Weekly global protein digest: Japan to cull record number of chickens to halt HPAI

Analyst Jim Wyckoff shares an update on the USDA reports and global protein news
calendar icon 13 January 2023
clock icon 10 minute read

Weekly US beef, pork export sales

USDA Thursday reported US beef net export sales for 2023 marketing year, which began January 1st, totaled 13,300 MT primarily for Japan (4,800 MT, including decreases of 600 MT), China (3,400 MT, including decreases of 100 MT), South Korea (1,700 MT, including decreases of 700 MT), Mexico (900 MT, including decreases of 100 MT), and Taiwan (700 MT, including decreases of 100 MT), were offset by reductions for Chile (100 MT). Net sales of 600 MT were carried over from the 2022 marketing year, which ended December 31st. Exports for the period ending December 31st of 4,300 MT brought accumulated exports to 942,000 MT, up 2 percent from the prior year total of 925,100 MT. The primary destinations were to South Korea (1,300 MT), Japan (1,200 MT), China (500 MT), Mexico (400 MT), and Taiwan (200 MT).

Pork: Net sales for 2023 marketing year, which began January 1st, totaled 13,100 MT were primarily for Mexico (4,700 MT, including decreases of 300 MT), Japan (3,500 MT, including decreases of 400 MT), South Korea (1,400 MT, including decreases of 700 MT), Canada (800 MT, including decreases of 400 MT), and the Dominican Republic (600 MT, including decreases of 100 MT). Net sales of 4,000 MT were carried over from the 2022 marketing year, which ended December 31st. Exports of the period ending December 31st of 9,700 MT brought accumulated exports to 1,502,900 MT, down 16 percent from the prior year total of 1,791,700 MT. The primarily destinations were to Mexico (6,000 MT), Japan (1,300 MT), South Korea (600 MT), China (500 MT), and Canada (400 MT).

Japan to cull record number of chickens in bid to halt HPAI

Japan will cull a record of more than 10 million chickens to combat highly pathogenic avian influenza (HPAI), the agriculture ministry announced after finding another case in southwestern Japan. Culls in 2022 totaled 10.08 million chickens in 57 cases, taking out the prior record of 9.87 million chickens culled in November 2020-March 2021 which was from 52 cases of HPAI. There have been 23 prefectures affected compared with 18 in the 2020 infections. Japan warned producers to be on high alert and an official was quoted by Reuters as saying outbreaks in wild birds have been greater than expected.

USDA making more investments in meat and poultry processing

USDA says it is investing more than $12 million to expand independent meat and poultry processing capacity in Ohio, Michigan and Minnesota. Vilsack announced that Meat and Poultry Processing Expansion Program grants will help fund the following projects:

• In Ohio, International Food Solutions Inc. is receiving $9,575,250 to help redevelop and expand a vacant building in Cleveland into a plant with the capacity to process 60 million pounds of poultry. The expansion will include cold and dry storage and two processing lines. The project will create 227 good-paying jobs. International Food Solutions is a woman- and minority-owned business that has produced thousands of prepared meals for K-12 students receiving free and reduced-price school meals.

• In Michigan, grower-owned cooperative Michigan Turkey Producers is receiving $1,531,204 to help upgrade the hot water system, wastewater treatment facilities and refrigerated trailers to accommodate an expansion at its plant in Grand Rapids. With recent automation upgrades and the continuing expansion made possible by the grant, the plant will be able to add a shift and double its processing capacity to 10 million turkeys annually. The additional capacity also will allow the plant to provide back-up for other facilities of similar size in neighboring states.

• In Minnesota, Benson + Turner Foods Inc. is receiving $962,954 to build a 6,788-square-foot cattle and hog processing plant on the White Earth Indian Reservation and storefront near Waubun. The grant will help the company achieve its goal of building a sustainable business that benefits the local economy by using locally grown livestock and providing new opportunities for producers to market their products by providing USDA-certified processing for them.

This is in addition to recent announcements of $74 million in 22 MPPEP projects, $75 million in grants through the Meat and Poultry Intermediary Lending Program, $3.9 million in Value Added Producer Grants, and $5.7 million in Food Supply Chain Loan Guarantees, all supporting meat and poultry processing. These programs are a few of the suite of programs facilitating investment in meat and poultry processing.

FAO food price index continued to drop in December

The UN Food and Agriculture Organization (FAO) global food price index dropped for the nineth straight month and was 1.0% below year-ago. The decline in December was driven by a steep drop in the international prices of vegetable oils, along with smaller declines in cereal grains and meats. Compared to year-ago, prices were up 2.5% for meat, 7.8% for dairy, 4.8% for cereal grains and 0.7% for sugar, while vegoils dropped 19.1%.

Weekly USDA dairy report

CME GROUP CASH MARKETS (1/6) BUTTER: Grade AA closed at $2.3825. The weekly average for Grade AA is $2.3806 (+0.0006). CHEESE: Barrels closed at $1.7250 and 40# blocks at $2.0550. The weekly average for barrels is $1.7263 (-0.1325) and blocks, $2.0013 (-0.1500). NONFAT DRY MILK: Grade A closed at $1.2975. The weekly average for Grade A is $1.3069 (-0.0275). DRY WHEY: Extra grade dry whey closed at $0.3900. The weekly average for dry whey is $0.4088 (+0.0050).

BUTTER HIGHLIGHTS: Throughout the country cream is available. Contacts in the Northeast say volumes offered at low multiples are working through the market. Cream multiples were a little steeper in the Central region this week. In the West, some butter makers report current multiples have led to them using some volumes internally rather than selling on the spot market. Butter makers, in all regions, are running active production schedules. In the Northeast and Central regions, stakeholders say butter demand lightened around the holiday season. In the West, demand for butter is being outpaced by availability and spot loads are available for purchasing. In the Northeast, spot butter inventories have remained tight into the winter. Some contacts in the Central region say strong production, plentiful cream supplies, quieter demand, and a recent warehouse fire, have contributed to some uncertainty in the regional butter market. Bulk butter overages range from 3 to 15 cents above market, across all regions.

CHEESE HIGHLIGHTS: Cheesemakers say milk is available, with loads being sold for below Class prices throughout the country. In the Midwest and West, cheesemakers say they are utilizing this milk to run busy production schedules. In the Northeast, some cheesemakers relay lighter production due to the year-end holidays. In the Midwest, cheese demand varies as some contacts report lessening sales in recent weeks, while others report steady interest. Contacts in the Northeast report steady food service demand, though retail demand is softening. Lighter demand has been reported by Western cheesemakers in both retail and food service markets. Some contacts in the Northeast and West say lower prices for cheese produced in international markets are contributing to softening export demand. Others in the West report strong sales of cheese to purchasers in Asian markets. Cheese is available for spot purchasing throughout all regions.

FLUID MILK: Milk production is steady to higher in all regions. Overall Class I sales have increased in the East and the Midwest, as schools reopened this week and spurred an increase in orders. Unseasonably cold temperatures in Florida may have affected milk output, as many areas in the north and central parts of the state saw below freezing temperatures. In the wake of the harsh winter storm, cow comfort has improved in the Midwest. Extreme rain accumulation in California has impacted cow comfort, with forecasters anticipating another five days of intense storms. The Midwest continues to see up to $10 discounts on Class III milk loads. Class II demand is light across all regions. Condensed skim is readily available and in demand in all regions. F.O.B. cream multiples are 0.92-1.20 in the East, 1.00- 1.22 in the Midwest, and 0.90-1.26 in the West.

DRY PRODUCTS: For most dairy powders, prices slipped lower this week. High heat nonfat dry milk prices dropped on the top end of the range for both the Central and East regions. Demand for low/ medium nonfat dry milk is weak throughout the Central, East, and Western regions, whereas the West is seeing more demand for high heat nonfat dry milk. The Central and East dry buttermilk market is stagnant, with steady prices and little demand. In the West, dry buttermilk production has remained strong while demand remains light, and prices edged downward. Dry whole milk prices dropped lower this week, with processors focusing production on contracted loads. Dry whey demand remains light in all regions, and prices on the range remained steady in the Central region, moved slightly lower in the Northeast, and the top of the range dropped in the West. The animal feed whey market remains quiet. Whey protein concentrate 34% prices were unchanged this week. Lactose prices are mixed, with the mostly price series expanding. Rennet and acid casein prices are unchanged.

International dairy market news

EUROPEAN DAIRY MARKET OVERVIEW: WESTERN EUROPE: Weekly milk collections in western Europe are recovering following a cold spell at the end of the year. Although reported YTD milk production values for 2022 are still below last year's values, positive milk growth in the last few months should narrow that gap. The three largest EU milk producers, German, France and Holland, had increases in milk growth for September and October. In addition, the United Kingdom has also seen an increase in milk intakes through the fall. According to CLAL data made available to USDA, the provisional November 2022 cows' milk delivered to dairies in the UK was 1,235,000 MT, up 3.0 percent from November 2021. Year-to-date milk deliveries through November 2022 in the UK, 14,085,500 MT, is 0.8 percent less than year-to-date milk deliveries through November 2021.

EASTERN EUROPE: Eastern European milk collections have been an area of growth throughout the last year. Reported milk production in Poland, the largest eastern EU milk producer, has registered positive milk growth in every month in 2022 compared to 2021. According to CLAL data made available to USDA, November 2022 cows' milk delivered to dairies in Poland was 992,000 MT, up 2.4 percent from November 2021. Year-todate milk deliveries through November 2022 in Poland, 11,722,000 MT, increased 2.3 percent compared to year-to-date milk deliveries through November 2021.

OCEANIA DAIRY MARKET OVERVIEW: NEW ZEALAND: With New Zealand now having transitioned a few months into the seasonal decline in milk production, the hope for a recovery in the New Zealand farm gate milk price is waning. Falling GDT dairy commodity prices continue to impact the farmgate milk price. Some stakeholders note that the likelihood of the milk price falling further is diminished, as most of the season's production has been sold or priced. Weak dairy demand from China has helped deteriorate global dairy commodity prices. China remains a key WMP market for New Zealand, but uncertainty continues around China's unsure position as Covid policies and border issues impact the market. Some market representatives anticipate weak prices will continue in the first half of 2023, while forecasting improvements around mid-year. Meanwhile, weaker than normal demand is a major risk to the farm gate milk price.

AUSTRALIA: In Australia, while market activity has been somewhat quiet over the holiday period, orders have been good as milk production seasonally declines. As such, dairy processors anticipate tighter than usual dairy commodity products during Q1 2023, as manufacturers factor in milk production volumes. Currently, the country's milk price is highly volatile as sources point out that the retail price of milk continues to inflate around factors that influence milk producers' costs. By all accounts, Australia's milk production season has suffered along the lines of extensive drought, with shortages ranging from fuel, feed, fertilizer, and labor, to name a few. Consequently, production costs have transferred to grocery store shelves where retail milk prices are trending higher. As such, consumers are choosing to transition to private label brands. Meanwhile, butter, skim milk, and whole milk powder are expected to suffer reductions in the country's 2023 export market.

SOUTH AMERICA DAIRY MARKET OVERVIEW: Trading markets have been quiet since early December for dairy commodity importers and exporters in the South American region. International sporting competitions followed by the holidays have meant some extra time off in recent weeks for contacts in a number of countries in the Southern Cone. Trading activity is expected to pick up for 2023, but market tones are certainly in question. Chinese trading has slowed, which has impacted, in the bearish sense, the global dairy commodity industry. Trading within MERCOSUR and beyond is helping offset some of the lag into Chinese ports. Political upheaval in countries within South/Central America has created roadblocks to processing, hauling/shipping, and trading there.

NATIONAL RETAIL REPORT: Total conventional dairy ads increased 9 percent, while organic dairy ads had a much higher 61 percent increase. Total ads for conventional ice cream in 48-64 ounce containers decreased 3 percent. This item had a weighted average advertised price of $3.75, up 3 cents. Organic ice cream appeared in no ads this week.

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