Mexico reports H5N1 avian influenza in wild duck

A case of H5N1 avian influenza was found in a “clinically healthy” migratory duck in the state of Jalisco, animal safety agency Senasica, which is part of Mexico’s ag ministry, said. This case does not indicate the occurrence of a highly pathogenic avian influenza (HPAI) outbreak. The announcement coincides with the Mexican government’s official statement that the country has been declared H5N1 free following the initiation of a vaccination campaign in high-risk areas. Senasica has clarified that the presence of H5N1 in a wild bird does not contradict the government’s declaration of being H5N1 free, and no cases have been identified in commercial poultry as of now.

Weekly USDA US beef, pork export sales

Beef: Net sales of 13,300 MT for 2023 were down 25 percent from the previous week, but up 7 percent from the prior 4-week average. Increases primarily for South Korea (4,300 MT, including decreases of 400 MT), Japan (3,700 MT, including decreases of 400 MT), China (1,600 MT, including decreases of 100 MT), Mexico (700 MT, including decreases of 100 MT), and Canada (700 MT, including decreases of 100 MT), were offset by reductions for the United Kingdom (100 MT). Net sales of 300 MT for 2024 were reported for Hong Kong (200 MT) and Taiwan (100 MT). Exports of 15,100 MT were down 1 percent from the previous week, but up 4 percent from the prior 4-week average. The destinations were primarily to Japan (4,100 MT), South Korea (3,700 MT), China (2,200 MT), Mexico (1,700 MT), and Canada (1,000 MT).

Pork: Net sales of 43,000 MT for 2023 were up 57 percent from the previous week and 61 percent from the prior 4-week average. Increases were primarily for Mexico (14,600 MT, including decreases of 300 MT), China (9,400 MT, including decreases of 100 MT), South Korea (4,400 MT, including decreases of 200 MT), Japan (3,400 MT, including decreases of 200 MT), and Australia (2,600 MT). Net sales reductions of 100 MT for 2024 were reported for Japan. Exports of 28,300 MT were down 6 percent from the previous week, but up 6 percent from the prior 4-week average. The destinations were primarily to Mexico (11,700 MT), Japan (3,300 MT), China (3,000 MT), South Korea (2,400 MT), and Canada (2,000 MT).

Cal-Maine Foods shares hit

The egg producer's shares fell more than 12% in premarket trading after the company reported lackluster sales figures due to lower prices.

Debate over advanced pricing of Class I and II milk sparks concerns about disorderly marketing

The ongoing USDA hearings to amend the Federal Milk Marketing Order system have reached their seventh week, with discussions centered on 21 submitted proposals, including those related to Class I skim milk price adjustments and advanced pricing dynamics. The American Farm Bureau Federation notes that dairy industry stakeholders have raised concerns that the current use of advanced pricing, coupled with the "average-of" plus 74 cents formula, has led to disorderly marketing conditions and non-uniform pricing for dairy farmers. The Federal Milk Marketing Order system seeks to establish minimum uniform prices paid to farmers based on the value of raw milk in various dairy products, and this debate aims to address issues related to pricing equity among handlers and farmers within the system.

Judge dismisses lawsuit against McDonald's and Wendy's over hamburger size advertising

US District Judge Hector Gonzalez has delivered a victory for the fast-food industry by dismissing a lawsuit that accused both McDonald's and Wendy's of deceptive advertising regarding the size of their hamburgers. The judge's ruling stemmed from a lack of evidence demonstrating that the fast-food chains had provided smaller burgers than advertised or that the plaintiff had encountered advertisements for the McDonald's Big Mac and Wendy's Bourbon Bacon Cheeseburger, which were central to the lawsuit. This favorable outcome is expected to strengthen the legal position of other fast-food chains, including Yum! Brands' Taco Bell and Restaurant Brands' Burger King, which are currently facing similar lawsuits.

Cargill expects chicken industry turnaround amid challenging times

Cargill Inc., a major crop trader, found itself amid the chicken industry's worst downturn in years shortly after making a multi-billion dollar bet on U.S. chicken in 2021. Despite this rocky start, the sector is showing signs of a much-needed recovery, which Cargill anticipates will occur "months, not years" from now, Hans Kabat, the president of the company's North American protein business, told Bloomberg.

When Cargill initially announced the acquisition of chicken producer Sanderson Farms Inc., they were optimistic, driven by high demand for chicken products and soaring prices. However, the market landscape shifted during the lengthy process of closing the deal, marked by increased chicken supply and consumers reducing purchases due to rising meat prices amid inflation. This led to an oversupply of chickens with elevated feed costs.

In recent months, the domestic chicken sector has started to stabilize, with some companies scaling back production to rebalance the market. Falling feed costs, including a nearly 30% drop in corn futures, have further aided the recovery.

Despite the initial challenges, Cargill remains committed to the poultry industry, recognizing its importance within the company's protein segment. Protein is a significant part of Cargill's business, and the chicken industry's ability to quickly adapt to changing conditions, due to the short life cycle of birds, provides hope for a brighter future. However, the beef sector is expected to face more prolonged challenges, as cattle take significantly longer to reach market weight.

Cargill aims to meet consumer demands by expanding its offerings of case-ready cuts, marinated meats, and tray packs while remaining bullish on the long-term prospects of both the chicken and beef industries, as global protein demand is expected to persist for decades.

USDA seeks approval to gather additional information for organic dairy variance requests

USDA is seeking approval to collect supplementary information related to variance requests in the context of organic dairy regulations. Earlier this year, a final rule concerning the Origin of Livestock within organic regulations for dairy was implemented, permitting small producers to request variances from program regulations. However, USDA's Agricultural Marketing Service (AMS) now requires additional data from those seeking variances and is in the process of obtaining clearance for this purpose.

The new information collected by AMS will play a crucial role in determining whether individual small certified organic dairy operations are granted or denied a variance from USDA organic regulations regarding the origin of livestock. A notice regarding this matter has been published in the Federal Register, initiating a 30-day comment period for stakeholders and interested parties to provide feedback on the proposed data collection.

USDA: European poultry and products annual report

Driven by strong internal demand, EU chicken meat production is expected to grow in 2023 and 2024. In 2024, Poland will be the largest EU chicken producer, accounting for more than 20 percent of all EU chicken production. After the COVID-19 related decline in 2021, Polish chicken production has resumed growth despite higher feed and energy costs and increasing competition from Ukraine. The chicken industry operates on a short two- to three-month production cycle which is very reactive to outside events. USDA forecasts are based on assumptions and information that are available at the time of publication.

EU chicken meat trade surplus is expected to slightly decline in 2023 and 2024 as imports increase and exports remain stagnant. As consumption in the HRI sector resumes, demand for inexpensive imported chicken meat parts especially from Brazil, Thailand, and particularly Ukraine is increasing.

Poultry imports from the UK continue to face post-Brexit constraints with EU veterinary inspection and other import requirements that now apply for UK chicken meat. With an expected doubling in 2023, chicken meat imports from Ukraine continue to benefit from the EU’s May 2022 decision to temporarily suspend import quotas and tariffs on Ukrainian chicken meat as it was extended for one more year in May 2023. EU chicken exports in 2023 were adversely affected by HPAI outbreaks as several importing countries imposed trade bans. At the same time, EU chicken meat exports to UK are expected to grow by 7 percent in 2023. For 2024, EU chicken meat exports will likely remain flat as increasing competition with inexpensive

Brazilian chicken will place EU producers at a disadvantage, especially in Asia and in sub-Saharan Africa. EU exports will continue to be constrained in 2023 so long as HPAI related bans continue.

Chicken meat remains the preferred animal protein compared to more expensive beef and pork products. With growing food inflation and higher energy costs, EU chicken meat consumption will remain strong in 2023 and 2024. EU consumption is closely related to demographic growth, and per capita consumption is also slowly increasing.

While special production schemes including organic, free range, and GMO-free chicken are widely supported throughout the EU, sales of inexpensive chicken meat cuts are growing at a faster rate compared to more expensive products like breasts and whole birds.

US restricts French poultry over HPAI vaccine

France started vaccinating ducks against highly pathogenic avian influenza on Monday, prompting the U.S. to impose trade restrictions on French poultry imports. Vaccinated birds may not show signs of infection, meaning it is impossible to determine whether the virus is in a flock, USDA said. Japan was also still reluctant to accept French poultry after vaccination.

China’s sow herd declines

China’s sow herd totaled 42.41 million head at the end of August, according to the country’s ag ministry, down 0.7% from July and 1.9% smaller than last year. Hog slaughter surged 22.1% from year-ago in August.

Weekly USDA dairy report

CME GROUP CASH MARKETS (9/29) BUTTER: Grade AA closed at $3.3000. The weekly average for Grade AA is $3.2310 (+0.3560). CHEESE: Barrels closed at $1.4800 and 40# blocks at $1.7200. The weekly average for barrels is $1.5185 (-0.1125) and blocks, 1.7465 (-0.0755). NONFAT DRY MILK: Grade A closed at $1.1850. The weekly average for Grade A is $1.1755 (+0.0375). DRY WHEY: Extra grade dry whey closed at $0.2900. The weekly average for dry whey is $0.2970 (-0.0070).

BUTTER HIGHLIGHTS: Cream volumes are tight throughout all three regions, and contacts in the Central region note that cream is having a significant impact on butter production. Central region butter makers say daily production has remained somewhat similar in recent weeks, despite increasing prices received for butter on the CME. In the West, butter production is mixed. Contracted cream volumes are keeping butter churns active in the East. Butter inventories are tight in the East. Contacts in the Central region say loads are available if purchasers are willing to pay higher prices for butter, but inventories are not abundant. In the West, bulk butter inventories are tightening amid strong demand. Contacts in the West report strong to steady demand for butter in retail and food service markets, while export demand is moderate to light. In the East, food service sales are steady, though retail demand is softening. Demand for butter is steady in the Central region, but some contacts are concerned that butter priced above $3/lb will cause purchasers to reduce orders to only loads which meet their immediate needs.

CHEESE HIGHLIGHTS: Unseasonably warm weather has negatively impacted milk production in some Northeast states, while milk volumes in the region are being drawn upon by school bottling purchasers. In the Midwest, some cheese makers say tight milk volumes are causing them to run reduced production schedules. Regional milk volumes are tight, and contacts report regional spot loads at prices $1 over Class and higher. Spot milk volumes are somewhat limited in the West, amid strong Class III demand. Some cheese makers in the region say this is contributing to lighter cheese production. In the West, retail demand for cheese is strong to steady and food service sales are steady. Contacts in the Northeast say cheese demand is lighter compared to the summer months. Cheese demand is steady from retail and food service purchasers in the Midwest. A few contacts in the Midwest say recent bearishness on the CME daily cash call has some customers stepping back, but cheesemakers in the region are still relaying mostly similar notes to previous weeks regarding demand. Cheese barrel makers say inventories are not currently a concern, despite increased bearishness for cheese barrels compared to blocks.

FLUID MILK: In the West region, farm level milk production varies. California, the Pacific Northwest, and the mountain states of Idaho, Utah, and Colorado report flattened milk output, as hot weather eases. For Arizona and New Mexico, the cow comfort level continues to push milk output lower. Class I demand is strong in New Mexico, Arizonia, and the Pacific Northwest, while California and the mountainous states report steady demand. The Central region’s milk output is down along seasonal lines, as active Class I demand squeezes processors’ milk intakes. East region milk producers are seeing flat to steady milk production. Bottling demand is steady to strong. Meanwhile, regional cream supplies have tightened. Cream cheese production is seeing an uptick is some regions. Cream multiples for all Classes are 1.38-1.48 in the East; 1.24-1.40 in the Midwest; and 1.10-1.34 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices are higher across the regions. Buyers from Mexico continue to make purchases. High heat nonfat dry milk prices adjusted higher in the West, while unchanged in the Central and East regions. Dry buttermilk prices are steady throughout the regions, as supplies tighten. Export interest is fair. The dry whole milk price is steady. Demand is steady, with a few loads available in the spot market. Dry whey markets are mixed. Prices are steady to higher in the Central region, steady in the Northeast, while higher in the West. Production and demand are steady. Whey protein concentrate 34% prices adjusted steady to lower in the range. Production is somewhat restricted as a few manufacturers place focus on higher whey protein concentrates. Lactose prices adjusted lower this week. Export demand is slow. Acid casein prices are unchanged, but rennet casein prices are lower. Spot loads are available.

INTERNATIONAL DAIRY MARKET NEWS

WESTERN EUROPEAN OVERVIEW: European weekly milk production continues to decrease seasonally, and monthly and year-over-year milk production rates are only trending slightly more than the previous year. According to CLAL data made available to USDA, July 2023 EU cows' milk delivered to dairies is estimated at 12,596,000 MT, up 0.5 percent compared to last year. Year-to-date EU cows' milk delivered to dairies through July 2023 is estimated at 87,235,000 MT, an increase of 0.7 percent when compared to January-July 2022 EU milk production. Among some of the top Western EU milk producers, the year-to-date milk deliveries and percentage changes from January-July 2022 are Germany, 19,384,000 MT, +2.6 percent; France, 14,194,000 MT, -2.3 percent; and Netherlands, 8,322,000 MT, +2.9 percent. The provisional July 2023 cows' milk delivered to dairies in the UK was 1,285,200 MT, up 1.0 percent from July 2022. Year-to-date cows' milk deliveries in the UK for January-July 2023, 9,240,500 MT, was 0.9 percent more than total milk deliveries in January-July 2022.

EASTERN EUROPEAN OVERVIEW: While milk production is seasonally decreasing across parts of Eastern Europe, industry sources suggest that that monthly and year-to-date volumes have stayed strong compared to last year. Preliminary milk production numbers from Poland report percentage increases above the average for the EU. According to a recent USDA Global Agricultural Information Network (GAIN) report, the Ukrainian livestock industry has shrunk considerably in the last few years. Dairy and dual-purpose bovines make up a large portion of the Ukrainian livestock population. However, low milk prices, decreased consumer numbers, decreased disposable incomes, and disruptions to milk sale logistics have contributed to strains on farm economics, prompting many farmers to reduce herd sizes. A Ukrainian dairy producer association estimates the country lost between 70,000 and 100,000 dairy cows in 2022.

OCEANIA OVERVIEW: NEW ZEALAND: New Zealand's dairy industry is challenged with projecting how dairy product prices will move under the current market conditions. While the recent increases in dairy product prices at GDT event 340 appear to have encouraged the industry, prices in general remain low. Reports show that the August 2023 WMP price saw an 18 percent drop, compared to August 2022. Another issue for the New Zealand dairy industry is milk production. Although seasonal 2023 milk production is increasing, there have been three consecutive months (June, July, and August) in which monthly milk production volumes have decreased when compared to 2022 milk volumes. August 2023-2024 milk production volumes slipped 0.9 percent on a milk solid basis. There is very little optimism in the market for milk production to improve prior to early 2024, as heavy rainfall and drought in different areas continue to deteriorate field conditions, which is likely to hamper the spring season milk yields. Meanwhile, China's demand is a development that is being closely monitored, as milkfats, SMP, and cheese exports to China for the month of August posted year[1]over-year improvements. On another note, the European Parliament is expected to approve the FTA with New Zealand sometime in late 2023 to early 2024. Conversely, the CPTPP with Canada has some challenges, with discussions likely to last longer than New Zealand dairy producers' desire.

AUSTRALIA: As Australia moves closer to the seasonal milk production peak, expected in a few weeks, there is a bit of tempered optimism. Milk pay prices are at a level that seem to encourage some producers in areas to work toward higher milk production. Competition among dairy processors for milk has led to offering higher milk pay prices. However, market representatives advise that Australia is on track for its smallest dairy production output in three decades. Higher dairy product prices can be found at retail stores, an indicator of the exhausted dairy manufacturing industry. Market representatives estimate that New Zealand's lower cost dairy products, which are being distributed into the country has grown, nearly 30 percent higher, compared to a year ago. Australia's recent dairy product export report shows an 8 percent year[1]over-year decline, but exports increased 5 percent year-to-date. Specifically, WMP exports declined 16 percent; SMP is down 16 percent; cheese dropped 7 percent, while butter exports rose 6 percent. Meanwhile, EU and Australia trade negotiations are still in check, but are expected to continue in the coming months.

SOUTH AMERICA OVERVIEW: South American milk output has improved following years of drought in the Southern Cone, but question marks remain for producers/processors in the region. Reports suggest Argentina's key dairy sector has continued to experience a somewhat dry summer. Moving northbound in the region, the El Nino phenomenon is expected to increase precipitation amounts, but how much rain is the question that remains. Brazilian milk output continues to grow in general, despite reported drops in key dairy states of the country. All said, spring is upon the region, and milk availability expectations have increased. Generally, across the continent, inflation has settled, and analysts suggest this is keeping the retail dairy aisle busier. Some notable countries in the area are still experiencing higher inflation rates, but improvements have been noted in some key parts of the region. Brazilian importing interests remain somewhat hearty, despite drop-offs when compared to a robust 2022. Argentinian exporters have said for the past two to three weeks that Brazilian interests for commodities, namely whole milk powder, have rebounded. Pipelines are being refilled, and Q1 contracts are being negotiated in earnest. Uruguayan exporters maintain strong trading relationships with North African countries, namely Algeria.

NATIONAL RETAIL REPORT: Conventional cheese was the most advertised dairy category. Shredded cheese in 6-8 ounce packages had a weighted average advertised price of $2.42, down 4 cents. Block cheese in 6-8 ounce packages had a weighted average advertised price of $2.31, up 6 cents. Sliced cheese in 6-8 ounce packages had a weighted average advertised price of $2.79, down 7 cents. The organic counterparts had weighted average advertised prices of $4.22, $5.28, and $2.99, respectively. The weighted average advertised price for conventional milk in half gallon containers went up 34 cents, while organic milk in half gallon containers went down 42 cents. The conventional version had a weighted average advertised price of $2.64. The organic version had a weighted average advertised price of $4.38.