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Weekly global protein digest: bearish Cold Storage, China's pork exports down sharply

27 May 2022
Jim Wyckoff Commentary -  TheCropSite

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

US pork export sales see solid rise; beef down a bit

USDA Thursday reported US pork net sales of 36,700 MT for 2022 were up 52 percent from the previous week and 39 percent from the prior 4-week average. Increases primarily for Mexico (15,100 MT, including decreases of 400 MT), Canada (5,700 MT, including decreases of 400 MT), China (5,300 MT, including decreases of 300 MT), Japan (3,600 MT, including decreases of 100 MT), and Colombia (2,700 MT, including decreases of 100 MT), were offset by reductions for El Salvador (100 MT). Total net sales of 100 MT for 2023 were reported for Australia. Exports of 33,000 MT were up 6 percent from the previous week and 4 percent from the prior 4-week average. The destinations were primarily to Mexico (13,700 MT), China (5,200 MT), Japan (4,700 MT), South Korea (2,900 MT), and Canada (1,600 MT).

US beef net sales of 20,000 MT for 2022 were down 14 percent from the previous week, but up 3 percent from the prior 4-week average. Increases were primarily for Japan (8,400 MT, including decreases of 500 MT), South Korea (3,900 MT, including decreases of 700 MT), China (2,500 MT, including decreases of 100 MT), Hong Kong (1,900 MT, including decreases of 100 MT), and Canada (700 MT, including decreases of 100 MT). Exports of 17,500 MT were down 12 percent from the previous week and 10 percent from the prior 4-week average. The destinations were primarily to Japan (5,200 MT), South Korea (4,500 MT), China (2,500 MT), Taiwan (1,500 MT), and Mexico (1,100 MT).

Poultry regulations coming from USDA

The Office of Management and Budget (OMB) on Wednesday finished reviewing a proposed rule from USDA’s Agricultural Marketing Service (AMS) on Transparency in Poultry Grower Contracting and Tournaments, and a pre-rule on Poultry Growing Tournament Systems: Fairness and Related Concerns. The proposed rule on poultry grower contracting and tournaments is one of three regulations the Biden administration has promised to pursue. The pre-rule on concerns and fairness in poultry growing tournament systems is a search for alternative solutions to determine whether the benefits of a regulation justify the costs. USDA Secretary Tom Vilsack could unveil the results as he appears today before the Senate Agriculture Committee. He could also unveil new CRP rules at today's hearing. If so, they could involve early out without penalty and earlier field work than current rules provide.

USDA making $200 million available for new meat processing capacity expansion program

The $200 million will “provide much-needed financing to independent meat and poultry processors to start up and expand operations,” USDA said. The funding will include $25 million for workforce training. The program will provide grants of up to $15 million to qualifying recipients that will use the funding to create a revolving loan fund to finance capacity expansion.

USDA raises food inflation forecasts for fourth consecutive month

USDA raised its food price outlook to 6.5% to 7.5% above year-ago, up from April’s forecast for a rise of 5% to 6%. The midpoint of that range would be the biggest rise in food prices since they jumped 7.8% in 1981. USDA now forecasts food away from home (restaurant) prices will rise 6% to 7% this year, up from its April forecast for a 5.5% to 6.5% increase. That would be the biggest rise in restaurant prices since 1981 when they increased 9%. Food at home (grocery store) prices are now forecast to increase 7% to 8%, up from the April outlook for a 5% to 6% rise. That would be the highest grocery store price rise since 1980 when prices jumped 8.1%.

Bearish meat demand implications in USDA Cold Storage Report

USDA's Cold Storage Report out earlier this week showed beef stocks at the end of April were a record for the month at 531.7 million pounds. While that was down 4.1 million lbs. (0.8%) from March, the five-year average was a 15.5-million-lb. decline during the month. Frozen beef inventories increased 82.9 million lbs. (18.5%) from year-ago and stood 74.1 million lbs. (16.2%) above the five-year average. Pork stocks at 530.2 million lbs. rose 44.3 million lbs. (9.1%) from March, far greater than the five-year average of a 16.4-milllion-lb. increase during the month. Pork stocks rose 73.3 million lbs. (16.0%) from last year but were still 52.7 million lbs. (9.0%) under the five-year average.

China’s pork imports down sharply from year-ago in April

China imported 140,000 MT of pork in April, according to official customs data, the same amount as March but down 67.6% from last year. Through the first four months of this year, China’s pork imports plunged 65.1% from the same period last year to 560,000 MT.

US House Ag panel to consider bill to create special investigator at USDA on competition in livestock industry

The measure would establish an Office of the Special Investigator for Competition Matters at USDA. Opponents say it duplicates authorities at USDA and would potentially bring costly regulations on the industry that they say would further increase food prices. The legislation would establish an Office of the Special Investigator for Competition Matters at USDA with subpoena powers and the ability to file civil lawsuits or take administrative actions against violations of the Packers and Stockyards Act of 1921 by meatpacking companies and live poultry dealers. Rep. Austin Scott (R-Ga.) said Democrats have wrongly blamed the meatpacking industry for higher meat prices while they have pursued policies that he said raised energy costs that have rippled through the economy.

“It’s a horrible piece of legislation,” Scott said, adding that it showed someone without an agricultural background had written it.

By voice vote, members agreed to an amendment by Rep. Jim Costa, D-Calif., that would require the head of the special investigator office to be a senior career executive rather than a political appointee. Members also by voice vote agreed to an amendment by Rep. Jimmy Panetta, D-Calif., that would require the special investigator to coordinate with the USDA’s general counsel office and with the Packers and Stockyards Division of the Agricultural Marketing Service. The special investigator also would have to notify the U.S. attorney general of any legal action the office takes in a federal district court.

US House Ag panel approves bill to expand meat processing capacity

Congress would create a loan and guarantee program to expand competition in the meat processing industry under a bill approved by the House Agriculture Committee on Tuesday. The bill would authorize up to $20 million a year through 2024 for the loan guarantees. Proponents said the bill would be a permanent version of a $500 million USDA initiative announced last summer. The House Ag Committee approved HR 4140 on a voice vote. It would authorize USDA loan guarantees for projects in rural areas that would expand and diversify the meat processing sector, improve employment or expand markets. In most cases, USDA would not be allowed to make or guarantee a loan of more than $50 million. The limit would be $100 million for cooperatives.

ADM in lab-meat venture

ADM has entered into a joint development agreement with Eat Just to lower its costs of production and tailor its cultured meat products for markets once they receive regulatory approval.

Weekly USDA dairy report

CME GROUP CASH MARKETS (5/20) BUTTER: Grade AA closed at $2.8500. The weekly average for Grade AA is $2.7960 (+0.1420). CHEESE: Barrels closed at $2.3475 and 40# blocks at $2.3800. The weekly average for barrels is $2.4130 (+0.0365) and blocks, $2.3740 (+0.0790). NONFAT DRY MILK: Grade A closed at $1.8000. The weekly average for Grade A is $1.7630 (+0.0330). DRY WHEY: Extra grade dry whey closed at $0.5075. The weekly average for dry whey is $0.4985(-0.0630).

CHEESE HIGHLIGHTS: Across all regions cheese production is active, though some production facilities in the Northeast and West are, reportedly, running below capacity due to labor shortages. Some cheese makers in the West also cite delayed deliveries of production supplies and limiting their ability to run full schedules. Midwestern cheese demand is mixed; contacts report that slipping prices in previous weeks caused some hesitance from purchasers, while others are purchasing to get ahead of a potentially bullish market. Meanwhile, demand is noted to be hearty in the Northeast and West. Cheese inventories are present to satisfy demand in the Northeast. In the Midwest, availability varies from balanced to tight. Spot inventories are available in the West, but contacts in the region say that cheese barrels have begun to show some tightness in recent weeks.

BUTTER HIGHLIGHTS: Cream inventories are available in the West, and contacts note that purchasers from other regions are interested in buying loads to meet local production demands. Contacts in the Northeast and Central region relay that local cream spot availability is tighter. Some butter makers in the Northeast say that more cream is being churned this week, though butter production schedules vary across manufacturers. Meanwhile, butter makers in the Central and West regions are running active schedules. Western butter makers say that labor shortages are limiting their ability to run full schedules. Contacts in the Central region report that demand has softened in the past few weeks. Food service demand for butter is stable in the Northeast and West, while retail demand is trending lower. Spot inventories are unchanged in the Northeast, but are becoming more available in the West. Bulk butter overages range from 4 to 15 cents above market, across all regions.

FLUID MILK: While milk production is still trending higher across much of the northern tier of states, milk output transitions to steady in the middle and southwestern states and then to lower in the southern states from New Mexico to Florida. The specific demarcation line varies week to week. Higher temperatures and humidity are starting to take hold in the south, suppressing cow comfort and milk output. Class I milk sales are moving lower as educational institutions reduce orders ahead of the summer breaks. Class III demand is active, and spot milk loads are available. Prices for spot milk in the Midwest range from $2.50 below Class III to $.75 above Class III. Condensed skim interest is increasing, while availability is mixed. Cream is available in the West, but tighter in the East and Central regions. Cream multiples for all Classes are: 1.32-1.42 in the East, 1.3050-1.36 in the Midwest, and 1.00-1.30 in the West.

DRY PRODUCTS: Prices for low/medium heat nonfat dry milk are mixed. Prices contracted in the Central and East region and are steady to lower in the West. Prices for high heat NDM are unchanged in the Central and East, but the range expanded in the West. Despite some downward market pressure, some contacts suggest market tones for NDM are more sideways than bearish. Dry buttermilk prices are largely steady but moved lower at the top of the Western price series. Inventories are snug and production is limited. The national dry whole milk price range expanded this week on slightly busier trading. Dry whey prices moved lower on increases in availability and softer export demand. Animal feed whey prices are steady to lower. Whey protein concentrate 34% prices are unchanged, and demand varies by brand. Prices for lactose are largely unchanged, but stronger demand for 200 mesh lactose and lactose used in infant formula processing pushed prices higher at the top of the range. Casein prices are steady to higher for both rennet and acid casein.

ORGANIC DAIRY MARKET NEWS: This week, total organic dairy retail store ads declined 54 percent. Organic milk, the most advertised commodity, saw store ads decline 64 percent, as it captured 74 percent of total organic ads by commodity. Organic milk, half-gallon container, led the way in volume of surveyed organic retail store ads. The report pointed out organic yogurt as having the largest drop in retail store ads, plummeting 236 percent. Organic butter ads also declined, 21 percent. The national weighted average advertised price for organic milk in half gallon container, $4.34, is 11 cents below the previous week's retail price. When compared to the conventional half gallon milk national weighted average advertised price, $2.76, the organic half gallon milk national weighted average advertised price is a $1.58 organic premium. Countrywide, organic dairy retail ads primarily saw declines. The Northeast reported the largest volume of ads, down 8 percent, compared to higher double-digit declines in most other store areas. The largest ad declines appeared in South Central and Midwest regions, 98 and 83 percent, respectively. Only the Southeast and Hawaii retail stores saw increases in volume of ads for the surveyed organic dairy commodities.

USDA weekly US dairy retail report

Total conventional dairy ads increased by 6 percent from last week, while organic ads fell by 54 percent. Conventional ice cream in 48-64 ounce containers remained the most advertised dairy item, despite appearing in 19 percent less ads. The national weighted average advertised price for this product was down $0.10 to $3.22. Yogurt ads were up by 42 percent for conventional and up 236 percent for organic. Conventional cheese advertisements grew by 15 percent this period, while no organic cheese advertisements were present. The number of conventional milk ads slid 7 percent lower. Organic milk ads numbers fell by 64 percent

TheCattleSite News Desk

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