Friday, December 31, 2021
CapitalPress.com 7
Subscribe to our weekly dairy or livestock email
newsletter at CapitalPress.com/newsletters
Dairy/Livestock
Global milk supply tightens
By CAROL RYAN DUMAS
Capital Press
Sierra Dawn McClain/Capital Press
A report from CoBank expects declining margins to
push producers to reduce dairy herds in 2022.
CoBank forecasts
tight milk supplies,
strong dairy demand
By CAROL RYAN DUMAS
Capital Press
Declining margins on
dairy farms in the U.S. and
around the world will push
producers to reduce herds,
tightening global milk sup-
plies in 2022.
Milk production in
Europe and New Zealand
in particular will continue
to face headwinds with
stricter environmental reg-
ulations discouraging any
growth in cow numbers,
according to a new outlook
report by CoBank.
But demand for dairy
products will continue to
grow due to the expected
continuing recovery from
COVID-19 and a higher
demand for protein — par-
ticularly in high-growth
regions such as Southeast
Asia.
“However, the U.S.
Phase One trade agree-
ment with China is set to
expire at year end, and
China could steer its pur-
chases toward our main
export competitors —
New Zealand and the EU,”
the report said.
Ongoing port conges-
tion and a strengthening
dollar would also hinder
U.S. dairy exports.
“Port congestion and a
shortage of available out-
bound containers will
remain as headwinds for
U.S. dairy exporters for
much of 2022,” the report
said.
Ongoing
logistical
snarls, resulting in higher
detention and demurrage
costs and declining mar-
ket share in Asian markets,
will pressure U.S. dairy
companies.
“International compa-
nies are already switching
dairy purchases to Europe
and New Zealand origin
— a trend that is likely to
accelerate in 2022,” the
report said.
U.S. domestic con-
sumption for dairy prod-
ucts, however, will be
more resilient as consumer
demand increases due to a
growing U.S. economy.
“The cross current of
resilient domestic and
global demand for dairy
products with the slowing
growth in milk supplies
should give additional
upward lift to milk prices
in 2022,” the report said.
Combined with softer
feed costs following big
corn and soybean harvests,
producer margins will
fi nally improve.
“However, high costs
for labor, construction
and freight will limit
upside margin potential
and dampen milk pro-
duction growth,” the
report said.
CoBank
expects
U.S. dairy producers to
increasingly
evaluate
robotics and automation
on the farm due to the
tightness in farm labor.
Producers in the West
will also face tighter
feed availability due to
the potential for continu-
ing drought, made more
likely by La Nina con-
ditions. That’s an addi-
tional incentive for dair-
ies in the region to move
farther inland, particu-
larly to the Midwest and
Plains states, the report
said.
“For dairy processors,
increasing milk costs,
inflation driving up oper-
ating costs and labor avail-
ability will mean some
processors get squeezed —
particularly those manu-
facturing commodity dairy
products,” the report said.
In addition, the signif-
icant expansion in capac-
ity for cheese production
coming online in 2022 will
reduce milk supplies avail-
able for other products.
Tanner Ehmke, CoBank
lead economist for dairy
and
specialty
crops,
authored the dairy por-
tion of the broader outlook
report on the U.S. rural
economy.
Global milk production in
the Big 7 exporting regions is
expected to decline by 0.3%
year over year in the fourth
quarter of 2021, marking the
fi rst year-over-year decrease
since 2019.
As a result, milk prices are
at levels not seen since 2014,
Rabobank analysts said in the
latest “Dairy Quarterly” report.
Weather-related
issues
in Oceania and margin ero-
sion in Europe and the U.S.
stymied growth, resulting in
a year-over-year defi cit that
was too deep for favorable
production in South America
to off set, they reported.
“Farmgate milk prices
have followed commod-
ity prices higher worldwide,
with more potential upside in
some regions,” they said.
But rising input costs,
lack of labor, unfavorable
weather and questionable
feed quality will limit the
Carol Ryan Dumas/Capital Press File
A tighter milk supply off ers the prospect of higher prices overseas.
production response.
Year-over-year gains in
milk production in the fi rst
half of 2022 are forecast at less
than 0.4%. A modest recovery
to a 1% gain in the second half
of the year is expected but will
require favorable weather and
a tempering of feed costs.
“High feed prices and
general input cost infl ation
are common themes across
the major milk-producing
regions. The ability to with-
stand the rising cost pressures
is highly dependent on the
milk price,” the analysts said.
Milk prices in most regions
are adequate to off set higher
costs but not high enough to
facilitate expansion, and dairy
exports have slowed due to
logistic disruptions, rising
transportation costs and ele-
vated commodity prices.
Global dairy exports on a
volume basis increased 6%
year over year in the fi rst half
of 2021 but slowed to a 2%
gain in the third quarter.
Rabobank expects global
exports to decline year over
year in the fourth quarter and
throughout 2022, a duration
not previously experienced,
the report said.
Report fi nds several factors in meat price infl ation
By CAROL RYAN DUMAS
Capital Press
A new report outlines the
factors that have contributed
to the rapid increase of retail
meat prices.
From January 2020
through November 2021,
retail prices have increased
27.3% for beef, 16.8% for
pork and 16.4% for chicken,
according to the U.S. Bureau
of Labor Statistics.
“Given the low food infl a-
tion rates in recent mem-
ory, it is no wonder that cur-
rent meat prices have been
causing sticker shock across
the country,” economists at
the National Pork Produc-
ers Council, Iowa State Uni-
versity and North Carolina
State University said in their
report.
Retail pork prices only
increased an average of 2% a
year from 2000 to 2019.
The report found both
pork producer and pork
packer margins are near the
fi ve-year average, but the
retail price spread for pork
has recently widened.
“The increase in retail
prices this fall at a time when
wholesale and farm-level
prices were falling was likely
driven by a lagged response
time to high wholesale prices
during the summer, increased
transportation costs, supply
bottlenecks and delays and
increased labor costs in retail
outlets and distribution cen-
ters,” the report said.
Retailers are typically
slow to adjust prices to refl ect
changes in their input costs,
but it appears likely they are
passing those extra costs on
to consumers, the report said.
“Perhaps the greatest
challenge to all food supply
chains is a lack of available
labor. Despite rising wages,
all industries are struggling
to fi ll open positions,” the
report said.
As of October, there were
more than 11 million job
openings in the U.S., and the
civilian labor force is about
2.4 million less than in Jan-
uary 2020.
“A lack of available work-
ers throughout the pork
industry has been (a) long-
standing issue that was made
worse by the pandemic, and
is one of the reasons pack-
ing plants have had capacity
issues,” the report said.
The tight and competi-
tive labor market is impact-
ing every aspect of the pork
supply chain, including the
transportation of hogs and
pork.
Another issue is the
2.5% loss in pork process-
ing capacity resulting from a
federal court order eliminat-
ing a USDA provision that
allowed faster line speeds
at six major packing plants.
That order went into eff ect
July 1.
“In addition to wide-
spread labor shortages and
reduced packing capac-
ity, the pork industry is also
dealing with transporta-
tion bottlenecks and higher
prices for fuel, energy and
packing materials,” the
report said.
“This
report
shows
there are numerous issues
aff ecting pork prices, but
increased profi ts — whether
at the retail, wholesale or
farm level — are likely not a
signifi cant contributor to the
rising prices,” Jen Sorenson,
president of National Pork
Producers Council, said in a
press release.
Associated Press File
A butcher prepares to pack-
age boneless pork loins at a
Des Moines, Iowa, grocery
store. Several factors have
contributed to higher meat
prices in 2021, a new report
fi nds.
INTRODUCING:
NEW AG SHOW IN 2022
MARK YOUR CALENDARS!
1st Ever High Desert Ag Show
March 26 - 27, 2022
U.S. dairy farmers slow production
By CAROL RYAN DUMAS
Capital Press
U.S. dairy producers
have reduced cow num-
bers and milk production in
response to ongoing margin
pressures and an uncertain
feed situation.
The dairy cow herd has
declined 118,000 head since
its peak of 9.5 million in
June, and milk production
fell into negative year-over-
year territory in November,
according to USDA.
Milk production fell
amid lackluster gains in pro-
duction per cow and declin-
ing cow numbers, Rabobank
analysts said in the latest
“Dairy Quarterly” report.
Rabobank is forecast-
ing milk production in the
fourth quarter to be down
0.5% and down 0.2% in the
fi rst half of 2022.
“Higher milk prices are
good news for dairy farmers
but are insuffi cient to drive a
signifi cant expansion in the
U.S. dairy herd. … Higher
construction costs and labor
challenges will limit the
incentive for any expansion
requiring new barns and
milking parlors,” the ana-
lysts said.
The rapid contraction in
milk production has tight-
ened markets and strength-
ened milk prices. Less milk
heading into butter and milk
powder has lifted Class
IV milk prices. American
cheese production remains
elevated, but the market for
fresh cheddar has buoyed
both block and barrel prices.
Rabobank expects Class
IV prices to move above
Class III prices in the fourth
quarter and remain there for
most of 2022.
“While this could trigger
some repooling and depool-
ing within federal orders,
the price spread between
Class III and IV should be
within a comfortable range
and minimally disruptive
to markets,” the analysts
said.
Domestic demand for
dairy continues to increase,
with a return to in-person
conferences, events and sit-
down dining, which benefi ts
butter and fat demand.
“U.S.
foodservice
demand is unlikely to
backslide dramatically in
response to further pan-
demic outbreaks, though
response to the omicron
variant over the winter will
be an important test,” the
analysts said.
Retail sales of fl uid milk
and cheese are down 7%
and 2.5%, respectively, year
over year from mid-October
to mid-November.
“Slower retail volumes at
this point are a function of
the ongoing return to food-
service channels as well as
diffi cult-to-match compara-
bles in 2020,” the analysts
said.
That pattern should con-
tinue as retail sales normal-
ize, but pressure on bud-
gets or further restrictions
in response to the omicron
variant could shift some
demand back to retail, they
said.
Exports remain strong,
up nearly 11% in volume
year to date through Octo-
ber, according to the U.S.
Dairy Export Council.
While China’s need for
milk powder is uncertain,
its whey demand should
remain robust, Rabobank
analysts said.
Deschutes County Fair & Expo Center
Redmond, OR
Our lineup of Ag events in the Northwest is growing! The inaugural Central
Oregon Agricultural Show will be held March 26 & 27 at the Deschutes County
Fairgrounds in Redmond, Oregon, with mul�ple large buildings for exhibitors
and a�endees to spread out. Classroom space is available to host and a�end
educa�onal events.
The Central Oregon Ag Show will be a great place to spend the day with friends
and family in a picturesque se�ng. The dates and loca�on also coincide with
the High Desert Stampede, a Pro Rodeo tour stop, scheduled for March 24 - 26,
bringing addi�onal foot traffic to the fairgrounds and evening entertainment!
We are looking for exhibitors and sponsors. Please inquire for more details, call
503-506-8014 or email events@eomediagroup.com.
Powered by: Capital Press & EO Media Events, LLC P.O Box 2048 |
Salem, OR 97308 | E-mail:events@eomediagroup.com
WWW.NORTHWESTAGSHOW.COM
EMPOWERING PRODUCERS OF FOOD & FIBER
S258357-1