads than the previous survey period.

NATIONAL RETAIL REPORT: For the long summer holiday weekend, retailers got in the festive mood, increasing total conventional dairy advertisements by 23 percent and organic ads by 108 percent. The most advertised item was conventional ice cream in 48-to-64-ounce containers, which appears in 15 percent more ads this week. The national weighted average advertised price for conventional ice cream in 48-to-64-ounce containers is $3.22, down 8 cents from last week. Advertisements for conventional 1 pound butter increased 48 percent with a weighted average advertised price of $3.81.

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