Weekly global protein digest: Prop 12, ASF in Romania, HPAI in Arkansas

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news
calendar icon 14 October 2022
clock icon 14 minute read

Judge pauses Wholestone Farms’ $500 million pork plant

On Oct. 11, Judge Sandra Hoglund Hanson put a halt to Wholestone Farms’ progress on its plans for a pork processing facility in Sioux Falls, South Dakota. Wholestone Farms estimated the project to cost $500 million and to employ over 1,100 workers. In addition, Wholestone planned to operate a butcher shop in Sioux Falls. In September, Smart Growth Sioux Falls, a group of area residents that opposes new slaughterhouses in the city, filed a civil complaint against Wholestone Farms, requesting the court deny the pork processor any permits needed to move forward with its proposed processing plant and butcher shop in Sioux Falls prior to the November 2022 election. According to Smart Growth, the city “preemptively” issued Wholestone a permit of occupancy for its butcher shop. The judge’s ruling will revoke all Wholestone’s permits approved by the city until Sioux Falls residents vote on the matter in November.

USDA’s annual global dairy and livestock report


Global production is forecast fractionally lower in 2023 as falling North America and EU production offsets gains in Brazil, China, and Australia. Brazil production is expected to increase 1 percent based on firm global demand in key markets although higher input costs and a weak domestic market will constrain growth. In China, higher cattle inventories are anticipated to support a 5 percent increase in beef production. Meanwhile, Australia production is expected to surge 13 percent on improved pasture conditions. Global exports in 2023 are forecast down 1 percent due to lower import demand, particularly in China. Nevertheless, lower total exports from North America and India are expected to benefit Australia and Brazil. Reduced North America competition in East Asia and rebounding Australia production will allow Australia to boost its shipments and increase market share. Meanwhile, Brazil exports are forecast record high as aggregate exports from its main competitors (Argentina, Paraguay, Uruguay, and India) are expected to fall 3 percent. Smaller cattle inventories are expected to weigh on the exportable supplies of Argentina, Paraguay, and Uruguay. As for India, exports are expected to be unchanged from 2022 with limited growth to a number of markets. U.S. production and exports: U.S. beef production is forecast down 6 percent on tighter cattle inventories. In 2022, drought conditions in much of the United States have resulted in high culling rates and earlier-than-normal placement of cattle in feedlots. This will result in a smaller cattle herd in 2023. U.S. exports are forecast 14 percent lower than 2022’s record volume as tighter cattle supplies and potential heifer herd retention will be reflected in lower beef production, thus constraining exportable supplies. Nevertheless, U.S. exports are expected to remain historically elevated on firm demand in key market.


Global production is forecast to rise 1 percent in 2023 to 111.0 million tons as production in China increases. China pork production is expected to grow 2 percent as the sector continues to recover from the impacts of African swine fever (ASF). High feed costs in China are expected to reduce incentives to over-fatten hogs. The United States, Brazil, and Mexico are also forecast to expand production, more than offsetting declines by other major producers including the EU and the United Kingdom (UK). Rising feed, energy costs, and environmental restrictions will dampen EU production. Producers in the UK face high feed costs and weaker demand for domestic pork. Brazil and Mexico continue to expand their hog sectors to meet growing domestic demand, partly driven by consumers seeking alternatives to higher-priced beef, and stronger export demand in several key countries. Production in Vietnam continues to rebound as the management of ASF has protected the sector from large-scale outbreaks. Global exports are forecast to fall 2 percent to 10.5 million tons in 2023 as China imports weaken for a second consecutive year. Despite persistent issues with ASF, Philippines pork imports are also forecast to decline due to the end of policies favoring imports in 2022; the temporary increase in pork quota volumes ended in May 2022 and reduced tariffs were extended through the end of 2022. UK pork imports rise as pre-pandemic consumption trends are expected to return, shifting purchases from retail to food service, shifting demand for domestically produced pork to imported pork. U.S. production and exports: U.S. production is forecast 1 percent higher in 2023 to 12.4 million tons on gradually increasing pig crops and heavier weights. However, U.S. exports are forecast lower in 2023 on easing demand by key importers such as Mexico and China.


Global production is forecast 2 percent higher in 2023 to a record 102.7 million tons. All major producers except China will make gains with the most significant growth in Brazil. Relatively high feed and energy prices have squeezed profitability globally, but expansion is spurred by robust demand as consumers are expected to seek lower-cost animal proteins amid rising food costs. Brazilian growth is driven by both domestic and global demand as it solidifies its position as the world’s leading producer, surpassing China this year. China production will be stagnant as growth in white feather production will offset a decline in yellow feather production. Demand for affordable chicken products, particularly white feather broiler meat, is expected to grow in 2023 as Chinese consumers shift towards a more diverse protein diet. Thailand production will grow 3 percent despite the anticipated slow recovery in domestic consumption and high production costs caused by supply disruptions to feed grains and day-old chicks. These factors will keep the growth rate below the pre-pandemic average. Russia and Mexico will also make gains amid strong domestic demand. EU production is forecast only marginally higher due to rising energy costs on the heels of highly pathogenic avian influenza (HPAI) outbreaks. Global exports are forecast 4 percent higher in 2023 to a record 14.1 million tons, the most aggressive growth in trade since before COVID-19. Expansion is buoyed primarily by increased demand in China, the EU, and Saudi Arabia, and as production growth is limited for a number of competing exporting producers, Brazil is expected to capture most of the gains. Brazil’s price competitiveness, EU market access, and ability to supply halal product makes the world’s leading exporter well-positioned to fulfill rising global demand. Thailand shipments will reach a record 1.0 million tons on increased shipments to major markets, particularly benefiting from improved China and Saudi Arabia market access. Exports by the EU are stymied by weak production growth on repercussions from HPAI and high prices stemming from increased input costs, particularly energy. U.S. production and exports: U.S. production is expected to rise nearly 2 percent to nearly 21.2 million tons in 2023 on a modest decline in feed prices and firm demand. Increased supplies will bolster exports which are forecast 3 percent higher to nearly 3.4 million tons.

US Supreme Court examines humane pig treatment

The U.S. Supreme Court (SCOTUS) justices voiced worries about the implications of a new California humane-pork law, Proposition 12, asking whether it might open the way for other states to try to impose their moral values beyond their borders. Justices suggested they might let a pork-industry challenge to the law go forward without issuing a definitive ruling on the measure’s constitutionality. If so, that could mean allowing a pork industry-backed lawsuit challenging the law to play out in the lower courts rather than rule on its constitutionality. A decision in the case is expected sometime next year. Link to our special report on the topic for more.

Justice Elena Kagan offered a possible solution to the dilemma facing the court. She noted that the dispute came to the Supreme Court before a trial on the merits, so at this early point in the litigation, courts must accept the challengers’ allegations in their complaint as true. At this stage, she stressed, even if a state’s moral interests in a law are something that courts should consider, the challengers’ complaint “alleges great costs to the pork industry.” Because the case is still at a preliminary stage, she said, isn’t the appropriate step for the court to send the case back for the lower court to balance the burden that Proposition 12 imposes on out-of-state commerce against the benefits to California?

“A state may not project its legislation into other states,” said Chicago attorney Timothy Bishop, representing the National Pork Producers Council. “We will not have a national economic union if California can impose its moral views this way.” He argued that if California’s law is upheld, Oregon could require that products sold there from other states must be made by workers who were paid the state’s higher minimum wage, or Texas could limit sales to products made entirely by lawful U.S. residents.

The Biden administration joined the case on the side of the pork producers and emphasized a similar argument. California’s Proposition 12 “imposes a substantial burden on interstate commerce,” said Deputy Solicitor Gen. Edwin Kneedler. “It invites conflict and retaliation and threatens the balkanization of the national economic union.”

California Solicitor Gen. Michael Mongan defended the law on the grounds that it applied only to pork sold in the state and not elsewhere. “California voters chose to pay higher prices to serve their local interest in refusing to provide a market to products they viewed as morally objectionable and potentially unsafe,” he said.

But objections surfaced from both liberal and conservative justices who foresaw a threat of similar measures. “We live in a divided country,” Justice Elena Kagan said, “and the balkanization that the framers were concerned about is surely present today.”

Justice Ketanji Brown Jackson suggested the California law may have gone further than necessary. Why not require labeling instead, she said, so consumers could avoid pork if it is originated with pigs subjected to cruelty? “Why couldn’t the state advance its interest in a less burdensome way?” she asked.

Justice Neil Gorsuch said the Constitution empowers Congress, not judges, to set national regulations that protect interstate commerce. He said it would be better to “defer to the states” than to have judges decide which state laws have too much effect on businesses in other states.

The Humane Society of the United States and several animal-protection groups objected to the Justice Department’s contention that Californians have no “legitimate” interest in preventing cruelty to animals. “The citizens of California do not want to be complicit in patronizing or condoning the abuse and cruel treatment of these intelligent, social animals,” wrote Katherine A. Meyer, director of the Harvard Animal Law and Policy Clinic. She noted that in the Dobbs vs. Jackson Women’s Health Organization decision that overturned Roe vs. Wade, the court said that questions of “profound moral and social importance” are “unequivocally” left to the people to decide. If so, she said, “Californians should be able to decide not to be complicit in such blatant cruelty to animals with respect to the food products sold in their state.”

— Lawsuit wants to force EPA to respond on CAFO regulation. A coalition of public interest and environmental justice organizations filed a lawsuit last Friday (link) to compel the EPA to respond to an earlier rulemaking petition submitted to the agency in 2017, that asked the EPA to overhaul how large-scale animal production facilities are regulated under the Clean Water Act. The lawsuit argues that the agency’s five-year delay to respond to the petition is unreasonable and violates the Administrative Procedure Act (APA), which requires agencies like EPA to respond to petitions “within a reasonable time.” Filed in the Ninth Circuit Court of Appeals, it aims to force EPA to issue a formal response.

Petitioners in the lawsuit include: Food & Water Watch, Center for Food Safety, Dakota Rural Action, Dodge County Concerned Citizens, the Environmental Integrity Project, Helping Others Maintain Environmental Standards, Institute for Agriculture and Trade Policy, Iowa Citizens for Community Improvement, Kewaunee CARES, Midwest Environmental Advocates, and North Carolina Environmental Justice Network.

Romania confirms new ASF outbreak

Romania has confirmed an outbreak of African swine fever (ASF) at a large pig farm in the western county of Timis. A Romanian official said, “A priority is to protect two other farms, each with tens of thousands of pigs, located a few kilometers away.”

USDA confirms HPAI in Arkansas commercial broiler breeder flock

USDA’s Animal and Plant Health Inspection Service (AHPIS) confirmed highly pathogenic avian influenza (HPAI) in a commercial broiler breeder flock in Madison County, Arkansas, the first HPAI case in Arkansas since 2015, according to state officials. The location has been quarantined and 57,000 birds were destroyed. This brings the total of states where commercial poultry operations have been confirmed with HPAI to 24. USDA data shows Arkansas accounting for 10.8% of birds harvested in August.

USDA weekly dairy report

CME GROUP CASH MARKETS (10/7) BUTTER: Grade AA closed at $3.2175. The weekly average for Grade AA is $3.2225 (+0.0740). CHEESE: Barrels closed at $2.2250 and 40# blocks at $2.0225. The weekly average for barrels is $2.2270 (+0.0290) and blocks, $2.0150 (+0.0265). NONFAT DRY MILK: Grade A closed at $1.5400. The weekly average for Grade A is $1.5395 (-0.0255). DRY WHEY: Extra grade dry whey closed at $0.4225. The weekly average for dry whey is $0.4260 (-0.0185).

CHEESE HIGHLIGHTS: Cheesemakers are running steady production schedules in the Northeast and West. Some processors in the Northeast have been affected by recent storm activity. In the Midwest, downtime at some cheese plants and increasing milk production are contributing to lower spot milk prices. Demand for cheese varies across markets and regions. In the Northeast, food service demand is steady while retail demand is down compared to a year ago. In the West, demand for cheese is steady in both retail and food service markets. Midwest cheese sales are meeting or exceeding stakeholder expectations. Contacts in the Northeast and West report strong demand for cheese from international purchasers. In the Midwest, cheese availability varies but stakeholders say loads of process cheese are quickly being purchased when they become available due to order cancellations. Cheese is available for spot purchasing in the Northeast and West, but contacts in the latter say barrel inventories are tighter than blocks.

BUTTER HIGHLIGHTS: In the Central and West regions cream is becoming more available. Cream volumes heading to states affected by hurricane Ian were moved to different parts of the country. Butter churning is increasing in the Central region. Meanwhile in the Northeast, production is mixed as churning has halted in some production facilities, but others are operating steadily. In the West, butter production is lighter due to maintenance at some production facilities. Butter demand is building in the Northeast and remains strong in the Central region. Food service demand is softening in the West, while bulk and retail sales are trending higher. Some contacts in the West say retail purchasers previously underestimated their needs and are searching for additional loads of butter. In the Northeast and West, butter inventories are tight.

FLUID MILK: Farm milk production is trending steady to higher across much of the United States. Favorable weather and cooler temperatures in some regions have aided cow comfort and have helped support milk flows. That said, the disruption caused by Hurricane Ian is forcing milk handlers to juggle milk collections and deliveries. In parts of Florida, farm milk pickups and retail restocking have been limited in some areas. The storms in the Southeast also shifted some hauling routes, keeping a lot of fluid milk and cream from moving out of the Midwest and Mid-Atlantic states into Southeastern facilities. As processors come back online, milk handlers are working to refill those pipelines. Demand for condensed skim milk is strong, and contacts say availability is generally limited. Cream supplies have become more available in recent weeks, partly due to the storms in the Southeastern region and partly due to slowing ice cream production. Cream multiples for all Classes are 1.34 – 1.45 in the East, 1.24 – 1.40 in the Midwest, and 1.09 – 1.36 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices and high heat NDM prices are lower in the Central and East region and steady to lower in the Western region. Demand is lackluster. Prices for dry buttermilk moved lower in the Central and East and Western regions. Demand for dry buttermilk is stagnant. Industry contacts think prices need to be closer to NDM prices to spur additional demand. Dry whole milk prices are unchanged. Prices for dry whey moved lower across the regions, except for the bottom of the Central dry whey price range which moved up a few cents. Dry whey supplies are not overwhelming, but demand is subdued. Whey protein concentrate 34% prices moved higher at the top of the range but held steady at the bottom. The price ranges for lactose, acid casein and rennet casein all are unchanged this week.

ORGANIC DAIRY MARKET NEWS: Federal Milk Market Order 1, in New England, reports utilization of types of organic milk by pool plants. During August 2022, organic whole milk utilization totaled 16.2 million pounds, up from 11.8 million pounds the previous year. Butterfat content, 3.25 percent, declined .05 percent from a year ago. The utilization of organic reduced fat milk, 16.0 million pounds, increased from 15.4 million pounds a year ago, while butterfat content, 1.37 percent, decreased .02 percent from a year earlier. This week, total organic dairy retail advertisements increased 4 percent from the previous retail survey report. As a percentage of total organic ads by commodities, organic milk led the way at 42 percent, while organic yogurt captured 28 percent, followed closely by organic cheese with 24 percent of total ads by commodity.

NATIONAL RETAIL REPORT: Dairy retail advertisement totals grew again this week. Total conventional ad numbers increased 8 percent, while organic ads got a 4 percent lift. In typical fashion, 48- to 64-ounce conventional ice cream was the most advertised dairy item. In atypical fashion, half-gallon milk was not the most advertised organic item, being outpaced by both eight-ounce cheese block ads and by the most advertised organic dairy item, one-gallon milk.

Headline image courtesy of https://www.supremecourt.gov/.

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