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Weekly global protein digest: Tyson says consumers buying chicken over beef, Beyond Meat cuts revenue & workforce

12 August 2022
Jim Wyckoff Commentary -  TheCropSite

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news

US beef exports up, pork down in latest week

USDA Thursday reported US beef net sales of 14,600 MT for 2022 were up 22 percent from the previous week, but down 17 percent from the prior 4-week average. Increases primarily for Japan (3,900 MT, including decreases of 400 MT), South Korea (3,100 MT, including decreases of 400 MT), Taiwan (2,000 MT, including decreases of 100 MT), China (1,800 MT, including decreases of 100 MT), and Mexico (1,500 MT), were offset by reductions for Switzerland (400 MT), Indonesia (100 MT), and Bahrain (100 MT). Total net sales of 200 MT for 2023 were for Japan. Exports of 20,800 MT were up 13 percent from the previous week and 11 percent from the prior 4-week average. The destinations were primarily to Japan (6,100 MT), South Korea (5,100 MT), China (4,400 MT), Mexico (1,300 MT), and Taiwan (1,200 MT).

US pork net sales of 21,500 MT for 2022 were down 31 percent from the previous week and 6 percent from the prior 4-week average. Increases primarily for Mexico (10,200 MT, including decreases of 500 MT), Japan (3,800 MT, including decreases of 300 MT), China (3,500 MT, including decreases of 200 MT), the Dominican Republic (1,400 MT), and Colombia (800 MT), were offset by reductions for South Korea (100 MT). Exports of 27,200 MT were up 4 percent from the previous week and 6 percent from the prior 4-week average. The destinations were primarily to Mexico (11,900 MT), China (4,800 MT), Japan (4,800 MT), Canada (1,700 MT), and South Korea (1,600 MT).

US egg prices in U.S. surge 47% as food inflation soars

Egg prices at US grocery stores soared 47% in July over last year, according to retail analytics firm Information Resources Inc. Prices have been driven by bird flu outbreaks, killing more than 30 million commercial and wild birds. The crisis hurt egg-laying hens and turkeys the most. Although the outbreak has eased, growers are still repopulating their flocks, which is expected to bring prices down eventually.

Chinese pork prices surge

China’s pork prices in July surged 25.6% from the previous month, with the strong gains attributed to production capacity cuts, farmers holding back pigs from market and a recovery in consumer demand. On an annual basis, Chinese pork prices jumped 20.2% last month.

Consumers choosing to buy chicken and cheaper cuts of beef

Tyson Foods says increased chicken demand is a sign shoppers are becoming more cost-conscious as food prices rise. Rather than buying more expensive steaks and loins, consumers are spending more on less expensive chicken and other meats, company officials said. Consumers are becoming more frugal as prices for essentials such as food and gasoline have become more expensive in recent months. Companies are paying close attention to shifts in demand as some retailers and consumer companies have issued profit warnings or projected falling sales in recent weeks as customers start to pull back on spending on certain items.

Meantime, expect price hikes on chicken as a newly created company is poised to control 15% of the market, bumping the market share of the industry’s top four competitors over 60%. The company stems from grain trader Cargill and Wayne Farms owner Continental Grain’s joint $4.5 billion acquisition of publicly traded Sanderson Farms.

Chinese meat imports inch up but still down from year-ago

China imported 643,000 MT of meat during July, up 40,000 MT (6.7%) from June but 207,000 MT (24.7%) below year-ago. China doesn’t break down the categories of meat imports in its preliminary data, but the sharp year-over-year reduction was due to slower pork demand. Through the first seven months of this year, China imported 4.1 MMT of meat, down 30.9% from the same period last year.

Food prices start to decline

The U.N. Food and Agriculture Organization (FAO) reported that its Food Price Index fell to 140.9 in July, down 8.6% from June and the fourth monthly fall since it reached a record in March. The monthly decline was the steepest since October 2008 and was led by a 19.2% drop in the Vegetable Oil Price Index to a 10-month low on falling prices for palm oil, rapeseed oil and soyoil. Cereal grain prices were down 11.5% for the month, led by a 14.5% decline in wheat prices. Sugar prices were down 3.8% in July compared with June and dairy prices fell 2.5%. Meat prices declined, but only by 0.5% in July vs June on weaker demand for beef and pork. But poultry prices hit an all-time high.

Beyond Meat cuts revenue outlook, trimming workforce

Beyond Meat has lowered its revenue forecast for the year and announced it will trim its workforce by 4%, citing broader economic uncertainty and consumers trading down to cheaper proteins. The company also reported a wider-than-expected loss and weak sales for the second quarter. Net sales dropped 1.6% to $147 million. The company attributed the decline to changes in foreign exchange rates, increased discounts and sales to liquidation channels. “We recognize progress is taking longer than we expected,” CEO Ethan Brown said in a statement, referring to the company’s push into mass market consumption with plant-based products that tries to mimic meat. With consumers pressured by inflation, Brown said Beyond customers are switching to cheaper private label meat alternatives or back to traditional meat.

US food prices rose 1.1% in July and are up 10.9% over last year

Groceries that families take home rose even faster at 1.3% for the month, or 13.1% over the past 12 months. Some are already saying food prices will ebb in coming weeks following the recent decline in commodity prices, but history shows it may take a while since inflation expectations are now built into the supply chain.

Weekly USDA dairy report

CME GROUP CASH MARKETS (8/5) BUTTER: Grade AA closed at $3.0100. The weekly average for Grade AA is $3.0280 (+0.0630). CHEESE: Barrels closed at $1.7925 and 40# blocks at $1.7850. The weekly average for barrels is $1.8190 (-0.1045) and blocks, $1.8270 (-0.0970). NONFAT DRY MILK: Grade A closed at $1.5025. The weekly average for Grade A is $1.5845 (-0.0775). DRY WHEY: Extra grade dry whey closed at $0.4350. The weekly average for dry whey is $0.4320 (-0.0195).

CHEESE HIGHLIGHTS: Milk is available for cheesemakers throughout the country, despite declining output. Some cheesemakers in the Northeast and West say they are running active schedules, though labor shortages are causing them to run below capacity. In the Midwest, production schedules are somewhat limited as some plants have downtime due to maintenance. Demand for cheese in retail and food service markets is, reportedly, softening in both the Northeast and West regions. Meanwhile, prices below $2 in the Midwest have contributed to an uptick in demand. Midwest cheese barrel inventories are mostly balanced, but curds are less available as demand is outpacing production. Cheese inventories are available in the Northeast and West.

BUTTER HIGHLIGHTS: In the Northeast, cream inventories are tight and Class IV multiples are rising. Contacts in the Central region relay that cream is available in the region and they are also able to purchase from sellers in the West. Volumes of cream are available in some parts of the West, though overall supplies are tightening in the region. Some Northeastern butter makers are finding it more profitable to sell cream, while others are actively churning. Maintenance, labor shortages, and high temperatures are affecting some western butter makers’ abilities to run full schedules. Contacts in the West report strong demand for bulk butter, but weakening food service and retail demand. Meanwhile in the Northeast, butter purchasing is in a summertime lull. In the Central region, butter sales are trending higher as some customers are preparing for increased fall demand. By midweek, market prices for butter extended to their highest price, on the CME, since September of 2015. Contacts in the Northeast and West are concerned that current butter inventories are tighter than in previous years. Central region contacts say they expect some firmness in butter markets, at least for the near- to mid-term.

FLUID MILK: Milk flows are seasonally trending lower across most regions of the United States. Aside from a few pockets in the country, combinations of high temperatures, high humidity, and drought are pressing milk volumes lower. While milk production is traversing the seasonal summer slowdown, Class I sales are picking up. The re-start of school terms has prompted school districts to begin placing orders with bottlers. The upswing of milk bottling has caused some milk loads to bypass manufacturing operations. Milk volumes are in good balance with processing needs with some spot loads available. Milk that is not needed in the region can find a home elsewhere in the region or in neighboring states. Condensed skim supplies are tightening but are still able to cover contracted needs. Demand for cream has picked up while supplies have tightened. Cream multiples are as high as 1.55 in the Midwest and East. Cream multiples for all Classes are 1.40 – 1.55 in the East, 1.25 – 1.55 in the Midwest, and 1.10 – 1.41 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk prices are mostly lower, and high heat nonfat dry milk prices are lower. The market tone for NDM is bearish, and demand has become slower. Prices for dry buttermilk are unchanged in the West, but the price range expanded in the Central and East. Demand is light, but some contacts expect an upturn as the fall baking season draws nearer. Dry whole milk prices are unchanged on limited trading. The price ranges for Northeastern and Western dry whey expanded, as the Central whey prices are steady to lower. Animal feed whey prices are also steady to lower. There is a generally bearish sentiment within whey markets. Prices for whey protein concentrate 34% are unchanged. Availability and buyer interest varies widely by WPC 34% brand and application use. Lactose, rennet casein and acid casein prices are all unchanged. Loads are moving through contracts uneventfully.

International dairy market news

WESTERN EUROPE: Western European milk production is still in its seasonal decline. Industry sources say that after a very hot start to the summer, temperatures in Germany have moderated a bit, and, in the end of July, weekly milk output has stabilized. However, with each passing heat wave milk intakes get pushed lower. German and French milk production is trending lower, and with each week, the gap between current year to date milk volumes and year to date milk volumes of last year widens.

EASTERN EUROPE: Eastern European milk production is seasonally declining, but large portions of Eastern Europe also have severe drought conditions, suppressing crop development and livestock production. Agricultural areas in Poland, Slovakia, Hungary, Romania and Ukraine have water deficits, and in some places, streams have run dry. Shortages of water and feed are creating financial stress for the region's dairy farmers.

OCEANIA: AUSTRALIA: The global market is currently having an impact on the Australian wheat price. Local wheat prices are reportedly up, on average. This, with other factors, such as elevated grain and fertilizer prices, along with natural gas prices, have created an upward shift in the Australian farmgate milk price. Nonetheless, labor shortages continue to be a problem as farmers compete for workers. The result of the shortages has been elevated industry exoduses by dairy farmers and reductions in herd sizes. According to one source, more than 1,500 dairy farms have exited the industry since 2016, diminishing Australian milk production from 9.5 billion liters in 2015-2016 to 8.8 billion liters in 2020-2021. Meanwhile, the risk to margins is ongoing and are projected to offset the strong milk prices and projected promising seasonal conditions. Sources anticipate a flat milk pool for the new season as major retailers now propose to increase the retail store milk price.

NEW ZEALAND: A collaboration between global dairy trading establishments is scheduled to introduce a new auction program on August 9, 2022. As a result, an auction platform has cutback 28,000 tons of whole milk powder, designated to be offered over a 12-month period in the new year, to auction through the new program. While it is early in the season, a point to be taken is the impact of weather conditions in the region. Central to the idea, soil moisture level is currently being supported by a stream of warm temperatures, following heavy rainfall in much of the country, as market sources expect milk solids for the season to rise 4 percent over last season. New Zealand's latest milk solids numbers rose above the previously projected output level. The June forecast ended the month up 1.1 percent year-over-year, although initially projecting a 0.4 percent decline year-over-year. Recently released export data show a drop in New Zealand WMP exports, 33 percent year over year. Exports to China were down 64 percent. Meanwhile, exports to North Africa and Sub-Saharan Africa increased 163 and 18 percent, as China drive these changes.

SOUTH AMERICA: As has been the case, milk production is variant from one region to the next on the continent. That said, more countries are reporting lower yields year over year, and reports suggest downswings are expected for the rest of the year regardless of current year-to-date figures. Feed and fertilizer costs have grown, as they have globally. Additionally, South American milk production is heavily impacted based simply on the smaller average herd sizes in the region. Milk prices are moving in a different direction than output. Increasing milk checks are not enough to offset production limits imposed by higher farm operating costs, particularly in Brazil and Uruguay.

NATIONAL RETAIL REPORT: US temperatures are up, but dairy advertisement totals are down. Conventional ad totals slipped 60 percent, while organic ads dropped 66 percent. The most advertised dairy item, conventional ice cream in 48 to 64 ounce containers, had a weighted average advertised price of $3.27, down $.11 from last week. Conventional one pound butter ads decreased 79 percent. The weighted average advertised price of one pound butter was $4.68, down 19 cents week to week.

TheCattleSite News Desk

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