3 March 2023

12 minute read

By: Jim Wyckoff

Beef: US net sales of 8,100 MT for 2023 were down 48 percent from the previous week and 62 percent from the prior 4-week average. Increases primarily for Japan (2,600 MT, including decreases of 300 MT), Taiwan (2,300 MT, including decreases of 100 MT), China (1,500 MT, including decreases of 200 MT), Mexico (400 MT), and Hong Kong (400 MT, including decreases of 100 MT), were offset by reductions for South Korea (200 MT) and Colombia (100 MT). Exports of 16,100 MT were down 4 percent from the previous week and 5 percent from the prior 4-week average. The destinations were primarily to Japan (4,900 MT), South Korea (4,000 MT), China (2,800 MT), Mexico (1,300 MT), and Taiwan (1,000 MT).

Pork: US net sales of 31,000 MT for 2023 were down 40 percent from the previous week and 21 percent from the prior 4-week average. Increases primarily for Mexico (13,400 MT, including decreases of 100 MT), South Korea (4,500 MT, including decreases of 600 MT), Japan (4,300 MT, including decreases of 300 MT), Canada (2,300 MT, including decreases of 300 MT), and Australia (1,400 MT), were offset by reductions for Nicaragua (100 MT). Exports of 30,400 MT were up 4 percent from the previous week, but down 3 percent from the prior 4-week average. The destinations were primarily to Mexico (13,800 MT), China (4,100 MT), Japan (3,800 MT), South Korea (2,200 MT), and Canada (1,500 MT).

USDA semiannual report on European Union poultry trade and products

European Union (EU) chicken meat production in calendar year (CY) 2023 is forecast to remain stable (0.3 percent growth) due to continuing Highly Pathogenic Avian Influenza (HPAI) outbreaks in major EU producing countries. While broiler farms were relatively less affected by HPAI outbreaks, farms producing laying hens, turkeys and ducks' farms saw significant reductions in breeding stock. The broiler sector was indirectly affected by trade restrictions. Rising production costs due to higher feed grain and energy prices (exacerbated by the ongoing war in Ukraine) are constraining production. EU chicken meat production grew 1.2 percent in CY 2022, driven mainly by higher domestic consumption as COVID-19 restrictions were lifted enabling hotels, restaurants, and institution catering establishments (HRI) to re-open.

Polish chicken meat production is expected to slightly decline in CY 2023 due to HPAI outbreaks and lower profit margins triggered by higher energy and feed costs. Increasing competition from less expensive Ukrainian poultry entering the EU (see trade section) is also putting pressure on the Polish chicken meat industry that has just started to rebound after the COVID-19 restrictions. Spanish chicken meat production is forecast to slightly increase in CY 2023 as the Spanish poultry industry expects modest growth in HRI and in retail sales. Profit margins among Spanish poultry producers rebounded during the second half of CY 2022 as market prices increased. HPAI outbreaks in Spain mostly affected turkeys, broilers, ducks, geese, laying-hens, and breeding hens. Other poultry meat production like duck, quail, goose, pheasant, and partridge are mainly produced outdoors. South Africa which has historically been the leading export market for Spanish chicken, has banned poultry imports from Spain.

French chicken meat production is forecast to further decrease in CY 2023. Despite strong consumer demand, the French poultry sector has been adversely affected by higher production costs. The average cost of poultry feed increased by 26 percent in CY 2022. Fewer chicks are available due to ongoing HPAI outbreaks. While consumers in the French retail sector continue to favor locally produced quality chicken, less expensive Polish and Ukrainian chicken meat are increasingly used for HRI. Chicken meat production in the Netherlands is expected to slightly decline in CY 2023 after no growth in CY 2022. Increased production costs have put a lot of pressure on Dutch poultry farmers, even as they manage to remain profitable. This situation will almost certainly accelerate restructuring of poultry operations, perhaps even forcing the closure of some slaughter facilities.

In Italy, chicken meat production in Italy is expected to return to normal levels after HPAI outbreaks affected poultry meat production in CY 2022. In other EU countries, growing demand especially in retail is fueling slight increases in production. This trend is particularly evident in the demand for chicken meat produced under quality schemes like organic and free-range chicken. Paradoxically, organic and free-range production systems are also most susceptible to HPAI outbreaks as they come into contact with infected wildfowl and migratory birds.

In the wake of the many HPAI outbreaks since 2021, EU Member States are reinforcing surveillance and biosecurity measures on poultry farms and in some cases even instituting temporary bans on freerange farms.

Consumption

EU domestic consumption of chicken meat is expected to increase by 1.4 percent in CY 2023 as both retail sales and consumption in the HRI sector will increase.

Over the longer term, chicken meat consumption is expected to continue growing as consumer preferences continue to favor chicken over other animal protein. Chicken meat is generally more affordable. European consumers also generally consider chicken meat to be healthier, more versatile and easier to prepare.

Trade

EU chicken meat imports increased 13 percent in CY 2022 and are expected to further increase by 8 percent in CY 2023. The European HRI sector accounts for the largest share of imported chicken, Imports from Brazil and Thailand which were disrupted by COVID-19 restriction have regained market share. Imports from the UK continue to decline as the EU is imposing strict sanitary controls following Brexit.

EU imports of Ukrainian chicken meat grew by 60 percent in CY 2022, clearly benefitting from EU regulation 2022/870 which gave temporary trade concessions under the Deep and Comprehensive Free Trade Agreement (DCTA) of 2011. Under the new EU rules, Ukrainian chicken meat is eligible to enter the European market without tariffs or quotas. This measure is temporary and, unless it is extended, it will expire on June 5, 2023.

In CY 2022, EU chicken meat exports decreased by 6.1 percent driven by a 34 percent drop in EU chicken meat exports to Ghana and a 9 percent drop in exports to the Democratic Republic of Congo, two major markets for EU chicken. In CY 2021, Ghana and Congo did not have HPAI restrictions, and they were less affected by COVID-19 restrictions. This enabled EU exporters to ship low-priced cuts which were up to 30 percent cheaper than Brazilian competition. However, with rising production costs in the EU, EU chicken meat exports are now less competitive in African markets.

China’s sow herd contracts

China’s sow herd shrank 0.5% at the end of January compared with the prior month, according to ag ministry data. However, the herd at 43.67 million head was 1.8% bigger than January 2022.

Argentina halts poultry exports after case of HPAI

Argentine on Tuesday suspended poultry product exports after the first case of highly pathogenic avian influenza (HPAI) was confirmed in an industrial flock in the province of Río Negro. The country’s ag ministry said that’s an area with low poultry density. Argentina has confirmed about 25 cases of HPAI, mainly in wild birds. About 10% of Argentina’s poultry production is exported, with China being its top market taking roughly three-quarters of all shipments.

USDA confirms HPAI in Illinois commercial turkey flock

USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed highly pathogenic avian influenza (HPAI) in a commercial turkey meat bird flock in Wayne County, Illinois, with 18,200 birds. This is the first case of HPAI in a commercial operation in Illinois as prior cases in 2022 were all in either non-poultry or backyard flocks. In the last 30 days, there have been 29 flocks confirmed in 14 states.

Germany, Poland report ASF cases

Another case of African swine fever (ASF) was confirmed on a small domestic hog farm in the eastern state of Brandenburg, Germany. Poland discovered ASF in five wild boars in the northern part of the country.

Mildly bullish USDA cattle on feed data

Last week’s USDA Cattle on Feed Report showed all three categories on the bullish side of the average pre-report estimates. USDA reported the Feb. 1 feedlot inventory at 95.9%, January placements at 96.4% and last month’s marketings at 104.2% of year-ago levels. While the report data was mildly friendly compared to the pre-report expectations, the underlying numbers are fully bullish as feedlot supplies and available calves for placement on feed continue to tighten.

USDA cold storage data supportive for beef

USDA’s Cold Storage Report showed beef stocks dropped contra-seasonally during January, while pork inventories climbed slightly more than average. Beef stocks at the end of January totaled 532.7 million lbs., down 11.2 million lbs. (2.6%) from December. The five-year average was a 7.7-million-lb. increase in beef stocks during the month. Pork stocks totaled 517.7 million lbs., up 61.3 million lbs. (13.4%) versus December, whereas the five-year average was a 54.6-million-lb. increase during the month.

Brazilian exporters expect to keep supplying China with beef despite ban

Brazilian meatpackers Minerva SA, Marfrig and JBS said they will be able to keep supplying China with beef despite a ban after a confirmed case of bovine spongiform encephalitis (BSE) in the country. The companies say they intend to fill export orders to China via plants in neighboring South American countries.

Plant-based dairy alternatives

The US FDA issued new guidance Wednesday that requires companies to better explain how plant-based dairy alternatives compare with dairy milk. Under the new proposal, the FDA would continue to label those products “milk,” but explain on prominent labels how their nutritional content differs from cow’s milk, such as calcium or vitamin D levels. The framework drew mostly cheers from dairy producers, but advocates for plant-based milks said that it would add unnecessary burdens to the growing industry. The agency is soliciting comments.

Latest weekly USDA dairy market report

CME GROUP CASH MARKETS (2/24) BUTTER: Grade AA closed at $2.4300. The weekly average for Grade AA is $2.3925 (-0.0290). CHEESE: Barrels closed at $1.5400 and 40# blocks at $1.8800. The weekly average for barrels is $1.5725 (+0.0200) and blocks, $1.9375 (+0.0570). NONFAT DRY MILK: Grade A closed at $1.2150. The weekly average for Grade A is $1.2163 (-0.0157). DRY WHEY: Extra grade dry whey closed at $0.4650. The weekly average for dry whey is $0.4594 (+0.0204).

BUTTER HIGHLIGHTS: Cream is plentiful in all regions, though contacts in the Central and West regions report steady to lighter demand this week. Butter makers in parts of the upper Midwest report winter storms this week may have an impact on production and require some cream handlers to look for different destinations for loads. In the Northeast, butter makers are running active schedules, and some manufacturers are churning butter on a seven-day schedule. Butter makers are producing strong amounts of butter, despite persistent regional labor shortages. Central region contacts say butter inventories are in sufficient shape for the spring. Butter inventories are tighter in certain parts of the East. Meanwhile in the West, spot inventories of unsalted butter are tighter than salted. Demand for butter is light to weak from both domestic and international customers in the West. Retail and food service butter demand is unchanged in the East, though some stakeholders say retail demand is trending higher than this time last year.

CHEESE HIGHLIGHTS: In the Northeast and West, milk is available for cheesemakers to operate steady production schedules. Contacts in the Midwest say they are running busy schedules, but some in the upper parts of the region anticipate down time this week due to winter storms. Milk is being sold in the region for as much as $10 under Class III as volumes remain ample. In the Northeast, demand for Italian-type cheeses is strong, while retail and food service demands are steady. Contacts in the West relay sales to retail and food service markets are steady to lighter, while export demand is mixed. Retail cheese makers say they are busy in the Midwest, but barrel makers report orders are down compared to last year. Midwest cheesemakers say orders of Italian style cheeses are unchanged. Cheese block inventories are available, though lighter than previous weeks, in the Northeast. On the CME, the gap between blocks and barrels looms, but contacts in the Midwest view current price points as healthy.

FLUID MILK: Milk output is mixed from region to region and from state to state. For instance, in most Western states, improved cow comfort and weather are keeping output steady to higher. In Colorado, though, recent single-digit temperatures have slowed output. Eastern and Midwestern regions have also experienced some inclement weather. That said, milk availability reports are anything but mixed. There is plenty of milk available for processing across the Classes. Bottlers are taking on steady to lighter milk loads, as schools are breaking or prepping for spring vacations. Class III spot milk prices ranged from $10 to $2 under in the Central region. Cream is readily available in all regions. Central region butter makers are finding cream in the West and Midwest, but Midwestern and Eastern Class II/III cream usage is noted as increasing. Condensed skim availability has been steady in recent weeks, but now some contacts are saying it is widely available. F.O.B. cream multiples are 1.16-1.26 in the East, 1.05-1.26 in the Midwest, and .85-1.21 in the West.

DRY PRODUCTS: Dry buttermilk prices shifted lower in all regions. Demand is light, and inventories are reportedly widely available, particularly in the Western states. Low/medium heat nonfat dry milk (NDM) prices slid lower in the West, while moving steady to higher in the Central/Eastern regions. Condensed skim availability is anything but variant, as contacts say it is widely available for drying. Dry whole milk prices increased, on spring demand upticks. Dry whey prices were mixed throughout the regions. Central prices firmed again, as Midwestern processors report availability as tighter. Whey protein concentrate 34% prices continue to decrease, as the entire whey protein complex remains in a bearish stint following a relatively long bullish run throughout the 2022 calendar year. Lactose prices were steady, but market tones are edging on the bearish side of the spectrum. Casein prices were unchanged, as contacts expect steady to quiet markets until Q2.

ORGANIC DAIRY NEWS: The Agricultural Marketing Service (AMS) reported December 2022 estimated fluid product sales. The U.S. sale of total organic milk products was 230 million pounds, down 9.4 percent from December 2021 and down 2.0 percent year-to-date. Meanwhile, the February 2023 in-store retail surveys of selected supermarkets in twenty-nine U.S. cities show the retail prices of organic whole milk in the half gallon container. The prices ranged from $3.99 in multiple cities to $6.49 in Pittsburgh, PA. The simple average price for February 2023, $4.81, is unchanged from the previous month.

NATIONAL RETAIL REPORT: Total conventional ad numbers decreased 1 percent this week and total organic dairy ads decreased by 10 percent. Conventional ice cream in 48-64 ounce containers was the most represented dairy product advertised, with a weighted average advertised price of $4.22, up 25 cents from last week. Sour cream in 16 ounce containers was the most advertised organic dairy item, with a weighted average advertised price of $3.00, down $1.49 from last week. Conventional butter in one pound packages appeared in 10 percent fewer ads this week, with a weighted average advertised price of $4.53, down 29 cents from last week.