Weekly global protein digest: USDA ups food price forecasts, China's economy and pork market

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news
calendar icon 28 October 2022
clock icon 8 minute read

USDA weekly export sales for US beef, pork

Beef: US net sales of 14,100 MT for 2022 were primarily for South Korea (4,600 MT, including decreases of 600 MT), Japan (2,700 MT, including decreases of 400 MT), China (2,600 MT, including decreases of 100 MT), Mexico (1,000 MT), and Taiwan (800 MT, including decreases of 100 MT). Net sales of 1,900 MT for 2023 were reported for South Korea (1,200 MT), Japan (500 MT), Indonesia (100 MT), and Taiwan (100 MT). Exports of 17,400 MT were primarily to Japan (4,600 MT), South Korea (4,500 MT), China (3,000 MT), Mexico (1,500 MT), and Taiwan (1,000 MT).

Pork: US net sales of 20,300 MT for 2022 primarily for Mexico (16,900 MT, including decreases of 300 MT), China (5,600 MT, including decreases of 100 MT), South Korea (1,400 MT, including decreases of 200 MT), Colombia (900 MT, including decreases of 100 MT), and the Dominican Republic (800 MT), were offset by reductions for Australia (3,500 MT), Japan (2,600 MT), and Canada (400 MT). Exports of 30,700 MT were primarily to Mexico (14,300 MT), China (4,200 MT), Japan (3,500 MT), South Korea (2,500 MT), and Canada (2,100 MT).

USDA ups food price forecasts for 2022 and 2023

USDA raised their forecast for food price inflation in 2022 and 2023 from their September forecasts, now seeing 2022 prices for all food rising 9.5% to 10.5% (9% to 10% prior), food at home (grocery store) prices moving up 11% to 12% (10.5% to 11.5% prior) and food away from home (restaurant) prices rising 7% to 8% (6.5% to 7.5% prior). While USDA still sees smaller increases in 2023, they upped their forecasts to all food prices rising 3% to 4% (2.5% to 3.5% prior), grocery store prices increasing 2.5% to 3.5% (2% to 3% prior) and restaurant prices moving up 4% to 5% (3% to 4% prior).

China’s economy saddled by Covid restrictions

China’s economic growth is hitting an early speed bump in the fourth quarter as Covid-19 curbs and anxieties further tapped the brakes on travel and shipping, constraining consumption and commerce. Mobility statistics – from metro passenger traffic in cities and flight cancellations to domestic container handling at major ports – have worsened in October despite falling local coronavirus cases, suggesting Covid-19 preventive measures, or fear of those measures, are still stifling economic activity.

China’s pork imports increased in September

China imported 150,000 MT of pork in September, up 10,000 MT (7.1%) from August but down 54,000 MT (26.5%) from last year. Through the first nine months of this year, China imported 1.22 MMT of pork, down 61.2% from the same period last year.

China’s Q3 pork production inches up

China’s third-quarter pork output totaled 12.11 MMT, up by less than 1% from the same period last year. China’s pork output totaled 41.5 MMT in the first nine months of the year, up 5.9% from last year. But the growth rate of China’s pork production has slowed recently since increasing every quarter year-on-year for the last two years, as some farmers reduced their breeding herds after months of low hog prices and high feed costs eroded profits. China’s pig herd totaled 443.94 million head at the end of September, up 1.4% from last year.

China encourages farmers to sell more hogs

China’s state planner has increased its coordination with large-scale hog farms to ensure stable supplies, as it tries to cool soaring prices in the world’s largest pork market. China’s largest hog producers have agreed to “undertake social responsibilities,” said the National Development and Reform Commission (NDRC) said. The companies will take the lead in ensuring supply and price stability in the market, release fattened hogs in a timely manner and speed up the slaughter pace when necessary, it added. Beijing has already issued several warnings to farmers urging them to stop holding back hogs from slaughter to wait for higher prices.

Weekly USDA dairy report

CME GROUP CASH MARKETS (10/21) BUTTER: Grade AA closed at $3.2000. The weekly average for Grade AA is $3.1935 (+0.0015). CHEESE: Barrels closed at $2.0900 and 40# blocks at $2.0575. The weekly average for barrels is $2.1620 (-0.0210) and blocks, $2.0530 (+0.0075). NONFAT DRY MILK: Grade A closed at $1.4200. The weekly average for Grade A is $1.4480 (-0.0670). DRY WHEY: Extra grade dry whey closed at $0.4400. The weekly average for dry whey is $0.4390 (+0.0150).

CHEESE HIGHLIGHTS: In the Northeast and West milk is available, allowing cheesemakers to run steady production schedules. In the Midwest, milk availability is tightening as bottlers and other holiday -based demand is pulling on milk supplies. Cheesemakers in the region say they are operating as actively as they can. Cheese is available on the spot market in the Northeast, and blocks remain available for purchasing in the West. Contacts report tighter cheese barrel inventories in the West. In the Midwest, cheese barrel inventories are snug, and cheesemakers say they are keeping up or falling behind on orders. Contacts in the Midwest say demand for cheese is strong for all varieties. In the Northeast and West, stakeholders say food service and export demands are steady. Meanwhile, retail demand is declining in these regions as inflationary pressures are affecting some customers’ purchasing habits. Cheese barrels remain priced above blocks on the CME, and some contacts in the Midwest view this as a market inhibitor.

BUTTER HIGHLIGHTS: Cream availability is growing across the country. In the West, some butter makers are purchasing more cream to maximize production. Butter makers in the Midwest are purchasing additional loads of cream with multiples in the low/mid 1.20s. In the Midwest, plant managers are churning and/or micro-fixing to keep up with demand. Northeast butter making is more sporadic: some butter producers are actively churning, while others are selling loads of cream while their churns are down. Retail demand for butter is hearty in the Northeast. Contacts in the Central region say demand is vigorous and meeting expectations. In the West, some retailers have, reportedly, underestimated their needs and are actively looking for additional loads of butter. Food service and bulk butter demands are steady in the region. Spot butter inventories are tight in the West. Meanwhile in the Northeast, butter inventories are available though some contacts are concerned that increased holiday demand will contribute to shortages in the coming months.

FLUID MILK: Milk production is steady or trending higher across the country. Contacts report cooler weather is contributing to increased cow comfort and milk output. In the Southeast, demands are mixed and vary based on hurricane recovery efforts. Stakeholders say pipelines have not been refilled in Florida, but orders are trending higher in the state. In the Midwest, milk volumes are meeting current processing needs and some loads are being moved to the Mideast and Southeast areas. Some contacts in the Pacific Northwest and the mountain states of Idaho, Utah, and Colorado say they are selling loads of milk to other parts of the West region. Milk volumes are tighter in Arizona and New Mexico, and some processors say they are purchasing loads of milk from other areas to meet their current needs. Class I demand is strong in the East. Contacts in the Midwest say Class I demand has been steady since August, but some retailers are requesting additional volumes from bottlers as the Q4 holiday season approaches. Class III demand is slowing in the Midwest, according to some milk handlers. Cream is becoming more available in all regions. In the East, some butter makers are selling loads of cream into other Classes, as processors are working to meet increased holiday demand. Contacts in the West say Class II cream purchasers are also acquiring additional loads to prepare for the holidays. Cream multiples for all Classes are 1.34 – 1.44 in the East, 1.23 – 1.32 in the Midwest, and 1.07 – 1.32 in the West.

DRY PRODUCTS: Prices for low/medium heat nonfat dry milk (NDM) were lower across the range and mostly price series for all regions. Prices for high heat NDM were unchanged in the East and Central regions. In the West, high heat NDM prices were lower this week as many spot purchasers base their pricing on low/medium heat NDM. Dry buttermilk prices continue to decline in the Central and East and West regions. Prices are moving to be more in line with NDM, and contacts in the West are hoping this will lead to increased interest from spot purchasers. Dry whole milk prices are holding steady amid limited production and availability. Stakeholders say spot market activity for dry whole milk remains slow. The price range for dry whey was unchanged in the Central and West, while the Northeast range tightened this week. Domestic dry whey demand is steady in the Northeast and West. Contacts in the Central region say waning export demand for dry whey to Southeast Asia has kept more loads in domestic markets. Domestic purchasers in the Central region are not keen on buying additional loads of dry whey at this point of the year. The price range for whey protein concentrate 34% was unchanged this week. Limited supplies are causing prices to hold firm, while other higher whey protein concentrates are under considerable price pressures. The bottom of the lactose price range and mostly price series moved higher, while the tops were unchanged. The price ranges for acid and rennet casein saw no movement at the tops, but the bottom of each moved lower.

ORGANIC DAIRY MARKET NEWS: The Agricultural Marketing Service (AMS) reported August 2022 estimated fluid product sales. The U.S. sale of total organic milk products was 241 million pounds, up 2.1 percent from August 2021, but down 1.5 percent year-to-date. The August 2022 organic milk pay price in Europe adjusted higher over the previous month in Germany, Bavaria, France, and Austria. the DMN Retail Report, shows total organic dairy retail advertisements increased 28 percent from the previous retail survey report.

NATIONAL RETAIL REPORT: Total conventional dairy ads declined by 15 percent, but organic dairy ads increased by 28 percent this week. Advertisements for conventional ice cream in 48 to 64-ounce containers increased by 41 percent and maintained its position as the most advertised dairy item. The weighted average advertised price of $3.43 is two cents higher than last week’s price. Conventional egg nog in quart containers appeared in this week’s survey with a weighted average advertised price of $3.28.

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