Some bans on U.S. poultry exports remain in place

China and some smaller importers have kept trade bans on U.S. poultry despite months without new cases of highly pathogenic avian influenza (HPAI). China, South Africa and the Dominican Republic each maintain bans on poultry from 37 states that previously reported HPAI infections, USDA records show. Mexico, the top overall market for American poultry meat, has largely lifted trade bans, though shipments from Colorado, Washington state and counties in a few other states remain blocked. Export losses from the outbreak total $895 million, the USA Poultry and Egg Export Council said.

USDA expects food price inflation for 2023 to be slightly lower

At 5.8% compared to the previous projection of 5.9%. The grocery store price inflation forecast has been significantly reduced by a whole percentage point to 4.9%. Food price inflation for 2024 is expected to considerably decrease compared to 2023, with an expected rise of 2.4%.Restaurant prices are predicted to increase slightly less than before, now at 7.5% as compared to previous 7.7%. For 2024, a 6.1% rise in restaurant prices is anticipated.

Interestingly, some food categories are expected to experience price declines in 2024, including pork, eggs, and dairy products. Notably, egg prices have shown significant volatility, escalating by as much as 37.8% in February 2023, yet ultimately expected to only rise 2% over the year. USDA’s initial forecasts often undergo revisions, as seen in the fluctuations in 2023 food price inflation predictions beginning from July 2022. This dynamic forecasting, which includes various inputs like energy, labor, and maintenance costs, particularly affects restaurant prices. For 2024, USDA projects that food price inflation will be lower than that seen in 2023 and significantly lower than the rise seen in 2022, though these are initial forecasts and subject to changes as more data comes in. However, despite the reductions, consumers will continue to pay more than the 20-year average for all types of food, marking a four-year trend. The anticipated reductions have been tied to interest-rate increases initiated by the Fed.

EPA set to address tighter water regulations related to Consolidated Animal Feeding Operations (CAFOs)

This follows a petition filed in 2017. The petition argues that CAFOs manage to bypass necessary permits due to a loophole in the stormwater regulations. The EPA has pledged to respond by Aug. 15, following an agreement reached in the United States Court of Appeals for the Ninth Circuit in April. The groups that initiated the petition have also agreed to voluntarily drop their legal action by Aug. 29, pending the EPA's response.

Weekly USDA export sales for U.S. beef, pork

Beef: US net sales of 12,400 MT for 2023 were down 42 percent from the previous week and 28 percent from the prior 4-week average. Increases primarily for South Korea (3,900 MT, including decreases of 400 MT), Japan (3,400 MT, including decreases of 700 MT), Canada (2,500 MT, including decreases of 100 MT), Mexico (1,300 MT, including decreases of 100 MT), and China (900 MT, including decreases of 200 MT), were offset by reductions for Taiwan (900 MT). Total net sales of 200 MT for 2024 were for Japan. Exports of 17,200 MT were up 7 percent from the previous week and 8 percent from the prior 4-week average. The destinations were primarily to South Korea (4,900 MT), Japan (4,000 MT), China (2,400 MT), Mexico (1,700 MT), and Taiwan (1,300 MT).

Pork: US net sales of 17,800 MT for 2023 were down 30 percent from the previous week and 25 percent from the prior 4-week average. Increases primarily for Mexico (7,300 MT, including decreases of 300 MT), Japan (2,800 MT, including decreases of 200 MT), Canada (2,300 MT, including decreases of 400 MT), Colombia (1,900 MT, including decreases of 100 MT), and South Korea (1,200 MT, including decreases of 400 MT), were offset by reductions for the Dominican Republic (100 MT). Exports of 27,100 MT were up 14 percent from the previous week and 4 percent from the prior 4-week average. The destinations were primarily to Mexico (12,300 MT), China (4,500 MT), Japan (3,000 MT), Canada (1,600 MT), and South Korea (1,600 MT).

NPPC’s concerns with Prop 12 compliance

The National Pork Producers Council (NPPC) expressed concerns over the potential difficulties and uncertainty the U.S. pork industry will face due to California’s Proposition 12. The report noted that the law could significantly increase costs for tradespeople and farmers. Complying with the new legislation's requirements would involve constructing pig barns at an estimated expense of $3,400 to $4,000 per sow, a cost increase of approximately 25% compared to traditional communal housing and 40% more than solo stall housing accommodating the same number of animals. NPPC is advocating for a federal resolution to the issues posed by this law.

China maintains position as the world's largest meat importer since 2019

This comes despite a recent decrease in imported meat volumes, according to a USDA Economic Research Service report. In 2022, its imports were 43% higher than those of Japan, the second-largest meat-importing country. Factors such as disease, strict environmental laws, and the departure of small-scale farmers have limited China's meat supply, resulting in an increase in domestic prices and making imports more appealing.

Pork, the most consumed meat in China, generally dictates the nation's meat supply and demand trends. The African swine fever epidemic in 2019 substantially lowered China's pork supply, which boosted its position as the world's top meat importer over Japan. Even though pork production recovered and meat imports subsequently fell, China retained its ranking in 2022.

At the same time, beef imports have been increasing because longer production cycles, insufficient grazing lands, and persistent disease have hindered China's ability to meet domestic beef demand. Chinese consumers are also consuming more poultry—mainly because it tends to be the most affordable meat—yet rising feed costs and diseases have inflated domestic poultry prices, leading to higher poultry imports.

While China's meat consumption appeared to reach a peak after 2014, statistical models project that consumption will continue to rise through 2031. Trends such as changes in diet and moderate growth in income and prices drive this prediction. However, the Covid-19 pandemic and subsequent economic downturn in 2022 have dampened consumption and the associated import prospects. Other factors — like ongoing disease risks and the high cost of livestock feed, which lowers profitability for local producers — continue to impact the market.

New Jersey Governor Phil Murphy signed legislation banning sow crates and veal-calf stalls

Activists say the stalls significantly limit the mobility of the animals. By implementing this law, New Jersey becomes the 15th U.S. state to inhibit the use of such restraints, including "battery" cages for egg-laying hens, as announced by the Humane Society of the United States, a strong advocate for this legislation.

The new regulation seeks to ban gestation crates that severely confine the movements of breeding pigs before birth, as they represent an intolerable degree of cruelty, according to state Senate President Nick Scutari, one of the bill's sponsors. The law mandates that the state Agriculture Department establishes, within six months, rules and protocols governing the confinement and treatment of breeding sows and veal calves. Some exceptions exist, such as the two weeks before sows are about to give birth or when they are nursing piglets.

Recall that on Thursday, we reported Triumph Foods, a pork processor company, has filed a lawsuit questioning the legality of a voter-initiated law in Massachusetts. This law requires farmers to allot more space to breeding sows, and restricts the sale of pork produced on farms situated outside the state that fail to meet the Massachusetts standard. A similar law, California’s Proposition 12, was recently deemed constitutional by the U.S. Supreme Court; however, Triumph Foods' argument is that the ruling was based on specific claims, not on the principle itself, suggesting that future challenges are possible. Additionally, Triumph Foods is seeking a delay in implementing the Massachusetts law, known as Question 3, until their case is resolved. The law was set to come into effect on Aug. 24. Triumph Foods headquarters is located in St Joseph, Missouri.

Of note: The so-called EATS Act, the livestock industry's answer to California's Proposition 12, could jeopardize more than 1,000 health, safety, and welfare laws on the state level and threaten states' rights, said a report by a Harvard Law School group. Link for details.

Economic update analyzes pork industry issues and dynamics

The National Pork Producers Council (NPPC) released its third quarter pork industry economic update to provide a snapshot of top pork industry issues, current trends, and marketing conditions impacting U.S. pig farmers.

Key takeaways from the Q3 update include:

• California Proposition 12 creates significant challenges and market uncertainty for pig farmers across the country and has far-reaching implications beyond the pork industry.
• Persistently high production costs continue to be a major challenge to pig farmers’ profitability. Average cost and breakeven levels are 9% higher than one year ago and have increased 60% over three years.
• So far this year, negotiated hog and pork cutout values, on average, have been about 20% below the same week last year. Prices have gained seasonal momentum over the past three months but remain below year-ago levels.
• Hog slaughter and pork production increased an estimated 1.2% and 0.3% respectively through mid-July 2023. USDA is now projecting a 1.4% increase in pork production this year, while domestic pork availability is expected to drop 2.5% to 49.8 pounds per capita for 2023.
• Inflation has cooled to 3.1%, though the prices of many consumer necessities like food and housing continue to increase more rapidly than the pre-pandemic average. Inflation, rising interest rates, and other macro-level factors may continue to strain consumer purchasing power, which impacts demand for meat and pork.

“The U.S. pork industry is incredibly important not only to agriculture but to the entire U.S. economy,” said Scott Hays, NPPC president and pork producer from Missouri. “As producers face an unprecedented economic environment caused by dynamic market conditions and exacerbated further by California Proposition 12, our industry is incredibly resilient as demonstrated by generations of farm families who continue to take pride in producing affordable, nutritious protein for consumers.”

Weekly USDA dairy report

WEEK OF JULY 24 - 28, 2023 | VOLUME 90, REPORT 30 CME GROUP CASH MARKETS (7/28) BUTTER: Grade AA closed at $2.6800. The weekly average for Grade AA is $2.6540 (+0.0945). CHEESE: Barrels closed at $1.7625 and 40# blocks at $1.9075. The weekly average for barrels is $1.7925 (+0.2785) and blocks, $1.8720 (+0.2385). NONFAT DRY MILK: Grade A closed at $1.1600. The weekly average for Grade A is $1.1520 (+0.0440). DRY WHEY: Extra grade dry whey closed at $0.2500. The weekly average for dry whey is $0.2570 (+0.0105).

BUTTER HIGHLIGHTS: In the East and Central regions cream availability is tightening. Contacts in the West report cream is more available than in other regions, but say temperatures are increasing in the northern parts of the West and are contributing to a reduction in excess cream volumes. Butter production is mixed in the West, as some manufacturers note light production schedules, while others say they are steadily churning. East region butter makers are running active production schedules, while some butter makers in the Central region report scheduled down time at plants this week. Butter inventories are tightening in the Central region amid strong demand from retail and food service customers. In the East, increased market activity is starting to chip away at butter stocks, but contacts note inventories remain ample. Demand for butter is steady from retail and food service customers in the East. Some contacts in the West say they are building inventories ahead of the baking season. Export demand for butter is light in the West, while retail sales are steady, and food service demand is strong. Bulk butter overages range from 0 to 12.5 cents over market value.

CHEESE HIGHLIGHTS: Cheesemakers in the Northeast say production has plateaued, as milk output is declining in the region. In the Midwest, cheesemakers are operating strong production schedules, though some have reported downtime at plants this week. This downtime has contributed to some milk availability, while overall milk production is declining in the region. Spot milk prices in the Midwest range from $5 to $3 under Class III. In the West cheesemakers note declining milk availability but say supplies are available for strong to steady cheese production. In the East and Midwest, contacts report strong cheese demand. Export sales of cheese are mixed in the West, as contacts report steady interest from purchasers in Mexico but note some hesitation in Asian markets. Cold storage space has become more available in the Northeast in recent weeks, and contacts in the Midwest say loads are moving quickly. Spot loads of cheese are available in the West.

FLUID MILK: Milk production is seasonally declining week to week. The southern portions of the West region and Midwest region have had more pronounced lowering of milk output. Some handlers in the southwest have relayed decreases in nonfat and butterfat components of milk volumes. Cream availability is tighter, especially in the southern portions of the West and Midwest regions. Some areas of the East and Midwest are experiencing abnormally dry conditions. Drought monitors indicate pockets of moderate to severe drought. Crops in east and central Texas are dry. Heavy rainfall and flooding have caused crop damage concerns in portions of the East region. Class III demand is strong. All other Classes are steady. Handlers anticipate stronger Class II demand from ice cream makers as temperatures continue to sustain current levels or increase. Some Class II manufacturers have noted customers are choosing to purchase soft serve mixes with lower fat content to curb input costs. Cream multiples for all Classes are 1.35-1.44 in the East, 1.25-1.38 in the Midwest, and 1.05- 1.31 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices moved higher. Export demand is trending upward with increased interest from purchasers in Mexico. High heat NDM prices also moved higher. High heat NDM inventories are tighter as some manufacturers indicate a Q4 start for further high heat NDM drying schedules. Prices for dry buttermilk moved lower in the West, while Central and East dry buttermilk prices held steady. Some off-spec loads are selling into feed channels below the reported prices. Bottom end dry whole milk prices moved lower. Stakeholders relay most dry whole milk production is to meet contractual obligations. Dry whey price movement varied by region, shifting higher in the Central and expanding in the East. In the West, although the range contracted, the mostly price series moved higher. Some tightness of brand preferred spot loads is noted. Whey protein concentrate 34% prices are unchanged to lower. Current market conditions are shifting some production away from whey protein concentrate 34%. Lactose prices held mostly steady. Current prices and market conditions are contributing to some manufacturers reducing or halting production. Prices for rennet casein were unchanged, while acid casein prices slid lower. Demand for both is light.

NATIONAL RETAIL REPORT: Total conventional dairy advertisements increased by 29 percent this week, and total organic dairy ads increased by 23 percent. Shredded cheese in 6-8 ounce packages was the most advertised dairy product, with a weighted average advertised price of $2.49, up 4 cents from last week. Half gallons of milk were the most advertised organic dairy product, appearing in 70 percent more retail ads than last week, with a weighted average advertised price of $3.90, down 7 cents from last week. Conventional butter in one-pound packages appeared in 272 percent more ads this week, with a weighted average advertised price of $4.09, down 14 cents from last week.