Weekly global protein digest: Chicken Big Mac, price of beef falling in US

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global protein news
calendar icon 25 August 2022
clock icon 9 minute read
Jim Wyckoff Commentary -  TheCropSite

World Bank: “We believe food prices reached their highest level in the second quarter of 2022”

World Bank Senior Agriculture Economist John Baffes said last week in an interview with the Japan Times (link), noting that the World Bank’s Food Price Index has dropped by roughly 12% since its high in April.

Commercial chicken flock confirmed with HPAI in California

USDA’s Animal and Plant Health Inspection Service (APHIS) said a commercial broiler breeder flock of 33,900 birds in Fresno County, California, has highly pathogenic avian influenza (HPAI), marking the 21st state to have HPAI in a commercial operation. With three infections in commercial flocks in Utah last month, there are now four U.S. flocks still under active quarantine in the U.S.

Some Senate Democrats call for USDA to rethink efforts on methane digesters

Five Senate Democrats want USDA to back away from plans to encourage the installation of methane digesters at livestock operations, warning USDA Secretary Tom Vilsack in a letter that the effort will result in more consolidation in agriculture and the U.S. food industry. The lawmakers cited costs for a methane digester range from $400,000 to $5 million and “would not be economic viable without significant public subsidies and incentives.” They argued that money spent on subsidizing methane digesters are funds that “cannot be spent on alternative manure management strategies or regenerative agriculture practices.”

Chicken Big Mac to be tested by McDonald’s after an upbeat U.K. trial

McDonald's will be testing a chicken Big Mac in select Miami-area locations later this month, the company confirmed to USA Today. The menu item was first introduced in the United Kingdom earlier this year and met with much positive feedback, selling out less than two weeks. "We're always looking to give our fans more ways to enjoy the classic menu items they know and love," McDonald's said in a statement. "Made with two crispy tempura chicken patties, our iconic Big Mac sauce, and topped off with pickles, shredded lettuce, and American cheese, this sandwich brings some of our fans' favorite flavors together for the perfect bite."

Beef is getting cheaper, bringing some economic relief to consumers

Prices of beef in the US, typically among the costliest grocery store purchases, are falling after more than a year of increases, as consumer demand softens for some cuts. Supplies are improving due to better staffing at meat plants, and supermarkets are offering more discounts on rib-eye, New York strip and other often-expensive products, according to the WSJ. Retail beef prices fell 0.7% for the four-week period ended Aug. 7, compared with the same period a year ago, according to data from research firm Information Resources Inc. That decline came after beef prices fell 1% during the prior four-week period, which was the first monthly decline since June 2021.

Latest USDA monthly cold storage report

July 2022 Highlights

Total natural cheese stocks in refrigerated warehouses on July 31, 2022 were up 1 percent from the previous month and up 5 percent from July 31, 2021.

Butter stocks were down 5 percent from last month and down 21 percent from a year ago.

Total frozen poultry supplies on July 31, 2022 were up 5 percent from the previous month and up 6 percent from a year ago. Total stocks of chicken were up 6 percent from the previous month and up 12 percent from last year. Total pounds of turkey in freezers were up 3 percent from last month but down 3 percent from July 31, 2021.

Total frozen fruit stocks were up 22 percent from last month but down 2 percent from a year ago. Total frozen vegetable stocks were up 10 percent from last month but down slightly from a year ago.

Total red meat supplies in freezers were down 1 percent from the previous month but up 23 percent from last year. Total pounds of beef in freezers were down 1 percent from the previous month but up 27 percent from last year. Frozen pork supplies were down 2 percent from the previous month but up 20 percent from last year. Stocks of pork bellies were down 20 percent from last month but up 53 percent from last year

China’s pork imports unchanged in July but well below year-ago

China imported 120,000 MT of pork in July, unchanged from June but down 65.1% from last year. Through the first eight months of this year, China imported 930,000 MT of pork, also down 65.1% from the same period last year.

International Dairy Market News

WESTERN EUROPE: Across Europe, milk production continues to trend downward along seasonal tendencies. In many of the Western European countries, milk deliveries are below previous year-to-date values. However, some countries like Austria, Belgium, the Czech Republic, Denmark, and the Baltic States have seen milk production growth in the first half of the year. Summertime heat and drought conditions continue to suppress milk production and push milk components down.

EASTERN EUROPE: Milk production is seasonally trending lower. High temperatures and drought extend into Eastern Europe, where farmers are finding reductions in milk and crop yields. One bright spot is Poland that has realized year-to-date milk growth.

AUSTRALIA: Australia continues to face the challenge of weakening milk production. Besides farm and manufacturing labor shortages, continuing to drag down milk production are producers reducing cow numbers and milk producers leaving the industry. With that said, the local dairy situation has become fairly interesting as competition grows amongst milk processors, in correlation to the milk supply deficit. The recent record high milk price was a bit of a surprise for some in the Australian dairy industry.

NEW ZEALAND: While milk output is lower, dairy farm costs continue to eat into milk payout, eating away at most of the milk price gain. Market sources indicate that operating expenses for dairy farms, including interest, rent, principal repayment, and taxes are 22 percent higher than in the 2021 milk production season. In response to the fixed milk price (FMP) recently introduced by a major New Zealand milk producer to its suppliers, sources expect volatility in the current market will probably prompt oversubscribing to the FMP, as it did recently in July.

SOUTH AMERICA: Brazilian contacts say governmental programs to help the impoverished could benefit consumer level buying, but dairy retail demand has been lower as a result of fluctuating currency values and inflation rates. Dairy farmers in the region continue to face a plethora of cost and employment related issues. Some contacts say drought in parts of the region remains at the forefront and has created a ripple effect on both feed costs and general milk output across the continent.

US RETAIL REPORT: Total conventional dairy ads are up 12 percent and organic ads are up 7 percent. Milkfat-based dairy ads are leading the way this week, as conventional ice cream, in 48-to-64- ounce containers, is once again the top advertised dairy item this week. The national weighted average advertised price for conventional ice cream in 48-64-ounce containers is $3.39, down 9 cents. Another cream -based product, 16-ounce conventional butter, had 63 percent more ads than last period, with a national weighted average advertised price of $4.79, up $1.12 from the previous survey period.

Weekly USDA dairy report

CME GROUP CASH MARKETS (8/19) BUTTER: Grade AA closed at $2.9400. The weekly average for Grade AA is $2.9665 (+0.0040). CHEESE: Barrels closed at $1.8950 and 40# blocks at $1.8200. The weekly average for barrels is $1.9370 (+0.0630) and blocks, $1.8710 (+0.0490). NONFAT DRY MILK: Grade A closed at $1.5200. The weekly average for Grade A is $1.5240 (+0.0295). DRY WHEY: Extra grade dry whey closed at $0.4500. The weekly average for dry whey is $0.4490 (+0.0070).

CHEESE HIGHLIGHTS: Milk production is declining but milk volumes remain available for cheese making across all regions. In the Northeast and West, cheesemakers are running busy production schedules. Some production facilities in both regions are running below capacity due to labor shortages. In the Central region, cheesemakers say more milk is available than typically expected at this time of the year due to some expected and unexpected down time at production facilities. Cheese inventories of both blocks and barrels are available for spot purchasing in the Northeast and West, though barrel inventories are snug in the Central region. Market prices for cheese have declined in recent weeks, contributing to an uptick in demand from customers in both domestic and international markets. Contacts in the Central region say market prices of $2 may be a price barrier, as they feel that may be more than purchasers are willing to pay.

BUTTER HIGHLIGHTS: In the Northeast, cream multiples are pushing higher amid strong demand. Higher multiples have enticed some butter makers to sell cream loads, constraining butter production. Cream availability is tight in the central and West regions. Tight cream supplies have contributed to increased micro-fixing rates in the Central region. Ice cream makers in the West are purchasing loads of cream to run steady production schedules. Western butter makers are running busy production schedules, though some say limited tanker availability has contributed to unplanned down time. Retail and food service demand are trending higher in the West, amid Labor Day and back to school sales. Steady demand is present in the Northeast. Contacts in the central region say food service and retail customers are purchasing hand-to-mouth. Some stakeholders in the region say this may contribute to higher butter prices in the coming months. Butter inventories are available in the West, but tighter in the Northeast.

FLUID MILK: Milk output is mixed from flat to declining nationwide. Depending on the area, humidity is playing a role in keeping cow comfort levels in the negative. Generally, milk does remain available for processing needs, but there are exceptions. In Arizona, where flooding has inhibited hauling and processing, plant managers are getting milk from other parts of the Western region. Class I demand has picked up markedly in recent weeks, and orders are expected to continue for the near-term, as schools continue to open across the country. Condensed skim is available, but prices remain at above-market levels. Cream availability, as butterfat levels decrease at the farm level seasonally, has begun to shore up week after week. F.O.B. cream multiples are 1.45-1.60 in the East, 1.40-1.55 in the Midwest, and 1.10-1.46 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices continued their downtrend this week. Processors are clearing warehouse space at more aggressive rates, as domestic end users are fiscally benefitting from a quieter Mexican import market. Dry buttermilk prices were steady to lower, as inventories remain somewhat snug, but demand levels are tepid. Ice cream manufacturers are expected to slow down production, and, therefore, demand for buttermilk, in the coming weeks. Dry whole milk prices held steady, but offers were reported above the current range. Dry whey prices were mixed from region to region. Generally, dry whey remains available for end users, but brand specific loads are keeping higher prices steady or higher. Whey protein concentrate 34% prices were generally steady, although the top of the range shifted one cent lower. Secondary market sales of whey protein concentrate 34% are still ranging above the reported first/ spot sale range. Lactose prices were mostly steady this week, as market tones are reportedly stable. Despite some notes that acid and rennet casein are potentially becoming slightly more available, prices are unchanged this week.

TheCattleSite News Desk

IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any traders and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.

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