Weekly protein report: Dairy margins face pressure from weaker all-milk prices

 Cattle futures markets pause

 

October live cattle on Tuesday rose $0.15 to $218.925. September feeder cattle gained $0.40 to $333.45. Live cattle and feeder cattle futures saw some mild short covering today, following recent strong selling pressure. Both markets traded both sides unchanged during the session. The charts are still significantly bearish. Lower cash cattle trading last week will limit buying interest in futures this week. USDA Monday reported cash cattle trading last week averaged $228.52—down over $6 from the prior week’s average of $235.21.

 

JBS wants to acquire more of Pilgrim’s Pride

 

Pilgrim’s Pride Corp. shares jumped after meatpacking giant JBS NV offered to acquire the shares of the chicken producer it doesn’t already own in a stock deal valued at about $1.2 billion. JBS already owns an 82% stake in the chicken producer, Bloomberg reported. It is now proposing an exchange of PPC shares for JBS shares, in a deal based on the Tuesday closing prices of both stocks. Pilgrim’s Pride shares jumped as much as 8.8% in after-market trading. 

 

JBS said the move would create a more simplified organizational structure, cost savings and more efficient capital allocation across the group. Pilgrim’s Pride shareholders would also get access to JBS shares, which the company noted has a larger market capitalization and broader institutional investor base. The offer is the latest strategic move as the world’s largest meat processor seeks to expand its global footprint.

 

Chinese eating more burgers - what it means

 

For agriculture, the Chinese population eating more burgers means a larger burger channel should create additional demand across several ingredient categories: grinding beef and poultry, wheat flour for buns, cheese, potatoes, vegetable oils, sauces and processed vegetables. But because the expansion is being driven by value-conscious consumers, operators will remain highly sensitive to ingredient costs.

 

That means the burger boom is more likely to be a volume and processing opportunity than a premium-food story. Chains may emphasize smaller patties, chicken products, mixed-protein formulations, local cheeses and domestically sourced ingredients to hold menu prices down. An American restaurant logo does not necessarily mean American-origin ingredients.

 

US beef suppliers have regained an important opening: China renewed registrations for 425 US plants whose eligibility had expired and approved 77 additional facilities in May. Still, Reuters noted that tight US cattle supplies and record domestic beef prices were expected to limit any immediate export surge.

 

China also began applying an additional 55% tariff to beef imports exceeding supplier quotas on Jan. 1, with the overall 2026 quota set at 2.7 million metric tons. The safeguard is intended to protect China’s domestic cattle producers and places another ceiling on how much of the burger boom can translate into unrestricted imported-beef demand.

 

Bottom line: China’s burger boom is a useful economic indicator precisely because it is occurring during a period of weak household spending. Consumers are not necessarily abandoning thrift. They are finding a product that makes thrift easier: one portion, one price, minimal waiting and no leftovers. Restaurants, meanwhile, are responding with smaller formats, franchise expansion, delivery integration and menus designed around individual rather than family consumption.

 

Fort Morgan, Colorado, Cargill beef plant lockout to end

 

Cargill employees have voted to end a labor dispute that had halted cattle slaughter at a beef plant in Fort Morgan, Colorado, since April and left about 1,700 workers without pay, Reuters reported. Workers will return to ⁠the plant around August 24 and slaughtering is expected to restart the week of September 7, Cargill said. The company stopped paying plant workers in ⁠May after suspending cattle slaughtering at the facility a month earlier in a dispute over pay, the report noted.

 

Feedyards are next in the beef capacity squeeze

 

Slow turns, weather losses and costly cattle threaten feedyard occupancy

 

USDA and Kansas State University data increasingly point to a two-stage version of the same capacity problem now forcing beef packers to close, sell or consolidate plants. In the first stage, feedyards appear full because cattle are not moving to slaughter quickly enough. In the second, once that backlog clears, low placements and a depleted feeder supply leave too many pens chasing too few animals.

 

Full pens, slow turns

 

USDA counted 11.37 million cattle in feedlots with capacity of at least 1,000 head on July 1, up 2% from a year earlier. But that increase did not come from expanding feeder supplies: June placements fell 3%, while marketings were the lowest for any June since the series began in 1996. Oklahoma State University estimates total US feedlot capacity at 17.1 million head and calculates that the available feeder supply is insufficient to maintain the current on-feed inventory at the industry’s recent turnover rate.

 

Full pens do not disprove overcapacity. They may instead show that cattle are turning too slowly.

 

USDA estimated federally inspected cattle slaughter at 517,000 head during the week ended Aug. 15, down from 536,000 a year earlier. Meanwhile, average dressed weights increased to 885 pounds from 866 pounds. Fewer cattle are being processed, but those reaching the rail are heavier — a combination consistent with cattle being carried longer and feedlot inventory backing up behind constrained slaughter schedules.

 

The economics turn

 

The economics are also turning abruptly. Kansas State’s latest unhedged cash-market model estimated that June closeouts still produced profits of $446 per steer and $345 per heifer. July returns were projected to remain positive, but August closeouts swing to losses of $144 per steer and $265 per heifer. Projected steer losses deepen to more than $400 per head in September and October, while heifer losses range from roughly $262 to $353. Kansas State attributes the deterioration to weaker fed-cattle prices and elevated feeding costs of gain.

 

Those projections will not describe every operation. Hedged cattle, formula sales and ownership arrangements produce very different results. Custom feedyards also do not necessarily bear the cattle-price loss directly; it may fall on the rancher, investor or retained-ownership customer.

 

But the distinction only postpones the feedyard problem. A custom yard can collect feed markup and yardage while a customer’s cattle are in the pen. If repeated losses convince customers to place fewer cattle, retain ownership for shorter periods or demand lower feeding charges, the feedyard is left with the fixed costs of labor, equipment, water systems, debt and environmental compliance spread across fewer head.

 

June Kansas feedlot closeouts already showed average costs of gain of $101.56 per hundredweight for steers and $107.98 for heifers. Costs for cattle being placed during July were projected at approximately $106 and $111, respectively. Those figures include feed, yardage, processing, medication and death loss — and they were calculated before the worst of the late-July Plains heat event was reflected in closeout data.

 

Weather compounds the cost

 

Weather therefore adds more than an isolated death-loss event. Heat-stressed cattle reduce dry-matter intake, gain more slowly, convert feed less efficiently and often require additional days to reach a marketable endpoint. In this context, “reduced consumption” principally means cattle going off feed, rather than a demonstrated collapse in consumer beef demand.

 

South Dakota State University says the most dangerous conditions combine high temperatures, humidity, limited airflow and inadequate nighttime cooling. Heavy cattle that have been on feed for more than 130 days are particularly vulnerable. Reports from South Dakota estimated at least 2,000 cattle deaths from the July heat, with the total believed to be higher, but there is no authoritative national count.

 

That absence of a clean number helps explain why the losses have received less attention than the Tyson plant changes. USDA’s monthly “other disappearance” category combines death loss with cattle moved back to pasture and cattle shipped to other feedlots. It therefore cannot isolate weather mortality or show, in real time, how much heat stress has added to feeding costs and reduced performance.

 

A regional mismatch

 

The pressure will also be uneven geographically. Tyson is ending operations at its Joslin, Ill., beef facility and its Eagle Mountain, Utah, case-ready plant while pursuing a sale of the Pasco, Wash., beef plant. Tyson says it can shift production to other facilities and maintain similar national slaughter, but that does not preserve regional competition. Fewer nearby packer bids can mean longer cattle hauls, higher freight costs and a weaker local basis even when national slaughter capacity appears adequate.

 

The Pacific Northwest is a clear example. Washington feedlots held 270,000 cattle on July 1, 6% more than a year earlier. If Pasco’s ownership or operating status remains uncertain, regional feedyards may have cattle ready for market but fewer economical destinations. A national processing network can be “balanced” on paper while a particular feeding region becomes badly mismatched with its remaining slaughter capacity.

The longer-term arithmetic

 

The longer-term arithmetic is more troubling. US feedlot capacity has remained near 17.1 million head for years. At the start of 2026, only about 81% of that capacity was occupied. Oklahoma State calculated 1.77 feeder cattle outside feedlots for every animal already on feed, compared with an estimated annual turnover rate of 1.99. In other words, the available feeder pool cannot keep current feedlot inventory and existing capacity operating at normal turns without herd rebuilding, greater imports or additional dairy-beef animals.

 

That makes the present congestion deceptive. Packers are reducing hooks because they cannot procure enough cattle at prices that leave a processing margin. Feedyards are temporarily holding more cattle because those packers are slowing the chain. But once the heavy-cattle backlog is worked through, the same cattle shortage that emptied packing-plant shifts will begin emptying feedlot pens.

 

A quieter contraction

 

Feedyard contraction will be less visible than a plant closing. A packing facility announces layoffs involving hundreds or thousands of workers. A feedyard can reduce occupancy pen by pen, delay maintenance, cut a shift or stop bidding aggressively for replacement cattle without issuing a public announcement. The contraction may not become obvious until placements, yard sales, loan performance and regional cattle basis confirm it.

 

Bottom line

 

Sources say the feedyard sector is not yet in precisely the same position as the packers — but it is moving toward the same fixed-cost reckoning. Full pens occupied by money-losing cattle hurt their owners. Empty pens hurt the yards themselves. As today’s backlog clears, feedyard overcapacity could become the next major stage of the beef industry’s capacity reset.

 

Lean hog futures market still technically weak

 

Hogs remain the weakest technical market in livestock, but they were also the most stable. October lean hog futures fell 37 1/2 cents Friday to $81.75 after touching a six-week low early, ending the week just 47 1/2 cents lower. December settled at $72.475. Chart-based specs still control this market, and Friday's bearish weekly low close in the October contract keeps the daily-chart downtrend intact.

 

Cash is the problem. The national base carcass price fell $4.07 Friday afternoon to $93.30, and the CME Lean Hog Index stood at $95.87 — a premium to October futures wide enough to explain both the fund short and the reluctance to chase the downside. The pork cutout actually firmed 98 cents to $99.90, with bellies the only lower primal. Estimated weekly slaughter of 2.334 million head ran 63,000 above the prior week but more than 83,000 below a year ago. Managed money added 5,479 contracts to its net short in the week ended Aug. 11.

 

Perspective: October hogs are trading roughly $14 under the cash index, which is a large discount to defend if the seasonal cash decline proves shallower than the board assumes. Slaughter running well below year-ago levels argues the supply side is not the problem. Until the cash index rolls over decisively or the fund short gets crowded enough to squeeze, the path of least resistance stays lower — but seasoned analysts say this is the livestock market with the most fuel for a violent short-covering rally.

 

Tyson Foods restructuring its beef business, closing Joslin, Illinois plant

 

Tyson Foods “is making strategic changes to its beef operations to position the company for long-term success,” said a company press release Thursday. “Tyson Foods will anchor its beef business around three strategically located beef facilities in the central United States: Dakota City, Nebraska; Holcomb, Kansas and Amarillo, Texas, to create a more competitive footprint amidst one of the most historic cattle shortages the country has ever experienced. Recent USDA cattle inventory data, which included continued evidence of limited heifer retention, indicates these supply constraints are likely to persist, requiring strategic action. The company will end operations at its Joslin, Illinois, beef facility and its Eagle Mountain, Utah, case-ready facility. Additionally, Tyson Foods is pursuing the sale of its Pasco, Washington, beef facility. With these changes, the company will ramp back up a second shift at its Amarillo, Texas, facility as cattle become available,” said the press release.

 

Argentine beef recall raises questions about import oversight

 

Sid Miller presses USDA after nearly 30,000 pounds bypass required reinspection

 

Texas Agriculture Commissioner Sid Miller is calling for tougher scrutiny of imported beef after nearly 30,000 pounds of Argentine product entered US commerce without receiving required federal import reinspection.

 

USDA’s Food Safety and Inspection Service recalled approximately 29,600 pounds of raw Argentine beef after discovering the shipment had bypassed the mandatory US reinspection process. The products were distributed in Texas and Florida. No illnesses, injuries or specific contamination have been reported.

 

The recall reflects a serious inspection and compliance failure, but it does not show that the beef was unsafe. Imported meat from USDA-approved countries must still be presented for US reinspection before entering commerce, and USDA now needs to determine how that safeguard was missed.

 

Miller said the episode shows foreign beef must be held to the same rigorous standards as US production and urged consumers to “Buy American. Buy Texas.” His criticism will resonate with cattle producers already concerned about increased beef imports and domestic herd numbers near historic lows.

 

The amount recalled is far too small to have any measurable impact on cattle or beef prices. The bigger impact is political. The case could increase scrutiny of USDA import controls and strengthen producer arguments for tighter inspection enforcement and clearer country-of-origin information.

 

Bottom line: Miller has a valid point that the inspection lapse demands an explanation. But so far, the incident is evidence of a breakdown in the import-reinspection process — not evidence that Argentine beef broadly poses a food-safety problem.

 

Monthly USDA supply and demand report: livestock

 

USDA’s cattle assumptions deserve particular attention because WASDE explicitly incorporates the planned Aug. 24 reopening of the Douglas, Ariz., port for Mexican cattle. USDA assumes Douglas reopens but all other Mexican cattle ports remain closed until an official reopening timetable is announced.

 

Against that policy backdrop, USDA cut 2026 commercial beef production from 25.288 billion pounds in July to 24.967 billion pounds, reflecting slower steer and heifer slaughter and lower cow slaughter. The 2027 projection was also cut.

 

But USDA simultaneously raised 2026 beef imports from 6.059 billion to 6.132 billion pounds. Exports were essentially unchanged at 2.333 billion pounds, and projected per-capita beef disappearance fell from 59.4 to 58.9 pounds.

 

Normally, a 321-million-pound cut in beef production would be price supportive. USDA instead reduced its annual 2026 steer-price forecast from $251.10 to $245.35 per cwt, including projected third-quarter prices of $242 and fourth-quarter prices of $245. USDA attributed the cuts to weaker-than-expected demand for fed cattle.

 

That is a significant message: USDA sees the cattle shortage persisting but believes demand and imports will absorb enough of the tightness to keep cattle prices below its previous forecast.

 

Live cattle futures were nevertheless higher on the day around the report, with October cattle quoted roughly 0.5% higher in a delayed Barchart snapshot. That divergence suggests the cattle market was not treating the WASDE price revision as decisive, particularly with domestic cattle supplies still historically tight.

 

For cattle producers, the report is not fundamentally bearish. Beef supply remains constrained. But USDA is warning that a tight herd does not guarantee ever-higher fed-cattle prices if retail demand softens and imported lean beef continues to fill the gap.

 

USDA hogs and pork: Smaller production, weaker exports, slightly better prices

 

USDA trimmed 2026 pork production from 27.955 billion pounds to 27.876 billion, citing slower slaughter and slightly lighter third-quarter carcass weights. Pork exports were reduced from 7.237 billion to 7.175 billion pounds, while ending stocks increased from 425 million to 445 million.

 

The annual barrow-and-gilt price forecast nevertheless increased from $64.82 to $65.32 per cwt, reflecting stronger recent prices.

 

The fundamental message is therefore mixed. Lower production is supportive, but weaker export demand and larger projected stocks absorb part of that tightening. Lean hog contracts were mixed around the session, which is consistent with a report lacking a singular bullish or bearish shock.

 

Dairy: Class III improves, but the producer milk-price outlook slips

 

USDA left 2026 milk production unchanged at 236.6 billion pounds and lowered 2027 production by only 100 million pounds to 238.0 billion. Cow inventories were raised for 2026, while output per cow was reduced slightly.

 

The price changes were more important. USDA raised its 2026 Class III forecast from $16.15 to $16.25 per cwt, reflecting higher cheese and whey prices. But Class IV fell from $18.40 to $18.15, as butter and nonfat dry milk forecasts were lowered. The all-milk price fell 15 cents to $19.85 per cwt.

 

Trade is also splitting the complex. USDA increased fat-basis exports, largely because of butter, while reducing skim-solids exports because of weaker lactose and nonfat-dry-milk shipments. Imports were raised on both fat and skim-solids bases for 2026.

 

CME dairy markets were generally firmer during the session — September Class III milk was around $17.31, up about 0.5%, while September cheese was more than 1% higher in delayed quotes — but those moves should not be attributed solely to WASDE.

 

For dairy producers, the report is mixed to slightly negative on margins. The Class III outlook improved, but the lower all-milk price combined with firmer grain prices after WASDE is not a favorable margin combination.

 

Weekly USDA dairy report

 

CME GROUP CASH MARKETS (8/14/26) BUTTER: Grade AA closed at $1.4600. The weekly average for Grade AA is $1.4755 (-0.0275). CHEESE: Barrels closed at $1.5625 and 40# blocks at $1.6000. The weekly average for barrels is $1.5535 (+0.0060) and blocks $1.6050 (+0.0590). NONFAT DRY MILK: Grade A closed at $1.7450. The weekly average for Grade A is $1.6570 (+0.0895). DRY WHEY: Extra grade dry whey closed at $0.6900. The weekly average for dry whey is $0.6895 (-0.0025). 

 

BUTTER HIGHLIGHTS: Milk supplies in the East remained steady, the Central region showed week-over-week improvement following seasonal weather, and the West's supply met demand, though spot milk availability was minimal. All regions report that cream is readily available, spot sales are active, and churns remain full. Butter demand throughout the United States is steady and is prepared for school year needs. The East region noted higher retail engagement this week. Contacts say inventories of 80 percent butterfat butter remain ample, while 82 percent butterfat stocks are still tight. Spot loads of 80 percent salted butter are trading around the CME weekly average. CME spot trading of butter is active, with prices sliding lower. Bulk butter overages in the East range from 2 cents below to 5 cents above market, Central has less wiggle room, ranging from 3 cents below to 2 cents above, and the West ranges from 1 cent below to 5 cents above. The butter market tone overall is firm and steady. 

 

CHEESE HIGHLIGHTS: Cheese production remains steady in the East, active in the Central region, and robust in the West. In the East, retail and food service demand are stable, supported by a 25 percent year-over-year increase in cheese retail ads. Export interest continues but is constrained by higher domestic prices for premium cheese, pushing most international business toward lower priced commodity styles. CME spot cheese prices moved moderately higher, and inventories remain within desired ranges due to active bulk cheese shipments to the Midwest for repackaging. In the Central region, cheesemakers report strong demand amid tightening milk availability. Despite this tightening, demand remains firm, and spot loads of cheese are available, holding in the $1.50s to $1.60 range. Inventory remains manageable but closely linked to evolving milk supplies. Class III spot milk pricing in the Central region ranged from flat Class to $5.00 over. Demand in the West is weaker for spot loads from cheese manufacturers. Domestic demand ranges from steady to lighter, even as cheese stands out as the most advertised retail commodity this week. Export demand is steady, but manufacturers report production continues to outpace demand, keeping spot loads available and inventories growing. International cheese production in Europe is reported as strong with steady spot prices. 

 

FLUID MILK HIGHLIGHTS: Eastern fluid milk availability remains sufficient despite recent hot weather. Class I demand is trending upward as schools reopen on a staggered schedule, though no significant volumes are pulling fluid milk from manufacturing. Class II demand is steady as the summer cream pull eases with tapering ice cream production. Class III supplies support consistent cheese operations, and ample Class IV cream keeps churns running ahead of the late-season holiday imbalance. Condensed skim demand is outpacing supply. In the Central region, mild weather improved cow comfort, steadying milk volumes. Class I demand is strengthening ahead of school openings, keeping spot availability tight. Cheese production is active, Class II and IV demand is strong, and cream markets are firm. Western milk and cream production are mixed amid heat, fires, and smoke. California output is up slightly, Idaho is tight, Utah is heavy, and the Pacific Northwest is steady. Class I demand is increasing; Class II is soft, Classes III and IV steady. Cream supplies are long. The market tone is steady. Cream multiples, all classes: East: 1.30–1.59, Midwest: 1.15–1.40, West: 1.10–1.30. 

 

DRY PRODUCTS HIGHLIGHTS: Central and East region low/medium-heat nonfat dry milk (NDM) prices strengthened, rising at both ends of the range and the mostly price series. High heat NDM prices also moved higher at both ends of the range. In the West region low/medium-heat nonfat dry milk prices moved up at both the bottom and top of the range, and the mostly price series increased as well. Prices for high-heat NDM also moved up at both the bottom and top of the range. Dry buttermilk prices remained unchanged this week throughout the country. Dry whey prices increased slightly at both ends of the range in the Central region while remaining unchanged in the East and West. Lactose prices increased at the bottom of the range while holding steady elsewhere throughout the series. Dry whole milk prices strengthened at both ends of the range this week. Whey protein concentrate (WPC) 34% prices strengthened across both ends of the price range and advanced at the top of the mostly range. Regular WPC 80% is reported from $12 to $13. Whey protein isolate (WPI) prices range from $14 to the upper $14s. The spread between WPC 80% and WPI has widened to around $2, which may encourage more WPI production. Prices for both acid casein and rennet casein remained unchanged this week. 

 

INTERNATIONAL DAIRY MARKET NEWS

 

WEST EUROPE: The UK-based Agriculture and Horticulture Development Board recently released a report analyzing milk utilization trends in the country. This report showed that milk production was at record highs in 2025/2026 and milk deliveries reached a new high for 2025. Milk production and consumption continued to decline last year, as 40 percent of production was used as liquid milk, down 5 percent from 2015. This year, milk has continued the trend of shifting towards cheese and other products. 

 

EAST EUROPE: Nearby European Energy Exchange butter futures closed on August 12 with a clear upward momentum, as August, September and October posted the strongest gains. November and December also firmed, reinforcing a bullish tone through Q4 2026. Beyond year end, closes from early 2027 onward held steady between roughly 4,325 and 5,125 euros per metric ton, indicating that while the forward curve remains elevated, trading interest and volatility are currently concentrated in nearby contracts. 

 

OCEANIA: AUSTRALIA: Dairy Australia recently released export data for Australia showing milk export volumes from July 2025 - June 2026 totaled 163,341 metric tons, an increase of 10.7 percent compared to export volume totals from a year earlier. Plant closures continue, including one planned in Q1 of 2027, leading to imports being higher than normal. Processors are generally content but cautious heading into 2027. Additionally, there is ongoing debate about Australia's lack of dairy subsidies compared with the EU and US, with the new EU trade agreement drawing criticism across agriculture. 

 

NEW ZEALAND: Following Global Dairy Trade (GDT) Event 409, a group in New Zealand that forecasts milk prices increased their 2026/2027 season milk price forecast to $9.78 per kilogram milk solids (kgMS). The spot value of milk decreased to $9.52/kgMS from $9.75/kgMS. GDT prices were higher for SMP, mostly steady for WMP, and lower for milk fats. The group's 2025/2026 season milk price forecast remains at $9.74/kgMS. This prediction reflects a US cents per NZ dollar exchange rate assumption of 0.5905 and a forecast range of $9.51/kgMS to $10.33/kgMS. The September 2026 Milk Price Futures contract last settled at $9.75/kgMS. 

 

SOUTH AMERICA: Milk deliveries across the region remain above year-ago levels, sustaining supply pressure on international powder values. In Argentina, the region's largest powder exporter, the farm-gate price rose for a fifth consecutive month in July (in nominal currency) and stands higher year-over-year. In Chile, the most recent monthly farm gate price trended slightly lower in nominal local currency terms but was reported somewhat higher year-to-date.