21 July 2023

27 minute read

By: Jim Wyckoff

South America

North America

Asia

Weekly USDA US beef, pork export sales

Beef: Net US sales of 20,900 MT for 2023 were up noticeably from the previous week and up 60 percent from the prior 4-week average. Increases were primarily for South Korea (7,800 MT, including decreases of 600 MT), Mexico (4,100 MT, including decreases of 100 MT), China (2,900 MT, including decreases of 200 MT), Japan (1,900 MT, including decreases of 500 MT), and Canada (1,800 MT, including decreases of 100 MT). Exports of 16,200 MT were up 16 percent from the previous week and 1 percent from the prior 4-week average. The destinations were primarily to Japan (4,200 MT), South Korea (3,600 MT), China (3,000 MT), Mexico (1,500 MT), and Taiwan (1,300 MT).

Pork: Net US sales of 19,200 MT for 2023 were down 22 percent from the previous week and 28 percent from the prior 4-week average. Increases were primarily for China (5,300 MT, including decreases of 100 MT), Mexico (5,000 MT, including decreases of 400 MT), Japan (4,100 MT, including decreases of 200 MT), South Korea (900 MT, including decreases of 200 MT), and Canada (900 MT, including decreases of 400 MT). Exports of 25,300 MT were up 31 percent from the previous week, but down 12 percent from the prior 4-week average. The destinations were primarily to Mexico (8,000 MT), China (4,400 MT), Japan (4,300 MT), Canada (1,900 MT), and Colombia (1,700 MT).

China pork imports slowed a little in June but still well ahead of year-ago

China imported 130,000 MT of pork in June. While that was down 7.1% from May, it was up 4.5% from June 2022. Through the first half of 2023, China imported 940,000 MT of pork, up 16.5% from the same period last year.

Japan imposes temporary ban on poultry imports from the Brazilian state of Santa Catarina

The move is due to concerns over highly pathogenic avian influenza (HPAI), found in a backyard chicken, as reported by Brazil's meat lobby, ABPA. This follows a similar suspension previously applied to Espirto Santo after an HPAI outbreak on a non-commercial farm. In response, Brazil's Agri Minister, Carlos Favaro, plans to negotiate poultry import requirements with Japanese authorities during an upcoming visit. The occurrence in Santa Catarina is only a minor blow to Brazil's overall exports as markets there contribute a mere 3% to the country's total chicken exports, despite it being Brazil's second-largest meat processor.

Lawsuit attacks CAFO permits

The Wisconsin Dairy Alliance has spearheaded a lawsuit arguing that the state has overstepped the boundaries set by the U.S. Clean Water Act. The contention lies in the state's requirement for larger dairy farms to acquire special permits, the objective of which is to prevent manure pollution in waterways. The Dairy Alliance maintains that the stipulations extend beyond the mandates of the federal act.

Monthly USDA livestock and dairy outlook summary

Beef/Cattle: The semiannual Cattle report will be released on July 21, giving an indication of producers’ intent to retain females in their herds. Beef production in 2023 is raised with higher expected cattle slaughter, which more than offsets a decline in expected weights in the third quarter. For 2024, the beef production forecast is lowered as expected fed cattle marketings are shifted into late 2023 rather than early 2024. Cattle price forecasts in 2023 are raised from last month on firm demand and the expectation of relatively tighter supplies, carried into 2024. Beef imports for 2023 are raised on recent trade data. Exports for the year are reduced slightly; but no change is made to the export forecast for 2024. Dairy: For 2023, farm milk production projections are unchanged from last month at 228.4 billion pounds. However, the milk production forecast for 2024 is reduced from last month to 230.6 billion pounds, driven by a lower projected number of dairy cows and a slower growth in yield per cow. The all-milk price forecast for 2023 is $18.20 per hundredweight (cwt), $0.15 lower than last month’s forecast. The all-milk price forecast for 2024 is $19.10 per cwt, $0.55 lower than last month’s forecast.

Pork/Hogs: The Quarterly Hogs and Pigs reported June 1 numbers in breeding and market hog inventories to be about the same as a year ago. Producer farrowing intentions for the summer and fall 2023 quarters were both reported down about 4 percent and are each likely to have a negative effect on pork production in first-half 2024. Pork production is forecast at 27.4 billion pounds this year, up 1.4 percent from 2022. Production is expected to fall fractionally in 2024. U.S. pork exports are raised 110 million pounds in 2023 to 6.91 billion pounds, and in 2024 by 160 million pounds to 6.98 billion pounds based on competitive U.S. pork prices and diminished competition from other international pork exporters.

Poultry/Eggs: Estimated broiler production is adjusted up in the second quarter of 2023 on recent data, while all outlying quarters are unchanged. Broiler exports are also unchanged, while imports are adjusted up, reflecting the current trade policy allowing some shipments from Chile. Broiler prices are adjusted down in 2023 on recent data. The table-egg production forecast for 2023 is increased by 5 million dozen to reflect stronger-than-expected May egg flock inventory data. The average wholesale egg price forecast for 2023 is adjusted to reflect second-quarter realized data. Egg and egg product exports are adjusted up on improving production that is meeting strong international demand. Egg imports are adjusted up on the strength of May shipments. Turkey production for 2023 is adjusted up on recent production data and strong hatchery indicators. Turkey exports are adjusted up on increased production, and imports are adjusted up reflecting current trade policy. Turkey prices are adjusted down for 2023 and 2024 on recent data.

Recent Developments in U.S. Dairy Product Wholesale Prices: From the week ending June 10 to the week ending July 8, 2023, most wholesale dairy product price trends reported in the USDA National Dairy Products Sales Report (NDPSR) decreased. The price per pound for 40-pound blocks of Cheddar cheese decreased 13.92 cents, and the price for 500-pound Cheddar cheese barrels (adjusted to 38-percent moisture) decreased 3.26 cents. The prices for butter and dry whey fell by 1.67 cents and 4.81 cents, respectively. The price direction for nonfat dry milk (NDM) was the exception, increasing by 1.01 cents per pound.

For the trading week 3 ending July 14 at the Chicago Mercantile Exchange (CME), the average spot prices for Cheddar cheese 40-pound blocks and 500-pound barrels averaged $1.4860 and $1.4005 per pound, respectively. CME prices for butter, NDM, and dry whey averaged $2.5115, $1.0915, and $0.2340 per pound, respectively. Most Oceania and Europe average dairy product export prices reported by USDA Dairy Market News increased from April 2023 to May 2023. Exceptions include a decline in the Oceania skim milk powder price and the Western Europe dry whey price.

According to USDA National Agricultural Statistics Service (NASS), U.S. milk production in the United States totaled 19.875 billion pounds, 0.6 percent above May 2022. Milk cows numbered 9.430 million head, 13,000 head higher than May 2022. Milk per cow in May averaged 2,108 pounds per head, 10 pound above May 2022. As reported by USDA, NASS, in the most recent monthly Agricultural Prices report, the all-milk price in May 2023 averaged $19.30 per cwt, down $7.90 from May 2022. The May 2023 corn price was $6.54 per bushel, down $0.72 from May 2022. The price for alfalfa hay was $279 per short ton, up $35 from May 2022. The soybean meal price (reported by USDA, Agricultural Marketing Service) was $423.58 per short ton in May, down $17.70 from May 2022. The milk[1]feed price ratio reported by USDA, NASS, was 1.42 in May, down 0.56 points from May 2022. With lower milk farmgate prices and higher feed cost, the dairy farm margin as calculated for the Dairy Margin Coverage program declined to $4.83 in May, $7.68 lower than May 2022, the lowest dairy farm margin so far in 2023.

Dairy cow slaughter has been active so far in 2023, above 2022 levels. Dairy farmers are faced with lower milk prices and high operating costs, making it more expensive to keep dairy cows as some farmers have chosen to cull some of their cows. In addition, drought conditions in some parts of the country are also making it more difficult for dairy farmers to provide forage for their cows, leading to some farmers culling their herds to reduce feeding costs.

In May, dairy product exports declined 23.7 percent on a milk-fat milk-equivalent basis, and 11.6 percent on a skim-solids milk-equivalent basis, compared to May 2022. Export volumes for butter, cheese, dry skim products, dry whey, whey protein concentrate, and lactose declined in May 2023 compared to May 2022. Several factors have likely contributed to the decline in dairy export volumes in May 2023, including weaker demand from key exports market such as China and increased competition from New Zealand, which has a strong dairy industry and close proximity to key export markets.

In May, dairy imports on a milk-fat basis totaled 652 million pounds, 0.6 percent below May 2022. On a skim-solids basis, imports in May were 440 million pounds, 23.3 percent below May 2022. Notably, in May 2023, import volumes of casein, milk protein concentrate, and canned milk declined from May 2022. During May, domestic use on a milk-fat basis totaled 18.4 billion pounds, 1.9 percent higher than May 2022. On a skim-solids basis, May domestic use totaled 15.7 billion pounds, 6.3 percent higher than May 2022. Compared to 2022, domestic use of butter, cheese, dry skim products, whey protein concentrate, and lactose increased in May 2023.

2023 Dairy Forecasts

For 2023, the U.S. milking herd and milk production are unchanged from last month’s forecast at 9.415 million head and 228.4 billion pounds, respectively. Based on recent dairy trade information, 2023 export volume forecasts were reduced from last month’s projections, mainly due to lower expected butter and cheese exports. On a milk-fat basis, the annual dairy export forecast for 2023 is 11.6 billion pounds, 0.3 billion lower than last month’s forecast. On a skim-solids basis, the dairy export projections were lowered by 0.2 billion to 50.9 billion pounds, reflecting lower expected exports of whey products and a number of other dairy products.

The 2023 forecast for dairy imports on a milk-fat basis is 7.8 billion pounds, unchanged from last month’s forecast. On a skim-solids basis, the dairy import forecast is 6.5 billion pounds, 0.2 billion lower than last month’s projections, due to lower expected imports of milk protein concentrate. On a milk-fat basis, domestic use in 2023 is forecast at 223.4 billion pounds, up 0.2 billion from last month’s forecast. On a skim-solid basis, 2023 domestic use was lowered by 0.1 billion pounds from last month’s forecast to 182.6 billion pounds.

The 2023 price forecasts for Cheddar cheese, dry whey, and NDM are lowered to $1.675 (-5.5 cents), $0.350 (-2.0 cents), and $1.170 (-2.0 cents) per pound, respectively, due to large cheese stocks and rising competition in international demand for dry whey and NDM, especially from New Zealand. However, the 2023 butter price forecast remains unchanged at $2.435 per pound. With lower expected prices for cheese and dry whey, the Class III milk price forecast for 2023 is adjusted to $16.05 per hundredweight (cwt), down $0.65 from last month’s forecast. With lower expected prices for NDM in 2023 more than offsetting steady butter prices, the Class IV milk price forecast has been decreased by $0.15 to $18.20 per cwt. The all-milk price forecast for 2023 is $19.55 per cwt, $0.40 lower than last month’s forecast.

2024 Dairy Forecasts

Milk cow numbers in 2024 are projected to decline to 9.390 million head, 5,000 head lower than the previous month’s forecast. The forecast for milk per cow is 24,560 pounds, 10 pounds lower than last month’s forecast. The projection for 2023 milk production has been lowered to 230.6 billion pounds, 0.2 billion lower than last month’s forecast.

Livestock, Dairy, and Poultry Outlook: July 2023

On a milk-fat basis, the export forecast for 2024 is 12.6 billion pounds, 0.2 billion lower than last month’s forecasts, due to lower expected butter exports. In 2024, dairy exports are projected to total 53.8 billion pounds on a skim-solids basis, unchanged from the previous month’s forecast. The dairy import forecasts from last month projections are lowered to 7.6 billion pounds (-0.1 billion) on a milk-fat basis and 6.9 billion pounds (-0.1 billion) on a skim-solids basis. The forecast for 2024 domestic use is adjusted lower. On a milk-fat basis, the annual domestic use forecast for 2024 is 224.6 billion pounds, 0.1 billion lower than the previous forecast. On a skim-solids basis, the forecast for domestic use is 182.7 billion pounds, 0.2 billion lower than last month’s forecast. From the previous forecast, the 2024 price for Cheddar cheese, dry whey, and NDM are lowered to $1.690 (-8.5 cents), $0.315 (-4.5 cents), and $1.125 (-0.5 cent) per pound, respectively. Meanwhile, the 2024 butter price forecast is increased by 1.0 cent to $2.345 per pound. With lower expected prices for cheese and dry whey, the Class III milk price forecast for 2024 is adjusted to $15.95 per cwt, down $1.05 from last month’s forecast. The Class IV milk price forecast remains unchanged at $17.45 per cwt. The all-milk price forecast for 2024 is $19.10 per cwt, $0.55 lower than last month’s forecast.

Pork/Hogs

Lower Producer Farrowing Intentions Reported in the June Quarterly Hogs and Pigs May Signal a Course Correction for the U.S. Pork Sector The Quarterly Hogs and Pigs report issued by USDA on June 29 fulfilled one of its primary functions in giving a clear response to the query of the number and classification of animals on the ground on June 1, 2023. The responses published in the report boil down to, “about the same as a year ago”—total market hog numbers (100 percent of a year ago)—thus signaling the numbers of hogs likely to be processed between June 1 and early October. The report also delivered unexpected—but exceptional—news with respect to the March–May litter rate: at 11.36 pigs per litter. This was above most analysts’ expectations but consistent with spring reports from the Swine Health Information Center. The reports showed a moderating of cases testing positive for most virulent swine diseases, especially of the various strains of porcine reproductive and respiratory syndrome, a disease that has wreaked untold havoc—in swine deaths and financial losses—along the pork production chain for the past few years.

At the time USDA issued the June report—with live equivalent prices of 51-52 percent lean hogs averaging about $63 per hundredweight—many pork producers had been operating in the red since late last year,4 largely due to high feed costs and unexpectedly weak consumer demand. In the past, such prolonged market conditions would likely have brought about a measurable reduction of the inventory of breeding animals. However, the June report indicated that the breeding inventory stood at 6.1 million head, roughly unchanged from the last report in March. The breeding information contained in the June report is likely signaling producers’ strategy for managing hog production in an environment of high feed costs and weak consumer demand that have combined to generate—according to Iowa State Estimated Livestock Returns—a series of pork producer losses averaging more than $32 per head (live) between November 2022 when the losses began and May 2023. However, since December 2022, consecutive reports have indicated minimal breeding inventory changes.

The December 1 inventory was - 0.35 percent below a year earlier, the March 1, 2023, breeding inventory was 0.04 percent lower than a year earlier, and the June 2023 inventory, at 6.146 million head, declined by -0.36 percent or 22 thousand head compared with a year earlier. It appears that even in the face of considerable losses, hog producers have opted to maintain breeding inventories largely intact, varying its numbers only seasonally, unlike in the past when losses would bring on relatively swift and significant reductions in numbers. This approach to managing a breeding operation under a prolonged period of financial stress is likely driven by the current structure of the U.S. hog industry—particularly the capital-intensive farrowing-to-wean end of the business—that aims to minimize reductions in sow numbers even during periods of extended financial loss.

In 2023 in particular, producers appear to have adopted a strategy to limit short-term losses by marketing hogs at lighter-than-usual weights. In the medium term, producers seem to be aiming at lowering hog supplies by farrowing fewer sows. With respect to hog weights, the weekly estimated average live weight of barrows and gilts for Iowa, Southern Minnesota, and South Dakota have averaged 285.2 pounds through week 26 of this year, compared to 287.7 pounds.

Production Implications of the 2023 Pig Crops It is notable that while quarterly farrowings and farrowing intentions in 2023 are each year-over year lower, litter rates can often offset farrowing reductions. This was the case in the first and second quarter of 2023 when relatively strong litter rates—especially in the March–May quarter when the litter rate was 11.36—offset farrowing reductions. Although as producers follow through with farrowing intentions as stated in the June report, strong litter rates in the third and fourth quarters of 2023 could mitigate the size of the decline in the pig crops implied by the intentions.

The December–February 2023 pig crop (fractionally larger than that of a year earlier) will be processed mainly in the third quarter of this year. Assuming slightly higher weights as corn prices moderate, pork production for the quarter should approach almost 6.6 billion pounds, almost 1 percent above a year ago. Third-quarter hog prices—live equivalent, 51-52 percent lean—are expected to average $63 per cwt, more than 21 percent below average prices a year ago and below break-even for many U.S. hog producers. The March–May pig crop, almost 1 percent greater than the same period of 2022, should be processed mostly in the fourth quarter of this year. Estimated average dressed weights are likely to be higher than last year, given USDA’s forecasts for a larger year-over-year corn crop and moderating corn prices. The larger spring pig crop will combine with expected heavier dressed weights to yield a fourth-quarter production volume of 7.1 billion pounds, 3 percent greater than a year ago.

Greater pork supplies will likely drive hog prices year-over-year lower: Prices are expected to average $57 per cwt for the quarter, about 10 percent below a year ago. If producers follow through on their stated intentions to farrow almost 4 percent fewer sows in the June–August quarter, a modest increase in litter rates would still yield significantly fewer slaughter-ready hogs in the first quarter of 2024. Anticipated increases in average estimated dressed weights due to moderating feed costs are not likely to offset lower animal numbers.

First-quarter 2024 pork production is expected to be about 6.9 billion pounds, almost 3 percent lower than a year earlier. Average first-quarter hog prices should be about $63 per cwt, almost 15 percent higher than a year earlier. Much the same scenario is likely to play out in the second quarter of 2024 if producers follow through on their reduced farrowing intentions statednin the June report. The lower fourth-quarter 2023 pig crop deriving from 4.5 percent lower intended farrowings is likely to yield a pig crop— even with trend increases in litter rates—that is too small to be offset to by anticipated estimated average dressed weight increases from moderating feed costs. Second-quarter 2024 pork production is expected to be about 6.5 billion pounds, over 1 percent below production a year earlier.

Hog prices for the second quarter of 2024 should average $68 per cwt, just under 20 percent higher than hog prices a year earlier. Reasons for Optimism As grim as the pork business has been thus far in 2023, there are several signs that the hog and pork markets may have changed direction. First, hog slaughter numbers turned seasonally lower in June, as did pork production. Estimated federally inspected (FI) hog slaughter in June this year was about 10.375 million head, almost 1 percent below a year ago. Pork production was more than 2 percent below a year ago, with lower dressed weights. June 2022 FI dressed weights were 215 pounds per head, while weekly average weights this year were estimated at about 212 pounds. As indicated earlier, June hog prices averaged more than 20 percent below prices a year ago, but the graph of daily hog prices below suggests that buyers began to pay higher prices in June for lower quantities of hogs.

USDA world dairy report

Thus far in 2022 record exports- on a value basis- are being set across all dairy commodities, driven by strong international dairy product prices. Through October, dairy export values are up 25 percent, with robust growth across the major product groups including skim milk powder (NDM/SMP), whey, lactose, cheese, and butter; however, from a volume perspective, average export growth across commodities is a more modest 5 percent. Nowhere is this dichotomy more prevalent than with NDM, where export quantities have fallen 8 percent over this period while export values have increased 27 percent.

For the current year, NDM exports are forecast to fall about 8 percent to 819,000 tons due to slowing shipments to China where consumption of SMP has shifted to whole milk powder (WMP) in response to higher prices and higher domestic WMP production. NDM/SMP exports are expected to rebound in 2023 to 836,000 tons as higher milk production drives production higher for a number of dairy products. Note: Given “Other” is a mix of different units of measurement, volume change is unavailable Through October, whey and cheese exports saw similar activity with volume growth of 7 percent and 13 percent, respectively, while values grew 38 percent and 26 percent, respectively. Butter was the one major dairy product where export volume growth has outpaced export value growth, reflecting significantly lower unit values to Mexico and Canada.

Thus far in 2022 record exports- on a value basis- are being set across all dairy commodities, driven by strong international dairy product prices. Through October, dairy export values are up 25 percent, with robust growth across the major product groups including skim milk powder (NDM/SMP), whey, lactose, cheese, and butter; however, from a volume perspective, average export growth across commodities is a more modest 5 percent. Nowhere is this dichotomy more prevalent than with NDM, where export quantities have fallen 8 percent over this period while export values have increased 27 percent. For the current year, NDM exports are forecast to fall about 8 percent to 819,000 tons due to slowing shipments to China where consumption of SMP has shifted to whole milk powder (WMP) in response to higher prices and higher domestic WMP production. NDM/SMP exports are expected to rebound in 2023 to 836,000 tons as higher milk production drives production higher for a number of dairy products. Note: Given “Other” is a mix of different units of measurement, volume change is unavailable Through October, whey and cheese exports saw similar activity with volume growth of 7 percent and 13 percent, respectively, while values grew 38 percent and 26 percent, respectively. Butter was the one major dairy product where export volume growth has outpaced export value growth, reflecting significantly lower unit values to Mexico and Canada.

Global milk production is expected to grow by 1 percent in 2023 reflecting a return to normal weather conditions, improved availability of inputs (mainly concentrates, fertilizers and fuels for feedstuffs production), and investments in comfort-related technology and more efficient husbandry practices, which have been key to maintaining milk production growth.

Milk production in Australia is expected to decline 1 percent in 2023. The overall outlook for production conditions in 2023 is favorable with record milk prices, low hay prices, and easing feed grain prices. Above average rainfalls across the major dairy farming regions have provided ample fodder and low-cost water for irrigation. Traditionally, these conditions would cause producers to boost dairy cow numbers and lead to higher milk production. However, dairy farms continue to face labor shortages which will prevent expansion in cow numbers. Furthermore, energy and fertilizer costs have soared, causing dairy farmers to scale back cow numbers and either partially or fully convert to beef cattle production. These enterprises require less labor and may be more profitable with beef prices near record highs. For 2023, there is unlikely to be any substantial price relief in imported nitrogen fertilizer prices, which have grown upwards of 3-4 times since January 2021, or electricity costs (milking parlors on dairy farms use substantial amounts of electricity). As fertilizer and energy prices are expected to remain high, there will be continued pressure on dairy farmer profitability.

In China, raw milk production is expected to reach 42.1 million tons in 2023. The growth in China’s raw milk production can be attributed to government policies supporting dairy production, large-scale investments by dairy companies, and the importation of over 1.2 million head of high-quality cattle during the last 5 years. It is estimated that approximately 80 percent of cattle imports, which have come predominantly from New Zealand and Australia, are for dairy production. Dairy processors are expected to process much of this year’s seasonal surplus raw milk into WMP.

Dairy cow numbers in the European Union (EU) are forecast to fall below 20 million head in 2023, a decline of 1.7 million head since 2016, and a decrease of 564,000 head since 2021. Despite continued year-on-year increases in milk productivity, the decline in cow numbers has eroded EU cow milk production, which is forecast for 2023 at 143.0 million tons. The planned implementation on January 1, 2023, for the new Common Agricultural Policy (CAP) and the accompanying Farm to Fork Strategy (F2F), will likely add uncertainty for the dairy sector in the coming year. The EU-wide drought in 2022, which persisted all summer, hindered 2022 fodder production and has depressed milk production as higher production costs for energy, fertilizer, and feed negated higher farm-gate milk prices. Non-cow milk production, mostly concentrated in Mediterranean member states, has fared better, driven by consumer demand for dairy products like goat cheeses or mozzarella buffalo, as well as local milk production for niche products protected by a geographical indication (GI). However, farmers in France and Italy that produce milk for GI products faced shortages of fodder and halting production as they could no longer met the feeding standards for their GI production.

Despite relatively high milk prices, New Zealand milk production is forecast to decline marginally in 2023 to 21.0 million due to a smaller dairy herd and slightly lower milk per cow yields. Cow yields are forecast to be impacted by a third consecutive La Niña weather pattern, as well as a smaller feed base, impacted by a cold and wet winter slowing spring pasture growth coupled with a smaller winter forage crop from prolonged dry conditions in the first half of 2022. Cow numbers are forecast to decline 0.3 percent to 4.9 million head, continuing the trend of herd contraction since peaking at 5.2 million head in 2014.

For 2022, milk production in New Zealand is forecast at 21.1 million tons, down 4 percent from 2021. At the start of the 2022 year, most dairy production regions encountered a prolonged dry period, symptomatic of the La Niña weather pattern. The prolonged dryness in the first half of 2022 coincided with an upsurge in COVID-19 cases which initially had a major impact at farms. Surging cases led to a slowdown at slaughter facilities due to lack of workers and resulted in many cull dairy cows being delayed and held on farm. These cows then utilized feed that would have typically been prioritized for the milking herd. Producers were also hampered by rising input costs with a range of industry estimates putting on-farm inflation for dairy farms at 16-17 percent as of mid-2022. New Zealand dairy farms are reliant on imports for farm inputs such as agrichemicals and nitrogen fertilizer from China, which saw global supply chain disruptions from COVID-19 disruptions. In addition to feed costs, fuel and electricity prices have also been rising for dairy farms.

China’s Q2 pork output surges

China’s second-quarter pork output rose 4.6% from last year to 14.4 MMT, the highest in at least a decade for the period. Amid poor margins and concerns of weaker prices ahead, farmers culled hog herds, increasing pork production. China’s pork output in the first half of the year rose 3.2% from the same period last year to 30.3 MMT. China slaughtered 375.48 million hogs in the first six months of the year, up 2.6% from a year ago. China’s pig herd rose to 435.17 million head in the second quarter, up 4.23 million head from the end of the first quarter.

Massachusetts enforcement of a state law necessitating suitable living conditions for livestock delayed until Aug. 23

That’s due to an ongoing lawsuit. The law instructs farmers to grant enough space for veal calves, breeding sows, and egg-laying hens to maneuver and extend their limbs. This announcement came as parties involved, including state officials, the restaurant and pork industries, require more time to assess outstanding issues following the Supreme Court's upholding of a similar California law, Proposition 12, in May.

The extension was approved by U.S. district judge Margaret Guzman to allow for further consultations and possible settlement negotiations. The Massachusetts suit, like the one taken to the Supreme Court, challenged the constitutionality of the animal welfare standards established by a 2016 referendum, known as Question 3.

Following the Supreme Court's decision, the National Pork Producers Council stated that Massachusetts could define its own meat production standards. However, issues such as restrictions on shipping noncompliant pork products through Massachusetts to other New England states or other countries remain unsettled.

Question 3 not only establishes standards for Massachusetts farmers but also prohibits the sale of goods from other states unless they abide by Massachusetts' regulations. According to the NPPC, this creates additional obstacles in the pork supply chain by preventing the transportation of noncompliant pork through Massachusetts for delivery to other locations.

NPPC’s take: “This extended implementation allows the coalition and Massachusetts to continue discussions on implementation to ensure a smooth transition — including the transshipment and exports of pork through Massachusetts — so pork can continue to reach other New England states as well as provide guidance to the industry and supply chain. It is important to note that this Status Report and Joint Motion to Extend Stay does not change Q3, the rules, or what it means to be compliant. It simply extends the existing enforcement stay for a few more weeks.”

Weekly USDA dairy report

CME GROUP CASH MARKETS (7/14) BUTTER: Grade AA closed at $2.5500 The weekly average for Grade AA is $2.5115 (+0.0390). CHEESE: Barrels closed at $1.3925 and 40# blocks at $1.4800. The weekly average for barrels is $1.4005 (+0.0499) and blocks, $1.4860 (+0.1110). NONFAT DRY MILK: Grade A closed at $1.1050. The weekly average for Grade A is $1.0915 (-0.0141). DRY WHEY: Extra grade dry whey closed at $0.2475. The weekly average for dry whey is $0.2340 (-0.0004).

BUTTER HIGHLIGHTS: Heat has begun to play a stronger role in limiting cream availability for churning throughout the country, but particularly in the south and southwestern states. Butter churning has slowed in general, and some butter makers are strictly churning contracted cream volumes. Butter demand is steady to strong ahead of the late summer/early fall season throughout all regions. Some brokers have reported tighter availability for bulk butter, for both 80% and 82% butterfat varieties. Butter market tones are holding firm.

CHEESE HIGHLIGHTS: The spot milk range for Central region cheesemakers grew this week. The farther south, the tighter the milk availability. Prices were reported from $11 under to flat Class. In comparison, prices last year during this week were $3 to $1 under Class III. Milk handlers and cheesemakers expect increasing milk prices in the near-term. Cheese demand notes vary from region to region, and they are also dependent on cheese variety. Mozzarella processors in the West say slower pizza sales have affected those markets. Midwestern and Eastern cheesemakers are reporting steady to strong sales. Some barrel and cheddar manufacturers in the Midwest say they are working near capacity and are still busy trying to fulfill customers’ needs. Market tones have shown some relative strength this week. Contacts are hopeful upcoming limits on milk availability and customer requests will help to continue the bullish price movements of week 28 thus far.

FLUID MILK: Milk availability is variant throughout the country and within respective regions this week. Southern, southwestern, and southeastern milk output recessions have been regularly reported in recent weeks. Heat and humidity are playing a strong role in suppressing cow comfort in the southern United States. Upper Midwest and mid- and northeastern states’ farmers are starting to report slow, yet steady, milk drawdowns. Some relatively cooler evenings, sweatshirt weather according to a number of farmer contacts, in the Northern Plains and Upper Midwestern states have yet to crimp milk output as quickly as it has been hampered in the south. Texas contacts say relatively high humidity, along with 90+ degree days, are noticeably checking milk output/availability. Spot milk prices moving into Central cheese processing ranged from $11 under Class to Class. Cream availability is trending toward the tighter end of the spectrum, as well. Despite slight slowdowns in ice cream manufacturing, ice cream making has had its grips on the overall cream supply. Some butter makers have said spot cream prices are beginning to move out of their fiscal reach. F.O.B. cream multiples are 1.30-1.40 in the East, 1.24-1.32 in the Midwest, and 1.10-1.29 in the West.

DRY PRODUCTS: A bearish raincloud continues to hover over a number of domestic dry dairy commodities this week. Strong milk output and a quieter export market have colluded to create strong supplies and slower ordering in recent months. Low/medium heat nonfat dry milk (NDM) prices are lower to steady in all regions. Mexican demand is noted as hot or cold on any given week. Buttermilk prices moved lower to steady throughout the regions. Buttermilk marketers continue to say tones are softer week after week. Dry whole milk prices continue to edge lower this week, but contacts suggest markets are more quiet than bearish. Dry whey prices were lower in all regions. Heavy milk availability in recent months has added to whey stores, while export demands remain sluggish. Whey protein concentrate (WPC) 34% prices were steady to lower. Lactose prices were steady to lower, as alternatives are keeping lactose markets less competitive. Casein demand and trading activity were quiet, as prices were unchanged for acid and rennet casein this week.

ORGANIC DAIRY MARKET NEWS: The organic feed corn trade activity is good on moderate market demand. Spot market exchanges have picked up over the last few trading periods. Meanwhile, there is limited forward contract activity. FOB organic corn spot market prices are currently down 57 cents from last period. Organic feed soybean trade activity is balanced on moderate demand. Current FOB organic soybean market prices are up 85 cents from last period. There were few forward contracts procured on both feed and food grade wheat, as well as organic soybean meal. Trading is sluggish on all other organic grain markets. This post-holiday week, retail grocery stores across the country elected to decrease their total organic dairy advertisements 10 percent, compared to the last week's retail survey ad number. The largest percentage of total organic dairy ads for commodities was displayed by organic ice cream at 37 percent. Grocers increased their ice cream ads 94 percent over last week's ad number. Organic milk and yogurt followed, both posted 24 percentages.