26 July 2024

17 minute read

By: Jim Wyckoff

North America

Asia

Weekly global protein digest—7-25-24

Weekly US beef, pork export sales

Beef:  Net US sales of 13,400 MT for 2024 were down 13 percent from the previous week and 4 percent from the prior 4-week average. Increases were primarily for South Korea (4,400 MT, including decreases of 300 MT), Japan (2,200 MT, including decreases of 400 MT), China (1,800 MT, including decreases of 100 MT), Mexico (1,200 MT, including decreases of 100 MT), and Hong Kong (1,200 MT, including decreases of 100 MT). Exports of 16,300 MT were up 5 percent from the previous week and from the prior 4-week average. The destinations were primarily to Japan (4,300 MT), South Korea (3,500 MT), China (2,500 MT), Mexico (1,600 MT), and Taiwan (1,300 MT).

Pork:  Net US sales of 30,200 MT for 2024 were up 28 percent from the previous week, but down 19 percent from the prior 4-week average. Increases were primarily for Mexico (7,700 MT, including decreases of 800 MT), South Korea (6,400 MT, including decreases of 300 MT), Japan (4,500 MT, including decreases of 400 MT), Colombia (3,600 MT, including decreases of 100 MT), and China (2,100 MT, including decreases of 100 MT). Exports of 32,900 MT were up 3 percent from the previous week and 7 percent from the prior 4-week average. The destinations were primarily to Mexico (13,200 MT), Japan (5,000 MT), China (3,900 MT), South Korea (2,700 MT), and Canada (2,100 MT).

Colorado ramps up H5N1 dairy testing

Colorado began requiring dairies to test milk supplies for the H5N1 virus every week, the state’s lead veterinarian told Reuters. The state’s new mandate aims to identify additional farms that could be infected and spread the disease to other dairies or poultry flocks. Colorado has confirmed infections in 47 dairy herds since the U.S. outbreak in dairy cows began in late March, with about 60% of its cases detected in the past month. A USDA epidemiological “strike team” arrived in Colorado this week to assess how the virus may be spreading among dairies.

China aims to control dairy, beef output as weak sales hit prices

China plans to implement measures to help dairy and beef producers limit production to prevent prices from falling further, an ag ministry official said. Earlier this year, China issued regulations to reduce its breeding sow population. Prices of beef and dairy, along with pork and poultry are falling in China as shoppers, grappling with a slowing economy, scale back purchases. “The prices of beef and raw milk in the first half of the year fell by 12.1% and 12.5%, respectively, and beef cattle and dairy cow breeders are making losses,” said Wang Lejun, the ag ministry’s Chief Animal Husbandry Officer. “For beef and dairy cows, we want to guide farms to optimize and adjust the herd structure, moderately eliminate old and low-yielding cows, and better match production development with market demand,” he said.

USDA reports on dairy world markets and trade

Ongoing Economic Crisis in Argentina Impacts Dairy

The Argentine dairy industry is grappling with significant challenges this year brought about by the country’s economic crisis. The combination of inflation in domestic inputs and government instituted foreign exchange controls (restrictions on capital outflows, controls on foreign debt payments, etc.) have wide-ranging impacts on milk production, export competitiveness, and domestic consumption, and is reshaping the industry's landscape in the short run.

Argentine dairy farmers depend heavily on largely domestically produced inputs, including feed, machinery, and fuel. The increased financial burden has forced many to cut production or seek additional capital, with many operating at a loss. As a result, year-to-date milk production in Argentina has declined precipitously. From January through June 2024, Argentina milk production fell 13 percent from the same period in 2023. In 2023, milk production totaled 11.7 million tons, but this figure is forecast to fall 7 percent to 10.8 million tons. The abrupt drop in production in early 2024 led to a rapid recovery in milk prices, which supports expansion in production during the second half of the year. The consistent decrease in production over the past 5 years highlights the sector's struggle to maintain output levels amidst rising costs and economic instability.

Conversely, the currency devaluation has made Argentine dairy products more competitive in the global market. A weaker peso translates to lower prices for foreign buyers. Exchange rates and inflation were so disadvantageous to domestic producers that it raised significant uncertainty as to whether traders would sit on inventories or if there would be a rush to secure foreign currency, notably in U.S. dollars. Dairy export volumes increased 10 percent in the first 5 months of 2024 compared to the same period in 2023. Notably, cheese exports are forecast to rise from 85,000 tons in 2023 to 100,000 tons in 2024. Domestically, the economic situation remains challenging. The rise in production costs has led to higher prices for dairy products on the domestic market.

In 2024, milk production in the European Union (EU) remains relatively unchanged. Improvements in output per cow are largely offset by declines in the dairy herd. The dairy cow population has dropped below 20 million, continuing a trend of declining herd size. This drop is driven by various factors including lower milk prices and elevated production costs. These economic challenges have led to the exit of smaller, less efficient farms from the market, which has reduced overall milk production capacity. Additionally, environmental regulations and policies are impacting milk production. Initiatives to reduce nitrogen emissions in countries like the Netherlands and Ireland are expected to result in further reductions in herd sizes. These environmental restrictions, combined with challenges in generational renewal—where younger potential farmers are disinclined to take over due to the demanding nature and tight profitability of dairy farming—are contributing to the consolidation of the market. As a result, larger farms are likely to maintain their herd sizes better than smaller farms, which could help regulate the reduction in cow numbers.

The profitability of milk production has been declining since early 2023, with farm-gate milk prices dropping while production costs for inputs remaining high. This squeeze on margins is affecting farmers' decisions to continue milk production, further accelerating the decline in cow numbers. There was a temporary increase in milk deliveries in early 2024, but these gains are not expected to sustain throughout the year as farmers who postponed exiting the industry in 2023 are likely to do so in 2024. In 2024, the spring season saw favorable weather in most parts of Europe, with warm temperatures and adequate rainfall, which benefited pasture conditions and green feed availability. However, some regions like northwestern Europe experienced excessive rainfall that hindered field access and grassland re-growth, particularly in countries like Ireland where pasture-based systems predominate.

New Zealand's fluid milk production is forecast to decline by 0.7 percent to 21.1 million tons in 2024. This decline is primarily attributed to the shrinking national herd and the short-term effects of the El Niño weather pattern, which brought both increased rainfall and challenging dry conditions at different times of the year. Additionally, the sector faces softening revenue and high costs of debt servicing, which have put pressure on many dairy farmers. The macroeconomic environment in New Zealand remains challenging for many dairy producers. High interest rates set by the Reserve Bank of New Zealand (RBNZ) have increased the cost of debt servicing, comprising nearly 19 percent of the breakeven milk price per kilogram of milk solids (KgMS). This financial strain is compounded by rising input costs, particularly for feed and fertilizer, which are critical for maintaining high milk yields. Despite challenges for farmers, processors continue to invest in upgrading processing capabilities, shifting from milk powder production to more value-added products such as butter, cheese, and cream. Trade remains a vital driver of New Zealand's dairy industry, with 95 percent of milk production exported in some form. The country's trade agreements, particularly with China, ensure steady demand for its dairy products.

Australia's cheese production in 2024 is projected at 435,000 tons, supported by higher milk supplies and relatively strong profitability. Despite facing rising input costs, Australian dairy farmers have maintained significant production levels through technological investment and efficient management practices. Cheese consumption within Australia remains substantial, with an estimated 380,000 tons consumed domestically. Australian consumers have a strong preference for locally produced cheese. The surplus production is forecast to be exported, with approximately 165,000 tons of cheese expected to be sent to international markets in 2024. Major export destinations include Japan, China, and various Southeast Asian countries. • In 2024, EU cheese production is set to rise by nearly 1 percent, reaching approximately 10.5 million tons. This increase is driven by robust domestic consumption and consistent export demand. The primary producers – Germany, France, Italy, the Netherlands, and Poland – contribute nearly three quarters of the EU's total cheese output. Cheese production remains a key priority for the European dairy sector due to its dependable returns and high market demand. EU cheese exports are projected to grow by 1 percent to 1.4 million tons in 2024.

Domestic consumption of cheese within the EU is expected to accelerate, supported by economic recovery and the resurgence of the hospitality and tourism sectors. Germany, France, Italy, Poland, and Spain are the leading cheese-consuming countries. Following a dip in 2022 due to reduced consumer purchasing power, cheese consumption stabilized in 2023, but is anticipated to follow an upward trajectory in 2024. Factors such as rising incomes and the return to pre-COVID levels of tourism and dining out are key contributors to this growth in domestic cheese consumption.

In 2024, New Zealand's cheese production is projected at 375,000 tons. Recent investments in processing facilities have enabled New Zealand to diversify its cheese portfolio, catering to both local and international markets. This includes expansion into soft cheese varieties like brie, blue cheese and gouda. Domestic cheese consumption in New Zealand remains modest at around 40,000 tons, reflecting its smaller population. Consequently, the majority of cheese produced is destined for export markets. This year, New Zealand is anticipated to export approximately 350,000 tons of cheese and reflective of lower forecast production. Key destinations for these exports include China, Japan, and Australia. • The outlook for U.S. cheese exports in 2024 is promising, with exports through May already 28 percent higher than the same period in 2023, bolstered by global economic recovery and a significant price advantage against competitors in the first quarter of the year.

Canada is a top five destination for both US beef and pork exports

However, shipments are sometimes slowed by regulatory issues. The recent transition to the Public Health Information System (PHIS) Export Module was intended to reduce paperwork and simplify the export process. But Courtney Heller, U.S. Meat Export Federation (USMEF) director of export services, says some documentation obstacles persist for U.S. exporters. Heller adds that because the food safety and inspection systems in the U.S. and Canada are so similar, red meat trade between the two countries could be further streamlined. USMEF is working with industry partners such as the Meat Institute to develop recommendations that could simplify regulatory processes and help bolster U.S. exports to Canada.

Last year US pork exports to Canada totaled nearly 220,000 metric tons

That makes Canada the fourth largest market for U.S. pork, with export value topping $875 million. Through May of this year, pork exports are slightly below last year’s pace in volume (85,500 MT) and steady in value ($338 million). U.S. beef exports to Canada totaled 103,500 metric tons in 2023, ranking fifth among U.S. export markets, with export value also totaling about $875 million. Through May of this year, beef exports are up 8% in value ($353 million) despite a 5% decline in volume (just under 40,000 metric tons).

Massachusetts’ Q3 pork law survives industry court challenge

A federal judge on Monday rejected an industry-backed bid to block enforcement of a Massachusetts law banning the sale of pork from pigs kept in tightly confined spaces, saying a federal law governing slaughterhouses does not preempt it. U.S. District Judge William Young in Boston rejected arguments by Missouri-based pork producer Triumph Foods and out-of-state hogs farmers that the state law conflicted with a federal law regulating slaughterhouse inspections. The pork producers argued the Federal Meat Inspection Act preempted the state's law because it created additional, different requirements on how pigs are to be handled than the federal law provided. But Young said Massachusetts’ law does no more than ban the sale of non-compliant pork meat and does not regulate how a slaughterhouse itself operates. This ruling represents a significant victory for animal welfare advocates and supporters of the Massachusetts law. However, it also highlights the ongoing legal challenges faced by state-level animal welfare legislation in the context of interstate commerce and federal regulations.

US cattle on feed report: placements less than expected

USDA estimated the large feedlot (1,000-plus head) inventory at 11.304 million head as of July 1, up 61,000 head (0.5%) from year-ago, though 23,000 head less than the average pre-report estimate implied. June placements declined 6.8%, while marketings dropped 8.7% – both falling more than anticipated – especially placements. The data is relatively neutral, though the placements number may attract some buying in deferred live cattle futures.

China to probe EU pork for anti-dumping using sampling method

China has put three companies from the European Union at the center of its anti-dumping investigation into pork products from the bloc. Beijing has chosen Danish Crown A/S, Vion Boxtel BV, and Litera Meat S.L.U. — the top three exporters of pork products in the region to China — to determine if dumping has occurred and assess the damage to the domestic sector, the commerce ministry said. The investigation, which began June 17, will look into pork and its by-products imported from the EU after the bloc decided to impose anti-subsidy duties on Chinese electric vehicles.

China’s June pork imports continue to lag sharply from year-ago

China imported 90,000 MT of pork in June, up 12.5% from May but 33.5% less than last year. Through the first half of 2024, China’s pork imports totaled 520,000 MT, down 45.3% from the same period last year.

Weekly USDA dairy report

CME GROUP CASH MARKETS (7/19) BUTTER: Grade AA closed at $3.0750. The weekly average for Grade AA is $3.1140 (-0.0010). CHEESE: Barrels closed at $1.9125 and 40# blocks at $1.8650. The weekly average for barrels is $1.8980 (-0.0140) and blocks $1.8630 (-0.0855). NONFAT DRY MILK: Grade A closed at $1.1975. The weekly average for Grade A is $1.1795 (-0.0010). DRY WHEY: Extra grade dry whey closed at $0.5175. The weekly average for dry whey is $0.5055 (+0.0085).

BUTTER HIGHLIGHTS: In the West, domestic butter demand varies from steady to lighter. For the Central region, domestic butter demand is slightly down. In the East, domestic butter demand is steady for retail and steady to lighter for food service. Cream volumes are generally tighter throughout the country. In the Southwest, handlers indicated fat components in milk output are decreasing. However, some week-over-week increases in cream availability for the Central region were noted. In the Northeast, roads and bridges damaged by Hurricane Beryl created some transportation difficulties. Butter production schedules are mixed. Bulk butter overages range from minus 4 to 10 cents above market, across all regions.

CHEESE HIGHLIGHTS: Cheese production schedules vary from steady to lighter throughout the U.S. Contacts in the East note cheese production varies from area to area. Bridge and road damage sustained during Hurricane Beryl affected some milk deliveries, and cheese manufacturing in certain locales was quieter than in recent weeks. Cheese manufacturers in the Central region relay steady production schedules. Milk suppliers say cheesemakers are actively seeking out spot milk loads. Spot milk prices were reported at $1-under to $1.50- over Class III. Cheese demand is steady to lighter, as some contacts say customers are waiting for a potential dip in cheese prices. Cheese availability ranges from balanced to tighter. Cheese processors in the West also share steady to lighter manufacturing. Milk availability is waning seasonally, but manufacturers have shared they are able to find spot loads of milk to meet production needs. Cheese inventories are widely available throughout the region.

FLUID MILK: Milk output is trending seasonally lower throughout most of the country. Class I demand is also in a seasonal lull, as school districts are in the midst of their summer hiatus. Hurricane Beryl created some setbacks for milk haulers in the East region, as flooding and road closures were reported in Vermont and New Hampshire. Cheesemakers in the Midwest reported a slight atypical uptick in availability moving deeper into the summer months, but only slightly. Central Cheesemakers reported spot milk prices from $1.00-under to $1.50-over Class III. Condensed skim availability has tightened in recent weeks, particularly in the East. Cream multiples, for the most part, were steady to higher, although Central region butter processors said they received slightly more spot market volumes from within the region this week compared to week 28. Ice cream manufacturing is still somewhat active moving later into the peak production season. Cream multiples range from 1.30 – 1.50 in the East, 1.21 – 1.38 in the Midwest, and 1.12– 1.39 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices were mixed this week, as they moved lower in the Central/East regions, while they were steady to higher in the West. As condensed skim availability decreases, manufacturing/availability are expected to continue their seasonal downturns. High heat NDM prices were steady in the Central and East, while moving lower in the West. Dry buttermilk prices held steady in all regions. Drying activity is generally limited, as butter churning rates, despite some slight upticks in the Central region, are moving lower on the whole. Dry whole milk prices were unchanged from week 28, as inventories are noted as very tight. Dry whey prices were steady to higher in all regions. Demand is somewhat sluggish, but inventories are noted as steady to tight depending on the end usage goal. Brand preferred volumes of dry whey are noticeably snug, whereas interchangeable loads are still available. Whey protein concentrate 34% prices are steady to higher, as processors continue channeling whey solids into production of high[1]protein concentrates. Lactose prices were mixed. Domestic demand for lactose is somewhat hearty, particularly for higher-mesh varieties. Acid casein prices were steady to higher, while rennet casein prices were unchanged. Spot demand for rennet casein is quieter in the European Union.

INTERNATIONAL DAIRY MARKET NEWS: WEST EUROPE: As expected, seasonal milk declines are taking place across West Europe. That said, milk production levels are generally above that of last year. According to CLAL data made available to USDA, May 2024 EU cows' milk delivered to dairies is up compared to last year. Year-to-date EU cows' milk delivered to dairies through May 2024 is up when compared to January-May 2023 EU milk production. Poor weather resulted in a weak start to the milk production season in Ireland and the United Kingdom. Milk volumes during the normal peak of spring flush were below those of last year. More recently, improvements in weather and grass growth rates have helped bolster milk output. First cuttings of hay are thought to be at good levels, and depending on future weather patterns, hay harvest and milk output should match more closely to typical output levels.

EAST EUROPE: Milk production across East Europe continues to show strong output growth. The January - May 2024 provisional milk production in Belarus is up from January - May 2023. The European Commission reports the Combined Drought Indicator (CDI) for late June 2024 signals warning drought conditions for parts of East Europe, including Poland, the Balkans, and parts of Romania and the Baltic States. Warning conditions suggest that drought conditions exist that are negatively affecting crops and vegetation.

AUSTRALIA: Dairy Australia recently released export data showing milk export volumes from July 2023 – May 2024 were down percent from the same time period a year earlier. April 2024 milk sales were up from April 2023. Milk sales from the start of the season in July through April 2024 were up compared to the same time period a year earlier. The June 2024 Production Inputs Monitor from Dairy Australia stated drier than normal weather was present across many of the dairy regions during June, contributing to stronger demand for supplementary feed.

NEW ZEALAND: A group in New Zealand, which forecasts dairy prices, decreased the forecasted milk price for the 2024/2025 season, following GDT event 360. The group explained that the results of GDT event 360 were bearish overall for milk prices. Recently released data from New Zealand for May showed the number of dairy cows sent to slaughter during the month was up from May 2023. From the start of 2024 through May, cow slaughter numbers are up from the same time in 2023.

SOUTH AMERICA: Contacts suggest seasonal milk upticks are yet to be notable. An intensely wet fall season, which brought flooding and rainfall to key dairy areas throughout the continent, has become a warmer/dryer winter. One positive note, according to analysts, is that dryness is allowing for a timely corn harvest. As operational costs have been a looming concern for dairy farmers and the dairy industry, on the whole, an increase in quality forage/silage is expected to help stabilize some dairy farm costs in the near-term.

NATIONAL RETAIL REPORT: Conventional and organic dairy ads increased. Except for cream cheese, total ads for all reported conventional commodities increased this week compared to the prior week. Cheese remained in the top spot as the most advertised dairy commodity. Conventional ice cream was also heavily represented in dairy ads. Conventional ice cream ads increased this week. Yogurt was the third most advertised conventional diary commodity and top advertised organic dairy commodity. In terms of ad numbers, sour cream was more prevalent than milk this week.