6 September 2024

12 minute read

By: Jim Wyckoff

South America

North America

Asia

Chile approves trade agreement expanding US meat and cheese market access

The Chilean government approved a trade agreement ensuring market access for U.S. meat and cheese products, protecting terms like cheddar, gouda, prosciutto, and salami. This follows the exchange of letters between US Trade Representative Katherine Tai and Chile’s Undersecretary of International Economic Relations Claudia Sanhueza on June 21, 2024, which initially established the mutual understanding.

China's anti-subsidy probe on EU dairy imports offers limited relief to struggling domestic sector

China's investigation into EU dairy imports aims to alleviate pressure on local farmers, but the impact will be minimal as it targets only a small portion of imports, Bloomberg reports. The dairy sector is grappling with oversupply, declining demand, and falling milk prices, with 80% of farmers facing losses. China's dairy production surged 40% in the past decade, but economic slowdown and shifting consumer habits have exacerbated the industry's challenges. While curbing imports makes strategic sense, the measure is seen as a response to EU tariffs on Chinese goods.

USDA advances pre-rule on fed cattle market pricing to OMB

USDA has sent a pre-rule to the Office of Management and Budget (OMB) to gather input on addressing pricing issues in the fed cattle market. The rule aims to enhance price discovery, transparency, and protect producers from unfair practices and market manipulation. The pre-rule stage will assess whether regulatory action is necessary or if alternative solutions exist. A proposed rule is expected by this month, with a final rule anticipated by May 2025. However, the November elections could affect any unfinished rulemaking if there is a change in control of the White House.

Nebraska’s largest feedlot set to open amid local concerns and innovation claims

Blackshirt Feeders, soon to be Nebraska's largest cattle feedlot, is preparing to receive cattle later this month, the Nebraska Examiner reports. The state-of-the-art facility near Haigler aims to expand to 150,000 head of cattle, featuring innovations like a rolled concrete base and biodigesters to produce methane from manure. While local officials and residents express both hope and skepticism, concerns remain over water use, increased traffic, and potential environmental impact. The $200 million project could boost local employment but faces scrutiny from environmental experts and smaller operators.

H5N1 confirmed in California

Cows at three dairy farms in California tested positive for the H5N1 virus, the state’s ag department announced late last Friday. H5N1 infections have now been confirmed in dairy cattle in 14 states totaling more than 190 herds, along with 13 dairy and poultry farm workers.

Boar's Head plant in Virginia linked to deadly listeria outbreak amid serious sanitation violations

The Boar's Head deli meat plant in Jarratt, Virginia, is embroiled in a major food safety scandal following a deadly Listeria outbreak linked to repeated violations of federal regulations. USDA documented 69 noncompliance instances over the past year, including severe sanitation issues like mold, insects, and meat residues on equipment. The outbreak, which has caused nine deaths and hospitalized 50 people across 18 states, has been traced back to Boar's Head liverwurst. Despite the plant's serious sanitation failures, no enforcement actions were taken by USDA. In response, Boar's Head has recalled over 7 million pounds of products and suspended operations at the plant while addressing the issues.

Butterball settles wage-fixing lawsuit alongside other poultry processors

Butterball LLC has settled a class action lawsuit accusing poultry processors of wage-fixing, joining companies like Jennie-O Turkey Store, Koch Foods, and Tyson Foods in resolving the case. The settlement terms were not disclosed and are pending court approval. The lawsuit, originally filed in 2019, alleged that the companies conspired to suppress wages, violating the Sherman Act. Other settlements in the case have included significant payouts from Pilgrim's Pride, Perdue Farms, and others.

Pork and beef producers in developed markets face credit downgrade risks due to climate policies, Fitch warns

Fitch Ratings warns that pork and beef producers in developed markets are increasingly vulnerable to credit downgrades due to rising costs from stricter climate policies and the need for new technologies. Emerging markets, however, remain less affected due to stable demand and delayed climate policy implementation. The beef industry also faces challenges from shrinking demand driven by population decline, health concerns, and climate targets. Fitch estimates that one in five corporate issuers could be at risk of downgrades by 2035 due to climate-related vulnerabilities.

USDA announces plans to conduct field trials for vaccines aimed at preventing avian influenza (H5N1) from infecting dairy cows

While four vaccines are licensed for avian influenza, none are approved for the current strain. USDA's trials, which began in April, are still in progress, with the agency considering next steps, including vaccine production if successful. Concerns include the rapid mutation of the virus, potential vaccine efficacy, and the risk of losing export markets due to difficulty distinguishing vaccinated from infected birds. USDA stresses biosecurity as the primary defense against the outbreak.

USDA's Center for Veterinary Biologics is now accepting submissions for field studies that could lead to conditional or full licensure of nonviable, non-replicating vaccines. This marks a shift from previous requirements that all studies, even those not involving virus challenges, be conducted in containment facilities.

Besides traditional vaccine development, there is also interest in mRNA vaccines, similar to those used for Covid-19, which are being tested for their efficacy in both animals and humans.

USDA seeks feedback on tech-enhanced inspections and meat plant categorization changes

USDA is convening a virtual meeting of the National Advisory Committee on Meat and Poultry Inspection (NACMPI) on Sept. 16-17 to gather input on leveraging technology for inspections and potential changes in categorizing meat and poultry plants. USDA aims to assess whether changes in plant categorization by size could improve the evaluation of business operations and the impact of regulations. The committee will also explore ways to enhance inspections using technology. Subcommittees will discuss these topics and provide recommendations to USDA during the meeting.

USDA tightens guidelines for animal-raising and environmental claims on meat labels

USDA's Food Safety and Inspection Service (FSIS) has issued stricter guidelines for substantiating animal-raising and environmental claims on meat and poultry labels, such as "raised without antibiotics," "grass-fed," and "climate-friendly." The new guidelines encourage meat and poultry establishments to provide more documentation, including third-party certification or USDA audit-based programs, to back up their claims. FSIS also highlighted the need for relevant environmental data and warned of enforcement action against false or misleading antibiotic claims, following a study that found 20% of cattle labeled "raised without antibiotics" had detectable antibiotic residues. Further testing and potential rulemaking may follow.

Weekly USDA dairy report

CME GROUP CASH MARKETS (8/30) BUTTER: Grade AA closed at $3.1700. The weekly average for Grade AA is $3.1820 (+0.0230). CHEESE: Barrels closed at $2.2600 and 40# blocks at $2.2100. The weekly average for barrels is $2.2115 (-0.0135) and blocks $2.1280 (+0.0460). NONFAT DRY MILK: Grade A closed at $1.3300. The weekly average for Grade A is $1.3115 (+0.0325). DRY WHEY: Extra grade dry whey closed at $0.5600. The weekly average for dry whey is $0.5605 (-0.0005).

BUTTER HIGHLIGHTS: Nationwide, butter churning is steady. Cream availability has increased, and multiples have eased slightly. Some contacts anticipate the next two weeks may provide greater opportunities for strengthened churning. Some butter manufacturers are also busy micro-fixing to prepare for fall needs. Butter demand is steady to ticking higher seasonally. Seasonal purchases and buyers seeking to assure coverage of fall butter needs are pulling butter inventories lower. Bulk butter overages range from minus 7 to 10 cents above market, across all regions.

CHEESE HIGHLIGHTS: Despite strengthening market prices, cheesemakers say demand has shown no marked difference week over week. Cheese demand is steady, and inventories are tightening seasonally. Milk availability has increased as the school milk pipeline’s capacity is filled and as the Labor Day weekend approaches. This week, Central spot milk prices range from flat Class to $2.50 over Class III. However, some cheesemakers expect spot milk offers to fall closer to flat Class over the holiday and into next week. While cheese production is steady to stronger in the Central and East regions, some West region cheesemakers report continued high temperatures and seasonally depressed milk availability have some cheese plants operating at below full capacity.

FLUID MILK: Milk output continues to slowly decline throughout most of the country, but milk slides are starting to settle some. In the Pacific Northwest, mild late-summer weather has kept milk output steadier in that area of the nation. In the Midwest and Northern Plains, cooler weather and hearty feedstuffs are keeping milk drawdowns in check. The upcoming holiday weekend has processors reporting more accessible spot milk. Upper Midwest cheesemakers reported spot milk prices as low as Class III, while there were still some prices as high as $2.50-over Class reported, as well. Bottlers are beginning to replenish school pipelines, as most states’ school districts are in session and/or will be no later than next week. Cream availability has increased with the holiday-related plant downtime. Butter churning is busier in a few parts of the West and Midwest, as butter plant managers work to meet retail demand needs for the fall season. F.O.B. cream multiples are 1.33 -1.50 in the East, 1.20-1.40 in the Midwest, and 1.18-1.30 in the West.

DRY PRODUCTS: Dairy powder markets are, for the most part, gaining some bullish steam this week. Low/medium heat nonfat dry milk (NDM) prices shifted higher in all regions. Skim solids have been tighter throughout August, and demand for condensed skim/NDM has improved both domestically and from Mexican importers. Dry buttermilk prices were mixed in the Central/East regions, while steady to higher in the West. Dry buttermilk marketers are expecting some seasonally stronger demand tones as fall looms. Dry whole milk prices were steady to higher, on tight seasonal availability. Dry whey markets are mixed after recent price increases. Seasonal milk availability for Class III processing has shifted lower, but customers are hesitant to order anything outside of near-term necessity as market prices have been bolstered in recent weeks. Whey protein concentrate 34% prices moved higher, as there is a value for some customers when compared to NDM. Lactose prices were steady, however upticks in demand, particularly export interests, are present. Acid casein prices were higher this week on strengthened demand, while rennet casein prices were mixed.

INTERNATIONAL DAIRY MARKET NEWS

EUROPE DAIRY OVERVIEW: WEST EUROPE: The seasonal decline of European milk production got a push lower from very warm, humid weather across large portions of north-central Europe. Although milk production has grown across West Europe through the first half of the year, some industry contacts expect July and August milk production numbers to show a decrease in farm milk output. Besides the typical weather worries, the reemergence of bluetongue disease in some dairy herds has raised the concerns about milk availability for the coming months. Uncertainties regarding milk supply are supporting higher milk pay prices. The preliminary EU-27 July farm-gate milk pay price is registering at 46.23 euros per 100kg. Currently, weekly spot milk prices range from the mid-50s to over 60 euros per 100kg depending on location.

EAST EUROPE: Dry, hot weather has slowed milk production across parts of East Europe, but milk production has been strong for the first half of the year. According to CLAL data made available to USDA, the year-to-date milk deliveries and percentage changes from January-June 2023 in Poland, were 6,933,000 MT, up 5.0 percent. Online information services report June 2024 Ukrainian milk production was 721,000 tons, compared to 748,000 tons in June 2023. Ukraine's grain exports have expanded in the first few weeks of the 2024/25 (July-June) grain export season. Ukrainian agricultural ministry data suggests grain exports have reached 5.79 million metric tons as of August 19, compared to 3.61 million tons by the same date of the previous season.

OCEANIA DAIRY OVERVIEW: AUSTRALIA Milk production increased by 3.1 percent during the 2023-2024 season in Australia, compared to the prior season due to favorable weather conditions and poor production in the 2022-2023 season. The start of the 2024-2025 production season in Australia has seen lower farm gate milk prices, while weather and economic challenges are expected to remain present during this season. These factors have contributed to Dairy Australia forecasting a slight decline in milk production during the current season, compared to the 2023-2024 season. In Australia, opening milk prices for the 2024-2025 season were announced in June and are below prices offered last season throughout much of the country.

NEW ZEALAND: Milk production data from New Zealand for July 2024 was recently released. This data showed total July 2024 production was up 8.4 percent on a tonnage basis compared to a year earlier. During July 2024, the total kg of milk solids increased by 9.2 percent from the previous year. From the start of the production season in June 2024 through July 2024, milk production on a tonnage basis is up by 4.2 percent compared to the same time period a year ago, while milk solids production is up 4.1 percent from last year. Export data for July 2024 were recently released for New Zealand. This data showed a 11 percent increase in value for milk powder, butter, and cheese exported in July 2024 compared to July 2023. A group in New Zealand, which forecasts dairy prices, increased the forecasted milk price for the 2024/2025 season by 55 cents, to $9.21/kgMS, following GDT event 362. The group stated increasing prices for commodities traded on the GDT have contributed to higher futures prices for those commodities and aided in pushing the forecasted milk price higher.

SOUTH AMERICA DAIRY OVERVIEW: Regional analysts say the climactic situations that took place earlier in the year may have delayed the flush season, but in recent weeks the uptick in milk availability has been noted. In Argentina and Uruguay, year-over-year milk yields are lagging those of last year. Conversely, Brazilian and Chilean farm milk output continues to exceed last year's figures. Despite recent increases, processors in export markets say some drying/processing facilities are not at capacity. In early August, regional traders suggested there was a bit of a sluggish tone regarding Brazilian interests. In the latter half of the month, though, they say demand has ticked higher due to two notable factors: demand from North African outlets has been robust and the bullish GDT results from last week prompted quick growth in interest from Brazilian buyers. Inflation in the region is at levels that continue to hinder grocery store purchasing. Reports and analysts are in consensus that until inflation/ unemployment shifts occur, there will likely be continued slowdowns in the dairy aisle in regional grocery stores/chains.

US NATIONAL RETAIL REPORT: In the conventional space, six-to-eight-ounce sliced cheese was the most advertised item, while 16- ounce sour cream was the most advertised organic item. Conventional milk ad totals decreased eight percent, while organic milk ad totals moved lower by 12 percent. The weighted average advertised price of half gallon conventional milk was $2.26, while the weighted average advertised price of organic half gallon milk was $4.40, resulting in an organic premium of $2.14. The weighted average advertised price of conventional one-pound butter was $3.84, down $.86 from last week.