Weekly global protein digest: US House hearing on dairy, plant-based meats

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news
calendar icon 24 June 2022
clock icon 8 minute read
Jim Wyckoff Commentary -  TheCropSite

US Senate Ag Committee approves two measures on livestock markets

The Meat Packing Special Investigator Act (S 3870) and Cattle Price Discovery and Transparency Act (S 4030). The special investigator bill would set up a separate office at USDA to investigate competition issues in the U.S. livestock industry. Opponents argue it duplicates efforts already on the books at USDA via the P&SA Act and would increase costs and regulatory burdens on smaller producers. The cattle pricing bill would establish five marketing regions in the continental U.S. and require a specified percentage of cattle be traded via the cash market. The National Cattlemen’s Beef Association says that mandating sales activity could take away other pricing opportunities for producers. Despite Sen. Chuck Grassley (R-Iowa) saying the votes are there for full Senate approval, that outcome is far from assured.

US House Ag panel hearing on dairy

The National Milk Producers Federation said the dairy industry is seeking consensus on a range of Federal Milk Marketing Order improvements, including the Class I mover, that can be taken to USDA for consideration in a federal order hearing. Mike Durkin, president of Leprino Food Company, testified on behalf of the International Dairy Foods Association, a processor group, that IDFA recommends that:

Congress require USDA to conduct regular cost of processing studies that will generate data for our industry to use to develop proposals to adjust make allowances. Current make allowances have not been adjusted in over 15 years, and as a result, they don’t reflect the cost of manufacturing today’s dairy products.

The House Agriculture Committee reauthorize and expand the Healthy Fluid Milk Incentives Projects in the Supplemental Nutrition Assistance Program (SNAP).

Congress pass permanent authorization of the Dairy Forward Pricing Program, which allows producers to enter into forward price contracts with milk buyers for milk used to manufacture Class II, III, or IV products. Current authority for this program expires on September 30, 2023, which means that no forward price contracts may be entered into after that date.

China continues pork buys for state reserves

China will buy another 40,000 MT of frozen pork for state reserves on June 24. Beijing continues to stockpile pork via weekly purchases to boost hog margins.

China’s pork imports plunged in May

China imported 130,000 MT of pork during May, down 10,000 MT (7.1%) from April and 65.7% less than last year. Through the first five months of this year, China’s pork imports at 680,000 MT fell 65.2% compared with the same period last year.

US backs pork group, Farm Bureau in Proposition 12 Supreme Court case

US government filed a brief to the Supreme Court supporting the NPPC and Farm Bureau challenge to California’s animal housing law, Proposition 12. In an amicus brief, Solicitor General Elizabeth Prelogar said California “’has no legitimate interest in protecting’ the welfare of animals located outside the state,” quoting a previous Supreme Court decision. “Voters in pork-producing States must determine what constitutes ‘cruel’ treatment of animals housed in those States — not voters in California,” the brief said, quoting a 1935 Supreme Court decision, Baldwin v. G.A.F. Seelig Inc. Of note, Senate Ag Committee Chair Debbie Stabenow (D-Mich.) previously called on USDA Secretary Tom Vilsack to support California's Proposition 12 before the Supreme Court.

Prelogar’s brief noted the U.S. “takes no position on whether petitioners will ultimately be able to prove that Proposition 12 unduly restricts interstate commerce” under the Supreme Court’s Pike v. Bruce Church Inc. decision. But at this stage, “petitioners have plausibly alleged that Proposition 12 will have substantial adverse impacts on the interstate pork market,” her brief said, urging the Supreme Court to reverse the 9th U.S. Circuit Court of Appeals’ decision to dismiss the ag groups’ challenge, and remand the case to the appeals court. “If petitioners prove those allegations, then those burdens are ‘clearly excessive in relation to’ what petitioners allege to be insubstantial or non-existent ‘local benefits,’” she said.

Background: Farm Bureau and NPPC are challenging the constitutionality of California’s Proposition 12. The state law seeks to ban the sale of pork from hogs that don’t meet the state’s arbitrary production standards, even if the pork was raised on farms outside of California. AFBF and NPPC argue Proposition 12 violates the constitution’s Commerce Clause, which restricts states from regulating commerce outside their borders. The brief states Proposition 12 “will require massive and costly changes across the entire $26-billion-a-year industry. And it inescapably projects California’s policy choices into every other State, a number of which expressly permit their farmers to house sows in ways inconsistent with Proposition 12.”

The Prop 12 case will be heard Oct. 11.

From sizzle to fizzle? Plant-based meats

Plant-based meats flew off the shelves during the pandemic and hype around Impossible Foods and Beyond Meat helped draw $2 billion of capital to the sector. Now, with more than 100 startups in the plant-based chicken nugget space alone and growth slowing, investors are worried meatless meat could fizzle out.

USDA’s weekly dairy report

CME GROUP CASH MARKETS (6/17) BUTTER: Grade AA closed at $2.9400. The weekly average for Grade AA is $2.9560 (-0.0230). CHEESE: Barrels closed at $2.1575 and 40# blocks at $2.1450. The weekly average for barrels is $2.1795 (-0.0790) and blocks, $2.1705 (-0.1025). NONFAT DRY MILK: Grade A closed at $1.8000. The weekly average for Grade A is $1.8165 (-0.0555). DRY WHEY: Extra grade dry whey closed at $0.5075. The weekly average for dry whey is $0.5080 (-0.0290).

CHEESE HIGHLIGHTS: Milk is readily available for cheese producers throughout the regions. Spot milk prices in the Midwest ranged from $5 to $1 under Class III. Despite the extra milk, cheesemakers in all regions are reporting regular concerns regarding shorthandedness and supply chain snags at the production level. Demand notes are mixed, but Western contacts relay some consumer hesitance at current upward price movements. Export demand remains healthy, based on competitive global cheese values. Block and barrel prices on the CME are under some downward pressure. Cheese stocks are noted as balanced to slowly building.

BUTTER HIGHLIGHTS: Summer temperatures are starting to affect cream availability at the butter churn. Additionally, increased ice cream production has thinned cream availability, particularly in the Midwest and East. Western cream stores remain widely available for processing. Butter plant managers continue to prepare for fall demand needs, as they churn and/or micro-fix at somewhat active levels, although staffing shortages are being regularly reported throughout the nation. Seasonally, butter demand is currently somewhat quiet, although it continues to meet producers’ expectations. Butter market tones remain quite firm, as prices continue to hover just under the $3 benchmark.

FLUID MILK: Milk production is somewhat mixed across the country, but output is generally trending level to lower. Hot temperatures across southern states, from coast to coast, are impacting cow comfort and contributing to declining farm level milk output. Production is flat in the Pacific Northwest and varies in the Northeast. Bottling sales are stable to seasonally lower. Class III demand is steadily strong, boosted by robust cheese production across the country. Contacts say condensed skim is available in Western and Central states but spot loads are harder to come by in the East. Tighter cream supplies in the Central and East are reflected in higher multiples. Cream is available in the West, and some loads are moving into other regions. Cream demand is present, but some butter and ice cream production schedules have been reduced in response to staffing issues and/or transportation delays. F.O.B. cream multiples for all classes are 1.32-1.43 in the East, 1.26-1.35 in the Midwest, and 1.05- 1.31 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices are mostly unchanged. Domestic trading is slower in the Central and East regions on tighter supplies. Spot sales are more active in the West. High heat NDM prices are steady, and inventories are limited across regions. Dry buttermilk prices pushed higher in all regions. Spot availability is tight. Reduced butter output is hampering dry buttermilk production. Dry whole milk prices are unchanged. Production is sporadic, and spot offers from some manufacturers have been muted. Dry whey prices are mostly lower. Domestic demand is mixed, and inventories are steady to growing. Whey protein concentrate (WPC) 34% prices slipped lower. Inventory levels and demand are mixed, depending on WPC 34% specification. The lactose price range is unchanged. Contract negotiations are ongoing for Q3, with prices reportedly near or slightly higher than Q2 prices. Production is active. Prices for both acid and rennet casein are steady this week.

ORGANIC DAIRY MARKET NEWS: Total organic dairy retail ads declined 7 percent. The organic dairy retail survey results comprised milk, cream cheese, and yogurt only, as retailers choose to forego weekly specials for other organic dairy products that are typically surveyed. The percentage of ads for organic milk, cream cheese, and yogurt are 78, 3, and 19, respectively. Organic milk, the most advertised dairy commodity, saw retail store ads increase 2 percent. Organic milk in gallon containers had the largest volume of organic dairy retail store ads, up 100 percent. The national weighted average advertised price, $4.95, when compared to the conventional gallon milk national weighted average advertised price, $3.33, affords a $1.62 organic premium. Organic yogurt posted the largest week-over -week ad adjustment, advancing 52 percent in ads compared to the previous retail survey. Regular 32-ounce organic yogurt had the largest volume of ads, up 219 percent. The price per container, $4.05, resulted from the 58 cents drop in the weighted average retail price. Greek yogurt 32-ounce followed closely in ad volume, but ads declined 35 percent while the weighted average retail price increased 30 cents to $5.99 per container.

NATIONAL RETAIL REPORT: Total dairy advertisements were lower during week 24, as conventional ad numbers declined by 21 percent and total organic ad numbers were seven percent lower. Conventional ice cream, in 48 to 64 ounce containers, was the most advertised item, as ad numbers grew by 18 percent week to week. Cream cheese and half-gallon milk ads, on the conventional aisle, both increased weekly, but they were rarities on a week when a majority of dairy ads decreased.

TheCattleSite News Desk

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