24 November 2023

10 minute read

By: Jim Wyckoff

North America

Oceania

USDA confirms more cases of HPAI in South Dakota and California

USDA's Animal and Plant Health Inspection Service (APHIS) confirmed three additional cases of highly pathogenic avian influenza (HPAI) in commercial poultry operations in Edmunds County, South Dakota. The affected flocks include 30,100 commercial turkey breeder replacements, 19,200 commercial turkey breeder hens, and 33,400 commercial meat birds. This brings the total number of affected commercial flocks in South Dakota to 13, with a combined total of 451,500 birds.

Besides the South Dakota cases, USDA also confirmed HPAI at a commercial duck breeder operation in Fresno County, California, involving 23,400 birds.

The continued spread of HPAI in poultry operations is a concern for the poultry industry, as the virus can lead to significant economic losses. Efforts are being made to contain and mitigate the spread of the virus, including depopulation of affected flocks and increased biosecurity measures in poultry operations.

USDA annual Australia dairy and products report

Milk production for 2024 in Australia is forecast to increase by 0.6 percent to 8.50 million metric tons (MMT) after stabilizing in 2023 at an estimated 8.45 MMT from previous years of declining production. The forecast is amid an El Niño weather pattern in late 2023, likely to continue into 2024. The end to economic circumstances that encouraged dairy farmers’ diversification toward beef cattle production has strongly contributed to the stabilization of milk production. Factory use consumption of milk is forecast to increase to 5.847 MMT from an estimated 5.817 MMT in 2023, and fresh milk consumption is forecast to continue its gradual annual decline to 2.41 MMT. A new record cheese production of 445,000 metric tons is forecast for 2024, and the export of cheese is forecast to rise by 28 percent. The volume of butter, skim milk powder, and whole milk powder production are all forecast to decline moderately in 2024. However, exports for these three dairy commodities are also forecast to remain stable.

China's sow herd declines for tenth consecutive month

Data from the Chinese Ministry of Agriculture and Rural Affairs revealed that China's sow herd has decreased to 42.1 million, down from 42.4 million in September, marking a tenth consecutive month of declines. However, state broadcaster CCTV indicated that the government still considers this level to be higher than necessary, as pork consumption has been lower than anticipated, and productivity has continued to rise. This situation has put pressure on hog prices in China, which are now 42% lower than they were a year ago.

The ministry has stated its intention to "stabilize" the situation and encourage a more reasonable level of production. However, specific details about the policy shifts that may be implemented to achieve this goal have not been provided.

USDA this week began reporting on number of US hogs raised in compliance with animal confinement legislation

This reporting includes California's Proposition 12 for the first time. Prop 12 requires that pork produced on farms outside California provides breeding sows with at least 24 square feet of floor space, the same as required within the state.

This new classification will be included in the National Weekly Direct Swine Non-Carcass Merit Premium report, according to the Agricultural Marketing Service (AMS). Until now, ACL-compliant hogs were categorized as "other," which included hogs raised under various programs focusing on animal welfare, antibiotics, diet, genetics, meat quality, process verification, sow housing, and weight. The volume of ACL-compliant hogs under federal livestock reporting laws has grown large enough to warrant a separate listing, as per AMS.

USDA said this addition will provide valuable information to stakeholders in the pork industry, allowing them to make informed decisions related to ACL-compliant hogs. The National Pork Producers Council has been involved in advocating for this reporting and has stayed engaged with the USDA's Agricultural Marketing Service throughout the process. California has set Jan. 1 as the compliance date for Prop 12.

Neutral USDA cattle-on-feed report

Last Friday’s Cattle on Feed Report showed the Nov. 1 feedlot inventory up 1.7% from year-ago, as placements rose 3.8% and marketings declined 2.5%. All three categories were close to the pre-report estimates, so there was limited price impact.

How China’s African swine fever outbreaks affected global pork markets

Animal disease outbreaks can cause unexpected changes in supply and demand for meat and other livestock products. These changes can result in price fluctuations and disruptions in foreign trade that create uncertainty in international markets. Diseases that spread across national boundaries and result in the culling of large numbers of animals in major producing countries are especially disruptive.

This is what happened when African swine fever (ASF) spread from Europe to China in 2018—one of the largest animal disease incidents ever. The outbreak reduced China’s pork supply, and Chinese pork prices more than doubled to reach record levels. As China accounts for nearly half of the pork produced and consumed in the world, this report investigates the degree to which China’s reduced pork supply affected pork-exporting countries.

What Did the Study Find? The ASF virus moved from Europe to China in August 2018, then spread rapidly throughout the country. The virus impacted China’s pork supply more than indicated by the number of officially reported outbreaks.

Following China’s first ASF cases, its swine herd went through a 30-month cycle of decline and recovery from the third quarter of 2018 (Q3) to 2021 (Q1).

China lost an estimated 27.9 million metric tons of its pork production during the 30-month cycle. China imported a record volume of pork during those months, but the imports replaced only one-fifth of lost production. Thus, China experienced shortfalls in pork supplies for about 18 months, concentrated during the second half of 2019 and most of 2020.

Increases in pork prices lagged the spread of the disease. Pork prices in China more than doubled, with most of the increase occurring about a year after the initial outbreaks. Pork prices remained at a high level for 14 months and then fell rapidly during 2021. Pork prices returned to near their pre-ASF level about 38 months after the first outbreaks.

Pork exports to China surged during 2019–20. China accounted for 45 percent of world pork imports in 2020.

A total of 31 countries exported pork to China, but the European Union accounted for 58 percent of the exports. The United States was the second-leading pork exporter to China, with a 15 percent share, despite trade tensions that coincided with China’s ASF outbreaks.

During the 14-month peak in China’s import demand, the share of pork exported to China increased for top pork-exporting countries. Sales of higher value cuts grew fastest.

Impacts on pork markets outside of China were relatively modest. For example, increases in pork prices in three leading pork exporting countries (the United States, Germany, and Spain) were relatively brief and much smaller in magnitude than price increases in China.

Volatility in China’s pork market is an ongoing source of uncertainty for exporters despite the rebound in China’s production.

Weekly USDA dairy report

CME GROUP CASH MARKETS (11/17) BUTTER: Grade AA closed at $2.4900. The weekly average for Grade AA is $2.6225 (-0.1785). CHEESE: Barrels closed at $1.5600 and 40# blocks at $1.6000. The weekly average for barrels is $1.6530 (+0.0440) and blocks, $1.6220 (-0.0315). NONFAT DRY MILK: Grade A closed at $1.1925. The weekly average for Grade A is $1.2065 (+0.0215). DRY WHEY: Extra grade dry whey closed at $0.4100. The weekly average for dry whey is $0.4120 (+0.0210).

BUTTER HIGHLIGHTS: Cream availability is increasing across all regions. Butter price on industry cash exchanges continue to fall to levels not seen since mid-summer. In the East, butter production is limited as many processors report micro-fixing to keep inventories under control through the end of the year. Butter processors in the Central region are also opting to micro-fix for the same reason. In the West, processors are utilizing some additional cream to operate stronger production schedules than in recent weeks. Some plant managers say they have started to shift production focus from retail towards bulk butter, especially as cream prices remain lower than in recent weeks. Holiday retail demand remains strong as many retail stores have butter on advertisements. Butter Bulk butter overages range from 2.0 to 10.0 cents over market value.

CHEESE HIGHLIGHTS: Steady milk volumes are clearing into Class III operation in the Eastern region. Cheese production is steady in the East and cheddar continues to be the most in-demand American-type cheese. Demand is steady on the retail front. Spot milk availability remains somewhat tight in the Midwest with spot milk prices hovering around $1-over Class. Nonfat dry milk usage in cheese processing has increased as a result of limited spot milk offers ahead of the holiday week. Midwest cheese demand is steady to stronger. In the West, cheese makers are operating steady production schedules. Retail demand is steady to stronger. Across the country, demand from the foodservice sector has dwindled as high menu prices have deterred customers. Contacts relay domestically produced cheese loads carry a premium price over internationally produced loads, causing light export demand.

FLUID MILK: School breaks are here, and Class I needs have lightened somewhat. Still, as retailers gear up for some busy weeks ahead, that sector has offset some of the food service related drawdowns. Cheesemakers in the Central region continue to relay somewhat snug, particularly on the eve of a holiday week, milk availability. Spot milk prices in the Upper Midwest were reported from $.25- to $1-over Class, compared to $.50-under to $1-over Class during week 46 of 2022. Milk production varies from one area to the next, but mild fall weather has benefitted most parts of the country, particularly regarding component levels. Regarding components, namely milkfat, cream availability has noticeably loosened in most regions. Butter makers, ice cream manufacturers, and other cream end users are hesitant to add to end-of-year inventories, therefore cream has grown more difficult to place. However, contacts say that although they expect cream to be plentiful in the coming holiday week, it is still below the levels they typically see. Condensed skim has grown in availability throughout the country. F.O.B. cream multiples are 1.15-1.30 in the East, 1.14-1.28 in the Midwest, and 1.10-1.35 in the West.

DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices were mixed, but the price changes were relatively slight. An international tender has given some life to global skim milk powder markets and aided the NDM market tone in the United States. Dry buttermilk prices were steady to higher in all regions, as recently produced loads are tight, particularly in the West. Dry whole milk prices dipped this week, as market needs have quieted towards the end of the year. Dry whey prices were mixed nationally. In the Central region, prices were steady to higher as market participants work through early 2024 contracting. Bakery needs for whey are stable, but ice cream end use has slowed. Whey protein concentrate (WPC) 34% prices moved higher, as demand for higher protein blends continues to keep processors busy. Lactose prices were steady to higher. Lactose demand is lighter on export markets but holding up domestically. Rennet and acid casein prices shifted downward this week.

ORGANIC DAIRY MARKET NEWS: The number of retail organic ads in this week’s survey increased by 54 percent, from last week. Ads for organic butter, cheese, and cream cheese declined this week. The commodity which saw the most growth in organic retail ads this week was ice cream, with an increase of 664 percent. Organic eggnog and sour cream appeared in this week’s survey, after being absent last week. The Agricultural Marketing Service (AMS) reported September 2023 estimated fluid product sales. The U.S. sale of total organic milk products was 228 million pounds, down 4.0 percent from the previous year, and down 1.5 percent year-to-date. Compared to last period: Trade activity and demand are good for organic feed corn, while organic soybeans trade activity and demand are moderate.

NATIONAL RETAIL REPORT: In this week’s survey, the total number of conventional dairy ads grew by 15 percent, while total organic dairy ads increased by 54 percent. Conventional ice cream in 48-to-64-ounce containers was the most advertised conventional dairy product this week, after appearing in 145 percent more ads than last week. This item’s weighted average advertised price was $3.67, down $0.66 from last week.