24 February 2023

10 minute read

By: Jim Wyckoff

South America

North America

Asia

USDA annual Ag Outlook conference projections on US meat production

Cattle: U.S. beef production is projected at 26.5 billion lbs., down 6% from 2022. Exports are projected at 3.09 billion lbs., down 12.6% from last year. Cash price: $159.00, which would be a record and approximately $15.00 above last year.

Hogs: U.S. pork production is projected at 27.4 billion lbs., up 2% from last year. Exports are expected to inch up 0.2% from last year to 3.65 billion pounds. Cash price: $66.50, down $4.71 from last year.

Broilers: U.S. production is projected to be 46.7 billion lbs. with broiler meat exports seen at 7.32 billion pounds. Wholesale broiler price: $1.27 per lb., down 10% from last year.

Brazil discovers case of BSE

Brazil confirmed a case of bovine spongiform encephalitis (BSE) in a cow in the northern state of Para. Ag ministry officials say it appears to be an “atypical form” of the disease, but samples from the animal were sent to the World Health Organization for further testing. Brazil halted beef export to China, effective immediately. Brazil can ship beef to the U.S. as it is considered a country with negligible risk for BSE. But Brazil is affected with Foot and Mouth Disease (FMD) and the U.S. only allows imports of beef from the state of Santa Catarina, which is recognized as being FMD free. So, this BSE case in Para should not impact Brazilian beef shipments to the United States.

USDA on Mexico livestock and products, semi-annual report

In 2023, Mexico’s beef production is forecast to slightly increase, but faces slower consumption growth on a year-to-year basis as food inflation soars. As herd numbers increase, overall cattle slaughter is expected to rise. Carcass weights are expected to marginally decrease in 2023 and are offset by larger slaughter numbers of slightly younger animals. Mexico’s 2023 pork production is forecast to increase by 4.6 percent due to continued private sector investment. While pork imports are forecast 2.7 percent lower, Mexico is expected to maintain a strong volume of imports to satisfy domestic demand.

Mexico’s chicken meat production is forecast to increase by three percent in 2023. Although chicken meat is one of the most impacted proteins during Mexico’s inflation crisis, consumption per capita continues to increase, albeit at a slower pace on a year-to-year basis. The United States is Mexico’s number one destination for chicken meat exports, which are lowered slightly in 2023, as demand wanes due to Highly Pathogenic Avian Influenza (HPAI) H5N1 recovery in the United States.

US Supreme Court may announce a decision soon on the controversial Proposition 12 case

That case deals with California trying to dictate how hogs are raised, sources inform. The California law being challenged bans the sale of pork within the state unless pregnant pigs are allowed at least 24 square feet of space and the ability to stand up and turn around in their pens. The measure was approved with more 68% of the vote as part of a 2018 ballot initiative known as Proposition 12. The National Pork Producers Council and the American Farm Bureau Federation, which sued in 2019, say the measure violates the so-called dormant commerce clause, a doctrine that says the U.S. Constitution limits the power of states to regulate commerce outside their borders without congressional authorization.

US may be facing a new problem: Canadian “super pigs”

Crossbred and highly intelligent pigs are set to come into the U.S. by way of its northern neighbor. The pigs are “highly elusive,” as they can survive the cold by tunneling beneath the snow. The United States estimates that wild pigs already cause $1.5 billion in damage each year already; consider what more the super pigs can do.

China to maintain hog breeding herd size at reasonable size

China will keep the country’s breeding sow herd at a reasonable level of around 41 million, the country’s ag ministry said.

Price of US eggs exceeds ground beef

Bloomberg notes a global bird flu outbreak that has wiped out about 100 million poultry and high production costs pushed the price of 12 eggs to a record $4.82 in January, up from less than $2 a year earlier. Meanwhile, the price of a pound of ground chuck dropped to $4.64 from a peak of $5.12 last August.

China to buy pork for state reserves

The national average of pork prices against grain prices has fallen below the warning level of 5 to 1. As a result, China plans to buy 20,000 MT of pork for state reserves. This will be the first pork stockpiling this year. China’s state planner also announced it will continue to strengthen hog production capacity and price control and stabilize hog market operations.

Weekly USDA dairy report

CME GROUP CASH MARKETS (2/17) BUTTER: Grade AA closed at $2.3750. The weekly average for Grade AA is $2.4215 (+0.0235). CHEESE: Barrels closed at $1.5475 and 40# blocks at $1.8800. The weekly average for barrels is $1.5525 (-0.0275) and blocks, $1.8805 (+0.0220). NONFAT DRY MILK: Grade A closed at $1.2200. The weekly average for Grade A is $1.2320 (-0.0135). DRY WHEY: Extra grade dry whey closed at $0.4500. The weekly average for dry whey is $0.4390 (+0.0140).

BUTTER HIGHLIGHTS: Cream is available throughout the country, and contacts in the Central region note volumes are actively flowing into butter plants, while cream remains at favorable pricing for churning. Cream demand is steady to light in the West, though butter makers are operating strong production schedules in the region. In the East, some plant managers report churning every day of the week. Some stakeholders in the Central region say they are micro-fixing to meet specific needs, but they are also actively churning available cream supplies. Butter inventories vary throughout the East, with some contacts relaying tightness depending on where they are in the region. Demand for butter is meeting seasonal expectations in the Central region, though contacts note expectations are often low in February when compared to other parts of the year. Butter sales are steady in the East, and contacts are relaying light demand in the West ahead of spring holidays. Bulk butter overages range from 0 to 14 cents above the market, across all regions.

CHEESE HIGHLIGHTS: Milk is plentiful in the Northeast and West, allowing cheesemakers to operate strong production schedules. Some cheesemakers in the Northeast are operating below capacity due to labor shortages and delivery delays. In the Midwest, cheesemakers note milk is available, and some spot loads continue to move at $10 under Class III, though milk offers vary throughout the region with some cheesemakers relaying prices closer to $4 or $5 under Class. In the Midwest and West, demands for cheese are mixed, while contacts in the Northeast relay steady domestic cheese sales. Export sales of cheese are trending higher in the West. In the Northeast, cheese block inventories are lighter, seasonally, than in previous weeks. Cheese is available for spot purchasing in the West, but some stakeholders note barrel inventories are larger than blocks. Some western contacts suggest this is contributing to the greater than 30 cent block barrel spread seen on the CME throughout this week.

FLUID MILK: Milk production is steady to higher for the Northeast and areas of California, where cow comfort has improved following a stretch of unfavorable weather in each region. Parts of California were not affected as much as expected by the heavy rains received to start 2023. And in the Northeast, subzero temperatures ended. The remainder of the U.S. kept steady milk production this week. Industry contacts suggest that although the Central Valley of California and the mountain states of Idaho, Utah, and Colorado are seeing some tightness, strong milk volumes continued to be available. A few contacts speculate that farmers may lower milk output if milk prices fall. Bottling demand is generally steady. However, some eastern schools are closed for the entirety of next week, with some school districts even extending their breaks from President’s Day through March 1st. Contacts suggest that these closures may free up some milk supplies for Class II and Class III manufacturing. Class III demand lightened in Arizona, but demand is generally steady elsewhere. Midwest stakeholders continue to report spot load sales at below Class III price. Condensed skim milk demand and contract sales are steady. However, spot loads activity has lightened in some parts of the country. Regional availability ranges from strong to balanced according to stakeholders. Cream multiplies for all Classes are 1.17 – 1.27 in the East, 1.14 – 1.25 in the Midwest, and 0.85 – 1.21 in the West.

DRY PRODUCTS: Except for the top end of the range in the West, prices moved higher in all regions for low/medium heat nonfat dry milk (NDM). According to some contacts, higher skim milk powder prices and more presence from Mexican importers have spurred an uptick in export market activity. High heat NDM prices contracted in the West. Eastern and Central high heat NDM prices were unchanged. Market tones are steady to quiet, and high heat NDM inventories are tight. Dry buttermilk also saw more price movement in the West compared to the Eastern and Central region. The price range in the West contracted, while prices are steady to higher in the Central and East. Contracted sales of dry buttermilk are moving well. Dry buttermilk production is mixed, and some drying facilities are prioritizing schedules to NDM production. Dry whole milk production is mixed, with Central region dryers reportedly more active. Unchanged prices and quiet spot market activity were the themes. Dry whey prices remained the same or increased across all regions. Domestic demand is steady. Increased interest from international purchasers contributing to price increases is the sentiment from some stakeholders. Some production schedules have shifted towards dry whey with lower demand and prices for higher whey protein concentrates and permeate. Prices for whey protein concentrate 34% are steady to lower. Demand for lactose outside of contracts is light, and lactose prices are mostly steady. Despite lowered casein prices, contacts note more steady/quiet than bearish markets continued.

International Dairy News

EUROPEAN DAIRY MARKET OVERVIEW: WESTERN EUROPEAN OVERVIEW: Seasonally, milk production continues to grow in Western Europe. Preliminary weekly milk output data suggests that 2023 is starting out ahead of the two previous years. That said, Western European milk production in 2021 and 2022 was below expectations. Milk production in 2022, started slow and picked up near the end of the year.

EASTERN EUROPEAN OVERVIEW: Like their western counterparts, countries in Eastern Europe are seeing seasonally increasing milk production in the first months of 2023. Unlike the west countries, Eastern European countries like Poland and the Czech Republic had increases of monthly milk production in every month of 2022.

OCEANIA DAIRY MARKET OVERVIEW: NEW ZEALAND: New Zealand North Island and its grazing land is largely underwater from the recent lashing of Cyclone Gabrielle. The country's largest city, Auckland, is seeing excessive flooding and extensive damage to roads and infrastructure. As such, milk is being discarded due to transportation challenges. Aside from collections, industry sources point to pressure on the supply chain, as closed ports and rail lines lend to a highly strained national network. Otherwise, farmers are working to keep their milking sheds running as they shift stock and rely on generators. On another note, industry contacts report that moisture levels are high across the North Island and the soil moisture suggests that flooding has strained pastures and maize crops. Just prior to the change of events, industry sources were able to report improved pasture growth conditions and bumped up wheat stock levels.

AUSTRALIA: In southeastern Australia, farmer struggles have been ongoing from heavy rains that have waterlogged spring pastures, and flooded stored feed, leading up to recent projections of reduced new-season hay and grain production. This differs with southern and central Western Australia, where a strong supply of hay and silage is expected to be harvested in the region. Overall, summer crop prospects remained good to excellent in eastern Australia. Meanwhile, supply shortfalls in Australia are expected to lead to stronger demand, and consequently, higher prices for stored supplies of old-season hay and downgraded dry feed.

SOUTH AMERICA DAIRY MARKET OVERVIEW: Drought conditions continue to be the number one item mentioned by contacts in the South American region. Crop reports coming from Argentina are putting the drought's effects on clear display. Already limited crop yield expectations are not being met. In Argentina, early planted corn estimates have been clearly affected. If the expected rain does come over the next month or two, late corn yields could be at least somewhat more promising, according to reports. There are some positive notes regarding precipitation this week. Contacts from Brazil said their respective areas were receiving some precipitation. Undoubtedly, rains will have to come regularly to pave the way for improved soil moisture and increased forage/feed quality.

US NATIONAL RETAIL REPORT: Total conventional advertisement numbers decreased 19 percent week to week. Organic ad numbers decreased by nine percent, in total. Ice cream in 48 to 64 ounce containers was the most advertised conventional dairy item during week seven, while Greek yogurt in 32 ounce containers became the most advertised organic dairy item. Advertisement numbers of organic and conventional Greek yogurt, in 32 ounce containers, both increased by over 10 times from week six.