26 May 2023

14 minute read

By: Jim Wyckoff

South America

North America

Weekly USDA beef, pork export sales

US Beef: Net sales of 18,300 MT for 2023 were up 5 percent from the previous week and 15 percent from the prior 4-week average. Increases were primarily for Japan (5,500 MT, including decreases of 400 MT), South Korea (3,800 MT, including decreases of 400 MT), China (2,500 MT, including decreases of 100 MT), Mexico (2,200 MT, including decreases of 100 MT), and Taiwan (1,200 MT, including decreases of 100 MT). Exports of 16,500 MT were down 10 percent from the previous week and 3 percent from the prior 4-week average. The destinations were primarily to South Korea (4,700 MT), Japan (4,100 MT), China (2,300 MT), Mexico (1,400 MT), and Canada (1,300 MT).

US Pork: Net sales of 29,200 MT for 2023 were down 8 percent from the previous week and 29 percent from the prior 4-week average. Increases were primarily for Mexico (14,400 MT, including decreases of 300 MT), Japan (4,400 MT, including decreases of 100 MT), South Korea (4,400 MT, including decreases of 600 MT), Colombia (1,200 MT), and the Dominican Republic (1,100 MT, including decreases of 100 MT). Exports of 38,500 MT were up 5 percent from the previous week and 3 percent from the prior 4-week average. The destinations were primarily to Mexico (16,900 MT), China (4,600 MT), Japan (4,300 MT), South Korea (3,200 MT), and Australia (2,100 MT).

USDA Cold Storage Report shows exaggeration of seasonal trends

U.S. beef stocks declined more than average, while pork inventories climbed more than normal during April. That not only speaks to slaughter levels over the past month, but also demand. Beef stocks in frozen storage totaled 448.0 million lbs. at the end of April, down 29.8 million lbs. (6.2%) from March, nearly double the five-year average decline of 15.1 million lbs. during the month. Pork stocks at 565.5 million lbs. increased 31.6 million lbs. (5.9%) from March compared with the five-year average rise of 16.9 million pounds.

U.S. contemplating avian influenza vaccination strategy for turkeys

The U.S. is working on a bird flu vaccination scenario focusing on turkeys in the few states with the largest number of turkey farms, a move that would best meet a benefit-cost strategy, its chief veterinary officer said on Tuesday. However, no decision to vaccinate has yet been made, Rosemary Sifford, who is also deputy administrator of the Veterinary Services program at the Department of Agriculture (USDA), told Reuters. “Any vaccination strategy would need to be a very focused strategy... I would certainly not expect to do a widespread vaccination if we were to choose that path,” Sifford said. She sees “no positive impact” in vaccinating chickens since they have a short lifespan.

USDA has officially launched the Organic Dairy Marketing Assistance Program

The program aims to provide financial assistance to organic dairy operations that produce milk from cows, goats, and sheep, offering a one-time aid for a cost share of projected marketing costs for 2023. This aid targets smaller organic dairy operations and is capped at a maximum of 5 million pounds per operation. To qualify for aid, operations will have to present their USDA organic certification and verify their 2022 organic milk production or, under certain conditions, for 2023. A total of $104 million is available for this program, which will be disbursed in two installments. The initial payment will cover 75% of the total amount, with the remaining 25% potentially distributed if the USDA deems additional aid is required and if funds remain. Applications for the program will be accepted from May 24 to July 26, 2023.

USDA semiannual European Union dairy report

At the beginning of 2023, the European dairy cow herd amounted to slightly over 20 million head, which is 0.6 percent below the 2022 numbers. This decline has continued for several years and is expected to continue throughout 2023 as milk farm-gate prices have dropped since the beginning of the year, discouraging herd expansion. Low farm-gate prices combined with increasing costs of production, lack of successors, limits on farm development, and stricter EU animal welfare and environmental regulations are also leading to a smaller herd. Despite the declining dairy cow herd, until 2020, milk deliveries were on the rise because the drop in cow numbers was compensated by increasing productivity.

However, starting from 2021, EU cow’s milk deliveries have been in a downward trend, forecasted to reach 143,900 metric tons (MT) in 2023 and 0.55 percent down from 2022 level. The severe drought of 2022 negatively impacted the milk yield and may again affect several top milk[1]producing Member States (MS) in 2023. Despite consumers’ appreciation of non-cow dairy products, the 2023 non-cow milk deliveries to dairies are forecasted to stagnate because main sheep and goat milk producing MS’ herds declined and high inflation depressed the purchasing power of consumers. 2023 fluid milk domestic consumption is forecasted to further decline since 2020, when COVID-19 trends boosted the consumption of drinking milk.

Fluid milk has been facing competition from plant-based milk, which was estimated in 2022 to account for 11 percent of the overall milk market. With declining milk deliveries, processors are forecasted to have less milk available for factory use in 2023, which forces them to carefully assess for which products they will use the available milk. Cheese production remains the preferred EU27 milk factory use, and this trend is expected to continue, supported by solid domestic consumption of this product. In 2023, cheese production is expected to rise by 0.67 percent and amount to 10.45 million MT, despite declining milk deliveries. Cheese production should be favored over other dairy products, as its price is more stable, and butter prices reached their peak in 2022. Additionally, increasing consumption supports cheese production, with consumers willing to pay more for high-end products or choosing cheaper types of cheese.

Following the 2022 drop in EU27 cheese exports to main destinations, the 2023 export number is forecasted to stagnate. The EU27 butter production in 2023 is still forecasted to decrease by 0.6 percent, or by 13,000 MT, compared to 2022, as smaller milk supply will favor cheese production over butter and non-fat dry milk (NFDM). Imports, elevated in 2022 to support rebuilding consumption, are forecasted to remain at high levels, stagnating from the 2022 number. In 2023, EU27 butter consumption is forecasted to reverse to its declining trend, with stagnating demand from hotels, restaurants, and institutions (HRI), and consumers choosing healthier fats over butter.

As Non-Fat Dry Milk (NFDM) production in the EU is the residual product from EU butter and cream production, its production is declining in line with butter production. For 2023, NFDM production is forecasted to decline from 2022 levels, but only by 1 percent, reaching 1.5 million MT. Almost half of EU27 NFDM production is exported and, thus, declines in production are linked with a drop in exports. The EU27 NFDM exports compete heavily with NFDM exports mainly from the United States and New Zealand, with the EUR/USD exchange rate an important factor. The EU27 NFDM exports in 2023 are 5 forecasted to continue to shrink compared to 2022 by 1.5 percent, which is more than the drop in production, but the forecasted stagnating domestic consumption will leave more NFDM on the EU market. In 2023, with high inflation limiting the purchasing power of consumers, demand from the price-sensitive food processing sector is forecast to stabilize the domestic consumption of NFDM compared to 2022 levels.

Whole Milk Powder (WMP) production usually generates the lowest processing margins, and EU processors generally prioritize cheese production, which offers the most stable long-term returns. With declining milk supplies, EU27 WMP production is forecast to decline further, stabilizing at a low level of 600,000 MT in 2023, after a 6-percent decrease in 2022. EU WMP exports decrease in line with the drop in production and that is forecast to continue in 2023. EU27 WMP consumption, almost entirely by the EU food industry, is rather stable in the longer term.

From a policy perspective, apart from the expected EU dairy sectors’ concerns connected to the implementation of the new Common Agricultural Policy (CAP) and Farm-2-Fork (F2F) initiatives in 2023, the impact of the war in Ukraine will be addressed throughout 2023. Strengthening EU environmental and climate mitigation policies are expected to require additional non-productive investments and further erode dairy farming profitability. Additionally, as a result of Russia’s war in Ukraine, production costs (energy, feed, fertilizers) were strongly elevated in 2022. Tariff and quota-free access for Ukrainian agricultural products to the EU market allowed for feed cost increases to stabilize, however, input costs remain at a high level in 2023, which might depress dairy farmers’ margins with dropping farm-gate milk prices. As more dairy farmers may leave the sector, the major industry players are reviewing their milk allocation and product mix, as they adjust to these new EU policy realities.

Massachusetts and Prop 12 impact

The Supreme Court's recent 5-to-4 decision in favor of California’s Proposition 12 has also unlocked the stalled Massachusetts Question 3. The ruling stated that Proposition 12, a voter-approved initiative, does not violate the U.S. Constitution, and that California can decide which meat products can be sold within its borders.

Following the Supreme Court's decision, Massachusetts Question 3 is set to be implemented. Originally scheduled to take effect last summer, the implementation of the measure was on hold pending the Supreme Court's ruling. Massachusetts Question 3 shares similarities with Proposition 12, imposing housing requirements on the pork industry.

The National Pork Producers Council (NPPC) has stated that nearly all U.S. pork products fail to meet the housing standards set by Massachusetts Question 3. Passed by 78% of Massachusetts voters in 2016, Question 3 requires farmers to give chickens, pigs, and calves enough space to turn around, stand up, lie down, and fully extend their limbs. It also bans the sale of eggs or meat from animals raised in conditions not meeting these standards.

Despite two legal challenges, Question 3 is now moving towards implementation. However, officials in Massachusetts have not yet provided detailed plans for its enforcement. (The two legal challenges: The first, attempting to block it from the ballot for procedural reasons, was ruled against by the Massachusetts Supreme Judicial Court in July 2016. The second was filed with the U.S. Supreme Court by a coalition of agricultural states, claiming Question 3’s provisions violated the dormant Commerce Clause; the Court declined to hear the case in January 2019.)

Both Proposition 12 and Question 3 stipulate housing requirements for animals, and products that fail to meet these standards are banned from being sold in the respective states. Question 3 additionally bans the trans-shipment of whole pork through Massachusetts, which could potentially impact neighboring New England states.

Brazil declares animal health emergency to address HPAI in wild birds

Brazil has declared a state of animal health emergency for a period of 180 days in response to the confirmation of highly pathogenic avian influenza (HPAI) in wild birds. The country has confirmed eight cases of HPAI in wild birds since its first case was detected on May 15. As part of its response, Brazil has established an emergency operations center to coordinate, plan, and assess national efforts related to avian influenza, Reuters reported. Brazil is the top global exporter of chicken meat, with exports amounting to $9.7 billion in 2022. While the World Animal Health Organization's guidelines state that the detection of HPAI in wild birds does not pose trade issues, Brazil is notably worried about the disease affecting commercial flocks. The presence of HPAI in commercial birds can typically have implications for trade, potentially impacting Brazil's significant poultry industry.

Cell meat has big environmental impact

Cell-cultured meat often is portrayed as environmentally friendly because it uses less land and water than livestock, but it has a global warming potential of up to 25 times larger than beef depending on the growth media.

USDA weekly dairy report

CME GROUP CASH MARKETS (5/19) BUTTER: Grade AA closed at $2.4600. The weekly average for Grade AA is $2.4510 (+0.0455). CHEESE: Barrels closed at $1.4700 and 40# blocks at $1.5350. The weekly average for barrels is $1.4580 (-0.0535) and blocks, $1.5100 (-0.0985). NONFAT DRY MILK: Grade A closed at $1.1525. The weekly average for Grade A is $1.1600 (-0.0195). DRY WHEY: Extra grade dry whey closed at $0.2650. The weekly average for dry whey is $0.2845 (-0.0245).

BUTTER HIGHLIGHTS: Cream supplies are heavy and readily available for production needs in butter making facilities across the regions. Manufacturers’ in-house cream supplies are prompting seven[1]day production schedules in some instances, but personnel shortages constrain plant production capacity in the West region. With the heavy availability of cream supplies, manufacturers are taking advantage of the opportunity to produce and store bulk butter, as the market currently see bulk overages ranging 0 to 10 cents above the market. Butter demand is steady for both domestic and export markets, as seasonal baking needs boost retail butter interest. Meanwhile, food service demand is seasonally steady.

CHEESE HIGHLIGHTS: Cheese demand is mixed by region and by cheese variety, but more contacts are suggesting improvements in demand, particularly from the retail sector. Grilling season is noted as being a catalyst for improved retail sales. Midwestern cheesemakers say curd sales have yet to lift much, but processors are expecting some seasonal upticks to come near term. Milk remains widely available in all regions, particularly the upper Midwest, where spot milk prices ranged from $11 to $4 under Class III, compared to 2022 during week 20, when prices ranged from $2.50 under to $.75 over Class. Cheese market tones are under some continued bearish pressure.

FLUID MILK: Farm level milk volumes are steady to stronger across the nation. Cream and condensed skim are readily available in the East, and there is steady demand for all Classes. Across the region, many meal programs that include milk as a beverage will remain operational throughout the summer. In the Midwest, weather conditions have remained optimal for cow comfort, and milk output volumes are strong. Some stakeholders have expressed concerns about school breaks aligning with consistently strong milk outputs. Reported spot milk loads continue to command between $10 and $7 under Class III prices. In the West, farm level milk volumes are variable. In the Pacific Northwest, some unseasonably warm temperatures have impeded cow comfort, and milk production is down slightly from what was forecasted. In California, contacts have shared that some residual effects of excess rain and flooding are being felt, as milk volumes in those areas are below predictions. In Idaho, Utah, and Colorado, milk production is strong. Milk production is steady in New Mexico. In Arizona, contacts have shared that milk availability outweighs local processing needs and that spot load prices are below Class. Regional manufacturing is steady to stronger. FOB cream multiples for all Classes are 1.19-1.31 in the East, 1.17-1.29 in the Midwest, and 1.00- 1.25 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk prices were somewhat steady in the Central and East, moving lower only at the top of the range. High heat NDM prices were unchanged. Market tones are quietly steady. In the West, the top of the low/medium heat NDM range moved lower. High heat prices moved lower. Traders have shared that there is renewed interest in Mexico for NDM. The Central and East dry buttermilk price range was unchanged. Some off-spec inventory is moving into animal feed channels. Trading activity remains quiet. In the West, dry buttermilk prices decreased somewhat, with stakeholders relaying that inventories are heavy, and demand is quiet. Dry whole milk prices were unchanged, and demand is steady for contractual needs but quieter for spot trading. Central and West dry whey prices moved lower in most areas of the price series. In the Northeast, dry whey price range slid lower. There is a divide between prices for brand preferred loads, which are becoming rarer, and the more widely available interchangeable whey brands. CME prices dipped below $0.30 cents this week. Whey protein concentrate 34% market tones remain weak and the price range is unchanged. Some contacts have relayed that WPC 80% market tones have seemed to stabilize, giving hope that the same will happen for WPC 34%. Lactose prices are steady to lower. Contracted loads are steady, but spot sales are quiet. Inventories vary from manufacturer to manufacturer. Acid casein prices shifted lower whereas rennet casein prices are unchanged. Both varieties are expected to become more available than they were during the 2022 calendar year.

ORGANIC DAIRY MARKET NEWS: The Agricultural Marketing Service (AMS) reported March 2023 estimated fluid product sales. The U.S. sale of total organic milk products was 256 million pounds, up 1.3 percent from the previous year and up 1.1 percent year-to-date. Organic whole milk sales, 122 million pounds, were up 5.2 percent compared to a year earlier and up 6.0 percent year -to-date. Reduced fat milk (2%) sales were 83 million pounds, down 4.3 percent from the previous year and down 3.0 percent year-to-date. Organic flavored whole milk sales, 1 million pounds, decreased 30.5 percent from the previous year, while declining 49.6 percent year-to[1]date. This week, total organic dairy commodity advertisements decreased 6 percent from the previous retail survey ad number. Ads for organic cheese, milk, and yogurt made up double-digit percentages, 50,26, and 12, respectively, of total organic dairy ads in the survey period. Meanwhile, the half-gallon packaging posted the most ads in the organic milk category, but ads declined from last week. The weighted average advertised price of $4.42 is up from last week's $3.99 weighted average price.

NATIONAL RETAIL REPORT: Total conventional dairy advertisements decreased by 1 percent this week, and total organic dairy ads decreased by 6 percent. Ice cream in 48-64 ounce containers was the most advertised dairy product, with a weighted average advertised price of $3.44, down 42 cents from last week. Sliced cheese in 6-8 ounce packages was the most advertised organic dairy item, with a weighted average advertised price of $3.86 this week and no recorded ads the prior week. Conventional butter in one-pound packages appeared in 22 percent more ads this week, with a weighted average advertised price of $4.00, up 21 cents from last week. Greek yogurt in 4-6 ounce containers was the most advertised conventional yogurt item, with a weighted average advertised price of $1.04, down 4 cents from last week. Gallons of conventional milk appeared in 22 percent fewer ads, with a weighted average advertised price of $3.53, up 9 cents from the week before. Gallons of organic milk had a weighted average advertised price of $5.13, down $1.86 from last week. The difference in weighted average advertised price of conventional versus organic gallons of milk is an organic premium of $1.60.