Weekly global protein digest: HPAI spread threatens exports, US chicken price-fixing, Icahn pushing pregnant pig campaign

Analyst Jim Wyckoff shares highlights from the global protein market.
calendar icon 1 April 2022
clock icon 7 minute read

Bird flu continues to spread, threatening U.S. chicken exports

Highly pathogenic avian influenza (HPAI) was discovered at a commercial poultry farm in Johnston County, North Carolina, and in backyard flocks in Massachusetts, North Dakota, Ohio and Wyoming, USDA said. Since mid-January, HPAI has been found in 23 states in flocks totaling nearly 17 million birds. Countries have been temporarily banning imports from U.S. states where bird flu is present as a result, according to USDA. Top buyers such as Mexico, China and Cuba could bring in less poultry following the discovery in North Carolina, a major producer of chicken and turkeys, said Jim Sumner, president of the USA Poultry & Egg Export Council. Under the Organization for Animal Health (OIE), member countries are called on to not impose bans on international trade of poultry commodities in response to notifications in non-poultry or backyard flocks. However, some have opted to make such restrictions.

US chicken price-fixing prosecution ends in second mistrial; third trial planned

Jurors in Denver, Colorado deadlocked for the second time in the trial of 10 chicken company executives accused of price fixing, handing a significant setback to efforts by the U.S. Justice Department to police competition in food markets. U.S. District Judge Philip Brimmer ended the case Tuesday after jurors said they were unable to reach a verdict against the defendants, who worked for companies including Tyson Foods Inc., Pilgrim’s Pride Corp. and Perdue Farms LLC. The jurors deliberated for four days. In December, an earlier trial also ended in a deadlock. Chicken producers have been sued by buyers claiming anti-competitive practices. The Denver case was the first trial for a federal investigation targeting the biggest companies in the $95 billion chicken market. After the mistrial, a member of the prosecution team said the government plans to try the 10 defendants for a third time, according to three lawyers who were in the court room. The judge ordered the head of the Justice Department’s Antitrust Division to travel to Denver next week to explain that decision, the lawyers said. A Department spokeswoman declined to comment on the mistrial.

Carl Icahn takes his pregnant pig campaign to Kroger

Carl Icahn, the activist investor who has been prodding McDonald’s over the treatment of pregnant pigs in its supply chain, also raised the issue at Kroger, where he has nominated two people to the national grocery chain’s board. Icahn told Kroger he was concerned about animal welfare. Kroger said it isn’t directly involved in raising or processing animals but it is committed to helping protect the welfare of animals in its supply chain. Icahn objects to pig producers using small crates for pregnant pigs, something Kroger said it expects its suppliers to stop doing by 2025. Icahn owns about 100 Kroger shares and met with Kroger for the first time on March 25 before submitting the names, Kroger said. Kroger’s average hourly wage is $17, which is up 25% over the past four years, it said. Icahn nominated Alexis C. Fox, an animal-rights activist, and Margarita Paláu-Hernández, an investor. Kroger said it would review the matter, adding its shareholder meeting hasn’t been scheduled.

USDA publishes origin of livestock final rule for organic dairy

The U.S. Department of Agriculture published the highly anticipated Origin of Livestock (OOL) final rule for organic dairy. This change to the USDA organic regulations will promote a fairer and more competitive market for all organic dairy producers, by making sure that certified USDA organic dairy products are produced to the same consistent standard.

“This action demonstrates the USDA’s strong commitment to America’s organic dairy farmers,” Agriculture Secretary Tom Vilsack said. “The Origin of Livestock final rule provides clear and uniform standards about how and when livestock may be transitioned to organic dairy production, and how transitioned animals are managed within the organic dairy system. Now, all organic dairy livestock producers will have the confidence and certainty they are operating in a fair and competitive market.”

“Consumers of dairy that carry the USDA Certified Organic Seal can trust that those products meet their expectations for how organic dairy products are produced,” said Under Secretary for Marketing and Regulatory Programs Jenny Lester Moffitt. “At the same time, the rule announced today also ensures new organic producers have a fair way to enter the market.”

USDA’s National Organic Program (NOP) will oversee the new rule, which in general:

  • Allows a dairy livestock operation transitioning to organic, or starting a new organic farm, to transition non-organic animals one time.
  • Prohibits organic dairies from sourcing any transitioned animals. Once a dairy is certified organic, animals must be managed as organic from the last third of gestation. Variances may be requested by small businesses for specific scenarios.

USDA expects 2022 food prices to increase 4.5% to 5.5%

USDA expects food price inflation in 2022 to be from 4.5% to 5.5% based on the all food Consumer Price Index (CPI), up from their prior outlook food prices would be up 2.5% to 3.5% compared with 2021. Not a single category, or aggregate category now has a forecast that includes a potential decline.

The forecast for food away from home (restaurant) prices is for an increase of 5.5% to 6.5%, their third increase in as many months. Last month’s forecast was for a rise of 4% to 5%.

Food at home (grocery store) prices are now forecast to be up 3% to 4% in 2022, up from their previous forecast for an increase 2% to 3% from 2021 levels.

In 2021, grocery store prices increased 3.5% and restaurant prices were up 4.5%, with all food prices up 3.9% versus 2020 levels. The biggest increases in items tracked by USDA’s Economic Research Service (ERS) were the beef and veal category at 9.3% and the fresh vegetables category had the smallest rise of 1.1%.

The overall food price CPI rose 1% from January to February and was up 7.9% from February 2021. The restaurant CPI increased 0.4% in February 2022 and was 6.8% higher than February 2021. Meanwhile, grocery prices were up 1.4% from January while those prices stood 8.6% higher than they were in February 2021.

The increases versus year-ago marks were substantial for many categories, and all categories saw gains. Prices for meats, poultry, and fish were up 13.1% from February 2021 while they edged up 0.9% from January—following a more modest rise of 0.2% seen from December to January. Prices for meats were 14.0% higher than a year ago, while beef and veal prices gained 16.2% and pork prices were 14.0% higher. The CPI for meats rose 0.8% from January, with a rise of 0.5% for beef and veal while pork prices moved up 0.7%.

US pork, beef export sales down in latest week

USDA Thursday reported US pork net sales of 27,600 MT for 2022 were up 19 percent from the previous week, but down 14 percent from the prior 4-week average. Increases primarily for Mexico (14,300 MT, including decreases of 300 MT), Japan (4,000

MT, including decreases of 200 MT), South Korea (2,400 MT, including decreases of 500 MT), Canada (2,300 MT, including decreases of 700 MT), and the Dominican Republic (1,200 MT), were offset by reductions for Chile (300 MT) and El Salvador (100 MT). Exports of 30,600 MT were up 5 percent from the previous week and 8 percent from the prior 4-week average. The destinations were primarily to Mexico (13,200 MT), Japan (5,400 MT), China (3,500 MT), South Korea (2,900 MT), and Canada (1,600 MT).

US beef net sales of 23,000 MT for 2022 were down 17 percent from the previous week and 7 percent from the prior 4-week average. Increases primarily for China (7,100 MT, including decreases of 200 MT), Japan (5,300 MT, including decreases of 500 MT), South Korea (4,600 MT, including decreases of 700 MT), Taiwan (1,100 MT, including decreases of 200 MT), and Mexico (1,000 MT), were offset by reductions for Kuwait (100 MT). Exports of 20,400 MT were down 51 percent from the previous week and 11 percent from the prior 4-week average. The destinations were primarily to South Korea (6,500 MT), Japan (5,200 MT), China (3,100 MT), Taiwan (1,600 MT), and Mexico (900 MT).

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