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Wednesday January 17, 2018

Relax. USDA says there's plenty of turkey.

"Butterball's Turkey Shortage Might Ruin Your Thanksgiving," the Huffington Post breathlessly warned online readers a couple of weeks ago. The story, apparently spurred by a press release from a small New England grocery chain, made the Internet rounds, claiming that Butterball, with a 20 percent share of the U.S. turkey market, had halved its nationwide shipments of fresh turkeys bigger than 16 pounds because of production issues that had delayed their growth.

The National Turkey Federation cautioned against panic, noting that all but 20 percent of U.S. turkey sales are frozen, not fresh. Even Butterball said fresh turkey accounts for only about 15 percent of its stock. So what's the real turkey supply situation?

USDA reports turkey meat production in third-quarter 2013 was down 2.7 percent from a year earlier, at 1.44 billion pounds. The decrease in turkey production was due to a lower number of turkeys slaughtered--down 5 percent from a year ago--as average liveweights at slaughter were actually higher. This is the fourth quarter in a row where the number of birds slaughtered has been lower than in the same quarter a year earlier; however, the drop in the number of birds slaughtered was partially offset by gains in the average liveweight at slaughter to 29.9 pounds, 2.5 percent higher than a year earlier.

Turkey meat production in fourth-quarter 2013 is forecast at 1.48 billion pounds, 4 percent lower than a year earlier. Again most of this decrease is expected to come from a smaller number of turkeys slaughtered, with only a small gain in average liveweight at slaughter. Turkey meat production in 2014 is forecast to be 6 billion pounds, which would be an increase of 1.7 percent from the previous year. Production is expected to begin to expand in the second half of the year as turkey processors determine that falling feed costs more than offset lower prices and strong competition from the broiler industry in both the domestic and export markets.

Yet even with lower turkey meat production over the second and third quarters of this year, overall turkey stocks have remained above the previous year throughout 2013. Cold storage holdings of turkey products at the end of September were 542 million pounds, 4 percent higher than a year earlier. Stocks of turkey products totaled 216 million pounds at the end of the third quarter, almost identical to the previous year. The fact that stocks of turkey products are about even with the previous year is due partly to the lower overall turkey production and partly to continued relatively strong turkey product exports. For 2014, the quarterly ending stocks forecasts are expected to be slightly higher throughout the year. With higher stocks of whole birds, there has been downward pressure on whole turkey prices. Prices for whole frozen hen turkeys at the wholesale level averaged $1 per pound in third-quarter 2013, down from $1.08 per pound in third-quarter 2012. Whole frozen hen prices are expected to average $1.01-$1.05 per pound in fourth-quarter 2013, down about 3 cents from the $1.06 per pound average in fourth-quarter 2012. The quarterly price forecasts for frozen whole hens in 2014 are expected to be very-close-to-slightly-lower than the levels seen in 2013.

Cheese and dairy update

The latest update from USDA on milk production, from August, showed dairy production was continuing to stay above year-ago levels, at 2.6 percent for the country as a whole. That's the fifth month in a row supply continues to increase. Yet even with the increase, other factors may be contributing to continued high or steady prices through October, analysts say. Although total dairy stocks are increasing, with butter stocks reaching a July 31st high fully 26.2 percent above last year's, they have fallen just over 8 percent during the past two months, coming into the strong selling season marked by Thanksgiving through Christmas. Its current price of $1.44 per pound is down 0.9 percent, but it was as low as $1.36 on August 20. Butter could reach $1.55 to $1.60 per pound.

Meanwhile, American cheese stocks as of July 31 were 5 percent more than last year's, although they likewise have shown the same pattern of dropping sharply in mid-August, only to recover in the last two months. Both cheddar barrel and block prices dropped in August futures trading, and some analysts have predicted rising prices into this month. The Chicago Mercantile Exchange block cheese price rose by 1.7 percent in the last month, ending at $1.81 per pound.

Both nonfat dry milk stocks and dry whey stocks are higher than a year ago, at 60.9 percent and 38.6 percent, respectively. Continuing demand strength driven by strong exports, expected to finish the year at a record high, will keep butter, cheese, nonfat dry milk and whey protein prices from falling through the end of the year. The latest export data, for July, show exports compared to a year ago were:

  • Up 22 percent for cheese
  • Up 61 percent for nonfat dry milk
  • Up 24 percent for whey
  • Up 167 percent for butter.


Photo courtesy Chicago Mercantile Exchange via Pennsylvania State University

Courtesy USDA via Pennsylvania State University

As is almost always the case for U.S. dairy production, the cost of feed will be an important factor for dairy prices beyond the holiday season. Anticipating lower feed prices, analysts believe large western dairies will respond by increasing their milk production, particularly in the face of demand assurances from the export market. If USDA’s crop projections for corn and soybeans prove true, feed staple prices should fall far below last year's, although they may be tempered by continuing high prices for hay, another necessary feed ingredient. However, because of the sensitivity milk production typically shows to small changes in cost expectations, a lot of uncertainty still remains as to future milk prices.

Photo: USDA

Photo: Flickr/USDAgov

Consider the paradox of industry pundits arguing over the legality of a Chinese company owning Nebraska farmland through its announced plans in May to purchase the nation's top pork producer, Smithfield, even as a delegation of Nebraska farmers leaves for a trade mission last week to promote additional sales of Nebraska farm products in Asia. The situation underscores a market change that's been growing for decades in the food chain: U.S. farmers today are producing relatively less and less for domestic retailers and more and more to please the palates of overseas consumers.

According to one estimate, Nebraska now sends fully half its annual wheat crop to buyers outside the country. Altogether, the state sells $5.3 billion in ag products outside the United States, which according to the state ag department creates around $7 in economic activity. Now, a new report by the U.S. Department of Agriculture quantifies the scope of that international impact on commodity markets, along with the predictions for the impact to come. Highlights of the 19-page report, which you can read here, include:

  • Although down slightly from earlier estimates, fiscal 2013 agricultural exports are forecast at a record $139.5 billion, up $3.7 billion above fiscal 2012 exports. The most-shipped commodities include grain and feeds, sugar and tropical products, oilseeds and their products, horticulture products, cotton, and livestock, poultry, and dairy. The trend prediction for grain and feed as well as sugar and tropical products is down slightly, oilseeds and products and cotton slightly up, and livestock and dairy unchanged from last quarter.

Exports value

  • Spurred by slow but steady world growth in 2013, trade growth, which in 2012 had dropped to 2 percent from a robust 7 percent in 2011, is slated to rise 3 percent in 2013. China and other emerging Asian economies, in pursuing policies of slower but more balanced growth, are becoming less export dependent, seeing more domestic demand driven by higher wages, rising consumer spending and housing growth. In addition, higher Western Hemispheric and African growth is expected to offset the impact of Europe's continued recession on developing economies' exports and provide further insurance against a worldwide slowdown. In particular, Brazil and Argentina are expected to see 3 percent growth in 2013, due to strong export growth, higher investment, and high commodity prices. Europe's recession and Japan's growth slowdown are the major factors preventing more rapid trade and world economic growth in 2013.
  • USDA estimates that over the past two decades, the share of all U.S. farm production that went to other countries, based on value, rose from 13 percent in 1990 to 18 percent in 2009 (latest figures available). The export share based on volume remained relatively stable at around 20 percent over the same period. Since 1990, the volume of U.S. agricultural exports has grown by 1.2 percent annually, on average. The corresponding export values increased 4.9 percent annually from 1990 to 2009; thus, export unit values of all farm products rose by about 3.75 percent annually during the past two decades. Export prices of nonfood products, which are largely bulk commodities, climbed 1.9 percent per year over the same period. Based on an annual export volume growth of 3 percent and 2 percent since 1990 for processed and unprocessed food exports, respectively, export unit values for processed foods increased 3.3 percent per year, on average, while unprocessed food prices climbed 1.8 percent per year. Thus, not only is the volume of processed food exports growing faster than unprocessed foods, but their prices are also increasing faster. Given that processed food exports are mostly high-value products and unprocessed foods are largely bulk commodities with lower per unit values, their relative growth patterns favor processed food exports.

Export share

  • Consumer spending for food and beverages in the United States over the past year has slowed from the preceding year. As in 2012, spending at food services (food away from home) is still stronger than spending for food consumed at home, although both were weaker during the last four quarters. Furthermore, prices of many key imported farm commodities—such as coffee, cocoa, sugar, rubber, and tropical vegetable oils—have fallen sharply from their 2012 levels. The downward effect of these domestic food spending developments and lower import prices on U.S. agricultural imports is partly offset by the relatively strong 3.2-percent growth in personal disposable income in the past year through March 2013. The net result is a $1.5-billion reduction in the fiscal 2013 import projection to $111 billion from the previous estimate of $112.5 billion. This import value still represents a 7-percent gain from 2012, when agricultural imports grew 9 percent.

Agriculture's balance of trade

Where will beef prices go?

Following deep herd cuts spurred by high feed costs due to drought-induced shortages, U.S. beef production is dropping to its lowest point in 21 years. U.S. beef production is predicted to drop almost 5 percent next year, to 24.1 billion pounds. That drop, for the fourth in a row now, should make the U.S. cow herd its smallest since at least 1973.

Yet with retail ground-beef prices in June up 13 percent from the same time last year, wholesale beef prices dropped 12 percent since reaching a record $2.1137 a pound in late May, and cattle futures prices had dropped this year by about 6 percent. Since peaking in early May at $1.29 per pound the weekly price for cattle ready for slaughter has declined steadily to just above $1.20. Why the apparent disconnect between tightening supply and price?

U.S. beef cattle numbers on the decline

USDA reports nagging drought in the western and southwestern United States continues to motivate ranchers to send cows to slaughter, which temporarily elevates supply, despite the decreasing herd size. At the same time, feedlots continue to bring in heavy-weight cattle to put on feed for finishing. Both those scenarios contribute to increased short-term beef production during the late summer and fall, exerting downward pressure on fed cattle prices. From mid-March through at least the week ending June 22, weekly federally inspected cow slaughter has exceeded year-earlier levels, with both beef and dairy cows contributing to the increased year-over-year slaughter. At the same time, weekly feeder cattle sales volumes were generally above year-earlier levels, averaging close to 2 percent above year-earlier sales.

But it's not good news; the piper is eventually going to have to be paid. USDA reported the tide turned during June, as weekly sales volumes declined by more than 15 percent year-over-year. These developments foreshadow future declines in cow inventories, feeder cattle supplies, and, ultimately, total beef production.

Market watchers predict live cattle futures prices will reverse this year's decline, easily taking them back close to the record of $1.35 per pound reached in January, and are well on their way to a record for annual 2013. As wholesale beef prices, at $1.9028 a pound, reached their highest point in four weeks this week, University of Missouri ag economist Ron Plain was predicting they would easily exceed the peak $2.1137 they set in May in 2014.


Just in time for June National Dairy Month, the U.S. Department of Agriculture’s 35-page report, Why Are Americans Consuming Less Fluid Milk? A Look at Generational Differences in Intake Frequency, attempts to understand why most Americans don’t consume enough dairy products. Despite rising cheese consumption in recent years, per capita dairy consumption has long held steady at about 1.5 cup-equivalents, or only about half the amount the 2010 Dietary Guidelines for Americans recommends for anyone older than 8 years old.


Milk consumption declining

Data from USDA’s dietary intake surveys conducted between the 1970s and 2000s show that Americans remain pretty stable in the portion size when they drink milk. On the occasions they drink fluid milk, they typically consume about a cup. The change has come in consumption frequency. Between the 1970s and 2000s, people have become less apt to drink fluid milk at mealtimes, especially with lunch and supper, reducing the total number of consumption occasions, by:

  • Between surveys in 1977-78 and 2007-08, the share of preadolescent children who did not drink fluid milk on a given day rose from 12 percent to 24 percent, while the share that drank milk three or more times per day dropped from 31 to 18 percent.
  • Between 1977-78 and 2007-08, the share of adolescents and adults who did not drink fluid milk on a given day rose from 41 percent to 54 percent, while the share that drank milk three or more times per day dropped from 13 to 4 percent.

Underlying these decreases in consumption frequency, the USDA study says, are differences in the habit of drinking milk between newer and older generations. When you hold all other factors, like race and income, constant, generations of Americans born after the 1930s have consumed fluid milk less often than their preceding generations:

  • Americans born in the early 1960s consume fluid milk on 1.1 fewer occasions per day than those born before 1930.
  • Americans born in the early 1980s consume fluid milk on 0.3 fewer occasions per day than those born in the early 1960s.

Milk no longer a staple throughout the day

Those differences across the generations in fluid milk intake explain the observed decrease in per capita fluid milk consumption in recent decades despite efforts by government, dairy marketers and farmer-funded advertising campaigns to stem the decline. If that’s not bad enough news, the worse news is that the trend promises to continue. Milk-drinking habits are formed in childhood, by parents, and as today’s newer less-milk-consuming generations replace older ones, they will not only continue their habit of less consumption, but will teach it to their children, as well.

If there’s any good news to be found, it’s the fact that when Americans do consume fluid milk, they have continued to drink at least as much as they did in the 1970s. The fact that portions appear not to have decreased suggests any successful attempts at marketing or recommendations that help reintroduce milk-drinking at different times of the day should result in an upward bump in overall consumption.


In patnership with the Nebraska Grocery Industry Association

The Nebraska Grocery Industry Association was formed in 1903 by a group of Omaha grocery store owners, wholesalers and vendors to allow them to promote independent food merchants and members of the food industry, and to promote education and cooperation among its membership. NGIA continues to represent grocery store owners and operators, along with wholesalers and vendors located throughout Nebraska, by promoting their success through proactive government relations, innovative solutions and quality services. NGIA offers efficient and economical programs. NGIA also lobbies on both a state and national level, ensuring that the voice of the food industry in Nebraska is heard by our representatives.

Supported by the Nebraska Corn Board

The Nebraska Corn Board, on behalf of 23,000 corn farmers in Nebraska, invests in market development, research, promotion and education of corn and value-added products. The board aims to work closely with the farmer-to-consumer food chain, to educate everyone about the role corn has in our everyday healthy lives. The Nebraska Corn Board is proud to sponsor the Farmer Goes to Market program to help bring its mission of expanding demand and value of Nebraska corn to the consumer, through the strongest touch point in that chain: the Nebraska retail grocer.

Supported by the Nebraska Farm Bureau

The farm and ranch families represented by Nebraska Farm Bureau are proud sponsors of the Farmer Goes to Market program. We take great pride in supporting Nebraska's agricultural foundation. A key part of that effort is to make sure we produce safe and affordable food. This newsletter is an important part of our effort to connect the two most important parts of the food chain -- the farmer and the grocer -- with the goal of increasing consumer awareness and information about how their food is raised in Nebraska.

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