Weekly global protein digest: China's livestock industry, Taiwan imports 50K chickens, USDA reports

Analyst Jim Wyckoff shares an update on global protein news
calendar icon 10 March 2023
clock icon 19 minute read

Weekly USDA export sales: beef, pork

Beef: US net sales of 5,600 MT for 2023--a marketing-year low--were down 31 percent from the previous week and 67 percent from the prior 4-week average. Increases primarily for Japan (3,200 MT, including decreases of 700 MT), Mexico (1,400 MT, including decreases of 300 MT), China (500 MT, including decreases of 100 MT), Canada (300 MT, including decreases of 100 MT), and Hong Kong (200 MT, including decreases of 200 MT), were offset by reductions for South Korea (1,100 MT). Exports of 13,000 MT were down 19 percent from the previous week and 20 percent from the prior 4-week average. The destinations were primarily to South Korea (3,300 MT), Japan (3,000 MT), China (2,200 MT), Mexico (1,200 MT), and Taiwan (1,000 MT).

Pork: US net sales of 22,100 MT for 2023 were down 29 percent from the previous week and 44 percent from the prior 4-week average. Increases primarily for Mexico (10,700 MT, including decreases of 500 MT), South Korea (3,800 MT, including decreases of 500 MT), Colombia (1,200 MT, including decreases of 100 MT), Chile (1,100 MT), and China (800 MT, including decreases of 300 MT), were offset by reductions for Canada (300 MT). Exports of 30,300 MT were unchanged from the previous week, but up 1 percent from the prior 4-week average. The destinations were primarily to Mexico (13,700 MT), Japan (4,200 MT), China (3,900 MT), South Korea (2,500 MT), and Canada (1,600 MT).

March USDA supply and demand report for proteins

LIVESTOCK, POULTRY, AND DAIRY: Red meat, poultry, and egg supply and use estimates for 2022 are adjusted to reflect revisions to slaughter and production data. For 2023, the beef production forecast is raised from last month. Slaughter projections are raised through the first three quarters of the year on higher cow slaughter and increased placements of cattle in feedlots in the first quarter of 2023, which will likely be marketed in the third quarter.

Pork production is lowered as a higher-than-previously expected pace of slaughter in the first quarter is more than offset by lighter first-half carcass weights. Broiler and turkey production is raised for the first quarter on recent hatchery data and the current pace of slaughter. Egg production is reduced slightly on recent hatchery data. Turkey exports are lowered for the first half of 2023 on expectations of weaker demand in key markets. Trade projections for all other meats are unchanged. For 2023, cattle prices are raised for all four quarters on expectations of firm demand amidst tightening feedlot numbers. Hog prices are lowered for first-half 2023 reflecting current price movements.

Broiler prices are projected higher in the first quarter on recent data. Egg prices for the first half are raised on recent prices and lower supply projections. Milk supply and use estimates for 2022 are adjusted to reflect revisions to estimates of milk production and stocks. For 2023, milk production is forecast higher on a larger cow inventory. Output per cow is unchanged from last month. On both fat- and skim-solids bases, imports for 2023 are raised, while exports are reduced.

Cheese prices are lowered as supplies are expected to be relatively large and domestic demand is projected to be relatively soft. Butter prices are raised on recent data. Nonfat dry milk prices are unchanged, with a weaker first quarter offset by a stronger fourth quarter. Whey prices are raised on recent price observations and stronger expected demand. With the changes in component prices, Class III prices are projected lower, while Class IV prices are projected higher. The all milk price is projected lower at 20.45 per cwt.

Monkey business

HelloFresh, a German firm that delivers meal ingredients, said it would stop sourcing its coconut milk from Thailand, over fears that farmers there are using monkeys as forced labor. The firm has come under pressure from PETA, an animal-rights group, which says monkeys are often chained to trees and whipped, and forced to spend long hours picking the drupes (a fruit with a hard stony covering enclosing the seed, like a peach or olive, and comes from the word drupe, meaning overripe olive).

US Supreme Court rejects R-CALF petition

Without comment, the US Supreme Court rejected a petition, case 22-270, by R-CALF USA that argued the USDA improperly created an advisory committee that supported use of electronic ear tags for adult cattle shipped across state lines.

Australia: USDA Livestock and Products Semi-Annual report

The Australian cattle industry is expected to continue its strong herd rebuild in 2023 and Australian beef supply is expected to recover after falling to the lowest level in twenty-five years in 2021 and in 2022. With the support of increased female slaughter, it is expected that overall cattle slaughter, beef production, and beef exports will all rise in 2023. The live cattle export trade is also forecast to increase in 2023 as a result of improved trading conditions with Australia’s major trade partner. Australian pork production is forecast to decline slightly in 2023 after stronger than expected production in 2022. Pork producers in early 2023 are being challenged by high feed grain prices relative to pork prices which is anticipated to have an impact on slaughter numbers and pork production in the latter part of 2023. Australian pork imports and exports are forecast to remain stable for 2023.

US feeder cattle prices surging

The CME feeder cattle index has broken out to the upside recently, surging to the highest level since fall 2015. Not only will feeder cattle supplies remain tight, but the recent decline in corn prices has sparked increased demand for feeders. While futures hold premiums, the recent surge in the cash index remains price-supportive.

USDA reports on China’s livestock industry

Hog Production: Hog production (pig crop) in 2023 is forecast to decline by 2 percent year on year (YOY) to 700 million head due to, on average, lower sow inventories in 2022 compared to 2021. Hog Imports: Imports of live breeding swine in 2023 are forecast at 5,000 head due to large domestic sow inventories. In early 2023, the domestic sow inventory exceeded China’s Ministry of Agriculture and Rural Affairs (MARA) targets. A large domestic sow inventory is expected to curb imports of breeding swine. Pork Production: Pork production is estimated at 55.5 million metric tons (MMT) in 2023, a marginal increase. Producers are expected to respond to stronger consumer demand following the removal of domestic COVID restrictions (see Pork Consumption and Policy Section below). Further growth in pork production will be limited by the price of pork. In 2023, producers are expected to continue secondary fattening1 when they expect prices to rise. Pork Imports: In 2023, pork imports are expected higher by nearly 4 percent YOY to 2.2 MMT on stronger consumer demand following the end of COVID restrictions, but further growth will be curbed by higher domestic production.

Cattle Production: The cattle production forecast in 2023 remains unchanged at nearly 52.6 million head. Growth in the herd is expected to slow due to a marginal increase in the cow inventory in 2022 from 2021. Cattle Imports: Cattle imports in 2023 are forecast to decline to 270 thousand head from 350 thousand in 2022 due to a large cattle inventory and supplier-initiated export prohibitions. Beef Production: Beef production in 2023 is forecast to grow 3 percent to 7.4 MMT on stronger demand for beef products in the hotel, restaurant, institutions (HRI), and retail sectors following the end of domestic COVID restrictions. Beef Imports: Beef imports in 2023 are forecast slightly lower at 3.4 MMT. In February 2023, Brazil self-suspended beef exports following the detection of a suspected BSE case. If the suspension endures and no other alternate origin suppliers materialize, beef prices could move higher and negatively impact beef consumption in 2023.

Policy: Since the last FAS China GAIN report covering the PRC pork and beef sector, the country has ended its COVID controls on imported cold chain products.

USDA: India Livestock and Products Semi-annual

The expansion of India’s dairy sector is driving the increase in the cattle (both bovine and Asian domestic water buffalo) herd numbers. In marketing year (MY) 2023 (January-December) herd numbers have grown to 307.5 million head as compared to 306.7 million head in 2022. FAS New Delhi (Post) estimates that in MY 2023, India’s carabeef and beef production will subsequently increase by two percent to 4.4 million metric tons (MMT) beyond last year’s estimates. Production expansion is attributed to growing demand for carabeef from India’s export markets. India’s carabeef and beef consumption estimates for 2022 and 2023 are revised higher to 2.9 MMT and 2.96 MMT respectively as water buffalo beef continues to remain the most affordable source of animal protein. Post is raising the carabeef export number to 1.48 MMT in 2023 as industry sources are reporting increased demand from Malaysia and Middle Eastern markets.

China’s meat imports surge to start 2023

China imported 1.3 MMT of meat in January and February combined, up 21.2% from the same period last year. China doesn’t break down meat imports by category in the preliminary data, but much of the strong year-over-year increase was likely driven by pork imports, which began to ramp up in late 2022.

China’s pork production, imports expected to increase this year

USDA’s attaché in Beijing expects pork production and imports, along with beef production to increase this year. China’s pig crop in 2023 is forecast to decline 2% from last year to 700 million head but pork production is estimated at 55.5 MMT, up marginally from last year. The attaché expects China’s pork imports to rise 4% amid increased demand to 2.2 MMT. It expects beef production to increase 3% to 7.4 MMT, while beef imports are forecast to be slightly lower at 3.4 MMT.

Mexico to allow Brazilian beef imports

Mexico announced sanitary requirements for Brazilian beef imports Monday, opening the door to the country’s beef products for the first time as Mexico looks to diversify its food supply amid high inflation. The Brazilian state of Santa Catarina will be able to export fresh, refrigerated or frozen bone-in meat to Mexico, while another 14 states, including key producers such as Goias, Mato Grosso and Mato Grosso do Sul, will be able to export aged and boneless cuts.

USDA unveils Product of USA voluntary labeling proposed rule

USDA’s Food Safety and Inspection Service (FSIS) announced a widely expected rule regarding the labeling claims of Product of USA and Made in USA which would allow the voluntary labeling claims to be used for animals born raised, slaughtered and processed in the United States. In the case of multi-ingredient products, the same requirements would apply and that additional ingredients in the product — except for spices and flavorings — be of domestic origin.

FSIS is proposing to allow “qualified claims” to be made on package labels which would specify that the product was, for example, “sliced and packaged in the United States using imported pork.” If a state or region wants to put a label that would claim the products were made in that state/region, they would need to meet the proposed criteria for the Product of USA and Made in USA label. FSIS says labels claiming U.S. origin would be subject to routine inspection tasks by FSIS inspection program personnel. The proposed rule would apply to all products subject to mandatory FSIS inspection or eligible for voluntary inspection by FSIS. The agency said they believe there would be a one-time cost for updating labels, record keeping and market testing would be $3 million, with a range of $1.4 million to $6.7 million. If the rule becomes final, FSIS will issue guidance “as needed” on recommended documentation to meet the requirements. FSIS also did not indicate there would be any transition period and that the compliance date would be the date the rule becomes final. FSIS said it considered a 42-month extended compliance period, which it said would reduce costs but that would reduce consumer benefits they say that would emerge with the proposed Product of USA and Made in USA label, with the benefit being consumers would make more-informed choices of the products they purchase. Approximately 12% of meat, poultry and egg product retail labels had a Product of USA label, FSIS said.

The proposed rule has received mixed comments.

USDA: Brazil Livestock and Products Semi-annual

In 2023, Post forecasts that cattle production will grow 1.3 percent, to 48.5 million cattle head, as the Brazilian cattle sector reaches its peak in the production cycle. Cattle slaughter is expected to increase 2.8 percent due to elevated demand for beef exports and recovering domestic consumption. However, cattle producers are likely to face challenges of high production costs, potential droughts, and consequential damage to pasture. Post forecasts beef production to increase by 2.1 percent to 10.6 million tons CWE, of which 28 percent would be exported, amounting to 3 million tons CWE. For swine, in 2023 Post forecasts production to increase by 2.1 percent, reaching 45.8 million tons (CWE). As in 2022, swine and pork producers are likely to face elevated feed and production costs. Pork production is expected to grow 3.9 percent, reaching 4.52 million tons CWE, and it is anticipated that exports will increase by 7.4 percent and domestic production by 2.3 percent.

USDA: European Union Livestock and Products Semi-annual

High feed and energy prices and environmental restrictions are pressuring both cattle and swine farmers in the European Union (EU), leading to a reduction in operations. National implementation of the EU’s Common Agricultural Policy is not anticipated to curb the continued decline in beef production, as EU Member States are expected to increasingly focus on support for smaller farms. With lower domestic production, EU beef imports are forecast to recover to near pre-coronavirus levels in 2023. In addition to high input prices, the EU swine sector faces reduced domestic and export demand. The negative market factors collectively led to a record drop in the total swine and sow stock in 2022. With a smaller breeding herd, the supply of animals for slaughter is expected to fall this year. The lower availability of animals for slaughter will also compel the sector to restructure. In 2023, pork exports are projected to fall back to 2016-2019 levels.

NPPC statement on USDA’s decision to extend line speed trial

“The National Pork Producers Council (NPPC) applauds USDA’s decision to allow eligible pork harvest facilities to continue experimenting with ergonomics, automation, and crewing while maintaining line speeds that have been proven able to protect food and worker safety for over two decades. Ensuring sufficient harvest capacity is critical to allow America’s pork producers to continue to provide wholesome pork products to consumers. This extension will allow USDA to assess a final report of the data collected during the time-limited trial and determine next steps. NPPC appreciates the extension of the trial period and will continue working with the administration and Congress towards a permanent solution.”

Taiwan imports 50,000 chickens as supermarkets impose rationing to crack severe egg shortage

Some 50,000 breeder chickens arrived on the island this week as part of government efforts to boost supply, Taiwan’s Council of Agriculture says. Carrefour and PX Mart supermarket chains are restricting the number of eggs customers can buy to prevent hoarding or panic buying. The new birds will help farmers “accelerate the phase-out of low-yielding hens”, the government-run Central News Agency said. Countries from Japan and South Korea to Britain and parts of the U.S. have also run short of eggs this year or watched prices surge, with bird flu the chief culprit.

EPA commits to deadline for slaughterhouse wastewater rules

The Biden administration agreed to deadlines for EPA to update wastewater control standards for slaughterhouses, pleasing environmentalists who sued the agency for failing to address water pollution from poultry, pork and beef processing plants. Published this week in the Federal Register, the consent decree requires EPA to sign a notice of proposed rulemaking to revise the effluent limitation guidelines (ELG) by Dec. 13, 2023, and to take final action by Aug. 31, 2025. The announcement is the result of a 2019 lawsuit brought by the Environmental Integrity Group (EIG) and nine other environmental groups, who challenged EPA’s refusal to update the ELGs for direct discharges of wastewater from slaughterhouses.

FAO food price index drops again in February

The U.N. Food and Agriculture Organization (FAO) global food price index dropped for the 11th straight month in February and was 18.7% below the March 2022 peak. The February decline was driven by a significant drop in the price of vegoils and dairy, along with small reductions in cereal grains and meat, which more than offset a steep rise in the price of sugar. Compared to year-ago, prices were up 1.4% for cereal grains and 13.1% for sugar, while they declined 1.7% for meat, 7.2% for dairy and 32.6% for vegoils.

European Union: US Beef Imports into the EU High Quality Beef Quota Increased in 2022

U.S. beef exports under the EU High Quality Beef (HQB) quota increased by over 2,000 metric tons (MT) in 2022, to 13,438 MT. The quota usage rate increased to 52.9 percent, up from 50.1 percent in 2021, despite an increase in the quota from 23,000 MT in 2021 to 25,400 MT in 2022.

Weekly USDA dairy report

CME GROUP CASH MARKETS (3/3) BUTTER: Grade AA closed at $2.3450. The weekly average for Grade AA is $2.3940 (+0.0015). CHEESE: Barrels closed at $1.5750 and 40# blocks at $1.9500. The weekly average for barrels is $1.5675 (-0.0050) and blocks, $1.9160 (-0.0215). NONFAT DRY MILK: Grade A closed at $1.1775. The weekly average for Grade A is $1.1830 (-0.0333). DRY WHEY: Extra grade dry whey closed at $0.4450. The weekly average for dry whey is $0.4500 (-0.0094).

BUTTER HIGHLIGHTS: Across all regions, cream is available, and butter makers are running active production schedules. As the spring holidays grow nearer, some processors in the East say they are churning seven days a week. In the East, butter being produced is primarily being frozen or going towards contractual needs, and stakeholders say spot inventories vary. Central region contacts say butter has become more available in recent months. Contacts in the West report heavy butter inventories, as retail demand is below some previously forecasted levels. Meanwhile, export demand from the region picked up at the end of last week. In the East region, demand for butter is steady in retail and food service markets. Central region plant managers say butter demand is steady, but on the slower side of the spectrum. Bulk butter overages range from 0 to 14 cents above the market, across all regions.

CHEESE HIGHLIGHTS: Milk is plentiful throughout the country, and cheesemakers are operating busy production schedules. Cheesemakers in the Northeast say labor shortages remain an issue. Some plant managers in the Midwest report extra downtime during the workweek. In the West, domestic demand for cheese is steady, while export sales are mixed. Demand is increasing in the Northeast, and some contacts note stronger sales of Italian-style cheeses compared to cheddar. Cheese processors in the Midwest convey steady to strong demand, though curd producers continue to report softer demand. Makers of cheese barrels in the Midwest say they are finding some balance in inventories, and any buildup of cheese is being alleviated within a few weeks of production. In the West, cheese barrel inventories remain larger than blocks.

FLUID MILK: Farm level milk yields are mixed after some inclement weather in recent weeks/days throughout the country. Winter storms in areas of the West that are still recovering from heavier than typical rainfalls are adding to the uneven milk output levels from one farm to the next. All said, though, milk is generally plentiful for all Classes in all regions. Bottling orders are variant from one region to the next, as school orders vary. Retail bottling orders are steady. Spot milk availability into cheese production is widely available in the Midwest, as spot prices ranged from $10 to $2.50 under Class III. Condensed skim is and has been widely available for drying, as well. Butter makers are running active churning schedules, as cream multiples are holding at steady, for the most part, from week to week. F.O.B. cream multiples are 1.20-1.27 in the East, 1.14-1.25 in the Midwest, and .95-1.21 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices were steady to lower in the domestic U.S. market this week. Skim milk powder, globally, is reportedly available. Therefore, importers are finding options outside of the U.S. market for certain uses. Buttermilk powder prices continued to soften in the Western region. Contacts say volumes dried in late 2022, yet trading in current/ recent weeks, are putting some bearish pressure on the timbre of dried buttermilk markets. Dry whey prices were mixed, but most prices are shifting northbound. Some manufacturers/end users say edible and feed whey availability has slimmed down. Lactose markets continued to face bearish pressure, as alternatives such as deproteinized whey and permeates are available and competing with lactose moving into export and domestic channels. Whey protein concentrate 34% prices shifted lower at every facet, as the entire higher-protein blend market. continues to face available supplies and tepid demand. Dry whole milk prices moved lower after a price shift higher the previous week. Casein prices are steady on slow trading ahead of Q2 contractual updates.


EUROPEAN DAIRY MARKET OVERVIEW: WESTERN EUROPE: After reaching pay prices of about 60 cents per kg, European farm milk pay prices have tumbled. According to the EU Commission's Milk Market Observatory, the January average farm pay price for cow's milk is estimated at just under 57 cents per kg. And industry contacts report that the farm milk price is now closer to 50 cents per kg. While pay prices have dropped significantly, so too have input costs. As a result, farmers have yet to feel the economic pinch, and milk production is starting off strong in 2023. Milk output is increasing seasonally across most of Europe.

EASTERN EUROPE: The European Commission has published a regulatory proposal to extend the duty and quota free status of Ukrainian agricultural goods entering the EU by another year. The extension, if approved by the European Parliament and Council, would extend the free market access for Ukrainian goods to June 2024. Ukrainian officials have emphasized the importance of agricultural exports to stabilizing dairy and other agricultural markets within Ukraine following the Russian invasion of Ukraine one year ago.

OCEANIA DAIRY MARKET OVERVIEW: NEW ZEALAND: In New Zealand, sources report that national milk production for February 2023 is anticipated to be higher year-over-year, resulting from the current good pasture conditions throughout the North Island. Meanwhile, a key co-op in NZ is cutting its farmgate milk price on the heels of lowering its milk collection forecast for the season. The decline is attributed to sluggish China interest that is impacting the whole milk powder prices. Sources report that the WMP price has slid nearly 5 percent since December 2022. AUSTRALIA: In Australia, record-high farmgate milk prices and higher supply chain costs point to the country's continuing decline in milk production volumes. January 2023 milk output fell 6.6 percent season-to-date. Sources report this is the lowest production year in the past 5 years, as processors attempt to manage the shrinking milk supply. Instrumental to the declines have been a miserable Australian winter, flooding, and significant farm exits. With lower milk production, there has been a huge impact on dairy commodity processing. Industry representatives are quick to point out the significant decline in skim milk powder (SMP) production, as cheese production has become the primary focus for processors' limited milk supplies. Additionally, exports have dropped off, falling 7 percent for the calendar year ending December 2022.

SOUTH AMERICA DAIRY MAKRET OVERVIEW: Recent reports have been lopsidedly bearish regarding climactic conditions in the stronger milk producing areas in the South American region, namely Argentina, Brazil and Uruguay. Years of prolonged drought have certainly taken their toll on the pasture/forage quality and general feed availability. Crop quality and access, among other factors in recent years, have translated into continual increases in operating costs for regional dairy farmers. This week, though, contacts are passing along some positive notes around areas receiving sorely needed rainfall and near-term expectations of a break from the heat and dryness. As La Nina's effect loosens, reports suggest a more neutral weather pattern will bring about seasonal precipitation as dairy farmers in the region hope to close their summer months with some positive weather notes. Clearly, though, the current and near-term impacts will still weigh on expenses, as crop/feed yields are not expected to exceed even limited expectations.

US RETAIL REPORT: Total dairy retail advertisements increased from week eight. Conventional ad numbers moved up by seven percent, while organic ad numbers nearly tripled in totals from the previous week. Conventional ice cream, in 48-to-64-ounce containers, is the most advertised single dairy item this week. Milk, in one-gallon containers, was the most advertised organic dairy item.

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