Weekly global protein digest — Animal rights group alarms farmers, lawsuit against JBS, new regulations in China
Analyst Jim Wyckoff shares this week's protein news from around the globe
9 March 2024
14 minute read
By: Animal rights groups have submitted 37,000 signatures to qualify a ballot measure in Sonoma County, California, alarming farmers.
The initiative, led by the Coalition to End Factory Farms, seeks to ban concentrated animal feeding operations. To qualify for the November ballot, they need 19,746 signatures. Supporters estimate that 50 to 60 agricultural operations in Sonoma County would be impacted, facing closure or significant operational changes. The local Farm Bureau warns of severe consequences for Sonoma and potentially other counties if similar efforts are pursued elsewhere.
China issues new regulations to control hog numbers
China issued new regulations to control the nation’s hog production capacity after an aggressive expansion of farms over the past two years led to an oversupply, a move that could reduce the size of the world’s largest pig herd. The retention of breeding sows will be dynamically adjusted according to changes in pork consumption and pig production efficiency, the ag ministry said. Regulatory measures will be triggered when the number of breeding sows rise or fall excessively to ensure a stable supply of pigs.
China last week lowered the national target for normal retention of breeding sows to 39 million from 41 million. Trivium China said, “If the number of breeding sows falls by two million in line with the lower national target, that would reduce China's pig herd size by at least 22 million, which will reshape the demand of feed grains like soybeans, corn and wheat.”
Background: China’s pig herds, which make up about half of the global total, were devastated by an outbreak of African swine fever from 2018 to 2021, leading to widespread culling, higher prices and a push for more production that in subsequent years resulted in volumes recovering to the point of overcapacity. China’s pig population was 434 million in 2023, up significantly from a low of 310 million in 2019.
Of note: Fitch, the rating agency, noted last week that “overcapacity in China’s hog breeding industry is likely to persist into the second quarter”, and that most breeders “are likely to continue facing losses.” It pointed to a “reluctance to downsize” across the market that “may partly stem from a desire to maintain their [breeders’] leading market positions and recoup previous investments.”
USDA Dairy Margin Coverage (DMC) payments for January will be triggered
This is due to the national average margin reaching $8.48 per hundredweight (cwt). Farmers with coverage levels at $8.50, $9, and $9.50 will receive payments, which will be processed after March 4. The payments will amount to 2 cents per cwt for the $8.50 coverage level, 52 cents per cwt for $9 coverage, and $1.02 per cwt for $9.50 coverage. DMC payments will be sequestered by 5.7% — the sequestration reduction is fully automated; therefore, no action is required by County Offices except to verify that it has been properly applied. USDA has opened signup for the 2024 DMC program, which was reauthorized by the extension of the 2018 Farm Bill. Those enrolling will automatically be eligible for the January payments.
China lowers sow retention target
China’s ag ministry adjusted the national target for normal retention of breeding sows to 39 million from 41 million head. It also adjusted the lower limit for normal fluctuations in the stock of breeding sows to 92% from 95% of the normal retention level.
New York Attorney General Letitia James files lawsuit against JBS
The world's largest meatpacking company is accused of making misleading statements about its efforts to reduce greenhouse gas emissions. The lawsuit alleges that JBS engaged in greenwashing by promoting environmentally friendly claims such as achieving net zero emissions by 2040, despite lacking proven agricultural practices to reduce emissions at its vast scale. The lawsuit is a major setback for JBS, which is based in Brazil, as it pursues a listing on the New York Stock Exchange.
In a statement, JBS said it disagreed with the attorney general’s allegations. It said that it would continue to work with farmers and others “to help feed a growing population while using fewer resources and reducing agriculture’s environmental impact.”
USDA reports on European Union poultry industry
Commodity: Chicken, Meat Production European Union (EU) chicken meat production in calendar year (CY) 2024 is forecast to grow by 0.4 percent, following the 1.65 percent increase in CY 2023. Despite continuing outbreaks of Highly Pathogenic Avian Influenza (HPAI) in major EU producing countries and increasing competition from imports, chicken meat production continues to grow driven by strong domestic demand. EU Chicken meat production has benefited from slightly lower energy and feed prices in 2023, particularly in Poland, now the leading EU producer. In several countries like the Netherlands and Belgium, environmental regulations such as the new limits on nitrogen emissions constrain further expansion in production. French chicken meat production also fell in CY 2023, as French costs of production remain relatively high. In the wake of the HPAI outbreaks, EU Member States are continuing to reinforce surveillance and biosecurity measures on poultry farms. Some areas are even instituting temporary bans on free-range poultry farms. Consumption EU domestic consumption of chicken meat is expected to increase by 0.9 percent in CY 2024, buoyed by both retail sales and consumption in the HRI sector.
Over the longer term, chicken meat consumption is expected to grow as consumer preferences continue to favor chicken meat. Chicken meat is generally more affordable than other animal protein. European consumers also generally consider chicken meat to be healthier, more versatile, and easier to prepare. Trade EU chicken meat imports increased by 2 percent in CY 2023 and are expected to further increase by 3.5 percent in CY 2024. The European HRI sector accounts for the largest share of imported chicken. Imports from Brazil stagnated in CY 2023, while imports from United Kingdom fell by 20 percent as the EU imposed strict sanitary controls following Brexit. Imports from Thailand also faced increased competition from Ukraine. EU imports of Ukrainian chicken meat grew by more than 50 percent in CY 2023. Clearly, this trade continues to benefit from EU regulation 2023/1077 which renewed temporary trade concessions under the Deep and Comprehensive Free Trade Agreement (DCTA) of 2011. Under this EU Regulation, Ukrainian chicken meat is eligible to enter the European market without tariffs or quotas.
This measure is temporary and, unless it is extended, it will expire on June 5, 2024. Some EU countries such as Poland have already asked the EU to impose limits chicken meat imports from Ukraine. In CY 2023, EU chicken meat exports decreased by 1.8 percent driven by an 18 percent drop in EU chicken meat exports to the Democratic Republic of Congo and an 11 percent drop in exports to Saudi Arabia, two major markets for EU chicken. Other markets which saw a decline in EU exports included Ukraine, Cuba, Liberia, and Malaysia. Even though EU export prices to Saudi Arabia decreased by 7 percent in CY 2023, prices are still 16 percent higher than in CY 2021. By comparison, in CY 2023, the Saudi import price for Brazilian chicken meat fell by 23 percent. Overall, with rising production costs across the EU, EU chicken meat exports are now generally less competitive, especially in African markets.
The UK remains the largest market for EU chicken meat (up 1 percent), driven by strong exports from Poland and Germany that effectively compete with Thai, Brazilian, Chinese, and Ukrainian chicken meat. South Africa, which used to be a major customer of EU chicken (up to 122,000 MT in CY 2019), imported less than 2,300 MT in CY 2022. In CY 2023, South Africa imports of EU chicken meat rose to 12,500 MT as HPAI restrictions eased trade with the Netherlands, Spain, and Ireland. EU chicken meat exports to Ukraine in CY 2023 decreased by 14 percent. As Russia’s ongoing war of aggression against Ukraine continues to disrupt trade flows, the purchasing power of Ukrainian consumers is very limited. Mechanically separated meat (MSM), which used to be exported from Poland to Ukraine, is now produced and consumed locally. High value cuts produced in Ukraine are increasingly exported to the EU to generate revenue.
HPAI outbreaks will likely continue to impact EU chicken meat exports. While EU chicken meat production costs have stabilized due to lower energy and feed prices, competition from less expensive Ukrainian chicken meat will continue to constrain opportunities for export. Thus, EU chicken meat exports are expected to remain flat at CY 2023 levels. Policy COVID-19 Update Highly Pathogenic Avian Influenza (HPAI) Situation Update HPAI outbreaks have plagued the EU poultry sector since autumn of 2021. The European Commission has reported a long list of outbreaks, but entering into 2024, there is a lower frequency of reported cases In 2023, France received EU approval to implement a vaccination scheme for its domestic duck flocks
China’s meat imports decline to start 2024
China imported 1.101 MMT of meat during the first two months of 2024, down 197,000 MT (15.2%) from the same period last year. China does not break down meat imports by category in the preliminary data, though pork accounts for the bulk of incoming shipments.
Weekly USDA dairy report
CME GROUP CASH MARKETS (3/1) BUTTER: Grade AA closed at $2.7575. The weekly average for Grade AA is $2.8015 (-0.0016). CHEESE: Barrels closed at $1.6500 and 40# blocks at $1.5500. The weekly average for barrels is $1.6620 (+0.0520) and blocks, $1.5940 (+0.0721). NONFAT DRY MILK: Grade A closed at $1.1975. The weekly average for Grade A is $1.1910 (-0.0053). DRY WHEY: Extra grade dry whey closed at $0.4250. The weekly average for dry whey is $0.4485 (-0.0659).
BUTTER HIGHLIGHTS: Retail demand is generally steady across the country. Food service demand varies. It is noted as quiet in the East and strong to steady in the West. Some stakeholders note orders for spring holiday demands are starting. Cream continues to be readily available throughout the nation. Butter makers are running strong production schedules. Butter manufacturers are busy building stock for later quarter demands and planned summer downtime. Some manufacturers say unsalted butter and bulk butter loads are tight for spot buyers. Bulk butter overages range from 3 to 15 cents above market, across all regions.
CHEESE HIGHLIGHTS: Farm level milk production is trending slightly higher in the Northeast. Cheese plant contacts share steady barrel production schedules despite quiet demand. Inventories remain comfortable. Contacts in the Central region report quiet spot milk offers, but they expect spot availability to increase in the near term as Class I demand wanes due to school breaks and seasonal milk production increases. Current spot milk prices are $0.25- to $2.50- over Class. Cheese demand remains lackluster, but some barrel makers share strong year over year demand. In the West, contacts share steady to stronger production schedules. Class III spot loads of milk are tight in some parts of the region. Several manufacturers note spot cheese availability is tight through the remainder of Q1.
FLUID MILK: Milk production is steady to strong throughout most of the country, though contacts in the Pacific Northwest note weaker output in recent weeks. In the mountain states of Idaho, Utah, and Colorado, milk production is mixed as some contacts note strengthening output, while others say milk volumes are decreasing. Demand for Class I milk is softening in the East, Midwest, and California. Contacts in some regions note spring break closures are contributing to lighter demand and say this will likely cause some of this Class I milk to move into other processing channels. In the Midwest this week, spot Class III milk prices ranged from $0.25- to $2.5-over Class III. Meanwhile, in the mountain states of Idaho, Utah, and Colorado, some contacts reported spot loads of milk trading as high as $4 over Class III. Cream is widely available in the Midwest, and contacts continue to relay multiples moving at flat market prices. In the West, Cream is available in most of the region, and contacts report demand is steady to stronger. Cream multiple ranges for all Classes are: 1.05 – 1.27 in the East, 1.00 – 1.27 in the Midwest, and 0.80 – 1.21 in the West.
DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices moved lower at the top of the range in the Central and East regions, while prices moved lower at the bottom of the range in the West. High heat NDM prices held steady throughout each region. Prices for dry buttermilk were steady in the Central and East this week. In the West, the dry buttermilk price range contracted as the bottom moved higher and the top moved lower. Demand for dry buttermilk is mixed in the West, and spot loads remain available. Dry buttermilk inventories are growing in the Central and East regions, but contacts note demand is strengthening as well. Dry whole milk prices held steady this week, while production has remained light, and demand is quiet. reported lighter demand from purchasers in Asia contributing to increased spot availability. In the East, dry whey prices held steady while stakeholders relayed steady demand and spot availability. Contacts in the West relayed higher dry whey prices across the range this week. The whey protein concentrate 34% (WPC 34%) price range was unchanged this week. Demand for WPC 34% is strong but waning. Inventories remain somewhat tight. Lactose prices moved higher at the bottom of the range, though the top held firm. The bottom of the acid casein price range shifted higher, while the top and both ends of the rennet casein price range were unchanged.
INTERNATIONAL DAIRY MARKET NEWS:
WESTERN EUROPEAN OVERVIEW: Seasonal weekly milk production in Western Europe continues to increase, but it is still below levels of the previous year. Farm milk supplies are snug compared to processing capacities. One large milk cooperative in the EU recently announced a guaranteed farm milk pay price of 46.50 euros per 100 kilograms, up 0.50 euros from last month. The EU ended 2023 with little change in total annual milk production from the previous year. According to CLAL data made available to USDA, Year-to-date EU cows’ milk delivered to dairies through December 2023 is estimated at 144,676,000 MT, unchanged when compared to January-December 2022 EU milk production. Farmer protests have tangled transportation and other activities in various regions of the EU over the last month. While the intensity of the protests has ebbed and flowed in different locations and at different times, the fury of the farmers was again stoked at a large agricultural fair in Paris last weekend. Angry farmers disrupted the fair, calling for government intervention to ease the increased economic and regulatory pressures. The Farm Council of national agricultural ministers from across the EU met on Monday in Brussels. In the meeting, the officials set forth a simplification package, initiatives to try to ease governmental regulation and provide greater support for farmers.
EASTERN EUROPEAN OVERVIEW: Czech and Slovak farmers have initiated protests and border blockages like their counterparts in Poland and Hungary, demanding fewer regulatory hurdles and improved protections from imported agricultural products. While supportive of the European Union and the aid provided to war-torn Ukraine, farmers are voicing their anger over what they see as unfair competition from imported goods that do not have to meet the same regulatory standards, especially Ukrainian goods that are imported without duties. A large dairy industry organization is calling on the Ukrainian parliament to provide additional financial support for the nation’s dairy processors. Many of the country’s dairy processors are running at 50 to 60 percent capacity, increasing their production costs and increasing the prices for consumer goods.
OCEANIA: AUSTRALIA: According to Dairy Australia, January 2024 milk production, 727.6 million liters, was up 5.2 percent from January 2023. Queensland was the only state which saw a decline in milk production in January 2024, compared to 2023 as milk output was down 0.2 percent. Milk production from the start of the season in July 2023 through January 2024, 5,347.3 million liters, increased 2.5 percent compared to the same time frame a year earlier. The cumulative volume of milk produced from July 2023 through January 2024 was up from the prior season in every province.
NEW ZEALAND: Milk production data from New Zealand for January 2024 was recently released. This data showed total January 2024 production was down 0.6 percent on a tonnage basis compared to January 2023. Total milk solids were also down in January 2024, decreasing by 1.2 percent from the previous year. Recently released export data from New Zealand showed an increase in dairy exports by volume of 12.5 percent in January compared to a year earlier. Despite this increase, the value of these exports was down 8.8 percent. Increased export demand was seen for most products, though exported cheese volumes were lower than the year prior.
SOUTH AMERICA: Weather has been relatively beneficial to some key milking regions in South America during the hot summer months. El Nino-wrought weather has provided some much-needed rainfall to some areas, but Argentina's milk output continues to be hampered by dryness and heat. As neutral weather patterns are expected to emerge near-term, Argentinian farmers are hopeful for increased rainfall to provide heartier feedstuffs and increased forage for their herds. That said, per the National Oceanic and Atmospheric Administration (NOAA), the La Nina phenomenon is expected to return after what Argentinian farmers feel was a very brief hiatus, sometime in the Southern Hemisphere's winter months. Brazil's milk output improved in 2023, according to reports. Contacts expect this to continue, if weather cooperates, as the country continues to push more self-reliance when it comes to milk output and processing capacity.
US NATIONAL RETAIL REPORT: Both total conventional dairy ads and total organic dairy ads decreased this week. Cheese was the most advertised dairy commodity. Conventional 6-8 ounce sliced cheese, 6–8-ounce shredded cheese, and 6–8-ounce block cheese had weighted average advertised prices of $2.72, $2.29, and $2.26, respectively. Yogurt was the second most advertised dairy commodity. Conventional yogurt ads increased by 14 percent. One-pound packages of butter had a weighted average advertised price of $4.65 this week, compared to $4.66 one week ago. The weighted average advertised price for half gallon containers of conventional milk was $1.96 and organic milk was $4.31. This represents and organic premium of $2.35.
