Weekly global protein digest: more HPAI, US expands processing capacity, China's pork imports drop

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news
calendar icon 20 May 2022
clock icon 11 minute read

Additional US commercial operations confirmed with HPAI

USDA data indicates that now 171 commercial flocks have been confirmed with highly pathogenic avian influenza (HPAI), with cases confirmed May 3 in Wisconsin (47,200 and 19,300 turkey meat birds in Barron County), South Dakota (56,200 turkey meat birds in Beadle County), Pennsylvania (12,500 duck meat birds and 29,500 duck breeder birds in Berks County), and Minnesota (118,900 turkey meat birds in Lyon County). The number of commercial flocks are showing as released by the Animal and Plant Health Inspection Service (APHIS) continue to increase, meaning the process of recovering continues to expand. Total HPAI confirmations are at 283 flocks in 32 states totaling 37.36 million birds in both commercial (171) and backyard (112) flocks.

U.S. pork, beef export sales down from last week

USDA Thursday reported US pork net sales of 24,100 MT for 2022 were down 8 percent from the previous week, but up 2 percent from the prior 4-week average. Increases were primarily for Mexico (8,400 MT, including decreases of 200 MT), South Korea (4,300 MT, including decreases of 300 MT), Colombia (2,400 MT), China (2,100 MT, including decreases of 200 MT), and Japan (1,900 MT, including decreases of 100 MT). Exports of 31,300 MT were down 6 percent from the previous week, but up 1 percent from the prior 4-week average. The destinations were primarily to Mexico (13,900 MT), China (4,200 MT), South Korea (3,600 MT), Japan (3,000 MT), and Canada (1,500 MT).

US beef net sales of 23,300 MT for 2022 were down 18 percent from the previous week, but up 35 percent from the prior 4-week average. Increases were primarily for Japan (7,900 MT, including decreases of 400 MT), South Korea (7,400 MT, including decreases of 900 MT), China (2,900 MT, including decreases of 200 MT), Taiwan (1,400 MT, including decreases of 200 MT), and Canada (900 MT, including decreases of 100 MT). Exports of 19,800 MT were unchanged from the previous week, but up 1 percent from the prior 4-week average. The destinations were primarily to South Korea (6,100 MT), Japan (5,300 MT), China (3,100 MT), Mexico (1,400 MT), and Taiwan (1,000 MT).

China’s pork imports down sharply from year-ago in April

China imported 140,000 MT of pork in April, according to official customs data, the same amount as March but down 67.6% from last year. Through the first four months of this year, China’s pork imports plunged 65.1% from the same period last year to 560,000 MT.

House Ag panel to consider bill to create special investigator at USDA on competition in the US livestock industry

A US House bill would establish an Office of the Special Investigator for Competition Matters at USDA. Opponents say it duplicates authorities at USDA and would potentially bring costly regulations on the industry that they say would further increase food prices. The legislation would establish an Office of the Special Investigator for Competition Matters at USDA with subpoena powers and the ability to file civil lawsuits or take administrative actions against violations of the Packers and Stockyards Act of 1921 by meatpacking companies and live poultry dealers. Rep. Austin Scott (R-Ga.) said Democrats have wrongly blamed the meatpacking industry for higher meat prices while they have pursued policies that he said raised energy costs that have rippled through the economy. “It’s a horrible piece of legislation,” Scott said, adding that it showed someone without an agricultural background had written it. By voice vote, members agreed to an amendment by Rep. Jim Costa, D-Calif., that would require the head of the special investigator office to be a senior career executive rather than a political appointee. Members also by voice vote agreed to an amendment by Rep. Jimmy Panetta, D-Calif., that would require the special investigator to coordinate with the USDA’s general counsel office and with the Packers and Stockyards Division of the Agricultural Marketing Service. The special investigator also would have to notify the U.S. attorney general of any legal action the office takes in a federal district court.

US House Ag panel approves bill to expand meat processing capacity

Congress would create a loan and guarantee program to expand competition in the meat processing industry under a bill approved by the House Agriculture Committee on Tuesday. The bill would authorize up to $20 million a year through 2024 for the loan guarantees. Proponents said the bill would be a permanent version of a $500 million USDA initiative announced last summer. The House Ag Committee approved HR 4140on a voice vote. It would authorize USDA loan guarantees for projects in rural areas that would expand and diversify the meat processing sector, improve employment or expand markets. In most cases, USDA would not be allowed to make or guarantee a loan of more than $50 million. The limit would be $100 million for cooperatives.

ADM in lab-meat venture

ADM has entered into a joint development agreement with Eat Just to lower its costs of production and tailor its cultured meat products for markets once they receive regulatory approval.

Canada publishes new dairy tariff rate quota (TRQ) policies in reaction to US complaint

USDA Secretary Tom Vilsack said the announcement by Canada was “disappointing” and “inadequate,” while US dairy industry leaders called on the Biden administration to impose retaliatory tariffs on Canada.

Canada’s international trade minister, Mary Ng, said Canada adjusted its dairy quotas to satisfy the USMCA ruling even if the U.S. did not like the result. The new dairy quota system eliminated TRQ pools reserved for processors — “the sole finding” against Canada, she said. “The new policies end the use of processor-specific TRQ pools,” Ng said. She added that Canada “has the full discretion to administer its TRQs under CUSMA [the Canadian acronym for the Canada-U.S.-Mexico Agreement] in a manner that supports Canada’s supply management system for dairy… We will always stand up for its dairy industry, farmers and workers and the communities they support, and at a time when global food security is under threat, it is even more important that we strengthen and maintain a strong and vibrant domestic dairy industry,” Ng added.

U.S. Trade Representative Katherine Tai said in a statement the U.S. was “deeply disappointed” by Canada’s announcement and communicated her disappointment to Canadian officials before the notice published Monday. “We will evaluate all options, and work with stakeholders and members of Congress, as we determine our next steps in the coming days.”

USDA Secretary Vilsack, during a call to reporters from Poland after meeting with G7 leaders about the Ukraine situation, said he had had a “very frank and specific conversation” with Canadian Minister of Agriculture and Agri-Food Marie-Claude Bibeau to tell her “how inadequate” the response was, and that the United States was “greatly disappointed” that the new quotas do not include retailers. Vilsack added, “There is no distance” between USDA, the Office of the U.S. Trade Representative and the U.S. dairy industry in reaction to the Canadian response. But some industry sources privately said the U.S. needed to get more aggressive with Canada. Asked about U.S. dairy groups calling today for retaliatory tariffs against Canada, Vilsack said “the first step was to convey the level of dissatisfaction… I am hopeful that the nature of my conversation with the Canadian minister underscores the initial level of disappointment,” Vilsack said, adding that he believes Bibeau “is capable of reading between the lines about what’s next.”

Canadian officials ought to be “capable of reading between the lines about what’s next, and maybe what’s next doesn’t have to happen,” Vilsack said during the teleconference. “I can assure you we are not going to give up on this.”

The National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) called on the U.S. government to levy retaliatory tariffs on Canada. “Canada made a clear choice to thumb its nose at both the United States government and its international treaty obligations,” said NMPF President and CEO Jim Mulhern. “It has completely disregarded the USMCA agreement signed just a few short years ago… Ottawa’s decision today is clearly designed to test our resolve by doubling down on its longstanding dairy trade violations, ignoring both the spirit and the letter of its trade agreements. That decision demands retaliatory action by the U.S. government. Otherwise, our trade agreements will be seen as toothless before the ink is dry,” Mulhern said.

Bottom line: Remember when USMCA participants said its dispute resolution would take a lot less time than under WTO? That is now being called into question.

Soaring food prices are triggering shortages and protests across the developing world

Disruptions from the Ukraine war add to existing strains on global supplies of grains, meat and other foodstuffs, the Wall Street Journal reported. India has invoked a rare ban on wheat exports to help tame domestic prices, a move likely to exacerbate global strains. The country is the world’s second-largest wheat grower, behind China.

Late last month, Indonesia halted the export of certain types of palm oil to lower soaring prices of cooking oil at home. Rising prices helped stoke the violent unrest that led to the resignation of Sri Lanka’s prime minister earlier this week and have fanned more peaceful protests in the Middle East. In parts of Africa, millers have run out of wheat. Consumers are skimping on food items once considered everyday staples and substituting cheaper products.

USDA’s dairy market news at a glance

CME GROUP CASH MARKETS (5/13) BUTTER: Grade AA closed at $2.7050. The weekly average for Grade AA is $2.6540 (+0.0065). CHEESE: Barrels closed at $2.3950 and 40# blocks at $2.3075. The weekly average for barrels is $2.3765 (+0.0385) and blocks, $2.2950 (-0.0535). NONFAT DRY MILK: Grade A closed at $1.7300. The weekly average for Grade A is $1.7300 (-0.0050). DRY WHEY: Extra grade dry whey closed at $0.5325. The weekly average for dry whey is $0.5615(-0.0280).

CHEESE HIGHLIGHTS: Labor shortages and delayed deliveries of production supplies are preventing some cheese makers from running full production schedules in the East and West regions. Despite this, production is strong as milk supplies are available for cheese makers. Demand for cheese is strong throughout the country, though some stakeholders in the Northeast and West note softer retail demand. In the West, contacts say that this decline in demand is being countered by strengthening food service demand. Curd demand is, reportedly, moving higher in the Midwest. Some Midwestern cheese makers say that they are able to reallocate loads of cheese to other customers when they become available due to cancellations or slowdowns. Cheese barrel inventories are tightening in the West, while blocks are becoming more available.

BUTTER HIGHLIGHTS: Ice cream makers throughout the country are pulling heavily on cream supplies. Cream output is trending higher in the East, though butter makers say that availability is not increasing. In the Central region, some managers say that they are sourcing loads of cream from the West. In the Central and West regions, butter makers are running busy schedules as they work to build inventories. In the East, production schedules vary; some butter makers say that their production runs are limited by lighter than normal cream intakes. Some grocery store shoppers are, reportedly, purchasing less butter due to high prices. Food service demand is steady nationwide. Inventories of salted butter are mixed in the Central region, though unsalted butter supplies are slim. In the West, contacts report that loads of unsalted butter are becoming more available. Bulk butter overages range from 4 to 15 cents above market, across all regions.

FLUID MILK: Milk production continues to increase in parts of the Midwest and East, for now. Warmer weather this week has some stakeholders reevaluating how long they can expect milk increases to last. In the West, milk output is mixed. Cow comfort is impacted by hot temperatures in New Mexico and Arizona, decreasing milk production. Across the Pacific Northwest, milk output is steady to higher, but down year over year. Across the country, Class I demand is variable. Bottling orders are declining in some regions as school districts reduce orders for the end of the school year. Class III sales are generally strong as cheesemaking remains busy. Western condensed skim demand is higher, with some contract buyers reportedly purchasing near the top of their availability. Cream access is mixed, with contacts reporting tightening supplies in the Midwest but wide availability in the West. In all regions, seasonal upticks in ice cream production are pulling hard at available cream supplies. F.O.B. cream multiples for all classes are 1.30-1.40 in the East, 1.27-1.36 in the Midwest, and 1.00-1.30 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices are level to lower. Domestic trading is stable to increasingly active, and production is steady. High heat NDM prices are also steady to lower, and inventories are limited across regions. The Western dry buttermilk price range shifted up, while Central and East prices inched higher at the bottom of the range but held firm at the top. Reduced butter output is limiting dry buttermilk production in the Central and East regions, and supplies are snug. In the West, some sellers are rerouting export loads to the domestic spot market as port congestion delays outbound shipments. Dry whole milk prices are unchanged. Production is contract-driven, and availability is very tight. Dry whey prices are mostly lower. The combination of busy cheese production and weaker global dry whey demand is catalyzing dry whey inventory growth. The bottom of the whey protein concentrate (WPC) 34% price range fell while the top remained steady. WPC 34% is facing some downward price pressure from dairy proteins with softer prices. Some manufacturers with heavier inventories plan to reduce production. The bottom of the lactose price range dropped. Inventories are robust but largely committed. The acid casein price range narrowed as the bottom increased. Rennet casein prices pushed upward.

INTERNATIONAL DAIRY MARKET NEWS: WESTERN EUROPEAN OVERVIEW: Milk deliveries across Western Europe continue to climb seasonally. However, milk deliveries in the three largest milk producing countries in the EU, Germany, France, and the Netherlands, continue to lag behind previous year production levels. Demand for most dairy products has cooled slightly in recent weeks. Industry sources suggest higher consumer prices, uncertainties within world dairy markets, shutdowns within major ports in China and the conflict in Ukraine all weigh heavily on consumer purchases. That said, some industry sources suggest demand for dairy products is slowly returning to pre-pandemic patterns.

Sarah Mikesell

Editor

Sarah Mikesell grew up on a five-generation family farming operation in Ohio, USA, where her family still farms. She feels extraordinarily lucky to get to do what she loves - write about livestock and crop agriculture. You can find her on Twitter or LinkedIn.

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