Weekly global protein digest: USDA's EU annual and US monthly livestock reports

Expect EU beef and pork production to trend down to record lows in 2023 and 2024
calendar icon 22 September 2023
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Weekly USDA export sales for US beef, pork

Beef: Net sales of 13,700 MT for 2023 were up noticeably from the previous week and up 15 percent from the prior 4-week average. Increases primarily for Japan (3,700 MT, including decreases of 500 MT), South Korea (3,100 MT, including decreases of 2,200 MT), China (2,500 MT, including decreases of 100 MT), Mexico (1,500 MT, including decreases of 100 MT), and Canada (700 MT, including decreases of 100 MT), were offset by reductions primarily for the United Arab Emirates (100 MT) and Italy (100 MT). Net sales of 500 MT for 2024 were reported for Japan (400 MT) and Taiwan (100 MT). Exports of 15,200 MT were up 15 percent from the previous week and 2 percent from the prior 4-week average. The destinations were primarily to South Korea (3,900 MT), Japan (3,300 MT), China (2,800 MT), Mexico (1,700 MT), and Taiwan (800 MT).

Pork: Net sales of 30,200 MT for 2023 were up 31 percent from the previous week and 1 percent from the prior 4-week average. Increases primarily for Mexico (13,500 MT, including decreases of 300 MT), South Korea (3,600 MT, including decreases of 300 MT), Canada (3,300 MT, including decreases of 700 MT), China (2,500 MT, including decreases of 200 MT), and Japan (2,100 MT, including decreases of 1,400 MT), were offset by reductions for Nicaragua (200 MT). Net sales of 200 MT for 2024 were reported for Colombia. Exports of 25,600 MT were up 23 percent from the previous week, but down 5 percent from the prior 4-week average. The destinations were primarily to Mexico (9,700 MT), Japan (3,700 MT), China (2,700 MT), South Korea (2,600 MT), and Canada (2,400 MT).

California's Proposition 12 triggers pork price surge and supply disruptions

California's Proposition 12, imposing stringent pork production standards, went into effect on July 1, 2023, causing significant price increases and supply chain disruptions in the state, according to a recent review by Southern Ag Today. The law mandates that uncooked pork sold in California must come from sows kept in pens with at least 24 square feet of space, impacting producers and processors from major hog-producing states.

While a Sacramento County court order allowed non-compliant pork in the supply chain before July 1 to continue being sold in California until December 31, early data from Circana retail-level scanners indicate signs of strain in California's pork market, the article notes. Pork prices have surged, with pork ribs and loin prices witnessing substantial hikes of 25% and 43% in August compared to June, respectively, in California. In contrast, the rest of the U.S. saw lower price increases during the same period.

Alongside rising prices, there has been a notable decline in the volume of pork purchased in California, decreasing by 23% from June to August 2023. This volume is 37% less than the average volume sold in August from 2020-2022.

Of note: The implementation of similar laws in other states, like Massachusetts, adds to the uncertainty surrounding the implications of Proposition 12 for consumers and livestock producers across the United States, particularly in the South.

USDA’s annual European Union livestock report

Highlights: Both EU beef and pork production are trending down to record lows in 2023 and 2024. Livestock farmers are confronted with high input prices and a complexity of regulations, which combined are pressing profit margins and creating investment uncertainty by the farmers. In contrast to the beef sector in western Europe, the sector in central Europe is structurally subsidized by which the cattle herd is anticipated to slightly expand in some Member States. The market dynamics in the EU swine sector show a strong cycle with current record prices for piglets and hogs. The improved profitability is expected to support a temporary rebound of slaughter during the second half of this year. With the absence of a full recovery of pork sales to China, the sector is attempting to diversify exports and resetting its focus on the domestic market. However, both beef and pork producers face dwindling demand by EU consumers who show a preference for poultry meat.

EU Livestock Sector Is Seeking Its Low

Note: Effective January 1, 2021, the United Kingdom (UK) completed its departure from the European Union (EU). In this report, if not otherwise indicated, the term EU refers to the current EU27 (without the UK). Cattle and Beef – High Carcass Prices Are Unable to Curb the Trend of Herd Contraction. Since 2017, the European Union’s cattle herd has been contracting. This will continue in 2023 and 2024. Record high carcass and milk prices have not reversed the contraction. Dairy and beef cattle farmers face reduced profit margins due to high feed, energy, and labor prices. Another challenge for the industry is new regulations imposed by the European Commission (EC), which require financial investments and changes in farm management practices. The incessant flow of new requirements creates uncertainty for farmers, limiting their ability to invest.

For example, while EU cattle exports, in particular to Turkey, recovered in 2022, upcoming EU Animal Welfare legislation on animal transport is expected to limit future live cattle exports. In Central Europe, the combination of specific and structural support, rising carcass weights, and falling feed prices is forecast to support a slight rebound in calf production. The Central Europeanherd is expected to expand or stabilize. However, in western EU Member States (MSs), the cattle herd is forecast to contract further in 2024 due to the lack of support for the sector. Based on the smaller cow herd and shrinking supply of young animals, EU slaughter is dropping. Estimated EU 2023 and forecast EU 2024 beef production continue the decline. The limited domestic and global supply of beef is increasing prices, reducing retail and food service sales, and curtailing EU imports of beef - particularly high-quality beef. Due to limited domestic supply, EU beef exports are anticipated to fall.

Swine and Pork – The EU Swine Sector Is Refocusing on the Domestic Market

Plummeting export demand combined with surging feed prices created a piglet production dip in 2022, which started a new swine cycle by causing a price surge for piglets, hogs, and sows during the second half of 2022 through the first half of this year. At the same time, feed prices came down from the peak levels reported during mid-2022. With the current improved profit margins, swine farmers are generally less hesitant to stop production and more eager to keep their stables occupied. The improved profitability is expected to support a temporary rebound of slaughter during the second half of 2023, but not sufficient to balance out the reduced slaughter in the first half of the year. In absolute terms, the most significant cuts are expected in almost all main pork producing EU MSs. In line with declining slaughter, EU pork production is forecast to decrease in 2023 and 2024. Because of the absence of a full recovery of Chinese demand due to the economic slowdown, the EU swine sector attempts to diversify exports to other third countries, but none of the destinations, not even combined, were able to fill the gap left by China. The sector also faces dwindling demand at the domestic market. EU consumers show a preference for poultry over pork based on health considerations, ease of preparation, and the relatively lower price. Through restructuring, the sector strives to bring the supply back in line with traditional domestic and export demand. Leading companies in northern and southern Europe plan to focus less on quantity and more on quality, profitability, and European consumer preference, furthering the concentration and integration of the sector.

The EU Cattle Herd Is Shrinking Due to High Input Prices

Since 2017, the European Union’s (EU) cattle herd has been shrinking and is forecast to continue this trend in 2023 and 2024. In 2021 and 2022, the annual reductions in the herd, as reported by the official Eurostat December census, were -1.11 percent and -1.18 percent. FAS EU Posts project the cattle herd contraction at -0.81 percent this year and -0.53 percent next year. During 2021 and particularly 2022, the dairy and beef cattle farmers faced slashed profit margins due to high prices of feeds and fodders (see graph below). Higher feed prices were reported throughout the EU (for more information see the FAS EU Grain and Feed Quarterly, published on August 2, 2023). While in the Balkans and Central Europe (Bulgaria and Romania), some companies imported Ukrainian corn and wheat at reduced prices, most feed compounders and cattle farmers in this region purchased their rations before the influx of Ukrainian grains, and at record price levels. The structural unprofitability of the sector has been further exacerbated by high energy prices and labor shortages. Cattle farmers are abandoning the industry, not only due to rising costs, but also due to a lack of successors.

The EU Dairy Sector Has Been Hit by the Lower Export Demand

The EU dairy sector is more reliant on global market developments than the EU beef sector, as about 20 percent of the EU dairy bulk commodities is exported to third countries (FAS PSD Online: five-year average statistics of cheese, butter, and milk powder). Only about 10 percent of EU beef production is exported. Due to decreased demand for dairy products in China, EU milk prices plummeted in 2023 (for more information see the EU Dairy and Products Semi-annual, published on May 22, 2023). In export[1]oriented EU MSs, such as France and the Netherlands, the profit margins of dairy farmers and processors deteriorated significantly. After reaching a peak in 2015, the French dairy herd has been declining since, even during periods when milk prices are stronger, as less competitive dairy farmers continue to quit and other keep phasing out their older dairy cows or excess heifers. In the Netherlands, the dairy sector will be hit hardest by the implementation measures to cut nitrogen emissions, as a large share of dairy farms are located near protected nature reserves. This will likely result in less animals per farm, and to a lesser extent the closure of farms. An exception is Ireland, where the dairy cow herd is forecast to continue its growth in 2023 and 2024.

During the First Half of 2023, EU Cattle Exports to Turkey Revived

Live cattle exports are an important factor in the profitability of most southern EU MSs. During the first half of 2023, EU cattle exports rose by eleven percent mainly due to surging exports to Turkey. Of the EU, Hungary, the Czech Republic, and Romania are the main suppliers to Turkey. Notable is the share, about a third, of pure-bred heifers shipped to Turkey by the EU. EU cattle exports to the other four main markets (Israel, Algeria, Lebanon, and Egypt) fell during this period. The elevated cattle exports to Turkey are based on the combination of increased domestic demand and limited exportable supply from Uruguay and Brazil. While the EU has a wide range of export destinations, its overseas options are declining as animal protection associations continue to issue allegations of EU animal welfare violations. EU Animal Welfare legislation on animal transport, which is expected sometime in 2023, may further limit live cattle exports (for more information, see the Policy section). The two leading EU exporters of live cattle to third countries are Romania and Spain, but the sectors in both countries have expressed concern about the viability of their live cattle trade. The Shrinking Supply of Young Animals is Pressing Slaughter Down. During the first half year of 2023, EU cattle slaughter fell by 3.6 percent, mainly based on a lower number of cow and heifer slaughter. FAS EU Posts forecast total slaughter to rebound during the second half of this year, and to decline by 3.0 percent over the entire year due to falling milk prices, and the draught in southern Europe. Based on the smaller cow herd and consequential shrinking supply of young animals, EU slaughter is projected to continue to fall in 2024 but at a slower pace. The most significant reductions are forecast in France and Italy. A significant increase of slaughter is not forecast in any of the 27 EU MSs. The lower supply of young animals will also result in a further decline of the EU cattle herd to 73.8 million animals by the end of calendar year 2024.

Pork: The Lost Exports to China Have Not Been Replaced by Other Destinations

During the first half of 2023, EU pork exports decreased by 21 percent, with reductions reported for all top-12 export destinations except the United Kingdom (mainly fresh boneless pork, and bacon) and Malaysia (mainly bellies). Exports to the United Kingdom, increased slightly (3.4 percent) due to the declining domestic supply. To put the current total EU export level in perspective, the volume equals the level reported before the ASF outbreaks in China. The shortage of pork in China pushed EU exports to a record of 5.2 MMT CWE in 2020, after which Chinese demand for pork imports fell in 2021 due to the COVID pandemic followed by an economic slowdown and a partial recovery of domestic pork production (see graph above). With the absence of a full recovery of Chinese demand, the EU swine sector attempted to diversify exports to other third countries, but none of the destinations, not even combined, were able to fill the gap left by China. In 2022, Spain’s pork exports grew in Asian markets such as Japan, South Korea, the Philippines, and Taiwan which compensated for only for 50 percent of the reduction in sales to China.

EU Producers Attempt to Diversify Exports to Other Markets

The Spanish pork industry estimates that in 2023, Spanish pork sales to non-EU markets will continue to decline in volume. The reason given is similar as reported by Danish Crown, namely the increase in EU domestic pork prices is reducing competitiveness on the global market. At the same time are producers, veterinary authorities, and governments trying to open new markets. The Portuguese sector expects to finalize the protocols to export pork to the Philippines by the end of 2023 and is also working to open Singapore and Vietnam. Germany concluded a regionalization agreement with South Korea and Ukraine and is attempting to open other markets which were closed due to ASF outbreaks.

China’s pork exports slowed in August

China imported 110,000 MT of pork during August, down 10,000 MT (8.3%) from July and 21% less than last year. Through the first eight months of 2023, China imported 1.17 MMT of pork, up 9.6% from the same period last year.

USDA monthly livestock outlook - September 2023 

US Imported More Swine and Cattle in First-Half 2023 

Than in Same Time Last Year The United States primarily imports live swine from Canada and cattle from both Canada and Mexico. In the first 6 months of 2023, total swine imports reached 3.3 million head, almost 1 percent higher than the same period last year. Most live swine are imported as young pigs for finishing; that is, fed to slaughter weights and then processed in the United States. Imports of pigs for finishing were 2 percent lower year over year but 8 percent higher than the 5-year average, a trend since 2021 after the closure of slaughter facilities and a rise in costs to raise pigs in Canada. Plant closures likely also supported higher imports of hogs for immediate slaughter, which increased almost 12 percent in first-half 2023, a 50-percent increase over the 5-year average. Total first-half 2023 cattle imports were 953,000 head, an 11-percent increase over the same period last year. This is likely supported by tight cattle supplies in the United States and higher U.S. cattle prices year over year. Over the last 5 years, about 75 percent of imports were feeder cattle, 25 percent were cattle for immediate slaughter, and less than 1 percent were for breeding. In the first 6 months of 2023, about 687,000 head were feeder cattle, and 88 percent of them were Mexican origin. Imports of feeder cattle increased more than 19 percent year over year in the first half, but at below the 2018–22 average. However, the number of slaughter-ready cattle—of which 99 percent came from Canada—decreased nearly 5 percent from last year to about 259,000 head, yet it remains above the 5-year average.

Beef/Cattle: Production and price forecasts are little changed from last month. The forecast for 2023 commercial beef production is 26.941 billion pounds, 40 million lower than last month’s projection, based on a lower production outlook for the second-half of the year. This is based on a slower expected pace of fed cattle marketing in September that is partially offset by higher expected cow slaughter for the rest of the year. As a result, the outlook for 2024 production remains unchanged from last month at 25.2 billion pounds. The cattle price forecasts for 2023 and 2024 are mixed. Fed steer prices are unchanged from last month. Prices for feeder steers are projected higher in fourth-quarter 2023 and first-half 2024. Based on July trade data, beef imports are raised in second-half 2023 and in 2024. However, U.S. beef exports are projected to decline further in 2023 and 2024 than forecast last month as the demand outlook from Asia is revised lower.

Dairy: The forecast for milk production in 2023 and 2024 has been lowered, to 227.5 billion and 230.4 billion pounds, respectively. This is due to a projected decrease in cow numbers, as dairy farmers face tight margins. With lower milk supplies and expected growth in domestic use, the all-milk price forecast for 2023 has been raised by $0.45 to $20.40 per hundredweight (cwt), while the forecast for 2024 is $20.30 per cwt, $0.95 higher than last month's prediction.

Pork/Hogs: Continued lower dressed weights offset higher August slaughter numbers to reduce pork production fractionally compared with a year earlier. Third-quarter pork production is expected to be about 6.4 billion pounds, 1.8 percent lower than a year ago. Hog prices for the quarter are forecast at $69 per cwt on lackluster hog and pork demand. Fourth-quarter pork production is expected to increase 2.3 percent over the same period a year ago, with hog prices more than 7 percent lower, to $59 per cwt, compared with the same period of 2022. July pork exports increased more than 4 percent above same-period volumes of a year ago, although a higher-valued U.S. dollar exchange rate and foreign expectations of upcoming seasonally low pork prices likely cut into U.S. market share across Asia. Total 2023 exports are forecast at 6.8 billion pounds, up 7.2 percent from last year.

Poultry/Eggs: Projected broiler production and exports are adjusted down in 2023 and 2024 on recent hatchery, production, and trade data. Broiler import projections are unchanged. Broiler prices are adjusted up in the third quarter of 2023. Table egg production is adjusted down in 2023 and 2024 based on the slow rate of growth of the layer flock. Projected hatching-egg production is decreased on lowered broiler production expectations. Wholesale prices for eggs are adjusted up in 2023 and 2024 on recent data and lowered supply expectations. Egg and egg product export expectations are lowered in the second half of 2023 on lower supply, while projected imports are increased in 2023 and 2024 on recent trade data. Turkey production projections are unchanged from last month. Projected imports are increased in 2023, and exports are increased slightly in 2023 and 2024 on the strength of recent shipments. The projected third-quarter turkey price is unchanged, but the outlying quarterly prices are adjusted down on recent price trends.

Weekly USDA dairy report

WEEK OF SEPTEMBER 11-15, 2023 | VOLUME 90, REPORT 37 CME GROUP CASH MARKETS (9/15) BUTTER: Grade AA closed at $2.7175. The weekly average for Grade AA is $2.7270 (+0.0170). CHEESE: Barrels closed at $1.8100 and 40# blocks at $1.8800. The weekly average for barrels is $1.8165 (-0.0410) and blocks, 1.9010 (-0.0490). NONFAT DRY MILK: Grade A closed at $1.1125. The weekly average for Grade A is $1.1075 (+0.0206). DRY WHEY: Extra grade dry whey closed at $0.3000. The weekly average for dry whey is $0.2975 (-0.0156).

BUTTER HIGHLIGHTS: Cream supplies are tight throughout the country, and contacts in the East report demand from butter makers is outpacing cream supply. Butter churning is somewhat active in the Central region. East region butter makers say labor issues have interrupted some production schedules. Meanwhile in the West, contacts report mixed butter production as some churns are running steadily, while tight cream volumes are causing some butter makers to run below capacity. Demand for butter from retail and food service customers is steady to strong. Contacts in the Central region say butter interest is unchanged and meeting expectations for this time of year.

CHEESE HIGHLIGHTS: Milk volumes are in balance with cheesemaking capabilities in the West, and plant managers in the region say they are operating steady production schedules. In the Northeast, heightened demand for milk from Class I processors is pulling on supplies which previously made their way to regional cheesemakers. Contacts say labor issues persist in the Northeast but note strong cheddar cheese production. Milk volumes are somewhat snug in the Midwest, and contacts continue to report spot milk prices above Class III. Cheese production varies in the region, as some processors have scheduled downtime but others are operating full schedules. Cheese demand is somewhat steady in the Midwest. Contacts in the Northeast and West report steady demand from retail and food service cheese purchasers. Bullish market tones for cheese, seen in recent weeks, are waning somewhat.

FLUID MILK: Milk production is lower throughout most of the country as seasonal trends continue. However, upper Midwestern contacts relay a relatively cool and mild late summer has begun to manifest higher output for the past two weeks. This helped milk supplies loosen up somewhat in the upper Midwest part of the country. In addition, handlers in the mountain states and pacific northwest indicate flatter week to week decreases recently. Milk supplies are tighter in the southwestern part of the country. Although some open processing is available throughout the country, and spot load availability is tighter in some parts of the country, manufacturers’ needs can be met. The National Agricultural Statistics Service (NASS) outlines some damage to pasture fencing and other infrastructure because of Hurricane Idalia. Class I bottling demand is strong as educational sessions are underway throughout the country. The heavier Class I processing is creating some additional spot cream volumes for the market. Class III demand is strong as cheese manufacturers seek additional spot loads of milk. Some stakeholders relay demand by confectionary manufacturers for Class IV milk products is up. Cream multiples for all Classes are 1.34-1.40 in the East, 1.25-1.38 in the Midwest, and 1.20-1.35 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices were unchanged, except for some downward movement on the bottom end in the West. Domestic customers say they are a little more active in their searching for NDM moving into the last quarter of the year. High heat nonfat dry milk (NDM) prices were unchanged, except for some downward movement on the top end in the West. Some manufacturers, currently not producing high heat NDM, anticipate only light, intermittent schedules for the remainder of the year. Dry buttermilk prices held steady. A few manufacturers indicate anticipated production schedules through year end will only meet contracted obligations. Dry whole milk prices moved higher. Dry whole milk production is light. Dry whey prices moved upward on the bottom end, but price movements on the top end were mixed. A few manufacturers relay comparatively tighter bleached dry whey supplies. Whey protein concentrate 34% showed upward movement at the bottom end of the range. Spot inventories for preferred brands are somewhat tight. Lactose prices moved higher on the top end of the range. Contacts report lactose inventories have receded somewhat in recent weeks. Rennet casein prices moved lower, while acid casein prices held steady. Acid and rennet casein demand is mixed.


WESTERN EUROPEAN OVERVIEW: Western European milk production, although trending seasonally lower, has been at or slightly above previous year levels for most of the year. In general, stronger milk production in the northern parts of the continent has offset lower production in the southern parts. As the summer heat abates, the weekly decline in milk output has slowed. Favorable weather conditions have aided cow comfort and supported milk output as the region approaches the typical nadir of the milk production curve. That said, some analysts anticipate that Q4 milk volumes may fall below previous year levels in some cases.

EASTERN EUROPEAN OVERVIEW: Like Western Europe, Eastern European milk production is following seasonal declines in milk production. Milk output in Poland, one of the top Eastern European milk producers, has continued at levels above 2022 milk output levels. According to CLAL data made available to USDA, July 2023 cows' milk delivered to dairies in Poland was 1,121,000 MT, up 1.4 percent from July 2022. Year-to-date milk deliveries through July 2023 in Poland, 7,723,000 MT, increased 1.5 percent compared to year[1]to-date milk deliveries through July 2022. The average farm-gate milk pay price in Poland for July 2023 was 42.18 euros per 100kg, down .97euros per 100kg compared to June.

OCEANIA: NEW ZEALAND: In New Zealand, dairy manufacturing output is seasonally low heading into the heavier production months. Some reports note that New Zealand milk output could be constrained this season from the degradation of pastures by wet conditions. Nonetheless, milk production generally increases October through December. With that said, uncertainty around China's demand is central as cows return to milking and manufacturing output looks to improve near-term. Market sources note the situation could likely impact dairy commodity prices with downward pressure from the milk supply increase, ultimately reducing the price cooperatives pay New Zealand dairy farmers for their milk.

AUSTRALIA: While Australia is early in the milk production season, a recent report indicated that the July 2023 output closely compares to July 2022 milk volumes. Meanwhile, current projections point to stronger output for 2023-2024 than 2022-2023, which saw milk production decline 5 percent, compared to the previous season. However, the industry still faces global market challenges as China's eased demand for dairy products has brought about lowered export pricing. A redeeming component for Australia, compared to New Zealand, is the country's robust farmgate milk price that farmers are receiving. Conversely, dairy products moving into the country from New Zealand induces heavy competition for Australian dairy manufacturers, as prices are pressured in the domestic market.

SOUTH AMERICA: South American milk production is nearing its peak according to contacts. They say spring production has arrived a bit early this year. Brazil, specifically, is reportedly having a banner year in regards to milk production and an increase in commodity processing. Uruguay and Argentina milk output has also increased week to week, but more importantly, from year to year. The end of the La Nina climactic phenomenon is currently evident, despite concerns about the opposite effects near-term from El Nino, and the potentially wet weather it can bring into Uruguay and Argentina. That said, recent and notable improvements in weather conditions, a wetter and mostly mild winter have preempted a return to a more "normal" spring milking season in the region.

NATIONAL RETAIL REPORT: Total conventional dairy advertisements decreased by 2 percent, while total organic dairy ads decreased by 27 percent. Conventional ice cream in 48-64 ounce containers was the most advertised dairy product, with a weighted average advertised price of $3.58, down from $3.93 last week. Ad numbers for conventional butter in one-pound packages increased 22 percent and had a weighted average advertised price of $3.68, down 14 cents from last week.

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