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Weekly global protein digest: US beef exports down, China meat imports increase

15 July 2022
Jim Wyckoff Commentary -  TheCropSite

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global cattle news

US pork, beef export sales slump in latest week

USDA Thursday reported US beef net sales of 9,200 MT for 2022--a marketing-year low--were down 17 percent from the previous week and 35
percent from the prior 4-week average. Increases primarily for Japan (3,800 MT, including decreases of 500 MT), Mexico (2,900 MT), Canada (900 MT), China (500 MT, including decreases of 900 MT), and Taiwan (400 MT, including decreases of 100 MT), were offset by reductions for South Korea (700 MT). Exports of 17,100 MT were down 16 percent from the previous week and 13 percent from the prior 4-week average. The destinations were primarily to Japan (6,300 MT), South Korea (4,500 MT), China (2,300 MT), Mexico (1,000 MT), and Canada (700 MT).

US pork net sales of 18,300 MT for 2022 were down 42 percent from the previous week and 37 percent from the prior 4-week average. Increases were primarily for Mexico (10,100 MT, including decreases of 400 MT), Japan (3,400 MT, including decreases of 800 MT), China (1,600 MT, including decreases of 200 MT), South Korea (1,200 MT, including decreases of 300 MT), and Colombia (800 MT). Exports of 23,100 MT were down 28 percent from the previous week and 21 percent from the prior 4-week average. The destinations were primarily to Mexico (10,800 MT), China (3,600 MT), Japan (2,900 MT), South Korea (2,100 MT), and Colombia (1,000 MT).

USDA quarterly livestock and poultry trade report: China pork demand down

USDA reports that this month, 2022 China imports are revised down nearly 1.4 million tons from the April forecast to approximately half of 2021 levels due to moderate recovery in China pork production. China is forecast to remain the world’s leading pork importer, accounting for 20 percent of global shipments, albeit down significantly from its 42 percent of trade share in 2020. The sharp plunge in China demand leaves major exporters such as the EU, Brazil, and United States searching for markets to offset diminished trade. With limited alternative markets that can absorb sizeable volumes, global pork trade is expected to fall 13 percent in 2022.

The changes in the China pork sector have a mixed impact on other meats. China chicken meat imports are revised lower in 2022 as consumers return to eating more pork, the preferred animal protein in China. However, unlike pork, the impact of the year-on-year decline in China chicken meat imports is far more muted. China is a relatively small player in the global chicken meat trade, accounting for only 5 percent of global shipments as the world’s fifth largest importer. As such, major chicken meat exporters are expected to more easily offset the decline with shipments to other markets. On the other hand, China beef imports are forecast to rise 3 percent in 2022 as demand remains relatively unaffected by changes in the pork sector.

Beef: Global beef production for 2022 is virtually unchanged from April at 58.7 million tons. Elevated global beef prices continue to incentivize slaughter among major producers. Improved rainfall has encouraged Australian producers to retain more heifers for breeding, but beef production is still expected to increase over last year’s historic low.

Global beef exports for 2022 are forecast up 1 percent to 11.9 million tons. Growth in Brazil, Canada, and Mexico more than offset a reduction in Australia. Brazil is forecast to export a greater portion of its production on firm China, Egypt, and U.S. demand. Although global import demand remains strong, inflationary pressures and persisting logistical issues have tempered greater demand expectations amid many countries lifting COVID-19 restrictions.

Pork: Global pork production for 2022 is forecast at 110.7 million tons, virtually unchanged from April as an upward revision in China offsets declines in the EU and Brazil. Production in China is raised nearly 2 percent to 51.8 million tons but remains below pre-African swine fever levels. EU and Brazil production is revised 2 percent lower to 22.6 million tons and 4.3 million tons, respectively, on slowing export opportunities weighing on prices.

Global pork exports for 2022 are revised nearly 10 percent lower to 10.6 million tons. The decline is primarily driven by a reduction in China imports which are lowered 39 percent to nearly 2.2 million tons on improved domestic supplies. Hong Kong imports are also revised down 21 percent to 275,000 tons as an increase in live swine imports from China bolsters local production. Demand is forecasted to increase in other markets such as South Korea, Mexico, Japan, and the Philippines, but are unable to offset the immense China decline.

Chicken Meat: Global chicken meat production for 2022 is virtually unchanged from the April forecast at 101.0 million tons as an upward revision in Ukraine largely offsets decreases in Brazil and the EU. Brazil inflation weakens domestic demand while the EU continues to grapple with elevated feed prices and the impact of highly pathogenic avian influenza.

Global chicken meat exports for 2022 are revised up 1 percent from April to 13.5 million tons as an improved outlook in Ukraine and China more than offsets reduced EU and UK shipments. China chicken meat imports are forecast to tumble further as rebounding domestic pork production eases demand for other animal proteins. Reduced domestic demand also supports a historical high level for China exports.

NOTE: The Ukraine chicken meat forecast is not typically revised for the July release. However, revisions are included given the complex and fluid domestic situation as well as significant changes in export policies and market access improvements since the April forecast.

China meat imports inch higher

China imported 603,000 MT of meat in June, up 1.5% from May but down nearly 19% from last year. Through the first six months of this year, China imported 3.5 MMT of meat, down 31.9% from the same period last year, driven by a sharp reduction in arrivals of pork.

Weekly USDA dairy report

CME GROUP CASH MARKETS (7/8) BUTTER: Grade AA closed at $2.9700. The weekly average for Grade AA is $2.9475 (-0.00280). CHEESE: Barrels closed at $2.1825 and 40# blocks at $2.1100. The weekly average for barrels is $2.1756 (-0.0039) and blocks, $2.0913 (-0.0677). NONFAT DRY MILK: Grade A closed at $1.7475. The weekly average for Grade A is $1.7469 (-0.0441). DRY WHEY: Extra grade dry whey closed at $0.4900. The weekly average for dry whey is $0.4925 (+0.0020).

CHEESE HIGHLIGHTS: In the Northeast and West milk is available for processing, but some cheesemakers say holiday down time, labor shortages, and supply chain issues are having a negative impact on production. Meanwhile in the Midwest, cheese makers are concerned with some farmers downsizing and milk haulers leaving the business. Spot loads of milk continue to trade as low as $6 under Class in the Midwest. According to producers in the Midwest, spot inventories of cheese are in balance with demand. Spot purchasers in the Northeast and West say cheese inventories are available. Domestic demand is softening in these regions, though contacts report strong export demand.

BUTTER HIGHLIGHTS: Across the country cream is available, though Central contacts report seasonally declining butterfat components. Butter makers are running busy schedules in the Central and West regions, though Northeast butter production is steady to lower. Demand for butter is declining from both food service and retail markets in the Northeast and West. Some Central region contacts are growing increasingly concerned that high gas and grocery prices will cause customers to reduce their butter purchasing or switch to lower priced alternatives. Spot inventories of butter are mixed in the Northeast, but tight in the West. Across all regions, bulk butter overages range from 2 to 16 cents above market.

FLUID MILK: Milk production continues to slow in the East and Midwest regions of the country. The mixture of hot and humid conditions encourages seasonal drops in output that decrease the level of processors’ milk supplies. In the West, cooler conditions are keeping milk production closer to steady in the California and the mountainous states of Utah, Idaho, and Colorado. New Mexico milk production is declining, while improved conditions in the Pacific Northwest contribute to an increase in farm-level output. Milk spot loads were available post-holiday, with healthy buyer discounts reported in the Midwest. Class I demand is mostly steady across the country. Cream markets are seeing steady to higher demand. Availability satisfies ice cream and butter production needs. F.O.B. cream multiples for all classes are 1.32-1.43 in the East; 1.24-1.35 in the Midwest; 1.05-1.33 in the West. Condensed skim demand is good, but hauler issues persist.

DRY PRODUCTS: The low/medium heat nonfat dry milk (NDM) spot market prices are lower. NDM production is seasonally active, despite the inability of manufacturers to produce at capacity. Demand has weakened in the domestic and international markets. High heat prices are lower, on limited trading. Dry buttermilk prices are steady to lower, following trends in the NDM market. Stocks are limited for current spot sale interest. Dry whey prices are mostly steady to lower. Deliveries to contracts are ongoing as spot buyers wait for lower prices. Stocks are mixed. Whey protein concentrate (WPC) 34% prices are unchanged. Production is steady to lower. The lactose market is unchanged. Inventories are still heavy. Dry whole milk spot prices are steady. Supplies are tight. Rennet casein prices moved higher on the bottom of the range, while the acid casein price remains steady. Supplies are limited.

EUROPEAN OVERVIEW: Western European milk intakes are in seasonal declines, and some industry contacts think that high temperatures through the month of June may have further suppressed cow comfort and accelerated those seasonal milk production declines. To add to the weather woes, parts of Southern Europe are in a severe drought and agricultural output is expected to decrease. Italy and several regions within Italy have declared a state of emergency to provide funds to address the water crisis.

EASTERN EUROPEAN OVERVIEW: Like much of the northern hemisphere dairy production regions, milk output is in seasonal declines across Eastern Europe. Some parts of the region are still experiencing year to year milk output growth. However, the conflict between Ukraine and Russia weighs heavily on the agriculture and food industries. Ukrainian grain exports, critical for regional food security and feed for livestock, are starting the 2022/23 marketing year at less than half what was shipped the previous year. In addition, the upcoming grain harvest could be nearly cut in half due to lands lost to Russian forces and decreased yields.

AUSTRALIA: To start the 2022-23 Australian milk season, processors in Australia saw the need to adjust the milk pay price higher, increasing the payout to suppliers. Meanwhile, the demand for most dairy products remains strong, although markets are confronted with supply shortages, as adverse weather and the seasonal factor impacts the level of milk production for now. As well, farm and plant labor shortages continue to constrain Australia's dairy production.

NEW ZEALAND: Milk production in New Zealand has nowhere to go except up as the industry advances through the winter season lull. With that said, the industry expects lower milk output this new production season. On the demand side, buyers are not as active while waiting to obtain a better picture of what the milk supply might look like before committing to historically high commodity prices. Relative to exporting, a free trade agreement has been secured between New Zealand and the EU, worth $1.8 billion a year to NZ by 2035.

US RETAIL REPORT: The total number of conventional dairy ads grew by 15 percent, while organic ads fell by 53 percent. This week’s most advertised conventional dairy item was ice cream in 48-to-64-ounce containers, which appeared in 20 percent more ads this week. Conventional cheese blocks in two-pound packages saw the largest increase in ad appearances compared to last week, appearing in 208 percent more ads.

Brazilian BRF plant cleared to export pork to Canada

Brazilian food company BRF received approval to ship pork to Canada. The approved unit, located in Santa Catarina state, will be able to export fresh and frozen pork cuts. It is the second Canadian authorization granted to BRF this year. In May, a Parana facility unit was cleared to export cooked poultry into Canada. Ottawa approved meat imports from Brazil in March. The BRF pork plant is the eighth facility granted permission to export meat to Canada, according to meat industry group ABPA.

Tyson Foods trying to repair the supply chain in its signature chicken business

The largest US chicken supplier has committed millions of dollars to expand production, the Wall Street Journal reports, after struggling for years to meet demand and turn a consistent profit in its poultry operations. The problems preceded the pandemic but have grown as upheaval in demand and distribution patterns have strained operations. Tyson’s challenges have played out across its sprawling operations, from problems at hatcheries to short-handed processing lines, undercutting the supplier’s ability to consistently fill growing customer orders. The recovery plan includes $1.3 billion in investment in automation across production lines, along with plans to cut $1 billion in costs by 2024. Market conditions are working in Tyson’s favor. Demand from grocery stores and restaurants remains strong and meat prices are rising, providing a financial cushion amid the internal changes.

Iowa Supreme court reinstates pork producers’ right to farm

In a big victory for Hawkeye pork producers, the Iowa Supreme Court in a 4-3 decision said the state may provide livestock producers immunity from nuisance lawsuits such as ones complaining about odor. The court reversed a precedent that had struck down an Iowa law granting immunity to livestock farmers and allowed neighboring landowners to sue for damages when farm operations affected their “quality of life.” Under a ruling in a case brought by activists against New Fashion Pork, landowners still may sue if their property is “damaged” because of a farmer’s failure to comply with a federal or state law or regulation or to use prudent and generally accepted management practices. In the majority opinion, Judge Thomas Waterman wrote that “protecting and promoting livestock production is a legitimate state interest and granting partial immunity from nuisance suits is a proper means to that end.”

Virtually all HPAI restrictions removed from US commercial poultry operations

Only three of the 186 commercial poultry complexes depopulated for highly pathogenic avian influenza (HPAI) have yet to be released from quarantine, according to Animal and Plant Health Inspection Service (APHIS) data. All three are egg laying operations representing about 2.3 million head — less than 1% of the U.S. commercial egg layer flock.

TheCattleSite News Desk

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