26 November 2021

9 minute read

Supply-chain snarls continue as holiday season unfolds

Two big grocery chains in the southeastern US are limiting the number of Thanksgiving staples customers can buy, the Wall Street Journal reports, in a reminder to consumers that supply-chain snarls are still roiling retailers as the holiday season unfolds. Publix Super Markets limited its customers to no more than two individual items from a menu of Thanksgiving ingredients. Winn-Dixie restricted shoppers to one turkey apiece while encouraging customers to “only purchase what they need.” That’s a contrast with a holiday typically marked by abundance, and it suggests there are still strains in food supply chains farms to processing plants. For supermarkets, the holiday is the first big test of the season of their ability to fill shelves and staff stores.

USDA still projects 2022 food price increases abating from 2021 marks; overall food price inflation, grocery store price increases in 2022 seen back near 20-year average. Inflationary pressures for food are set to post a second straight year of increases in overall food prices, restaurant and grocery prices that are above the 20-year average, according to the latest update from USDA’s Economic Research Service (ERS).

ERS expects overall food price inflation at 3.0% to 4.0% in 2021, with grocery store prices (food at home) up 2.5% to 3.5% and restaurant (food away from home) prices up 4.0% to 5.0%. Restaurant prices are the only overall category to be revised higher this month, previously having been forecast to increase by 3.5% to 4.5%. But the increases for 2021 are coming after similar boosts in 2020 — overall food prices rose 3.4%, restaurant prices rose 3.4% and grocery store prices rose 3.5%. All of those levels are above the 20-year averages of 2.4% for all food prices, 2.8% for restaurant prices and 2.0% for grocery store prices. If the current forecast levels hold, 2021 overall food price inflation and grocery price increases are the highest since 2020 while restaurant prices will have risen the most since 1990 when they rose 4.7%.

USDA increased its forecast levels at the grocery store for several products, including meat, poultry and fish; meats; beef/veal; and pork. Plus, increases for fats and oils and fresh vegetables are also now seen rising even more than the month-ago outlooks. USDA noted that the level of food price inflation “varies depending on whether the food was purchased for consumption away from home or at home.” They detailed that restaurant prices were up 0.8% in October 2021 and 5.3% higher than October 2020. Grocery store prices rose 1.1% from September to October and the October 2021 levels are 5.4% higher than October 2020.

So far this year, grocery store prices are up 2.8% from the same period in 2020, with restaurant prices up 3.9% and overall food prices registering an increase of 3.3%. “All food categories tracked by ERS increased in price from September to October,” the agency said.

Increases in meat prices in 2021 mark two years of sizable increases. The increased outlook for several food categories in 2021 versus the month-ago forecasts mean several categories will have seen back-to-back years that have increased more than the 20-year average. Meat, poultry and fish prices are expected to rise 5.0% to 6.0% after rising 6.3% in 2020. For meats, the forecast increase of 6.0% to 7.0% comes after an increase of 7.4% in 2020, while beef prices are seen rising 7.5% to 8.5% compared with the 9.6% increase for 2020. Pork prices are expected to increase 7.0% to 8.0% in 2021 after rising 6.3% in 2020.

USDA’s monthly cold storage report

October 2021 Highlights: Total natural cheese stocks in refrigerated warehouses on October 31, 2021 were down slightly from the previous month but up 8 percent from October 31, 2020. Butter stocks were down 13 percent from last month and down 6 percent from a year ago.

Total frozen poultry supplies on October 31, 2021 were down 8 percent from the previous month and down 18 percent from a year ago. Total stocks of chicken were up 3 percent from the previous month but down 17 percent from last year. Total pounds of turkey in freezers were down 27 percent from last month and down 19 percent from October 31, 2020.

Total red meat supplies in freezers were up 1 percent from the previous month but down 3 percent from last year. Total pounds of beef in freezers were up 9 percent from the previous month but down 5 percent from last year. Frozen pork supplies were down 6 percent from the previous month and down 2 percent from last year. Stocks of pork bellies were down 10 percent from last month and down 39 percent from last year.

USDA’s Romania African swine fever update

The number of active African Swine Fever (ASF) outbreaks in Romania continues to remain high. At the end of October 2021, there was a 43 percent surge in the number of outbreaks from the same time in 2020. Commercial farms continue to be impacted directly when the virus is confirmed at the farm level, or indirectly by restrictions imposed on animal movement. The draft ASF surveillance and control action plan is still pending the Romanian government’s approval.

USDA’s weekly US milk report

CME GROUP CASH MARKETS (11/19)

• BUTTER: Grade AA closed at $2.0475. The weekly average for Grade AA is $1.9890 (+0.0265).
• CHEESE: Barrels closed at $1.5200 and 40# blocks at $1.8575. The weekly average for barrels is $1.4795 (-0.0515) and blocks, $1.7235 (-0.0220).
• NONFAT DRY MILK: Grade A closed at $1.5550. The weekly average for Grade A is $1.5410 (-0.0210).
• DRY WHEY: Extra grade dry whey closed at $0.7000. The weekly average for dry whey is $0.6920 (+0.0300).

CHEESE HIGHLIGHTS: Cheese demand has slid a little the week before Thanksgiving, in some cases. Generally, though, it remains somewhat strong nationwide. Retail purchases are busy in the Eastern region. Milk is available, although overages from $.40 to $1 are being reported in the Midwest. Contacts are uncertain as to what will take place next week as plants close down an extra day, or more, for the Thanksgiving holiday. Speaking of production, staffing shortages continue to be reported regularly from all regions. Market tones are uncertain, and contacts say the questions regarding market tones due to freight cost increases, supply chain snags, and employee tightness are far from being answered.

BUTTER HIGHLIGHTS: Supplies of cream are tight in the East and Central regions, while mixed across the West. Labor shortages as well as a shipping delays are causing some butter production plants in the West to run below capacity. Labor issues are also limiting some plants’ ability to micro-fix. Although, plants in the East are, reportedly, micro-fixing to finalize orders in time for the Thanksgiving holiday. Butter demand is strong, seasonally, across all regions. Spot inventories are tight in the West, while remaining available to meet current demand in the East. Butter market tones are steady to bullish in the Central and West regions. Bulk butter overages range from 3 to 15 cents above market this week.

FLUID MILK: Farm level milk production is steady in the Midwest, steady to increasing in the East, and somewhat mixed throughout the West. In areas where demand is outpacing supply, including Arizona and the Southeast, some dairy processors are bringing in milk from other regions. Boosted by Thanksgiving and other end-of year holidays, Class I demand is growing for retail outlets. Some Midwestern cheesemakers have been able to find spot milk, but they report paying overages. Condensed skim markets have a stable undertone; contracts are steady and manufacturer supplies are reportedly in good balance with buyer demands. Cream is tighter in the East and Midwest, but availability varies throughout the West. Staffing shortages, supply chain challenges, and logistics issues continue to impact cream-based manufacturers and the dairy industry as a whole. F.O.B. cream multiples for all classes are 1.35 – 1.50 in the East, 1.30-1.50 in the Midwest, and 1.21-1.40 in the West.

DRY PRODUCTS: The top of the low/medium heat nonfat dry milk (NDM) price range shifted up in the Central and East, and the top of the mostly range increased as well. In the West, the bottom of the price range increased while the top, and mostly range, held steady. Spot inventories are tighter. Demand is firm in both export and domestic markets. The top of the high heat NDM price range increased in all regions. High heat demand is steady, but availability and production are limited. Dry buttermilk price ranges moved higher in all regions. The Western mostly range shifted up as well. Domestic demand is steady to higher and inventories are snug. The dry whole milk price range is holding steady. Inventories are tight as production is limited. Dry whey prices are steady to higher in all regions. In the Central and West regions, the mostly ranges inched higher. Domestic and export interest are steady to stronger. Production and availability vary. The whey protein concentrate (WPC) 34% price range jumped up, and so did the mostly range. Production is steady. Some manufacturers report receiving regular inquiries as end users look to WPC 34% for a possible substitute as other dairy protein prices increase. The lactose price range is unchanged, but the top of the mostly dropped. Inventories are heavy as logistical issues are slowing the pace at which lactose moves through contracts. Prices are steady for acid casein and rennet casein.

ORGANIC DAIRY MARKET NEWS (DMN): The Agricultural Marketing Service (AMS) reports estimated U.S. sales of total organic milk products for September 2021 were 227 million pounds, down 4.1 percent from September 2020 and down 2.3 percent year-to-date. Organic whole milk sales for 2021, 101 million pounds, were down 2.1 compared to a year earlier and down 1.2 percent year-to-date 2020. Reduced fat milk (2%) sales were 78 million pounds, down 7.8 percent from the previous year and down 2.1 percent year-to-date. Across the country, organic dairy retail advertisements increased 11 percent in surveyed stores. In general, organic milk ads grew 22 percent and organic yogurt ads 113 increased percent. Meanwhile, holiday butter demand led to a 27 percent uptick in 16-ounce organic butter ads, with prices increasing to $5.57, up 8 cents over last week. The difference between the half gallon conventional milk price, $1.79 and the half gallon organic milk price, $4.42, is an organic premium of $2.63. The price spread between organic and conventional milk, half gallon package, increased $0.93 from the previous organic retail survey.

NATIONAL RETAIL REPORT (DMN): The most advertised dairy item this week is conventional butter in a 1-pound package. The national weighted average advertised price for 1-pound conventional butter is $2.90. Conventional Greek yogurt in 4 to 6-ounce containers, the most advertised conventional yogurt item, has a weighted average advertised price of $0.97. The most advertised cheese item this week is conventional 8-ounce shred cheese, featured in 28 percent more ads than last week. The weighted average advertised price for conventional 8-ounce shred cheese is $2.39, 23 cents lower than last week. Conventional half gallon milk ad numbers skyrocketed 618 percent from last week.

OCTOBER US MILK PRODUCTION (NASS): Milk production in the 24 major States during October totaled 17.7 billion pounds, down 0.3 percent from October 2020. September revised production, at 17.3 billion pounds, was up 0.2 percent from September 2020. The September revision represented a decrease of 37 million pounds or 0.2 percent from last month's preliminary production estimate. Production per cow in the 24 major States averaged 1,990 pounds for October, 6 pounds below October 2020. The number of milk cows on farms in the 24 major States was 8.90 million head, 4,000 head more than October 2020, but 15,000 head less than September 2021.

TheCattleSite News Desk

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