Weekly global protein digest: Intl. dairy markets, USDA exports, deforestation

Analyst Jim Wyckoff shares an update on global protein news
calendar icon 5 May 2023
clock icon 11 minute read

Weekly USDA beef, pork export sales

Beef: Net US export sales of 20,100 MT for 2023 were up noticeably from the previous week and up 59 percent from the prior 4-week average. Increases primarily for Japan (4,700 MT, including decreases of 200 MT), South Korea (3,600 MT, including decreases of 500 MT), China (3,400 MT, including decreases of 100 MT), Taiwan (2,500 MT, including decreases of 100 MT), and Mexico (2,000 MT), were offset by reductions for the United Kingdom (100 MT). Exports of 18,800 MT were up 18 percent from the previous week and 16 percent from the prior 4-week average. The destinations were primarily to Japan (5,200 MT), South Korea (4,800 MT), China (3,500 MT), Taiwan (1,300 MT), and Mexico (1,200 MT).

Pork: Net US export sales of 49,000 MT for 2023 were down 9 percent from the previous week, but up 15 percent from the prior 4-week average. Increases were primarily for Mexico (14,600 MT, including decreases of 600 MT), China (14,200 MT, including decreases of 200 MT), South Korea (7,700 MT, including decreases of 800 MT), Japan (3,400 MT, including decreases of 300 MT), and Canada (2,700 MT, including decreases of 400 MT). Exports of 38,600 MT--a marketing-year high--were up 2 percent from the previous week and 10 percent from the prior 4-week average. The destinations were primarily to Mexico (15,100 MT), China (5,800 MT), Japan (4,700 MT), South Korea (4,100 MT), and Canada (1,700 MT).

Dairy appears absent in U.S./Canada trade talks

Statements released by both the U.S. and Canada following Tuesday’s meeting of U.S. Trade Representative Katherine Tai and Canadian trade minister Mary Ng cover a lot of issues, but it appears the dispute between the two countries over dairy was not a part of the discussions. The officials discussed “ongoing consultations under the United States-Mexico-Canada Agreement (USMCA) on certain Mexican energy and agricultural biotechnology measures that continue to threaten U.S. and Canadian investments and exports, and recent changes in Mexico’s mining law,” according to a readout from the Office of the U.S. Trade Representative. The statement issued by Ng’s office indicated the two discussed Canadian softwood lumber and Buy America provisions but again no mention of the dairy dispute.

Barclays toughens deforestation rules for beef sector clients

Barclays has told beef sector clients they must prevent deforestation in their South American supply chains, in a policy document seen by Reuters that toughens the bank’s stance. The document said the bank required beef producers to prohibit the production or primary processing of beef on or from areas in the Amazon cleared or converted after 2008. It also required them to commit to a deforestation-free South American beef supply chain, both direct and indirect, with full traceability, by 2025 in areas at high risk of deforestation including the Amazon, Brazil’s Cerrado and the Chaco biomes. Companies would also need to monitor, verify and report on deforestation-free beef volumes by December 2025 and have a policy commitment in place to respect human rights across their operations and supply chain. More broadly, Barclays said it had “no appetite” for providing financial services to soy, beef, palm oil, forestry and timber companies directly involved in illegal logging or related activities, which used fire to clear land or which committed acts of violence or exploitation of local communities.

USDA dairy payments information

DMC payments triggered for March. Prices will trigger payments under the Dairy Margin Coverage (DMC) program for March with the national average margin at $6.08 per hundredweight (cwt).

Dairy operations selecting Tier 1 margin coverage levels of $6.50, $7, $7.50, $8, $8.50, $9, and $9.50 per cwt. will receive payments while those with Tier 2 coverage levels at $6.50, $7, $7.50, and $8 per cwt. will be issued a payment. Payments range from 42 cents per cwt. for $6.50 coverage levels up to $3.42 per cwt. for $9.50 coverage, increasing by 50 cent increments for coverage levels between those marks.

DMC payments have been triggered each month this year with the national average margin at $7.94 per cwt. in January and $6.19 per cwt. in February.

Weekly USDA dairy report

CME GROUP CASH MARKETS (4/28) BUTTER: Grade AA closed at $2.3525. The weekly average for Grade AA is $2.3930 (+0.0090). CHEESE: Barrels closed at $1.5900 and 40# blocks at $1.6875. The weekly average for barrels is $1.5350 (+0.0040) and blocks, $1.6705 (-0.0865). NONFAT DRY MILK: Grade A closed at $1.1750. The weekly average for Grade A is $1.1660 (+0.0185). DRY WHEY: Extra grade dry whey closed at $0.3525. The weekly average for dry whey is $0.3415 (-0.0240).

BUTTER HIGHLIGHTS: Cream is available in the East, though some in the Mid-Atlantic states relay cream is going towards Class II manufacturing, rather than to churning. In the Central region, cream is available, but an uptick in Class II and III production schedules is contributing to a steady decline in cream stores. Cream is plentiful in the West, and butter makers are operating strong production schedules to work through available volumes. Butter makers in the Central region are operating strong production schedules, and some plant managers report they are churning and micro-fixing. Butter makers in the East say they are churning seven days a week in areas where cream is available. In the East, retail demand is steady, though contacts report softening food service butter sales. Bulk butter availability is limited in the Central region as butter makers are focusing on fulfilling contracts and on the upcoming early fall demand. In the West, loads of butter are available for purchasing.

CHEESE HIGHLIGHTS: Milk volumes are plentiful throughout the country, and cheesemakers in the Northeast and West are running strong production schedules to utilize available supplies. In the Midwest, some cheesemakers are reporting scheduled downtime this week, and milk volumes are available for spot purchasing at prices ranging from $4 to $10 under Class III. Contacts in the Midwest report some varieties of cheese are moving well, including retail and cut/wrap options. Meanwhile, inflation is said to be affecting some pizza/Italian restaurants who have cut back on their cheese purchasing. Retail demand is strong in the Northeast, though food service sales have cooled in recent weeks. Contacts in the West report strong food service sales, while retail demand is holding steady. Spot cheese inventories are available to meet purchasers’ needs in the West, while inventories vary somewhat in the Northeast region.

FLUID MILK: Seasonal conditions support increasing to steady milk production volumes across the country. In the West, farm level milk production is consistent throughout the region. In California, the Pacific Northwest, New Mexico, Arizona, and the mountainous states, milk output is steady. In the Midwest, farm level milk output continues to see a seasonal push, while areas of the East region are producing steady to strong milk output. Bottling sales are expected to ease in the Midwest, as some school districts prepare for impending mid-year breaks. Orders are strong, as heavy milk volumes clear to bottling in some areas of the East region. Class I demand is unchanged in the West region states. While contracted condensed skim sales are steady, spot loads are lighter in the West. In the Midwest, condensed skim is readily available, while at moderate levels in the East region. Manufacturing cream supplies are sufficient to plentiful across the country. F.O.B. cream multiples for All Classes range 1.15-1.32 in the East; 1.21-1.30 in the Midwest; and 1.00-1.27 in the West.

DRY PRODUCTS: Low/medium nonfat dry milk prices are mixed in the East and Central regions. Trading was active this week, on mixed demand. Supplies are growing. Spot loads are available, and contract sales are moving well. Prices are steady to slightly higher in the West. Drying schedules for high heat nonfat dry milk are irregular, with lower prices reported in the East and Central regions. Dry buttermilk prices are lower to steady in the Central and East regions. Inventories are adequate. Demand is mostly quiet. Prices for dry buttermilk in the West are steady. Spot activity is moderate. Production schedules are steady. The whole milk price range contracted this week. Production is steady to slow. Demand is seeing a slight uptick, in a quiet market. Dry whey prices are lower across the regions. Heavy milk volumes are moving into Class III manufacturing, supporting dry whey production. Demand is quiet. Prices for whey protein concentrate 34% (WPC 34%) are steady this week. Production is active. Domestic demand is steady, while international purchases are light. Lactose prices went unchanged across both the range and the mostly series this week. Spot sales are steady. Some buyers hesitate to secure loads beyond immediate needs. Acid and rennet casein prices are steady to lower this week. Trading is active on good demand.


WESTERN EUROPEAN OVERVIEW: The continuation of seasonal milk increases is advancing through the spring. Industry sources suggest milk production remains ahead of the previous year. Industry contacts say there is plenty of milk for most processing needs. This abundance is driving prices lower for skimmed milk concentrate, cream, and farm milk. Market participants expect milk prices to continue to be under pressure throughout the spring. Ample milk is fueling strong cheese production across Europe. Sales of cheese have picked up within Europe thanks to an easing of consumer cheese prices and with the advancement of the spring and summer holiday seasons.

EASTERN EUROPEAN OVERVIEW: Similar to their western counterparts, dairy producers in the East also are seeing seasonal milk growth. However, industry sources suggest the growth is not as robust as the previous year. The EU commission has offered a deal to five member states (Bulgaria, Hungary, Poland, Romania, and Slovakia) that would allow certain Ukrainian agricultural products to enter the respective countries for export into international markets. While leaders within the EU are optimistic that the deal will be accepted, the deal does not include dairy products. Russian inspections of grain ships leaving three Ukrainian Black Sea ports has temporarily resumed, allowing for the export of Ukrainian grain.

OCEANIA OVERVIEW: NEW ZEALAND: In New Zealand, March milk production resulted in another month of increased output for the fourth time in as many months. Milk production has been supported by better pasture growth conditions that will likely continue through the last few months of the season. Meanwhile, multiple milk co -ops have revised their milk price forecasts by adjusting milk prices downward. Key to the adjustments is Chinese WMP demand, which failed to recover at the expected levels. Sources report that WMP inventories in China are stable from active domestic production over several months. However, according to sources, China's current levels of domestic milk supply may become more expensive to produce.

AUSTRALIA: In Australia, supported by stiff competition for milk, dairy farmers are witnessing the highest farmgate milk prices most have ever seen. As national milk production continues to fall, there is a growing domestic buyer concern over the country's milk security. As such, the country's dairy market representatives have designated the next three years as the period for defining the sustainability of the Australian dairy industry. With the lower farm milk production, there is a significant impact on dairy commodity processing. Dairy industry sources 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.

SOUTH AMERICA DAIRY MARKET OVERVIEW: There are a number of improvements in recent weather trends being reported in the South American region, specifically in regard to much needed precipitation. Warmer than average temperatures in some of those same areas, though, have kept milk output expectations in check. As the La Nina weather patterns have ebbed, reports suggest El Nino patterns could bring rainy weather during the current corn harvest. Farmgate milk prices in strong dairy producing countries, namely Uruguay and Argentina, have increased due to notably limited output, according to reports. Contacts say a number of regional dairy farmers sold dairy cows into beef processing, as improved weather conditions for cow comfort and feed costs have arrived too late. NATIONAL RETAIL REPORT: Total dairy retail advertisements decreased on the conventional aisle by 17 percent, while organic dairy ad totals increased 56 percent from the previous week. Ice cream in the 48-64-ounce container was the most advertised conventional dairy product, with a weighted average advertised price of $3.55, down $0.53 from last week. Organic milk in half gallon packaging was the most advertised organic dairy item, having a weighted average price of $4.37, up $0.35 compared to the previous week.

MARCH COLD STORAGE REPORT (NASS): Total natural cheese stocks in refrigerated warehouses on March 31, 2023, were up 1 percent from the previous month but down slightly from March 31, 2022. Butter stocks were down 1 percent from last month but up 3 percent from a year ago. JANUARY MAILBOX MILK PRICES (FMMO): In January 2023, mailbox milk prices for selected reporting areas in Federal milk orders averaged $22.28 per cwt, down $1.72 from the December 2022 average and down $0.92 per cwt from the January 2022 average. The component tests of producer milk in January 2023 were: butterfat, 4.20%; protein, 3.32%; and other solids, 5.77%. 2022

MILK PRODUCTION, DISPOSITION, AND INCOME (NASS): Milk production increased 0.1 percent in 2022 to 226 billion pounds. The rate per cow, at 24,087 pounds, was 138 pounds above 2021. The annual average number of milk cows on farms was 9.40 million head, down 47,000 head from 2021. Cash receipts from marketings of milk during 2022 totaled $57.3 billion, up 37.1 percent from 2021. Producer returns averaged $25.39 per hundredweight, 36.9 percent above 2021. Marketings totaled 225.5 billion pounds, 0.1 percent above 2021. Marketings include whole milk sold to plants and dealers and milk sold directly to consumers. An estimated 994 million pounds of milk were used on farms where produced, 3.6 percent less than 2021. Calves were fed 92 percent of this milk, with the remainder consumed in producer households.

MARCH MARKET SUMMARY AND UTILIZATION REPORT (FMMO): During March, 14.9 billion pounds of milk were received from Federally pooled producers. This volume of milk is 13.5 percent higher than the March 2022 volume. Regulated handlers pooled 3.6 billion pounds of producer milk as Class I products, down 1.7 percent when compared to the previous year. The all-market average Class utilization percentages were: Class I = 24%, Class II = 9%, Class III = 51%, and Class IV = 17%. The weighted average statistical uniform price was $19.13 per cwt, $0.45 lower than last month and $4.63 lower than last year.

RETAIL PRICE REPORT (FMMO): U.S. simple average prices are: $4.31 per gallon for conventional whole milk, $4.25 per gallon for conventional reduced fat 2% milk, $4.79 per half gallon organic whole milk, and $4.79 per half gallon organic reduced fat 2% milk.

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