16 February 2024

16 minute read

By: Jim Wyckoff

North America

Asia

USDA annual Ag Outlook Forum projections on livestock

Cattle: U.S. beef production is projected at 26.19 billion lbs., down 3% from 2023. Exports are projected to 2.785 billion lbs., down 8.3% from last year. Cash price: $180.00, which would be a record and up $4.46 from last year.

Hogs: U.S. pork production is projected at 27.88 billion lbs., up about 2% from last year. Exports are expected to rise 3.8% to 7.080 billion pounds. Cash price: $60.00, up $1.41 from last year.

Broilers: U.S. production is projected to be a record 46.8 billion lbs., up just under 1% from last year. Broiler meat exports projected at 7.22 billion lbs., down fractionally from 2023. Wholesale broiler price: $1.27 per lb., up 2.4% from last year and a record.

Dairy: Milk cow numbers are seen lower in 2024, with milk production projected at 228.2 billion lbs., up 0.7% as production per cow is seen rising 0.9%. Exports are projected to rise 10% with a 1% increase in domestic use on a fat basis while use on a skim-solids basis is seen declining 1% but remaining above the five-year average. The all-milk price is projected to be $20.95 per cwt., up from $20.48 in 2023.

US CPI data shows surging inflation, led by grocery prices

The latest US Consumer Price Index (CPI) data in the U.S. revealed stronger-than-expected inflation, with grocery prices experiencing the most significant rise in a year.

Overall prices increased by 0.3% in January, surpassing expectations of a 0.2% increase. Core CPI, excluding food and energy, rose by 0.4%, matching December's level. Although headline inflation fell to 3.1% from 3.4% in December, it exceeded the expected rate of 3% or less. Core CPI remained at 3.9%, surpassing expectations of a slowdown to 3.7%. Grocery prices increased by 0.4%, the highest monthly rise since January 2023, with annualized grocery prices up by 1.2%.

Food prices overall rose by 2.6%, slightly lower than December's 2.7%. Despite the decline in the rate of inflation, consumers are still experiencing higher prices at the grocery store, indicating ongoing challenges despite the data showing a decrease in the inflation rate.

USDA’s latest US livestock report

Summary

Beef/Cattle: The semiannual Cattle report confirms historically tight supplies of cattle heading into 2024. Fewer calves are available than last year for placement in feedlots, although more than previously expected. As a result, anticipated fed cattle marketings have been raised for late 2024, but the marketings are offset by lower anticipated cow slaughter. With more steers and heifers in the slaughter mix, average carcass weights were raised in second-half 2024. From last month, projected beef production in 2024 is raised 75 million pounds to 26.185 billion pounds. Cattle prices in 2023 are raised on firm demand and lower feed costs. Based on estimated weekly import data, this year’s import forecast is expected to set a record at 4.125 billion pounds. Export projections are unchanged at 2.785 billion pounds. Sheep/Lamb: The 2024 January 1 inventory report for sheep and goats was released at the end of January. The total lamb and sheep inventory declined by -1.9 percent from the previous year. December supply and use estimates for 2023 have been incorporated into this report. Forecasts for 2024 lamb and mutton imports and exports are lower than the January 2024 forecasts.

Dairy: The milk production estimate for 2024 is lowered from last month; lower expected yield per cow more than offsets higher expected milk cow numbers. Wholesale price forecasts for 2024 have been increased for Cheddar cheese, dry whey, butter, and nonfat dry milk to $1.690, $0.480, $2.770, and $1.235 per pound, respectively, based on recent strength in prices, tight supplies, and stronger expected domestic demand. With higher dairy product prices expected across the board, Class III and IV milk price forecasts for 2024 have been raised to $17.10 per hundredweight (cwt) and $20.20 per cwt, respectively. The 2024 all-milk price estimate is adjusted higher to $20.95 per cwt.

Pork/Hogs: Strong demand for pork bellies contributed to a year-over-year higher wholesale cutout value in January, supporting processors’ gross spreads at above year-earlier levels for the month. Improved demand for pork compared with 2023—from both domestic and foreign consumers of U.S pork—is expected to support hog prices in 2024. Total exports for 2024 are raised to 7.1 billion pounds, 3.8 percent above exports in 2023, as U.S. pork becomes more competitive compared with pork sourced from the European Union.

Poultry/Eggs: Broiler production is adjusted up in the first quarter on strong average weights. Broiler prices are adjusted up in the first half of 2024, and projected broiler exports in 2024 are adjusted down on less-competitive prices and weak international demand. Projected table egg production in 2024 is adjusted down slightly on recent losses to Highly Pathogenic Avian Influenza (HPAI). Projected egg prices are increased on recent data. Projected imports and exports of eggs and egg products are unchanged for 2024. Projected turkey production was lowered in 2024, reflecting recent placement data and losses to Highly Pathogenic Avian Influenza (HPAI). Turkey prices were adjusted down on recent data, while projected exports in 2024 were adjusted up on favorable prices and strong demand.

Dairy

2023 Dairy Situation

In 2023, the U.S. dairy industry experienced the reversal of the 2022 situation: whereas feed, dairy products, and farm-gate milk prices increased year over year in 2022, these prices decreased year over year in 2023. The milk and feed price dynamics in 2023 resulted in some of the poorest margins since the implementation of the Dairy Margin Coverage Program (DMC). The national milking herd in 2023 was lower than 2022, but the milk per cow was slightly higher. Consequently, total milk production in 2023 was only fractionally higher than 2022. Growth of domestic use of dairy products was robust on both milk-fat and skim-solids milk-equivalent bases.

Conversely, U.S. dairy exports declined from the peak levels in 2022, driven by lack of price competitiveness as well as slowing demand for dairy products at a global level. The all-milk price in 2023 averaged $20.48 per hundredweight (cwt), $4.86 lower than 2022. While the prices that dairy farmers received in 2023 were generally lower than in 2022, the decrease in average all-milk price was larger than the decrease in average feed costs. Using the proxy used by USDA, National Agricultural Statistics Service (NASS) to calculate the milk[1]feed ratio, the feed-price proxy decreased by 8 percent from 2022 to 2023, while the all-milk price decreased by 19 percent. Average prices paid by all farmers6 for labor and machinery increased year over year by 5.5 and 1.7 percent, respectively. In 2023, the farm milk margin above the feed costs reported by the DMC fell below the catastrophic coverage margin ($ 4.00 per cwt) in June and July, triggering indemnity payments to all the producers enrolled in the program, including those who paid only the $100 administration fee. Moreover, for all months except November, the margins reported by DMC were below the $9.50 per cwt threshold that triggers payments for dairy producers who choose the highest levels of coverage.

Milk production in 2023 totaled 226.6 billion pounds, only marginally higher than in 2022 (+0.1 percent). Milk cow numbers in the first quarter of 2023 increased slightly from the fourth quarter of 2022, peaking at 9.444 million head in March 2023. Thereafter, they trended downward, falling to 9.357 million head in December. Milk per cow averaged 24,115 pounds in 2023, 0.1 percent higher than 2022. Milk per cow in the first half of 2023 was higher compared to the first half of 2022. However, hot weather impacted milk per cow in the late summer, contributing to a year-over-year decline in the second half of 2023. Domestic demand for dairy products in 2023 was year-over-year higher for most of them. On a milk-fat milk-equivalent basis, 2023 domestic use increased by 1.8 percent over the previous year, in contrast to the 1.1 percent decrease in 2022.

Domestic use on a skim-solids milk[1]equivalent basis increased by 2.8 percent in 2023, compared to an 0.8 percent decrease of 2022. In 2023, there were considerable increases in domestic use of whey protein concentrate, dry whey, butter, lactose, and American type cheese relative to 2022. However, domestic use for other-than American type cheese and dry skim milk products decreased.

Dairy Forecasts for 2024

The 2024 dairy herd size forecast has been revised upwards by 5,000 head, totaling 9,355 thousand for the year, due to higher expected milk cow numbers in the second half of the year. This small increase in the number of cows is attributed to higher expected milk prices early in the year, as milk production usually responds to changes in milk and feed prices with a lag of several months. Even with the higher forecast for milk cow numbers, they are still expected to be lower than 2023. Recent slaughter trends, together with tight replacement heifer inventories and high reported prices for dairy heifers, suggest a year-over-year decline for the dairy herd in 2024 despite lower expected feed costs, improved milk prices, and robust demand for dairy products.

The forecast yield per cow is reduced by 20 pounds to 24,395 pounds based on recent data. As a result, the revised milk production forecast for 2024 is 228.2 billion pounds, a decrease of 0.1 billion from the previous month’s estimate. On a milk-fat basis, dairy import forecasts in 2024 have been lowered to 7.4 billion pounds (-0.1 billion). However, on a skim-milk basis, imports remained unchanged at 6.4 billion pounds. Notable declines in import volumes of cheese, infant formula, canned milk, lactose, and yogurt are projected for 2024. Conversely, casein imports are anticipated to increase. The 2024 dairy export forecast on a milk-fat basis has been raised 0.1 billion pounds to 11.7 billion as export prices for cheese and butter are expected to be competitive in the international markets. The export forecast on a skim-solids basis is lowered to 51.9 billion pounds (-1.3 billion).

Compared to 2023, in 2024, higher export shipments are forecast for cheese, butterfat products, whey products and lactose, while canned milk and yogurt are projected lower. The 2024 forecast for domestic disappearance has been revised upward from last month’s projection following higher-than-expected domestic use in the last quarter of 2023. On a milk-fat basis, domestic use increased by 1.0 billion pounds, bringing the total to 224.7 billion pounds. On a skim-solids basis, domestic use is increased by 1.7 billion pounds, totaling 182.0 billion pounds. Ending stocks are expected to decline further in 2024, following the downward trend from 2023. Due to recent price increases, lower inventories, and higher expected domestic demand, the price forecasts for the main dairy products have been revised upwards.

The adjusted forecasts, in dollars per pound, are as follows: Cheddar cheese at $1.690 (+7.0 cents), dry whey at $0.480 (+5.0 cents), butter at $2.770 (+10.5 cents), and NDM at $1.235 (+4.5 cents). With higher cheese and dry whey prices, the new forecast for Class III milk is $17.10 per cwt, $1.00 higher than the previous forecast. With higher butter and NDM price forecasts, the Class IV price forecast has been raised to $20.20 per cwt, $0.85 higher than the previous projection. The all-milk price for 2024 is now forecast at $20.95 per cwt, up $0.95 from last month’s forecast.

Pork/Hogs

Gross Processors’ Spread Above a Year Earlier in January on Strong Belly Prices Demand for pork bellies appears to have driven the average January 2024 estimated wholesale carcass cutout to a value above that of a year earlier, something not seen since December 2022. The wholesale cutout value of the pork carcass in January was $87.01 per cwt, 7.4 percent higher than the January 2023 value. With prices of live equivalent 51-52 percent lean hogs averaging $49.83 per cwt in January 2024—more than 7.4 percent below hog prices a year ago—processors’ gross spread exceeded year-earlier levels in the first month of 2024. Toward the end of January, however, seasonally rising hog prices and slower rises of belly primal values effectively reversed the course of processors’ spreads. By the end of January, processors’ gross spreads, although still year-over-year higher than in late January 2023, had declined. While demand for pork bellies may have elevated cutout values for a few weeks, it is doubtful that a single cut can sustain strong spreads for the pork market overall.

Improving Pork Demand Expected To Support Hog Prices in 2024 Stronger demand for selected pork cuts and a slower pace of slaughter throughout 2024 will be key factors in raising hog prices beyond initially expected price levels. Strong belly prices in the first quarter should combine with the slower paced first-quarter hog slaughter to push average first-quarter prices of 51-52 percent lean hogs to $55 per cwt, up $4 per cwt from last month’s first-quarter forecast. Second-quarter commercial pork production is expected to be unchanged from last month’s forecast at about 6.6 billion pounds, but improving demand is likely to push second-quarter hog prices to $62 per cwt, more than 9 percent higher than in the same period last year. Higher production in the third quarter—almost 6.8 billion pounds, more than 4 percent higher than production in the same period last year—will likely offset continued improving domestic, and solid foreign demand, to lower hog prices almost 5 percent from a year earlier, to $66 per cwt. Fourth-quarter hog prices are raised $1 per cwt from last month’s forecast to $56 per cwt, almost 5 percent greater than last year, on pork production of about 7.4 billion pounds, almost 3 percent greater than fourth-quarter production last year. Improved domestic pork demand compared to 2023 and competitively priced U.S pork in foreign markets are likely to be the most important factors supporting hog prices in the fourth quarter of 2024.

Quarterly pork exports for 2024 are revised upward on strong December data, as follows: For the first quarter, exports are expected to be 1.765 billion pounds, 5.8 percent higher than same[1]period exports in 2023. Second-quarter exports are forecast at 1.785, virtually unchanged from the second quarter of 2023. Shipments of 1.645 billion pounds are expected in the third quarter, which would be about 6.6 percent higher than exports in the same period of 2023. Fourth[1]quarter exports are expected to be 1.885 billion pounds, about 3.4 percent greater than same[1]period shipments in 2023. Pork export forecasts for 2024 total about 7.1 billion pounds, up about 3.8 percent over the 2023 total of 6.8 billion pounds. This implies that 25.4 percent U.S commercial pork production will be exported. Production and export forecasts, combined with expectations for pork stocks changes, also imply a retail per capita disappearance of 50.7 pounds, up 1.02 percent over 2023

WHO: Low risk in China’s human case of bird flu

China on Jan. 27 reported a case involving a person infected with combined H3N2 and H10N5 strains of avian influenza. The World Health Organization says “the likelihood of human-to-human spread is considered low.”

Pork oversupply sparks economic concerns; industry seeks solutions

The Wall Street Journal reported on the challenges facing the U.S. pork industry, which has become overly efficient, resulting in an imbalance between supply and demand. Despite producing various pork products like tenderloin, ham, sausage and bacon, there’s insufficient demand to absorb the surplus.

Factors contributing to this imbalance, the article notes, include the industry’s focus on efficiency, the perception of pork as less desirable compared to chicken and beef, and misconceptions about pork’s preparation and healthiness. The industry is exploring various strategies to address these challenges, such as targeting new overseas markets, repositioning pork as an affordable alternative to beef and promoting fattier, more flavorful pork breeds. However, there’s no consensus on the best approach. Furthermore, the article highlights the financial strain on pork producers, with farmers losing money on each pig due to shrinking profit margins. If the industry fails to attract younger consumers, pork consumption is projected to decline further. To stabilize profits, the industry seeks to engage U.S. consumers, invest in marketing campaigns and innovate products to meet changing consumer preferences and lifestyles.

USDA to monitor poultry industry compliance with new transparency rule

USDA has informed the poultry industry of its intention to closely observe compliance with a new final rule aimed at enhancing transparency and disclosure in processing companies' contracts with poultry growers. Despite industry and lawmaker requests for a delay, the rule is set to come into effect on Feb. 12.

Weekly USDA dairy report

BUTTER: Grade AA closed at $2.6900. The weekly average for Grade AA is $2.7440 (-0.0280). CHEESE: Barrels closed at $1.5775 and 40# blocks at $1.5700. The weekly average for barrels is $1.5770 (+0.0390) and blocks, $1.6105 (-0.0345). NONFAT DRY MILK: Grade A closed at $1.2000. The weekly average for Grade A is $1.2175 (-0.0105). DRY WHEY: Extra grade dry whey closed at $0.5200. The weekly average for dry whey is $0.5075 (+0.0310).

BUTTER HIGHLIGHTS: Overall, retail demand is steady. That said, some stronger demand is noted in the Western region. Stakeholders relay mixed food service demand throughout the country. Food service demand is noted as strong in the Eastern region, steady in the Central region, and strengthening in the Western region. Cream volumes are plentiful, and spot loads are readily available across the nation. However, stakeholders indicate varied cream demand. Butter manufacturers are running strong to steady production schedules. Butter makers are working to ensure adequate inventories for early 2024 spring holidays. Unsalted bulk butter is tight. Bulk butter overages range from 1 to 8 cents above market, across all regions.

CHEESE HIGHLIGHTS: Contacts share cheese production schedules are steady in the East region. Cheese plant managers share overages for spot milk loads as well as increased condensed skim demand. Cheese inventories of both Italian and American-type cheeses are comfortable. In the Upper Midwest, contacts note cheddar demand is slower than anticipated. Some cheesemakers report growing inventories despite tighter milk availability than in recent weeks. Some contacts shared that they are expecting to run at full capacity through the spring holiday season to keep up with holiday demand. In the West, some cheesemakers note tighter milk volumes, while others share Class III spot loads are available. Cheese processors note steady to stronger production schedules and moderate foodservice demand.

FLUID MILK: In the Eastern and Midwestern regions, milk production is steady. In the Western region, milk production is steady to stronger. In California, handlers noted year-over-year comparisons for 2024 production levels have been at-or-above 2023 production levels. However, some manufacturers relayed limited ability to take additional spot loads. In the Midwest, the general sentiment among contacts is 2024 milk output will not be in line with that of 2023. Spot milk prices in the Midwest remain reported at Class III to $1-over Class. Class I, II, III, and IV demands are strong to steady. Condensed skim milk demand is steady to stronger, and spot load availability is tighter, leading to some above Class prices for loads. Cream multiples for all Classes are 1.00-1.27 East, 0.900-1.25 Midwest, and 0.75-1.18 West.

DRY PRODUCTS: Low/medium nonfat dry milk (NDM) prices moved higher in the west region and contracted in the central and east region. Contacts say some processing facilities are not at capacity. High heat NDM prices moved higher in all regions. Processing pushes towards low/medium heat NDM and other dairy powder commodities have kept high heat stores snug. Aside from an upward movement to the bottom end of the central and east range, dry buttermilk prices were unchanged. Some manufacturers note production schedules are ahead of contractual obligations. Dry whole milk (DWM) prices moved higher on the bottom end of the range. DWM inventories remain tight. Dry whey prices moved higher in all regions. Some manufacturers and distributors indicate inventories are tight. Whey protein concentrate (WPC) 34% prices moved higher on the bottom end of the price range. Stakeholders say WPC 34% remains a good value compared to other dairy proteins. Lactose prices held steady. Stakeholders relay spot inventories continue to become tighter. Both ends of the rennet casein price range, along with the top end of the acid casein price range, were unchanged. The bottom end of the acid casein price range had a downward price movement. Contacts report consistent domestic demand.

ORGANIC DAIRY MARKET NEWS: The USDA AMS National Organic Program (NOP)’s Organic Insider release on Monday, this week included a reminder for producers beginning to or in the process of transitioning to organic certification to apply for the Organic Transition Initiative (OTI) at a local NRCS service center as soon as possible. The number of ads for organic dairy products decreased during the last two retail surveys. Milk was the most advertised organic dairy product this week, followed by cheese, yogurt, cottage cheese, and sour cream. The Foreign Agricultural Service (FAS)’s December 2023 monthly export data showed an increase in export volumes for organic milk during the month, compared to both a month and a year earlier. Export volumes of organic milk were up year to date in 2023 from 2022.

NATIONAL RETAIL REPORT: The number of conventional retail ads increased by 2 percent during this week's survey, while organic ads decreased by 15 percent. The most advertised conventional dairy item found in this week's survey was ice cream in 48-64-ounce containers. Cheese remained the most advertised conventional commodity this week. Conventional yogurt ad numbers fell below those of ice cream this week, causing yogurt to become the third most advertised conventional commodity this week. The number of ads for conventional and organic milk increased this week.