18 August 2023

15 minute read

By: Jim Wyckoff

South America

Asia

Weekly USDA export sales for US pork, beef

Beef: US net sales of 15,100 MT for 2023 were up 2 percent from the previous week, but down 13 percent from the prior 4-week average. Increases were primarily for South Korea (4,600 MT, including decreases of 400 MT), China (3,200 MT, including decreases of 100 MT), Japan (2,700 MT, including decreases of 300 MT), Mexico (1,600 MT, including decreases of 100 MT), and Taiwan (700 MT, including decreases of 100 MT). Total net sales of 100 MT for 2024 were reported for Japan. Exports of 15,800 MT were down 2 percent from the previous week and 4 percent from the prior 4-week average. The destinations were primarily to South Korea (4,200 MT), Japan (3,500 MT), China (2,800 MT), Mexico (1,600 MT), and Taiwan (1,100 MT).

Pork: US net sales of 28,700 MT for 2023 were up 29 percent from the previous week and 36 percent from the prior 4-week average. Increases were primarily for Mexico (9,400 MT, including decreases of 300 MT), Japan (4,900 MT, including decreases of 200 MT), China (3,500 MT, including decreases of 100 MT), Canada (3,100 MT, including decreases of 400 MT), and South Korea (3,000 MT, including decreases of 1,000 MT). Total net sales of 2,800 MT for 2024 were for South Korea. Exports of 28,600 MT were up 7 percent from the previous week and 11 percent from the prior 4-week average. The destinations were primarily to Mexico (13,100 MT), China (3,600 MT), Japan (3,300 MT), South Korea (2,400 MT), and Canada (1,700 MT).

Tyson plans to sell China poultry unit

Tyson Foods plans to sell its China poultry business, Reuters reported, citing people with knowledge of the situation. The company has reportedly hired Goldman Sachs to advise on the sale and sent preliminary information to potential buyers, including a number of private equity firms. The sources did not say why Tyson was planning to sell the business.

US wholesale beef prices continue to rise

Wholesale beef prices posted strong gains for a third consecutive day, rising $1.73 for Choice and $1.74 for Select on Wednesday. Beef packer margins are improving amid the rising wholesale prices but remain in the red. Cash sources signal packers will be reluctant to actively raise cash bids until their margins turn positive.

Higher Chinese hog prices expected in H2

Chinese pork processing giant WH Group Ltd expects hog prices in China to rise 10% to 20% in the second half of 2023 from the first six months, supported by stronger demand and smaller supply glut. The head of WH Group forecast the median hog price to reach about 16 yuan ($2.20) per kilogram (kg) in the second half of this year, up from an average of 15.12 yuan in the first half, but the average 2023 price would still be significantly lower than 2022. WH Group executives also said the recent heavy rains and flooding in northern China did not affect its production.

Plant-based meat alternatives struggle to maintain early momentum

Despite initial strong interest, the market for plant-based meat alternatives in the U.S. is facing challenges in maintaining momentum, according to a new report from CoBank’s Knowledge Exchange. Higher prices compared to traditional meat products have led to a decline in repeat purchases by consumers. The price differential, along with lingering negative perceptions about taste, value, and versatility, remain obstacles for the plant-based meat category, the report notes.

Plant-based meat sales surged in 2020 due to consumer curiosity and increased discretionary income during pandemic-induced food shortages. However, less than half of those who initially tried plant-based products continued purchasing them, according to consumer research firm Mintel.

Sales of meat alternatives have steadily decreased since 2021, with a sharp decline in the past year. Volume sales dropped by 20.9% for the 52-week period ending in July 2023, based on data from Circana, a consumer behavior research firm.

For the plant-based meat category to regain traction, the report says, diversification of formats is crucial. While frozen and refrigerated options still dominate, shelf-stable varieties have seen growth, increasing by 82% in 2022. These products, such as plant-based versions of tuna, ham, and chicken, offer convenience and appeal to a broader audience.

High prices have limited the penetration of plant-based products to higher-income households, typically around 10% of households. To achieve wider adoption, according to the report, the category needs innovation in terms of product diversity and scalability. Health and environmental concerns have driven interest, especially among younger consumers. However, addressing price, convenience, and familiarity will be pivotal for the success of plant-based alternatives.

GOP senators introduce bill to prevent EPA's animal agriculture emissions reporting

Sens. Roger Marshall (R-Kan.) and Deb Fischer (R-Neb.) proposed legislation aimed at preventing the Environmental Protection Agency (EPA) from requiring livestock and poultry producers to report air emissions arising from animal waste. The bill outlines that emissions from animal waste would be exempt from the Emergency Planning and Community Right-to-Know Act (EPCRA). While an exemption from the EPCRA was previously established through regulations, the ag sector has sought to enshrine this exemption into law. Sen. Marshall stated that this legislation clarifies that low-level livestock emissions, which constitute less than 4% of total U.S. greenhouse gas emissions, are not information essential or valuable to first responders. The bill is supported by 15 other Republican senators and enjoys backing from numerous agricultural and livestock organizations.

USDA Monthly WASDE report for August

LIVESTOCK, POULTRY, AND DAIRY: The forecast for 2023 US red meat and poultry production is reduced from last month on lowered beef, pork, and broiler forecasts. Beef production is lowered on lower steer and heifer slaughter and lighter dressed weights although cow slaughter is increased. Pork production reflects lighter dressed weights although slaughter is raised slightly. Broiler production is reduced on lower expected eggs set and continued relatively low hatchability.

Turkey production is raised on slaughter data and hatchery data. Egg production is lower as hatchery data has indicated lower-than-previously-expected flock productivity and slower additions of pullets to the laying flock. For 2024, the red meat and poultry production forecast is raised on higher beef and turkey production which more than offsets lower broiler production. Beef production is raised, reflecting higher expected placements in late 2023 and early 2024. These cattle are expected to be slaughtered during 2024. Cow slaughter is also raised for the first part of 2024. Turkey production is raised slightly for early 2024.

US pork production is unchanged from last month. Growth in broiler production is slowed with lower prices expected to reduce producer margins. The slower pace of egg production growth in 2023 is expected to carry into early 2024. Beef imports for 2023 are adjusted to reflect recent trade data but no change is made to the forecasts for second-half 2023 or 2024. The beef export forecast is unchanged for 2023. Exports are raised for 2024 from last month on higher expected supplies of beef. Pork imports and exports are adjusted to reflect June data, but no change is made to the forecasts for the remainder of 2023 or 2024. Broiler exports are reduced for 2023 and 2024 on lower expected production. Turkey exports are raised on lower expected prices.

Cattle price forecasts for 2023 and 2024 are raised on continued firm packer demand. The 2023 hog price forecast is raised on current price strength, but no changes are made to 2024. The broiler price forecasts for 2023 and 2024 are lowered. Turkey price forecasts for 2023 and 2024 are lowered on current prices and expectations of continued weak demand. Egg price forecasts are unchanged. The milk production forecasts for 2023 and 2024 are lowered from last month.

The cow inventory is lowered for both years based on the July 1 dairy cow inventory and heifer retention data provided in the recent Cattle report, as well as the average cow inventory data in the latest Milk Production report. Output per cow is reduced for 2023 but unchanged for 2024. Fat and skim-solids bases imports for 2023 are lowered from last month on weaker expected imports of cheese and butter. For exports, the 2023 fat basis export forecast is lowered due to lower exports of cheese, butter and butterfat products, and whole milk powder. The skim-solids export forecast is lower due primarily to weaker sales of whey products.

Exports for 2024 are also reduced on both a fat basis and a skim-solids basis reflecting lower expected sales of butter, cheese, whey, and lactose. Imports for 2024 are reduced slightly on both fat and skim-solids bases, with weaker expected imports of cheese, butter, and casein. WASDE-639-5 Forecasts for 2023 butter and cheese prices are raised from the previous month based on recent price strength. Whey price forecasts are lowered for 2023, as global demand remains weak.

The forecast for nonfat dry milk (NDM) is raised slightly for 2023. The Class III price is raised as the higher cheese price more than offsets lower whey. The 2023 Class IV price forecast is raised due to higher butter and NDM prices. The all milk price for 2023 is raised to $19.95 per cwt. For 2024, butter and cheese price forecasts are raised with the strength in prices carrying over from the previous year. Whey prices are lowered, while the NDM forecast is unchanged. The Class III price is raised as stronger cheese prices more than offset lower whey prices. The Class IV price is raised based on higher butter prices. The all milk price is raised to $19.35 per cwt.

Japan lifts ban on Brazil’s Espirito Santo chicken products

The Japanese government lifted restrictions on chicken products from the Brazilian state of Espirito Santo, which it imposed after bird flu cases in local backyard flocks in late June, Brazilian agriculture ministry said. Japan was Brazil’s second largest destination for chicken exports in the first half of this year.

Grocery prices in the US ticked up slightly last month, driven largely by the rising cost of beef

Restaurants are also raising prices, new data shows, as their own expenses have gone up and as diners seem to be accepting more expensive menu items.

In July, the cost of various cuts of uncooked beef saw significant increases. Adjusted for seasonal variations, uncooked beef roasts surged by 6.5%, uncooked beef steak prices rose by 2.3%, and uncooked ground beef experienced a 1.5% price increase. When taken as a whole, the cost of beef and veal rose by 2.4% in the same month.

These price hikes have occurred against a backdrop of decreasing beef supplies in the country. Years of extreme drought conditions prompted farmers to rapidly sell off cattle due to high feed costs and the inability to sustain herds. This trend, particularly the sale of breeding cows, led to supply constraints in the present year.

USDA Sec. Vilsack presses Brazil on BSE, animal disease testing issues

USDA Secretary Tom Vilsack has sent a letter to Brazilian Minister of Agriculture Carlos Fávaro regarding concerns about Brazil's animal disease testing procedures. While Brazil reported an atypical case of BSE (bovine spongiform encephalopathy, also known as mad cow disease) with confirmatory test results within 24 hours as per World Organization for Animal Health (WOAH) standards, Vilsack highlighted that the time between initial detection, sampling, and completed test results lags behind other major beef exporting countries. He praised efforts to reduce the time between sampling and reporting to the WOAH, but stressed that delays in reporting could hinder effective disease control measures. Vilsack suggested a phone discussion to address the issue and offered U.S. diagnostic laboratories for confirmatory testing, along with technical discussions on surveillance and testing procedures. Brazil had previously faced criticism for delays in confirming an atypical BSE case to the WOAH.

The US Cattlemen’s Association criticized the letter, due to their opposition to Brazilian beef imports. “[T]he letter addresses only one of the concerns that the U.S. cattle and beef industry brought forward,” USCA president Justin Tupper said in a statement. “USCA remains adamant that the U.S. should immediately halt any further Brazilian beef imports until the country completely removes from its supply chain the practice of forced labor, ends the illegal deforestation of the Amazon rainforest for livestock production, and eliminates the threat of foot-and-mouth disease."

Analysts warn of heightened volatility in global food prices

That’s due to a convergence of unprecedented threats, the New York Times reports. A combination of factors, including extreme weather, Russia's interference with grain supplies in Ukraine, and protectionist trade policies, has made food supplies more vulnerable to disruptions. This emerging trend of volatility is being dubbed the "new normal," characterized by uncertainty in commodity and food prices. Russia's withdrawal from a grain deal with Ukraine and droughts in Asian food-exporting nations have impacted harvests and led to supply shortages. Governments banning critical food exports have further disrupted markets, contributing to rising prices. Labor costs and increased food producer pricing strategies have also driven up consumer food prices. The impact has been felt most acutely by small farmers and low-income individuals, exacerbating global hunger and food insecurity. The cumulative effect of recent shocks has left nations ill-equipped to manage potential future crises.

Weekly USDA dairy report

CME GROUP CASH MARKETS (8/11) BUTTER: Grade AA closed at $2.6900. The weekly average for Grade AA is $2.6690 (+0.0260). CHEESE: Barrels closed at $1.8250 and 40# blocks at $1.9900. The weekly average for barrels is $1.8055 (-0.0365) and blocks, $1.9705 (+0.0095). NONFAT DRY MILK: Grade A closed at $1.1100. The weekly average for Grade A is $1.1200 (-0.0115). DRY WHEY: Extra grade dry whey closed at $0.2700. The weekly average for dry whey is $0.2730 (+0.0120).

BUTTER HIGHLIGHTS: Cream availability remains tight across the country. In the Northeast, contacts say that they are relying on contracted loads of cream and micro-fixing bulk butter that was frozen earlier in the season in order to meet demand. In the Central states, many butter processors relay that the cost of spot loads of cream is curtailing spot purchasing and that they, too, are relying on contracted loads of cream and micro-fixing. In the West, cream is tight albeit generally more available in the Pacific Northwest than in the southern parts of the region. Contacts state that salted butter is more of a manufacturing focus at the moment, which has caused some unsalted butter inventories to wane. Retail and food service demands are unchanged. Bulk butter overages range from 2.0 to 10.75 cents over market value.

CHEESE HIGHLIGHTS: Class III spot milk prices in the Midwest were reported from Class up to $2 over Class during week 32. This marks the first week of the year in which no prices below Class were reported. Seasonal milk tightness is being reported across the regions, but Western cheesemakers relay they are still taking in enough spot milk to keep somewhat steady production schedules. Cheese demand varies. Some cheesemakers say the recent bullish run on the CME cash markets has slowed buying. Demand is noted as steady rather than slow, nonetheless. Barrel cheese loads are more accessible than their block counterparts, which has manifested in a roughly $.1650 margin on the CME spot call. Still, in general, market tones are viewed bullish to steady for the near-term.

FLUID MILK: Milk production is generally trending seasonally lower throughout the country. In the Northeast, persistent heat and humidity continue to affect both farm level milk outputs as well as milk components. Condensed skim is said to be more available than cream, and contacts suggest that local processing needs will shift in the near term as the academic year begins. Spot milk offers in the Midwest have slowed, as high temperatures in the southern states as well as an influx of Class I bottling orders, have prompted milk volumes to be transported around the region. For the first time this year there were no reported spot milk offers below Class, a stark difference from this week last year when spot prices were $3 under Class to $0.25 over Class. Cream remains tight. In the West, milk production is trending lower in all areas except for the Pacific Northwest, where cool nighttime temperatures have improved cow comfort. In Oregon and Washington, contacts say that milk production is flat as opposed to trending lower and that cream is more available than in other parts of the region. Cream multiples edged higher in all regions. Cream multiples are 1.42 – 1.50 in the East, 1.38 – 1.48 in the Midwest, and 1.15 – 1.33 in the West.

DRY PRODUCTS: Prices for low/medium heat nonfat dry milk (NDM) moved higher at the bottom of the range and mostly series for the Central and East regions. In the West, low/medium heat NDM prices moved higher in all facts. Domestic demand is moderate. Dry buttermilk prices moved higher at the bottom of the range for the West and was unchanged in the Central and East. Demand remains quiet though inventories are noted to be comfortable. Dry whole milk prices were unchanged this week due to slow trading activity. Dry whey prices were unchanged in Central and East regions, where demand is noted to be steady to lower. In the West, dry whey prices moved higher and renewed interest from Mexico and South American customers spurred demand. Whey protein concentrate (WPC) prices were unchanged, and various feed customers say that WPC remains their preference at the moment. Lactose market tones remain slightly bullish, though the price range dropped by one cent on the bottom of the range. Acid and rennet casein prices were unchanged this week.

ORGANIC DAIRY MARKET NEWS: The May 2023 European organic milk average pay prices declined in Germany, Bavaria, France, and Austria, compared to April 2023 average pay prices. Each country posted increases compared to April 2022 pay prices. This week, trade activity is good on moderated demand for organic feed corn. Current FOB organic corn spot market prices are down 42 cents from last period. The FOB organic soybean market did not have enough trades to trend, but a few volumes moved at 19.50 to 20.00. Few forward contracts procured on both feed and food grade wheat. There were no comparable trades on organic soybean oil and meal from last period. Trading is inactive on all other organic grains. This week, total organic dairy advertisements decreased 10 percent compared to the previous week's retail survey ad number. Milk advertisements make up the largest percentage of total organic dairy advertisements by commodities at 43 percent. Total organic milk ads decreased 11 percent this week. The half gallon container size is the most advertised organic dairy item, but ad numbers for this item decreased by 26 percent from last week. The weighted average advertised price is $4.53, down from last week's $4.85 weighted average price. Organic half gallons hold an organic premium of $2.44, compared to conventional half gallon milk.

NATIONAL RETAIL REPORT: Total conventional dairy advertisements were unchanged this week, while total organic dairy ads decreased by 10 percent. Ice cream in 48-64 ounce containers was the most advertised dairy product, with a weighted average advertised price of $3.71, down 21 cents from last week. Half gallons of milk were the most advertised organic dairy product, despite appearing in 26 percent fewer retail ads than last week, with a weighted average advertised price of $4.53, down 32 cents from last week. Conventional butter in one[1]pound packages appeared in had a weighted average advertised price of $4.13, down 45 cents from last week.