Weekly global protein digest - HPAI spreads, China’s pig herd growing, USDA dairy report

Livestock analyst Jim Wyckoff shares protein from around the globe
calendar icon 27 October 2023
clock icon 10 minute read

Weekly USDA US beef, pork export sales

Beef: Net sales of 17,400 MT for 2023 were up noticeably from the previous week and up 72 percent from the prior 4-week average. Increases primarily for South Korea (9,300 MT, including decreases of 400 MT), China (3,200 MT, including decreases of 200 MT), Japan (2,200 MT, including decreases of 200 MT), Hong Kong (1,000 MT, including decreases of 100 MT), and Taiwan (600, including decreases of 100 MT), were offset by reductions for Indonesia (100 MT). Net sales of 3,900 MT for 2024 were primarily for South Korea (2,200 MT), Japan (1,400 MT), Hong Kong (200 MT), and Taiwan (100 MT). Exports of 13,800 MT were up 1 percent from the previous week, but down 8 percent from the prior 4-week average. The destinations were primarily to South Korea (4,200 MT), Japan (3,200 MT), China (1,700 MT), Mexico (1,100 MT), and Taiwan (900 MT).

Pork: Net sales of 28,200 MT for 2023 were down 8 percent from the previous week and from the prior 4-week average. Increases were primarily for Mexico (10,200 MT, including decreases of 200 MT), China (3,400 MT, including decreases of 100 MT), Canada (3,200 MT, including decreases of 600 MT), Japan (2,900 MT, including decreases of 400 MT), and South Korea (2,600 MT, including decreases of 700 MT). Net sales of 400 MT for 2024 were primarily for Australia (200 MT) and South Korea (100 MT). Exports of 27,700 MT were up 7 percent from the previous week, but down 1 percent from the prior 4-week average. The destinations were primarily to Mexico (10,200 MT), Japan (3,500 MT), South Korea (3,000 MT), China (2,900 MT), and Colombia (2,200 MT).

USDA: US beef, pork stocks remain well below average

USDA’s Cold Storage Report Wednesday afternoon showed beef stocks at the end of September totaled 420.2 million lbs., up 24.8 million lbs. (6.3%) from August, which was greater than the five-year average increase of 11.1 million lbs. during the month. But beef inventories dropped 105.9 million lbs. (20.1%) from year-ago and were 60.7 million lbs. (12.6%) below the five-year average. Frozen pork inventories totaled 462.8 million lbs., down 6.5 million lbs. (1.4%) from August, whereas the average over the past five years was a 3.0-million-lb. increase during September. Pork stocks fell 74.3 million lbs. (13.8%) from last year and were 69.4 million lbs. (13.0%) lower than the five-year average.

China’s hog numbers down from year-ago

China’s sow herd at the end of September totaled 42.4 million head, down 2.8% from last year, the ag ministry said. The pig herd dropped 0.4% to 44.23 million head.

HPAI virus speads in US

Highly pathogenic avian influenza (HPAI) spreads to 12 commercial turkey flocks in four U.S. states, prompting trade restrictions from Mexico. The highly pathogenic avian influenza (HPAI) situation in the U.S. has escalated as of Oct. 23, with 12 commercial turkey flocks confirmed to be affected across four states. Among the impacted counties, eight out of nine had previously reported H5N1 infections earlier in the year, suggesting the potential for the virus to become endemic in the local environment and resident wild flocks.

The outbreak has not only raised concerns about the poultry industry but has also resulted in mounting trade restrictions. Mexico, a significant destination for U.S. poultry and related products, has suspended all poultry imports from the four affected states: Minnesota, South Dakota, Utah, and Iowa.

China’s hog herd growing, putting pressure on prices

China’s hog production is still growing, a farm ministry official said, with a higher-than-normal number of breeding sows set to maintain downward pressure on prices. China had 42.4 million sows at the end of September, unchanged from the previous month, but 3.4% higher than the normal level, Chen Guanghua, head of the animal husbandry and veterinary bureau at the ag ministry said. “The level of pig losses may even be greater than that of the same period this year,” he said, urging farmers to adjust their production.

USDA sends final rule on livestock markets to OMB, aims to promote ‘inclusive competition’

USDA submitted a final rule titled "Inclusive Competition and Market Integrity Under the Packers and Stockyards Act" to the Office of Management and Budget (OMB). This rule encompasses "proposed revisions" to regulations under the Packers and Stockyards Act (PSA), with the objective of promoting inclusive competition and market integrity within the livestock, meats, poultry, and live poultry markets.

The final rule follows the publication of a notice of proposed rulemaking in 2022, which garnered multiple extensions for the comment period, concluding in January 2023. The Agricultural Marketing Service has clarified that the rule includes "supplemental amendments" aimed at defining conduct that USDA considers "unfair, preferential, unjustly discriminatory, or deceptive, and a violation of the PSA." It also seeks to clarify criteria and types of conduct that would be viewed as "unduly or unreasonably preferential, advantageous, prejudicial, or disadvantageous, and violations of the Act, including retaliatory practices that interfere with lawful communications, assertion of rights, and associational participation."

Notably, USDA has another final rule related to transparency in poultry grower contracting and tournaments currently under review at OMB. Despite scheduled meetings concluding by late September, it remains uncertain when either rule will be published, as the recently submitted rule was originally targeted for finalization in September.

WSJ: Chinese-owned pork producer Smithfield considers U.S. listing amid challenging industry conditions

Smithfield Foods, the largest pork producer in the United States, is reportedly in discussions about a potential return to the U.S. stock market, the Wall Street Journal reports. The Chinese parent company of Smithfield, WH Group, is collaborating with banks to explore the possibility of taking the business public in the U.S. once again, with the listing potentially occurring as early as next year. However, deliberations are ongoing, and the timing may change.

Smithfield Foods was acquired by China's top meat producer in 2013, resulting in its delisting from the New York Stock Exchange. Following the acquisition, the combined entity became the world's largest hog farmer and pork producer and went public in Hong Kong in 2014. Nonetheless, WH Group's shares have faced challenges and are currently trading near record lows, mainly due to an African swine fever outbreak in China in 2018, which significantly impacted hog herds. The U.S. pork industry experienced growth in exports following the outbreak, but these exports have declined in recent years as China rebuilt its hog population, leading to an oversupply of pork in the U.S. High livestock feed prices due to global events, such as Russia's invasion of Ukraine, have compounded challenges for the industry.

Smithfield's potential return to the U.S. stock market comes amid concerns in Washington about Chinese ownership of key components of the U.S. food supply chain. Smithfield CEO Shane Smith has defended the company's Chinese ownership, stating that it has helped boost sales.

Of note: While Smithfield's listing discussions are ongoing, other major meat companies, like Brazil's JBS, are also considering U.S. listings amid challenging conditions in the meat industry.

USDA weekly dairy report

CME GROUP CASH MARKETS (10/20/2023) BUTTER: Grade AA closed at $3.3600. The weekly average for Grade AA is $3.3870 (-0.0560). CHEESE: Barrels closed at $1.7100 and 40# blocks at $1.7875. The weekly average for barrels is $1.6760 (+0.0570) and blocks, 1.7525 (+0.0510). NONFAT DRY MILK: Grade A closed at $1.2325. The weekly average for Grade A is $1.2275 (+0.0225). DRY WHEY: Extra grade dry whey closed at $0.3950. The weekly average for dry whey is $0.3745 (+0.0560).

BUTTER HIGHLIGHTS: Cream is tight in the West but is becoming more available in some parts of the region. Cream availability varies in the East and is available in the Central region. Contacts in the East and Central region say cream volumes have become more available recently than in prior weeks. Cream multiples in the Central region have shifted downward to the low 1.20s, becoming more comfortable for churning. In the East, contacts say they are purchasing spot loads and utilizing contracted cream volumes to run active schedules. Meanwhile in the West, butter production is mixed, and some butter makers relay current prices are contributing to limited spot cream purchases. Demand for butter is steady from domestic purchasers in the West, but contacts report moderate interest from international customers. In the East, demand for butter in retail and food service markets is unchanged from last week. Spot butter inventories are tight in the East, while stakeholders note somewhat tight bulk butter. Supplies of salted butter are not notably tight in the Central region. Bulk butter overages range from 3.0 to 11.0 cents over market value.

CHEESE HIGHLIGHTS: In the West, Class III milk demand is strong to steady, and some cheesemakers say spot availability is limited. In the Midwest, contacts report similar milk availability to previous weeks and relay spot milk prices starting just above Class III. In the Northeast, milk production is increasing seasonally but contacts report stagnant spot demand for Class III milk. Cheese production is steady in the Northeast and West. Contacts in the Midwest say cheese production picked up somewhat this week, as fewer plants were closed for maintenance compared to last week. Cheese inventories are said to be comfortable in the Northeast and growing some in the Midwest. In the West, some cheesemakers note inventories available for spot load purchasing are decreasing. Demand for cheese is steady from retail purchasers in the Northeast, while food service demand is strong. In the Midwest, cheese demand is mixed. Domestic sales of cheese to retail and food service sectors in the West are steady, but contacts say export demand is comparatively lighter.

FLUID MILK: Cow comfort improvements due to seasonally cooler weather are making their mark in areas throughout the country, but some farm milk output gains are noted as marginal. That said, in the Midwest, component levels from dairy farms’ monthly reports are strong. Class I demand notes are generally steady, if not slightly lower due to school breaks. Cheesemakers reported spot milk from flat market to $2 over Class III this week in the Midwest. Condensed skim availability has mirrored that of milk. Cream availability loosened somewhat in the East and Midwest. Class II and Class III cream end use has shifted lower. Butter makers in those regions say spot cream loads are back and at price ranges that work for Class IV use. F.O.B. cream multiples are 1.16-1.39 in the East, 1.22-1.34 in the Midwest, and 1.10-1.38 in the West.

DRY PRODUCTS: Domestic dairy powder commodity markets have, for the most part, found a bullish tailwind in recent weeks. Prices for the following moved higher in every region: nonfat dry milk (NDM,) dry buttermilk, dry whey, lactose and whey protein concentrate 34% (WPC 34%.) Dry whole milk prices held steady, while acid and rennet casein prices were lower. Low/medium heat NDM market tones are quiet, but offer prices continue to reach mid- $1.20s. Dry buttermilk availability has tightened noticeably since early October. Prices in the Central/East have shifted exclusively to $1+. Similarly, dry whey prices in the Central region have moved away from the high $.20s and into the $.30+ realm. Increasing demand and lighter production of WPC 34%, particularly as higher protein concentrations gain some attention from processors, have given those markets a shot in the arm.

ORGANIC DAIRY MARKET NEWS: Federal Milk Market Order 1, in New England, reports utilization of types of organic milk by pool plants. During September 2023, organic whole milk utilization totaled 14.7 million pounds, down from 17.6 million pounds the previous year. The butterfat content, 3.28 percent, is higher compared to 3.27 percent a year ago. Total organic dairy advertisements grew 76 percent compared to the previous week's retail survey ad number. Organic milk advertisements make up the largest percentage of the total organic dairy advertisements by commodities at 37 percent. Compared to last period, trade activity and demand is moderate on organic feed corn and soybeans.

US NATIONAL RETAIL REPORT: Advertisement totals increased by 76 percent for organic dairy ads, while conventional ad numbers slid by 16 percent during week 42. Despite the cooler weather, conventional ice cream in 48-to-64-ounce containers secured its normal top position this week, while milk in half-gallon containers is the most advertised organic dairy item. The weighted average advertised price for organic half-gallon milk is $4.24, compared to $2.25 for its conventional counterpart. Total conventional one-pound butter ads decreased 49 percent this week, but eight-ounce butter ad totals increased five percent. Conventional sour cream ad totals dropped 30 percent from week 41, while total conventional cottage cheese ad numbers decreased 27 percent.

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