Weekly global protein digest: US HPAI outbreak continues, restaurant prices going up

Analyst Jim Wyckoff shares highlights from the global protein market
calendar icon 18 March 2022
clock icon 8 minute read

USDA confirms bird flu in additional backyard flocks

USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed highly pathogenic avian influenza (HPAI) in a non-commercial backyard flock (non-poultry) in Merrick County, Nebraska, and in a backyard mixed species (non-poultry) flock. This bring total confirmed HPAI cases to 37 with 16 of those being in non-commercial backyard flocks. USDA also updated the number of birds involved in the Jefferson County, Wisconsin HPAI case to 2,757,800 birds in a commercial layer flock — APHIS originally reported the total at 3 million birds.

US pork export sales up, beef down in latest week

USDA Thursday reported US pork net sales of 38,300 MT for 2022 were up 51 percent from the previous week and 36 percent from the prior 4- week average. Increases were primarily for Mexico (21,700 MT, including decreases of 200 MT), Japan (6,100 MT, including decreases of 100 MT), Australia (2,700 MT, including decreases of 100 MT), Honduras (1,500 MT), and South Korea (1,400 MT, including decreases of 700 MT). Exports of 26,000 MT were down 9 percent from the previous week and 13 percent from the prior 4-week average. The destinations were primarily to Mexico (10,900 MT), Japan (3,900 MT), China (3,800 MT), South Korea (2,100 MT), and Canada (1,400 MT).

US beef net sales of 19,700 MT for 2022 were down 28 percent from the previous week and 11 percent from the prior 4-week average. Increases were primarily for China (6,600 MT, including decreases of 100 MT), Japan (5,200 MT, including decreases of 800 MT), South Korea (2,600 MT, including decreases of 700 MT), Mexico (1,700 MT), and Taiwan (1,300 MT, including decreases of 100 MT). Exports of 16,300 MT were up 2 percent from the previous week, but unchanged from the prior 4-week average. The destinations were primarily to South Korea (4,600 MT), Japan (3,600 MT), China (2,700 MT), Taiwan (1,800 MT), and Canada (900 MT).

Argentina warns beef sector to help tame inflation or risk export bans

Argentina’s government warned beef processors to do their part to help bring down domestic inflation or risk export bans on beef. The Argentine government has broad agreements with the beef sector to ensure the supply of certain cuts at low prices to the domestic market. Minister of Agriculture Julián Domínguez said, “I informed them that those who do not comply with the commitments assumed with the Argentine people will not be able to continue exporting meat.”

EPA seeks additional comments on collecting information from meat and poultry products industry

The Environmental Protection Agency has published a notice in the Federal Register which reopens the comment period for 30 days on its plan to collect information from the meat and poultry products (MPP) industry. EPA had previously sought comments on this new information collection request in the November 19, 2021, Federal Register. That initial action had a 60-day comment period. EPA is now requesting comments by April 15. EPA is looking to gather data from MPPs to “obtain a robust dataset that characterizes wastewater generation, treatment, and discharge from MPP facilities,” saying the effort is an “essential portion of the rulemaking process, necessary for EPA to determine appropriateness of current regulations.”

Restaurants passing on costs to consumers

Shake Shack is raising prices by 3% to 5% in March to offset inflation, on top of its 3% to 5% price increases in October. Wedbush analyst Nick Setyan took it off the firm’s Best Ideas list because of near-term challenges including higher food and fuel costs. Tyson Foods raised its prices and thrived during the pandemic. BMO Capital analyst Kenneth Zaslow expects a rapid return to more normalized beef margins, citing expanded U.S. beef processing capacity, more available labor, and tightening cattle supplies.

FAO warns of escalation in food prices

The U.N. Food and Agriculture Organization (FAO) is warning the situation in Russia and Ukraine could lead to an escalation in food prices, citing “disruptions to agricultural activities of these two major exporters of staple commodities could seriously escalate food insecurity globally, when international food and input prices are already high and volatile. Global prices of food and feed could rise by 8% to 20% as a result of the conflict in Ukraine, FAO warned. The conflict could also constrain agricultural production and purchasing power in Ukraine, leading to increased food insecurity locally. “Livestock and poultry rearing as well as production of high value crops, such as fruits and vegetables, could also be constrained in Ukraine,” the FAO said. However, the FAO said they do not see any “major impacts” on agricultural production in the Russian Federation.

Highlights of USDA monthly livestock and dairy report

Beef/Cattle: The forecast for 2022 commercial beef production was raised by 195 million pounds from last month to 27.570 billion pounds on higher expected non-fed and fed cattle slaughter. The fed cattle price was raised for 2022, while the feeder cattle price was lowered. January’s beef imports totaled 352 million pounds, up almost 57 percent from a year ago. The 2022 annual forecast for beef imports was increased by 50 million pounds from last month to 3.42 billion pounds. January’s beef exports totaled 288 million pounds, up 17 percent over the previous year. The beef export forecast for 2022 was raised by 30 million pounds to 3.30 billion pounds.

Dairy: The all-milk price forecast for 2022 has been raised to a record high of $25.05 per hundredweight, $1.50 higher than last month’s forecast. Dairy product price forecasts have been raised across the board due to strong prices in recent weeks and lower projected milk production. The milk production forecast for 2022 is 226.0 billion pounds, 1.2 billion lower than last month’s forecast and a projected decrease of 0.3 billion pounds from 2021. This would be the first year-over-year decrease in milk production since 2009. Export forecasts have been lowered from last month’s projections on both the milk-fat and skim-solids bases.

Pork/Hogs: The 2022 pork production forecast is reduced by 65 million pounds from last month on lower-than-expected February slaughter numbers, the likelihood of higher average carcass weights in the second half of the year, and evidence of elevated disease risks, also late in the year. Forecasts for U.S. pork exports in the first and second quarters of 2022 are reduced on weaker demand prospects in major importing regions. Total 2022 exports are expected to be 6.73 billion pounds, 4.3 percent below last year.

Poultry/Eggs: Broiler production is lowered on continued hatchability challenges and lower slaughter to date. Broiler exports are also decreased on lower production expectations. Broiler prices are increased on recent data and expectations for constrained supplies. First-half 2022 table egg production was revised down on higher expected production costs and slow expansion of the layer flock. Wholesale egg price forecasts (New York, Grade A, large) for all quarters were revised up due to current prices trending higher than expected and lower production growth. Egg and egg products exports were revised down due to lower-than-expected shipments in December and January. Turkey production and stocks forecasts were adjusted down, but 1-percent production growth is still expected in 2022. Exports were adjusted down due to decreased demand from key importers and highly pathogenic avian influenza (HPAI). Prices were raised for each quarter and are expected to gradually increase throughout the year.

USDA approves faster line speeds at three US pork plants

USDA approved faster line speeds at Clemens Food Group in Hatfield, Pennsylvania; Quality Pork Processors in Austin, Minnesota; and Wholestone Farms Cooperative in Fremont, Nebraska, as part of a pilot program. Plants approved for the trial program can operate at faster speeds for up to a year and are supposed to collect data on how line speeds affect workers. Nine plants were eligible to apply for the trial program because they were previously able to accelerate processing under the Trump-era rule.

USDA: quarterly hog prices raised on strong pork demand and reduced slaughter

USDA reports quarterly hog prices are raised as strong pork demand drives hog prices higher for reduced animal numbers. Prices for first-quarter 51-52 percent live equivalent hogs are expected to average $66 per cwt, about 19 percent higher than a year ago. Second- and third-quarter prices are raised to $78 and $75 per cwt, respectively. Both second- and third-quarter prices remain below a year ago—by 3.6 percent and by 2 percent, respectively—when wholesale pork prices were record-high.

Fourth-quarter prices are expected to be $65 per cwt, more than 15 percent above a year ago. For 2022, quarterly forecasts for live equivalent prices of 51-52 percent lean hogs average $71 per cwt, 5.5 percent higher than in 2021. Revised quarterly pork production forecasts for 2022 sum to 27.3 billion pounds, about 64 million pounds lower than last month and 1.3 percent lower than production in 2021.

Pork production in the first quarter is expected to be about 6.9 billion pounds, more than 5 percent lower than a year ago. The second-quarter forecast, at about 6.6 billion pounds, is down almost 2 percent from a year earlier, unchanged from last month. Second-half pork production is lowered marginally—by 55 million pounds—to account for elevated first-quarter disease risk indicated by data from the Swine Health Information Center,7 as well as for lower average dressed weights that may result from incentives for producers to market hogs in as timely a fashion as possible.

Third-quarter pork production is expected to be almost 6.7 billion pounds, 2.4 percent higher than a year ago. Fourth-quarter production is forecast at 7.2 billion pounds, fractionally lower than the same period last year. USDA will release the Quarterly Hogs and Pigs report on March 30. The report will contain new information relating to March 1 inventories, and December-February farrowings, litter rates, and pig crops. The report will also publish producers’ second farrowing intentions for the March-May quarter and first producer intentions for the summer June-August 2022 quarter.

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