🧈 #Buttergate / 🌧 South America's Weather Woes / 🐂 Cattle's Transparency Test

The Canadian dairy industry is telling its 10,000 farmers to ‘pause the palm oil.’

The issue: Buttergate.

Backstory: In late 2020, social media debates surfaced when consumers became curious about what was up with their butter. Many were noticing that their butter spreads were stiff and less spreadable at room temperature than normal. Canadian foodie and cookbook author Julie Van Rosendaal went as far as to call it ‘rubber-like.’

And if there was any year to notice a change in the butter dish, 2020 was it. Sales jumped 12.4% during the pandemic.

So what led to the mystery dairy spread debacle?

Rumors spread that lower-grade butter was hitting retail shelves as it was diverted from closed schools and restaurants. Others simply blamed colder temperatures.

The lead culprit: palmitic acids.

The fatty byproducts of palm oil processing are in the spotlight as producers ramped up its use last year when demand for butter surged. The feed additive increases butterfat components in the milk without increasing the overall quantity. It became the perfect solution to supply the butter boom without flooding a liquid milk market with plummeting demand.

Worth noting: There’s no scientific evidence proving the palm oil derivative is causing the hardened butter...yet.

Where this goes: In late February, the Dairy Farmers of Canada officially asked producers to switch away from palm oil to feed alternatives while they investigate consumer complaints. An expert working group has begun the process of digging into the data to reveal the root issue.

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South American farmers are feeling the weather woes and global effects have many on high alert.

The rundown: In Argentina, Mother Nature is being a little stingy with the agua. Growing regions are receiving up to 50% less of their normal rainfall amounts, and March is projected to be the driest in 30 years. And that has soy producers concerned about proper crop development as the beans are maturing.

But when it rains, it literally pours: While Argentine farmers are grasping at straws, Mother Nature has the hydrant wide open across Brazil. Farmers in the country’s northern and east-central growing regions are getting dumped on, putting the soybean harvest at 20% behind its normal pace.

The extra-sloppy Brazilian weather also has farmers concerned about the safrinha (second-crop) corn planting. Delayed planting due to the wet weather could create the perfect storm of a pollination schedule mixed with the dry season. No bueno for production numbers.

What’s ahead: Tight global supplies. With South American supply issues on everyone’s radar and U.S. grain stocks at 6-7 year lows, markets are turning to the projected northern hemisphere’s planting season to gauge how 2021 will play out.

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Show me the money cattle market transparency.

Senators Deb Fischer (R-Neb.) and Ron Wyden (D-Ore.) introduced the Cattle Market Transparency Act of 2021, which builds on years of research and discussion of negotiated trade of fed cattle.

Refresher: Negotiated trade or references to the spot/cash market is when a buyer and seller interact and determine an agreeable price on the day of sale. In the mid-2000s, 50%-60% of cattle sold went through the negotiated market. Over time, cattle producers have shifted to using formulas, grids, and other alternative marketing arrangements (AMAs) that help them manage risk and take home more bacon.

As a result, about 20% of cattle transactions are currently negotiated purchases with significant regional nuances.

The catch: AMAs depend on the price discovery from those direct, buyer-seller interactions. The cattle industry is united in agreement with economic research, saying there’s just not enough negotiated trade to provide sufficient price discovery.

But how the industry should go about making that change is where things get hairy.

Fischer’s bill calls on the USDA to set regional minimums of negotiated trade of fed cattle, establish a library of cattle formula contracts, and increase market data reports.

Where things stand: The American Farm Bureau Federation and U.S. Cattlemen’s Association are on board, but the National Cattlemen’s Beef Association is not down with the new approach yet…at least not until their voluntary industry plan fails to achieve enough price discovery.