Weekly global protein digest: Beyond Meat, international dairy report, HPAI in Brazil

Analyst Jim Wyckoff shares an update on global protein news
calendar icon 19 May 2023
clock icon 14 minute read

USDA US beef, pork export sales

Beef: Net US sales of 17,400 MT for 2023 were up 5 percent from the previous week and 7 percent from the prior 4- week average. Increases primarily for Japan (4,600 MT, including decreases of 300 MT), South Korea (3,500 MT, including decreases of 400 MT), China (2,900 MT, including decreases of 100 MT), Mexico (2,500 MT), and Taiwan (1,600 MT, including decreases of 100 MT), were offset by reductions for Indonesia (200 MT) and Chile (100 MT). Exports of 18,300 MT were up 24 percent from the previous week and 11 percent from the prior 4-week average. The destinations were primarily to South Korea (4,600 MT), Japan (3,800 MT), China (3,400 MT), Taiwan (2,000 MT), and Mexico (1,300 MT).

Pork: Net US sales of 31,900 MT for 2023 were up 6 percent from the previous week, but down 25 percent from the prior 4-week average. Increases were primarily for Mexico (15,500 MT, including decreases of 300 MT), China (5,200 MT, including decreases of 200 MT), Japan (2,700 MT, including decreases of 300 MT), Colombia (1,600 MT, including decreases of 100 MT), and Canada (1,000 MT, including decreases of 1,000 MT). Exports of 36,800 MT were unchanged from the previous week and from the prior 4-week average. The destinations were primarily to Mexico (15,400 MT), China (6,600 MT), Japan (4,100 MT), South Korea (3,100 MT), and Canada (2,100 MT).

Brazil confirms first cases of HPAI in wild birds

Brazil, the world’s top chicken exporter, for the first time confirmed highly pathogenic avian influenza (HPAI) cases but only in wild birds, the country’s ag ministry said on Monday. The Brazilian government confirmed the H5N1 subtype of the HPAI virus in two marine birds on the coast of Brazil's southeastern state of Espirito Santo. The ag ministry said because the cases were detected in wild animals, Brazil’s status “HPAI-free” was not affected.

Brazil boosts bird flu defense

Brazil is taking extra precautions to protect its poultry industry from a highly pathogenic avian influenza virus that was detected among wild birds in the country earlier this week. The Brazilian government this year raised investments 19-fold to increase testing capacity at its network of six federal laboratories, and increased the overall budget of its Animal and Plant Health and Inspection Services by some 12% to 209 million reais ($42 million). The ag ministry told Reuters increased testing may be required within a 10-km (6.2-mile) radius of the Espirito Santo outbreaks, including of commercial flocks, and that it will maintain surveillance of potential cases in wild birds nationwide.

NPPC outlines pork industry priorities in House Ag Subcommittee hearing

Scott Hays, President of the National Pork Producers Council (NPPC), told the House Ag Subcommittee on Livestock, Dairy, and Poultry struggles for hog farmers can be attributed to significantly moderated hog prices, record-high production costs that have increased by about 50% since 2020, trade retaliation, supply chain issues, labor shortages, threats from foreign animal diseases, and unfavorable legislation like California Proposition 12. He warned these challenges may lead to industry consolidation as many farmers might be forced to exit the industry.

Key policy priorities outlined by Hays for the 2023 Farm Bill include:

  • Full funding for programs ensuring animal health, given the increasing threat of foreign animal diseases like African swine fever.
  • Extension of Livestock Mandatory Price Reporting for one year while the industry gathers producer input for full reauthorization.
  • Opposition to proposed changes under the Packers and Stockyards Act, with a call for meaningful reforms that provide greater transparency for pork producers.
  • Increased funding for the Market Access Program and Foreign Market Development Program to build commercial export markets for U.S. ag products in the absence of meaningful trade access.
  • Addressing labor shortage by improving the H-2A visa program to grant access to year-round agriculture industries.

US House Agriculture Appropriations Subcommittee proposed to cut fiscal year (FY) 2024 discretionary spending by 2.1% from FY 2023

To reduce the impact of this cut, they plan to reclaim over $8 billion from prior appropriations. The draft bill also includes policy provisions that roll back the Biden administration's climate priorities by defunding climate-related research and withdrawing $2 billion in debt relief for distressed farm and ranch borrowers. It also proposes prohibiting the mail delivery of abortion pills. As expected, the bill would restrict USDA Secretary Tom Vilsack’s use of the Commodity Credit Corp. (CCC) spending authority.

Meat and poultry sector: Two proposed regulations favored by the Biden administration to provide farmers and ranchers with better negotiation power with meat-packers and poultry companies, would be put on hold. The bill would bar using the allotted funds to finalize these rules or advance similar new proposals.

California to work with pork industry on Prop 12 implementation

The California Department of Food and Agriculture (CDFA) pledged to work with the pork industry to implement Proposition 12, the initiative passed by the state's voters in 2018 which established minimum confinement standards for the sale of certain pork products within California borders. The U.S. Supreme Court last week upheld the law.

In a blog post, CDFA said, “As we approach July 1, when a previous court order suspending Prop 12 enforcement expires, CDFA looks forward to engaging with industry representatives to further discuss what is needed to achieve a smooth transition to compliance.” 

Steve Lyle, the CDFA director of public affairs, said: “Enforcement with respect to pork products cannot occur prior to July 1 pursuant to a stipulation filed in the Cal Hispanic Chambers of Commerce case.” CDFA in the coming months said it will “continue to focus on engaging with stakeholders to inform and educate. Enforcement actions could be taken by the attorney general’s office or any county or city-level prosecutor in California.”

CDFA’s Animal Care Program will continue to focus on implementation of distributor registration requirements, accreditation of third-party certifiers, and outreach and technical assistance to businesses throughout the supply chain.

A specialist in animal law says the SCOTUS ruling to uphold California law will result in a patchwork of laws that are likely to make national meat producers very uncomfortable.

Processed meats are the latest public-health villain

New York City is eliminating the likes of sliced ham, bacon and sausage from public school and hospital menus by 2025, the WHO is coming up with recommended consumption limits and U.S. agencies have set sodium-reduction goals for them. Behind the decisions, and many doctors’ push to get people to eat less processed meat, is growing research linking it to health problems including heart disease, stroke, Type 2 diabetes, certain cancers and dementia. Via the WSJ.

McDonald’s is liable for a “dangerously hot” chicken nugget that caused a child to suffer second-degree burn

Attorneys representing McDonald’s argued the nuggets — claimed to be over 200 degrees — were hot to avoid salmonella poisoning. A second trial will determine damages in a case that drew comparisons to the $2.7 million hot coffee lawsuit from 20 years ago. Link for more via Forbes.

More U.S. consumers eat three or more snacks a day than two years ago

Last year’s U.S. snack sales rose 11% from the year prior, according to market-research firm Circana. That has translated into big business for snack makers such as Hershey and Mondelez International, which saw sales grow 30% and 22%, respectively, between fiscal 2019 and 2022 — outpacing other major food companies. A host of startups are aiming new products at America’s snacking habit, while established food companies including Campbell Soup and Kellogg are trying to make further inroads into the snack market. Wall Street Journal.

USDA weighing a ban on chocolate milk and other flavored milks in elementary and middle school cafeterias

Concern over the amount of added sugars children consume has sharply divided parents, child-nutrition specialists, school-meal officials and others, the WSJ reports. Supporters of restricting flavored milk say it has added sugars that contribute to childhood obesity and establish preferences for overly sweet drinks. But opponents, including the dairy industry and many school districts, say removing it will lead to children drinking less milk.

USDA extends comment period on proposal to declare salmonella an adulterant in some uncooked chicken products

USDA’s Food Safety and Inspection Service (FSIS) said it will extend the public comment period on its proposed determination to declare Salmonella an adulterant in breaded stuffed raw chicken products when they exceed a very low level of Salmonella contamination. The comment period was originally set to end June 27, but the agency said it will hold the comment period open until July 27 “in response to requests from industry associations for additional time to determine and formulate comments on the impact of the proposal.”

Beyond Meat Inc., the plant-based burger maker amid a turnaround plan, seeks to raise as much as $200 million

The company will issue in an equity offering as it contends with falling sales and shrinking cash reserves. Beyond Meat said that it experienced a smaller-than-expected quarterly loss as supply chain pressures eased and cost controls produced results. The company also said it expected to see stronger revenue growth in the second half of 2023. Sales for the company’s international foodservice segment rose sharply, nearly doubling in the quarter as efforts to partner with firms like McDonald’s produced results. Meanwhile, the company announced its plant-based Beyond Steak is now certified by the American Heart Association (AHA) under its Heart-Check Food Certification Program.

Egg drop

The latest weekly egg report from USDA shows a sharp drop in the wholesale prices retailers are paying for eggs. They fell to roughly 78 cents per dozen in the first week of May, from a peak of about $5.30 at the end of last year. Note: These are wholesale prices, so you're still paying a markup. In the CPI data out last week, egg prices were down 0.3% in April, compared to March, though they were still up 21% from last year.

Organic food sales rise

Organic food sales in the U.S. topped $60 billion for the first time in 2022, amounting to 6% of total food sales.

Weekly USDA dairy report

CME GROUP CASH MARKETS (5/12) BUTTER: Grade AA closed at $2.4000. The weekly average for Grade AA is $2.4055 (-0.0155). CHEESE: Barrels closed at $1.4900 and 40# blocks at $1.5300. The weekly average for barrels is $1.5115 (-0.0455) and blocks, $1.6085 (-0.0540). NONFAT DRY MILK: Grade A closed at $1.1700. The weekly average for Grade A is $1.1795 (-0.0060). DRY WHEY: Extra grade dry whey closed at $0.3025. The weekly average for dry whey is $0.3090 (-0.0215).

BUTTER HIGHLIGHTS: Butter manufacturers have plenty of cream available to keep butter churns busy, with some manufacturers operating seven days a week. Inventories reportedly continue to grow in the East. However, a few contacts report production is being limited due to personnel shortages in the West. Retail and food service demand is firm overall, with steady draws on inventories from contract sales. That said, some central stakeholders report demand as lackluster. Loads are available to accommodate current spot market demand. Some stakeholders report production schedules shifting from unsalted butter into salted butter production, while others report more bulk butter moving into the freezer. Bulk butter overages range from 0 to 12 cents above market, across all regions.

CHEESE HIGHLIGHTS: Milk remains widely available for cheesemakers throughout the country. Spot milk prices reached $12 under Class III for Midwestern cheesemakers. Last year, during week 19, the spot milk load price low was $2.50 under Class. Some milk sellers say processors will not take on spot milk offers unless the price is below $7 under Class. Cheese demand is variable. Food service ordering is expected to slow down later this spring, as school districts begin their hiatuses. Grilling season is coming on soon, though, which is expected to benefit some retail focused cheese processors. Some plant managers continue to report scheduled downtime, while others are busily running through notably available milk stores.

FLUID MILK: Some stakeholders in California reported volumes are lower than anticipated. However, milk production throughout the country is strong to steady. That said, warmer temperatures in the southern Central region have contacts expecting a slip lower on overall milk output in areas that are reaching 90+ degree days. Milk supplies are available throughout the country for all Class needs. Due to labor shortages, trucking and freight shortages, as well as equipment hinderances, Federal Milk Marketing Order 1 has authorized the discarding of surplus milk supplies from May 10, 2023, to July 17, 2023. Contacts report some local water districts in California are wanting farmers to irrigate as much as possible, with warmer temperatures at higher altitudes influencing the snow melt pace. Hay and wheat farmers in some parts of the southern Midwest express sentiments that the upcoming harvest is not expected to be abundant. Class II demand has gained momentum, as ice cream manufacturers have heavier production. Production of cottage cheese and sour cream is noted as strong. Demand is steady for Class I, III, and IV milk volumes. Cream multiples for all Classes are 1.25-1.36 in the East, 1.22-1.30 in the Midwest, and 1.00-1.21 in the West.

DRY PRODUCTS: Low/medium nonfat dry milk (NDM) prices moved higher. Demand is moderate, and loads are available. Purchasers supplying Mexico are less active for Q2 thus far. High heat NDM prices are unchanged in the Central and East but moved higher in the West. High heat NDM inventories are tighter, but loads are available. Bottom end dry buttermilk prices reached below a dollar this week. Dry whole milk prices held their ground. Dry whole milk production is limited, and nonfat dry milk processing continues to reign regarding dryer use. Dry whey prices moved lower. Animal feed whey trading is moderately active as prices moved lower, mirroring those of edible grade whey. Loads are available to meet current demand. Whey protein concentrate 34% prices moved lower, with markets continuing to be under pressure. Some industry contacts suggest manufacturers may be selling off liquid whey to avoid drying and storage of whey solids. The lactose price range is unchanged, but lactose spot prices lost ground. Inventories are heavy, demand is weak, and production is relatively steady. Rennet and acid market prices declined sharply. Although markets are under some pressure, demand notes remain intact.

INTERNATIONAL DAIRY MARKET NEWS: WESTERN EUROPE: European dairy contacts note that weekly milk production deliveries are starting to level off, indicating that Europe may be approaching the seasonal milk production peak. Aided by favorable weather and cow comfort, milk output in northern Europe is ahead of volumes from the previous year. However, in parts of France, Italy, and Spain, hot and dry weather are suppressing milk output to some extent. Heat and drought impacted much of western Europe in 2022.

EASTERN EUROPE: According to online sources, March 2023 milk production in Ukraine is only slightly lower than milk production from one year ago, but it is approximately 80 percent of volumes in March 2021. The European Commission reached a compromise last week to limit the imports of Ukrainian agricultural products into neighboring EU countries. The agreement may allow for transportation through neighboring countries, but the agricultural products, which include milk and dairy products, will not be unloaded in those countries.

OCEANIA: NEW ZEALAND: Key to New Zealand milk production is field conditions, especially moving into the winter season. Last week, parts of New Zealand experienced more flooding. Currently it is hard to evaluate the flooding due to lots of water in the fields and restricting transportation infrastructure. However, much of the nation is experiencing high grass growth, as fields above the flood levels respond well to the added moisture, which in turn could potentially pull grain and feed prices down, sources note. Meanwhile, supply issues still prevail in the cyclone hit areas. On another front, on May 31, 2023, the signed free trade agreement between New Zealand and UK will enter into force. New Zealand dairy entering the UK will gradually become duty/tariff free, taking place over five years. By 2026 WMP and SMP will have full duty-free access, butter and cheese will be completely duty free in 2028.

AUSTRALIA: Low milk production output continues to challenge the country's dairy supply, as Australia March exports identify with the downward trajectory of previous months. Reports point out that lower volumes of cheese are going to usual destinations, such as Japan, while skim milk powder has not gathered enough interest from China to counter the decline in SMP exports. Of particular interest to some market representatives is the current import situation, as the country notes seven consecutive months of increased butter imports, driven entirely by a boom in New Zealand shipments. Meanwhile, the declining milk pool is influencing the consumer's dairy experience. According to the Australian Bureau of Statistics, prices for milk, cheese, and yogurt at retail grocery stores are up 15 percent over the past year.

SOUTH AMERICA: Many global eyes have turned to South America's recent crop export outlooks. For an example, U.S. crop farmer contacts expect some price increases due to Argentina's corn and soybean harvest limitations. Weather has improved according to regional contacts in Uruguay and Argentina, but effects of the drought are expected to be felt for the upcoming months. Brazil is in a different situation. Despite some droughts and/or flooding in that nation, crop outlook and export expectations are very strong. Farm milk output is viewed as improving in most areas of the continent, but contacts view the improvement as relative. They say milk yield expectations are not where they would have been during the fall of any year previous to the past few years, but any improvement is a step in the right direction after the multi-year drought.

NATIONAL RETAIL REPORT: There was a slight decrease in total advertisement volumes on the conventional aisle, and an increase of total organic ads this week. Conventional dairy ad totals decreased by a single percentage point, while organic ad totals increased seven percent week to week. Conventional ice cream in 48 to 64 ounce containers was the most advertised single dairy item this week, while half gallon milk ads held the top spot for organic ads. Conventional milk in half gallons had a weighted average advertised price of $1.64, while organic half gallon milk containers were priced at $3.99, a difference of $2.35.

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