The August 2023 issue of Consumer Food Insights from the Center for Food Demand Analysis and Sustainability at the Purdue University, College of Agriculture provides a valuable analysis of factors motivating purchase of food products over time and by demographic category.   The results from the latest survey based on 1,200 participants from across the nation was conducted from August 21st through August 25th.  The survey incorporated a weighting method termed iterative proportional fitting to ensure balance among respondent groups including gender, age, race, region, income and SNAP participation.  The results were also classified according to political persuasion according to the broad categories of “liberal”, “moderate” or “conservative”.

The survey considered food satisfaction, security, expenditures, beliefs and trust as the major response categories with appropriate data and interpretation relating to each of these factors.  With regard to consumer behavior, responses were graded on a scale of 1 (= never) to 5 (= always).  Among the moderate respondents, a score 3.2 was assigned to choosing generic foods over brands; 2.9 for local foods over non-local foods; 2.7 to cage-free eggs over conventional eggs; 2.6 for organic foods over conventional foods and 2.2 for plant-based proteins over animal proteins.  These relatively low scores incorporating the “rarely” to “sometimes” responses suggests indifference to the claimed health and other benefits claimed for organic and local food production.  There was no material difference between the “liberal” and “conservative” respondents and overall results were not different from the survey conducted in 2022.

The section on animal welfare is regarded as important with regard to consumer perceptions and motivation to select foods.  Given concern over the 2023 SCOTUS decision upholding Proposition #12 and the evident implications for the pork industry, respondents were specifically asked to quantify their preferences, expressed as a percentage, over a range of seven attributes. Price was the highest-ranked factor with a score of 23.  This was followed by Taste at 22, Freshness at 18, Nutrition at 14, Appearance at 11, Animal Welfare at 7 and Sustainability at 6.  There was no material difference between the points assigned to Welfare that ranged from 7 to 10 among income demographics and Price that ranged from 18 to 27.  Naturally, Price scored higher among respondents with annual incomes below $75,000.  Within the income range of $75,000 to $100,000, Price outranked Welfare four-fold.  Understandably, those with a “liberal” leaning were slightly more willing to pay extra for pork produced either more sustainably or with a higher level of welfare. Even within this demographic, Price and Taste combined at 40 percent outranked the combination of Animal Welfare and Sustainability scoring 19 percent.  Among the “moderates”, 30 percent indicated that they would decrease their consumption of pork with a general price increase, almost equivalent to the 28 percent that indicated that they would reduce pork consumption based on a price increase attributed to Proposition #12. This suggests that price is the principal motivating factor and that welfare as a contributor to the purchase decision was subordinate to other attributes of pork.

Given that eggs, pork and chicken compete as protein sources, it is not unreasonable to accept that the results of the Consumer Insight Study on pork are also applicable to eggs.  Over the past two decades, animal rights activists through slanted surveys of dubious statistical relevance have made unjust demands for improved welfare.  In recent years, sustainability has entered the picture with common cause between environmental and welfare activists. These groups have a joint commitment to displacing intensive livestock production but offer no practical alternative to the current ample, reliable, quality and inexpensive supply of protein. In reality, consumers are largely discounting sustainability and welfare as motivators in their purchases of specific animal products. 

During 2020, retail chains and restaurants were coerced into making commitments to transition from sourcing eggs from caged hens to alternative systems including aviaries and barns by 2025.  At the present time, 5.8 percent (18.9 million hens) of the nominal national flock of 325 million hens produce under the USDA Certified Organic seal and 106 million representing 32.5 percent of the national flock are producing eggs in other than cages.  The rate of conversion has slowed with many large producers replacing cages only in those states that have mandated alternative housing systems.  Many chains have reneged on their commitments to source eggs only from cage-free systems or have extended their compliance dates. 

The findings of the Purdue Center for Food Demand Analysis and Sustainability are essentially similar to the results obtained by Caputo et al. in their study published in February 2023 entitled The Transition to Cage-Free Eggs.  The approach used in this study to evaluate consumer preferences, applied conjoint analysis to determine motivation to purchase eggs requiring consumers to make tradeoffs among price, welfare and sustainability. More than half of those surveyed were primarily concerned over shelf price per dozen.

Most of the surveys conducted by welfare groups are simplistic and designed to elicit a desired outcome.  They rise to the level of asking seven-year-olds whether they are in favor of ice cream.  Structured surveys using accepted principles of market research are able to quantify a range of attributes. Results suggest that consumers, even if aware of welfare and sustainability considerations, regard price and taste as important motivators to purchase protein foods of animal origin. Put another way, everyone is in favor of welfare and sustainability but only a small proportion of consumers are either able or willing to pay for these attributes.

Federal Government Shutdown Looms

Given dissention within the majority party and their narrow margin in the House the Chamber has been unable to pass 10 of the 11 appropriations bills.

Accordingly most functions of the Federal Government will cease at midnight September 30^th and almost all Federal employees will be furloughed. The attempt to pass a Continuing Resolution with a blanket eight percent reduction in spending failed and would not in any event have passed the Senate. The possibility of a Discharge Petition is under consideration but this would be a complicated process requiring cooperation between the minority party and a suitable number of moderate members of the majority party who would break ranks with their leadership.

USDA Weekly Egg Price and Inventory Report, September 20^th 2023.

Market Overview

• The average wholesale unit revenue values for Midwest Extra-large and Large were down 18.6 percent this past week below seasonal summer values. Medium size was unchanged from last week. This past week shell egg inventory was up 1.3 percent, following a rise of 4.0 percent the previous week. The decrease in inventory was recorded despite presumed lower demand with higher shelf prices for generics. Supply is increasing due to a small but progressive weekly increase in the national flock from July onwards and continuing through September. This past week chains widened the spread between delivered cost and shelf price with a trend to higher stock levels if retail prices remain high. Deep discounters are restraining prices on generics. Eggs are still highly competitive in price against the comparable costs for other protein foods.
• Total industry inventory was up by 1.5 percent overall this past week to 1.78 million cases with a concurrent 2.4 percent increase in breaking stock, compared to an decrease of 0.1 percent last week. Demand for egg products will presumably decline at the end of summer with reduced travel and entertainment. Egg products are required for the food service and manufacturing sectors although exports are depressed Wholesale prices compare with 2020 and 2021, also characterized by low ex-plant unit revenue. Benchmark prices were approximately $0.70 per dozen lower than the corresponding week in 2022, that was influenced by flock depletions following HPAI.
• It is now apparent that the inventory held by chains and other significant distributors may be more important over the short term in establishing wholesale price than the USDA regional inventory figures. Changes in stock held by DCs and in the pipeline as determined by weekly orders are probably responsible for relatively small cyclic fluctuation in weekly industry stock.
• Low unit revenue compared to pre-HPAI will persist through the remainder of September. Sporadic outbreaks of HPAI are unlikely given that the seasonal Fall migration of waterfowl is four weeks away. The number and extent of future possible outbreaks during late fall and early winter of 2023 cannot be assessed until more information is available concerning the molecular and field epidemiology of the 2022 spring and fall waves of HPAI. The USDA has yet to identify specific modes of transmission for the 2022 epornitic including possible airborne spread from wild birds and their excreta over short distances.
• The current relationship between producers and chain buyers based on a single commercial price discovery system constitutes an impediment to a free market. The benchmark price appears to amplify both downward and upward swings as evidenced over the past year. A CME quotation based on Midwest Large, reflecting demand relative to supply would be more equitable. If feed cost is determined by CME ingredient prices then generic shell eggs should be subject to a Midwest Large quotation.
• According to the USDA the U.S. flock in production was up 0.2 percent or 0.6 million hens to 313.0 million during the week ending September 20^th. The total flock of 319.4 million hens included about 5.0 million molted hens that will resume lay during coming weeks plus 4.0 to 5.0 million pullets attaining production. Given the latest figures it is estimated that the producing flock is still 4 to 5 million hens lower than before the onset of HPAI.
• The ex-farm price for breaking stock was down 2.2 percent this past week to 91 cents per dozen.Checks delivered to Midwest plants were unchanged at 80 cents per dozen. Prices for breaking stock will remain low until there is a substantial increase in wholesale price for shell eggs.

The Week in Review

Prices

According to the USDA Egg Market News Reports released on September 18^th the Midwest wholesale price (rounded to one cent) for Extra-large was down 18.5 percent from last week to $1.28 per dozen. Large was down 18.7 percent $1.26 cents per dozen. Mediums were unchanged at $1.11 per dozen delivered to DCs. Prices should be compared to the USDA benchmark average 6-Region blended nest-run cost of 82.9 cents per dozen as determined by the USDA for August 2023. This excludes provisions for packing, packaging materials and transport, amounting to 57 cents per dozen as determined in mid-2023, from an EIC survey with low response. Currently producers of generic shell eggs are operating at break-even or negative margins depending on region and customer-supply agreements. The progression of prices during 2023 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

The September 18^th 2023 edition of the USDA Egg Market News Report documented a decrease of 0.6 percent in the USDA Combined Region value rounded to the nearest cent, to $1.64 per dozen delivered to warehouses for the week ending September 15^th 2023. This average price lags current benchmark Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.55 per dozen. At the high end of the range, the price in the South Central region attained $1.71 per dozen. The USDA Combined Price last week was approximately 12 cents per dozen above the 3-year average of $1.50 per dozen. This past week Midwest Large was approximately $0.70 per dozen below the corresponding week in 2022 that was elevated by losses due to HPAI.

Flock Size 

According to the USDA the number of producing hens reflecting September 20^th (rounded to 0.1 million) was up 0.6 million hens (0.2 percent) to 313.0 million. The total U.S. flock includes about 5 million molted hens due to return to production with approximately 4 to 5 million new pullets reaching maturity each week based on USDA monthly chick-hatch data for 20-weeks previously. The increase is offset by routine flock depletion in addition to residual losses during the Fall phase of the 2022 HPAI epornitic. Based on inventory level and prices the hen population producing eggs should now be in relative balance with consumer demand. Industrial and food service off-take although increasing, has not reverted to pre-COVID levels. Prices will continue to fluctuate and are expected to stabilize at a low seasonal level through the remainder of September into October 2023.

According to the USDA the total U.S. egg-flock on September 20^th was up 0.6 million hens (0.2 percent) to 319.4 million including second-cycle birds and those in molt. The difference of 6.4 million hens between flocks in production and total hens is an approximate figure but denotes that many molted hens will resume production after molt. Despite benchmark wholesale prices up for three consecutive weeks older flocks have been molted or depleted. At present there are 4 to 5 million fewer hens in the total flock with the difference equivalent to about 1.5 percent of the pre-HPAI national flock of 325 million hens.

Updated September 2023 USDA Projection for U.S. Egg Production and Consumption.

On September 18^th the USDA Economic Research Service issued updated values for egg production during 2022 with a projection for 2023 and a forecast for 2024. Production, consumption and prices were only slightly revised from the previous July 18^th 2022 report.

Projected egg production for 2023 was reduced 0.6 percent from the August Report to 7,885 million dozen This will be 1.3 percent higher than in 2022 due to replacement of a proportion of the hens depleted due to HPAI over the period extending from early spring through mid-December 2022. The per capita consumption of shell eggs and liquids combined for 2023 was 0.4 percent lower than in the August report to 280.0 eggs but up 1.0 egg (0.4 percent) from 2022. The average 2023 benchmark New York bulk unit price was up 2.0 percent at 187 cents per dozen. This was 33.5 percent lower than in 2022 attributed to a comparison with unseasonal high prices from the end of March through the 2^nd Quarter of 2023.

Subsequent USDA projections will provide greater clarity on the recovery of consumption in an economy that is impacted by moderating inflation. The Bureau of Labor Statistics recorded a rise of 3.7 percent in the Consumer Price Index for August with a 0.2 percent increase in the food component month-over-month. The 2023 Midwest in-carton wholesale price peaked at $5.17 per dozen on January 3^rd 2023 but fell precipitously to a market bottom of $0.78 per dozen on May 8^th attaining $1.64 on September 15^th This was above the USDA/EIC projection of the combined nest run August cost at 83 cents per dozen plus processing and packaging at 57 cents per dozen amounting to $1.40 cents per dozen.

Restoration in flock size at a rate of approximately 0.6 million per week is progressing but limited by the availability of pullet chicks for replacement and the rate of conversion to alternative housing systems. The cost of ingredients will influence margins and may result in cessation of production by some small-scale producers as negative margins prevail through summer. Unpredictable factors affecting price will include the extent of possible losses in the fall due to a reemergence of avian influenza; the supply and cost of ingredients as influenced by events in Ukraine; easing drought in the Midwest; increasing exports of eggs and products and the duration of current higher domestic consumer demand.

The forecast for 2024 includes a production of 8,145 million dozen, down 3.3 percent from 2023. Consumption will attain 287.5 per capita up a speculative 7.5 eggs or 2.7 percent above the projection for 2023. This will naturally depress prices with the NY-Large price dropping by 38.9 cents per dozen or 20.7 percent from the average for 2023.

In 2022 egg exports as shell and products combined attained 226.5 million dozen shell-equivalents, or 4.3 percent of production, down 42.2 percent from 392.0 million dozen or 4.9 percent of production in 2021. During 2022 egg imports as a result of HPAI depopulation, some in shell form but predominantly products attained 25.9 million dozen shell-equivalents, up 42.8 percent from 14.9 million dozen or 26.4 percent from 2021. For the first seven months of 2023 shell egg exports were up 10.7 million dozen, or 26.4 percent compared to the corresponding seven months in 2022 attaining 51.3 million dozen. Egg products were up 31.7 percent to 19,220 metric tons compared to the same period in 2022.

September 2023 USDA data is shown in the table below:-

Source: Livestock, Dairy and Poultry Outlook released September 18^th 2023

Subscribers to EGG-NEWS are referred to the postings depicting weekly prices, volumes and trends and the monthly review of prices, exports and related industry statistics.

Status of 2023 Corn and Soybean Crops

The USDA Crop Progress Report released on September 18^th confirmed moderate advances in soybean and corn development, with onset of harvest, both slightly ahead of the five-year average.

Relief of drought conditions in the Midwest has stalled but there has been little deterioration in crop condition this past week as a result of heat stress and drought over summer. The quality of both corn and soybeans compared to the 2022 crop for the corresponding week, is quantified in the table below. The combined highest categories of “good” and “excellent” for corn amounted to 51 percent this past week down from 52 percent last week and compared to 52 percent for the corresponding week in 2022. Soybean condition for the two highest categories was 51 percent this past week compared to the previous week at 52 percent and 52 percent for the corresponding week in 2022. As of September 12^th, 54 percent of corn acreage (was 49 percent last week) and 48 percent of soybean acreage (was 43 percent last week) were located in drought-affected regions.

Based on the sum of the “adequate” and “surplus” categories, surface and subsoil moisture levels were only slightly changed compared to the corresponding weeks in 2022. For the past week topsoil and subsoil moisture values for 2023 were both 42 percent for the two highest categories. These levels were similar to the previous week with values of 42 percent and 41 percent respectively. The most recent values for surface and subsoil moisture can be compared with values of 48 percent and 49 percent respectively for the corresponding week in 2022. It is to late for the transition to an El Nino to affect crop condition in coming weeks but may complicate the harvest with unseasonal rainfall.

Reference is made to the September 12^th WASDE Report #640 and the weekly Commodity, Economy and Energy Report in this edition, documenting acreage to be harvested, yields and ending stocks. The Pro Farmer crop tour released on August 25^th projected an average corn yield for the 2023 harvest of 172 bu. per acre, down 1.0 percent from the 173.8 bu. per acre as documented in the September WASDE. Soybean yield was projected at 49.7 bu. per acre, 0.8 percent below the 50.1 bu. per acre as documented in the September WASDE. The USDA incorporated the results of the NASS September survey of farmers to forecast yields for 2023 corn and soybean crops that were included in the Crop Production Report and September WASDE released on September 12^th.

WEEK ENDING   Crop Sept. 3rd 2023 Sept 10th 2023 5-Year Average Corn dough (%) 97 100 100 Corn dented (%) 82 90 87 Corn mature (%) 34 54 44 Corn harvested(%) 5 9 7         Soybean Status 18 States       Soybeans setting pods (%) 100 100 100 Soybeans dropping leaves (%) 31 54 43 Soybeans harvested (%) 0 5 4
Crop Condition V. Poor  Poor Fair Good Excellent Corn 2023 (%) 7 13 29 43 8 Corn 2022 (%) 9 12 27 41 11 Soybeans 2023 (%) 6 12 30 44 8 Soybeans 2022 (%) 5 10 30 46 9
Parameter 48 States V. Short Short Adequate Surplus   Topsoil moisture: Past Week 23 35 40 2 Past Year 20 32 45 3 Subsoil moisture: Past Week 24 35 40 0 Past Year 21 32 45 2

EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of the 2023 harvest in November.

Weekly Economy, Energy and Commodity Report: September 21^st 2023.

OVERVIEW

At 14H00 on September 21^st the CME price for corn was down 1.3 percent compared to the previous week to 476 cents per bushel for December delivery. Prices of commodities were influenced by weather conditions and profit taking and indirectly by events in the Black Sea. Other factors included movement in the wheat market, with the crop in Australia projected one third down due to El Nino. During the past week, 54 percent of corn acreage was located in drought areas compared to 40 percent a week ago. Orders by China resumed at the end of the 2022-2023 market year. Despite concern over weather as the crop matures, the demand for ethanol and a projection for lower ending stock of corn, prices are remaining substantially unchanged week-to-week.

Soybeans were down 4.5 percent from last week to 1,298 cents per bushel for November delivery. Prices during the week generally responded to events in Ukraine, predictions of crop size and ending stocks and some profit taking. During the week 48 percent of soybean acreage was located in drought areas up from 43 percent last week.

Soybean meal was down 2.8 percent to $389 per ton for November delivery, reflecting higher domestic and export demand. Price will fluctuate to reflect the CME price for soybeans and the demand for soy oil. The market has now accepted projections of crop size and higher stocks for the old crop as documented in the April WASDE Report and the forecast included in the September WASDE Report for the 2023 crop and the August 25^th report on the Pro Farmer crop tour.

WTI was up 0.2 percent from last week rising $0.15 to $89.10 per barrel at 18H00 on September 20^th attributed to higher demand and strengthening of the U.S. Dollar. There was considerable fluctuation in price during the week with WTI peaking above $93 per barrel on September 19^th before retreating. The May announcement of an ‘agreed’ production cut by OPEC and an intended 1 million barrels per day voluntary cut by Saudi Arabia announced on June 4^th and extending through December is now materially contributing to inflation.

Factors influencing commodity prices in either direction over the past four weeks included:-

• Variable weather conditions in areas growing corn and soybeans with projected lower yields despite reduced speculation in commodities. (upward pressure).

• Geopolitical considerations moved markets this past week. Cancellation of the BSGI in July and ongoing attacks on Ukraine port facilities continue to impact prices of wheat, corn, oilseeds and vegetable oils. Exports from Ukraine will be severely restricted even with E.U. support. Russia has unsuccessfully attempted to implement a Black Sea blockade on Ukraine that raises prospects for further asymmetric responses by Ukraine and even NATO intervention. This week three loaded bulk vessels left Chornomorsk for Egypt and other destinations and two vessels entered Odesa. (Upward pressure on corn and wheat and an indirect effect on soybeans)

• Macroeconomic U.S. factors:-
• Most economists in academia and the private sector are forecasting a “soft landing” of the economy following upgraded forecasts for Q3 GDP and economic parameters as detailed below. Inflation has declined from 9.1 percent month-over-month to 4.0 percent as a result of 11 FOMC rate cuts without materially increasing unemployment. There is evident stability in the bank sectors in both the U.S. and Europe. Large U.S. banks passed stringent “stress tests” in June.
• The Federal Reserve held the benchmark interest rate at the monthly FOMC meeting on September 20^th. The Fed. commentary indicated that the rate would be held high for a prolonged period in the range of 5.25 to 5.5 percent. Chairman Powell in Congressional testimony and through FOMC minutes indicated that additional increases should be expected with observers anticipating one more rate hike in late 2023 or early 2024 to restore inflation to near an annual 2.0 percent target that is now being questioned for validity.
• The Department of Commerce announced that the inflation rate for Q2 attained 2.6 percent down from the Q1 level of 4.1 percent.
• The August 30^th announcement of Q2 GDP confirmed a 2.1 percent annualized increase compared to a previous projection of 2.4 percent.
• The September 13^th release of the August 2023 CPI confirmed an annualized increase of 3.7 percent (3.2 percent July) with a core value of 4.3 percent. Food at home was up 0.2 percent from the previous month and 3.0 percent above July 2022. Food away from home was up 0.3 percent from July and up 6.5% from July 2022. Energy was up 5.2 percent, mainly due to gasoline, higher by 10.1 percent. The macro trend is clearly towards reduced inflation but with concern over escalation in energy prices.
• The August Producer Price Index (PPI) released on September 14^th rose 0.7 percent over July. The increase is attributed mainly to a rise in energy costs but with the core value excluding volatile fuel and food, was steady at 0.1 percent. Wholesale food was down 0.5 percent compared with a 0.4 percent increase in July.
• The September 14^th release of retail sales showed a monthly rise of 0.6 percent over August and 2.5 percent from August 2022. The Federal Reserve closely monitors this index as a measure of the trend in inflation.
• The Conference Board Consumer Confidence Index released on August 29^th for July/August, declined to 106 points, down from 114 in June/July
• Non-farm payrolls increased to 187,000 during August, lower than the 12-month average of 240,000 as documented by the Bureau of Labor Statistics on September 1^st The unemployment rate rose to 3.8 percent from 3.5 percent in July. Average hourly wage rate in August was up 0.2 percent from July to $29.00. Wage rates are closely followed by the Federal Reserve FOMC. Job openings declined to 8.8 million on July 31^st down 4.4 percent from 9.2 million on June 30^th
• Initial jobless claims released on September 21^st attained 201,000 for the week ending September 16^th, down 19,000 and compared with an estimate of 225,000. The Bureau of Labor Statistics estimated 1.66 million continuing claims as of the third week in September.
• A Bureau of Labor Statistics report on September 7^th recorded a 3.5 percent increase in Productivity for Q2; Unit Labor Cost was up by 2.2 percent on a normalized basis and Hours Worked down by 1.5 percent in Q2
• The ADP reported on August 30^th that private payrolls increased by 177,000, down 52.2 percent from July compared with an estimate of 195,000. This decline will not directly influence the probability of short-term future rate hikes or pauses. The ADP is regarded by the FOMC as an unreliable statistic

FACTORS INFLUENCING COMMODITY PRICES

• Dry weather in the Midwest during early June transitioned to intermittent rain effectively lowering prices for corn and soybeans in July and early August. Drought conditions prevailed in 54 percent of corn areas and 48 percent of soybean acreage this past week. (Downward pressure on prices with firmer indications yields in the July WASDE)
• The Pro-Farmer crop tour recently lowered yield estimates for corn and soybeans from the revised September WASDE estimates by 1.0 and 0.8 percent respectively, based on adverse weather conditions.

• It is evident that both polarization in the closely divided chambers of Congress and intra-party conflict between and among both sides of the House will delay adoption of appropriations bills. Passage of the 2023 Farm Bill will be contentious and now most likely to be delayed until the end of the year over SNAP eligibility and other entitlements that collectively represent 75 percent of total expenditure. The August 2^nd downgrade of U.S. debt from AAA to AA+ by Fitch Ratings recognizes Congressional dysfunction. The Agency cited “a steady deterioration in the standard of governance”. The House has failed to pass 11 appropriations bills or a continuing resolution necessary to avoid shutdowns at the end of the Federal fiscal year. In contrast the Senate has completed its work through bipartisan cooperation. This situation is creating uncertainty and will impact equity and commodity markets and the image of the U.S. governmental system.

• The August 12^th WASDE #640 updated soybean production and a near record corn harvest for the new crop with high world availability despite drought in the Argentine. The September WASDE confirmed the damage caused by the transitory drought in the Midwest during late May through early July by reducing the projected yields of both soybeans and corn from the August report. The U.S. will export 12 percent of both old and new crop corn resulting in lower ending stocks. Soybean exports will comprise 44 percent of the old crop and 40 percent of the new crop with a reduction in ending stock. (See WASDE Report in this edition confirming availability, use and ex-farm price projections)

• There is an expectation that for market-year 2023-2024, Brazil has commenced planting soybeans and expects to attain a record harvest of 159 million metric tons (5,842 million bushels) with export of 55 million metric tons (7,205 million bushels). A corn harvest of 131 million metric tons (5,156 million bushels) is anticipated with export of 55 million metric tons (7,205 million bushels). (Lower prices in the future subject to favorable reports on crop progress and actual harvests)

• The Dollar Index (DXY) was 105.6 on September 20^th, up 0.9 points from last week. The DXY has ranged from 99.6 to 110.8 over the past 52-weeks. The dollar index influences timing and volume of export orders and the price of WTI crude.

EXPORTS

The FAS Export Report, the third released for market year 2023/2024 on September 21st for the week ending September 14^th reflected carry-over from market year 2022-2023. The report confirmed that outstanding export orders for corn amounted to 10.4 million metric tons (410.7 million bushels). Net orders for the past week covering the 2023-2024 market year amounted to 0.57 million metric tons (22.4 million bushels). Shipments recorded during the past working week amounted to 0.60 million metric tons (23.7 million bushels). For the current market year to date cumulative exports of 1.33 million metric tons (52.3 million bushels) are 29.4 percent higher compared to the equivalent week of the previous market year. For market year 2024-2025 there were no outstanding or new sales this past week

(Conversion 39.36 bushels per metric ton. Quantities in metric tons rounded to 0.1 million)

The FAS Export Report for the week ending September 14^th reflecting market year 2023-2024 with carry-over from the previous market year, recorded outstanding export orders for soybeans amounting to 16.2 million metric tons (592.5 million bushels). Net orders this past week attained 0.4 million metric tons (15.9 million bushels). For the current market year to date cumulative exports of 0.9 million metric tons (35.0 million bushels) are 0.9 percent higher compared to the equivalent week of the previous market year. For market year 2024-2025 there were no outstanding or new sales this past week

 (Conversion 36.74 bushels per metric ton)

According to the Canadian Food Inspection Agency, an outbreak of avian influenza (H5N1 strain) was diagnosed in a commercial mixed-species poultry flock on September 12^th. Given chickens and turkeys and the small size of the flock, outside access is presumed. A control zone was established around the farm with surveillance. 

The case occurred in Warner County, southeast of Lethbridge approximately 70 miles north of the border with the U.S. The County includes a length of the St. Mary’s River and has numerous expanses of water.

Through September 1^st 2023, Alberta recorded 57 previous cases of avian influenza requiring the depopulation of 1.4 million birds.  This is the first case of HPAI diagnosed in the province since mid-second quarter.

The outbreak just before the advent of fall is concerning as it indicates shedding by migratory birds.

In anticipation of a fall outbreak of highly pathogenic H5N1 avian influenza and experience with the infection in previous years, the French National Agency for Health and Safety (ANSES) has established recommendations for vaccination of flocks:

• Commercial waterfowl can be vaccinated as a preventive measure
• All commercial poultry in an area undergoing an outbreak of H5N1 will be vaccinated as an emergency measure to create an immune population
• Culling will be restricted to affected farms. Flocks within the control zone will not be depleted as in previous years.
• Vaccines selected for the National Preventive Program are all based on the DIVA principle
• The Agency may deploy sentinels to detect a presence of virus although this can be accomplished by surveillance of wild migratory birds

The action taken by France to introduce vaccination as opposed to relying on depopulation as the only response is an evident shift within the E.U. from attempted containment to a more practical and progressive approach. 

Highly pathogenic avian influenza should be regarded as the Newcastle disease of the 2020's and should be suppressed, but not eradicated, using combining intensive immunization with biosecurity as in the 1970s and 1980s.

The Expanded Food Safety Investigation Act has sponsored by Senator Cory Booker (D-NJ) and Representative Rosa DeLauro (D-CT) has been introduced into their respective Chambers. The proposed legislation is cosponsored by Senator Richard Blumenthal (D-CT) and has widespread support from public health advocacy groups.

The proposed Act would allow investigators from both the Food and Drug Administration and the Centers for Disease Control and Prevention to enter farms and plants to collect samples to determine the source of foodborne infections and study the epidemiology of diseases especially associated with concentrated animal feeding operations (CAFOs).

The need for legislation is motivated by repeated outbreaks of STEC infection associated with leafy greens.  Plants are irrigated with water that is frequently contaminated by runoff from feed lots.  The Act would overcome the need for permission to be obtained for investigators to acquire samples in the course of outbreak studies. 

Senator Booker stated, “Public health agencies like the FDA and CDC face limitations in their ability to fully investigate and understand the problem since they lack the authority to enter farms and conduct microbial sampling.  The animal industry has also impeded investigators from accessing farms during outbreaks which further hinders their efforts to identify the source of outbreaks and develop preventive measures.”

Predictably, the legislation is endorsed by a number of activist organizations including the Center for Food Safety, Center for Science in the Public Interest, Consumer Federation of America, Consumer Reports, Food and Water Watch, the Natural Resources Defense Council and STOP Foodborne Illness.

The proposed legislation would have implications beyond investigation of any specific disease outbreak.  Applying whole genome sequencing to a pathogen isolated from both consumers and a feed lot will create opportunities for litigation.  The tort system would inevitably result in relocation of CAFOs that in many cases are in close proximity to fields used to grow leafy greens. Runoff with effluent to irrigation canals, presumably results in contamination of produce.  Since there is currently no absolute kill step for Salmonella, Listeria or E.coli responsible for extensive outbreaks of foodborne infection. The close proximity of CAFOs and irrigated fields creates a risk of contaminated leafy greens serving as a vehicle of infection. A similar situation may occur with Salmonella or Campylobacter infection acquired from consuming undercooked poultry. Breeder and growing farms and hatcheries for broilers and turkeys would be subject to warrantless entry by federal agencies performing microbiological sampling with unpredictable results creating to legal jeopardy.

Scientists at the Vaccine Research Center of the NIH National Institute of Allergy and Infectious Diseases are evaluating a second version of a “universal” influenza vaccine currently termed FluMos-v2.  The product comprises influenza virus hemagglutinin assembled in repeating patterns on a nanoparticle scaffold.  The fragments of virus simulate the immune system to respond to exposure to a viable virus.  The latest version of the candidate vaccine incorporates viral protein from six strains including four influenza A and two influenza B viruses to provide broad protection.

The latest clinical trial will enroll 24 volunteers aged 18 to 50 years.  Two intramuscular injections will be administered 16 weeks apart and subjects will be monitored for safety and response to the vaccine in comparison to 12 recipients of a placebo.

Dr. Hugh Auchincloss, Acting Director of NIAID, stated, “An ideal universal influenza vaccine could be taken less frequently than once a year and protect against multiple strains of influenza virus.  With each new universal influenza vaccine candidate and clinical trial, we take another step closer to that goal.”

The technology developed by NIAID could be applied to H5 AND H7 avian influenza viruses to develop an effective vaccine for administration in ovo that ultimately could provide protection for flocks in areas where avian influenza is likely to reoccur.

The American Society for the Prevention of Cruelty to Animals has released an inaugural animal welfare study assigning grades to major chains.  Criteria include cage-free eggs, pork derived from sows allowed group housing during gestation and compliance with the Better Chicken Commitment for Broilers.

It is significant that Whole Foods Market and Sprouts Farmers Market, the only chains receiving an A grade, cater to high-income demographics.

Five chains have ignored the ASPCA criteria including Trader Joe’s, Winn-Dixie and Piggly Wiggly.  Other chains received intermediate grades ranging from B through D.

Although welfare activist groups maintain that consumers are demanding higher levels of welfare, their surveys on which claims are based do not incorporate cost as a variable.  This is evidenced by the virtual cessation of conversion to cage-free egg production, which appears to have stalled at 35 percent of the total U.S. flock. This includes cage-free and certified organic eggs that by definition are required to be cage-free.  The differential in shelf price between eggs derived from conventional cages and alternative systems drives consumer choice and volume.  During times when consumers exhibit sensitivity to prices, demand for the least expensive food products transcends non-quantifiable attributes such as welfare and sustainability.

Speaking at the Goldman Sachs Communacopia + Technology Conference held in San Francisco during the first week of September, Tony Xu, CEO of DoorDash, acknowledged problems with delivery.  He noted that many consumers consider online ordering of groceries as being more onerous and less satisfying than purchasing in a brick-and-mortar store. Problems included out-of-stock and lack of alternative options to complete orders. 

According to Xu, DoorDash completed 532 million orders during the second quarter.  He claimed that his Company is continuing to expand in grocery delivery and is outpacing competitors including Instacart that recently filed for an IPO based on improved fundamentals.

Recently the New Yorker featured the career of Attorney Spencer Sheehan who initiates class-action litigation over label claims and ingredient composition of food products.

Since 2018 his law firm has filed over 500 consumer-protection class-action suits.  Some of the claims litigated by Sheehan include lack of real mint in Trident gum; the Snapple claim of “all natural” beverages that are devoid of real fruit and the case of frosted strawberry pop-tarts that do not contain strawberries.

Sheehan obviously employs personnel to scrutinize labels on packaged food with specific reference to “authenticity”. To quote the New Yorker “He is a folk hero”.  Essentially he initiates lawsuits that could be regarded as “shakedowns” resulting in negotiated payments since adverse publicity and the legal costs of going to trial outweigh the cost of settlement. 

Consumer-protection attorneys are the bottom-feeders of their profession and effectively impose additional costs on production without creating any benefit to either food safety or quality. Their nuisance suits detract from manufacturers’ ability to allocate earnings to R&D, employee benefits, capital improvement and shareholder dividends.

Despite increased trans-Pacific traffic westward to the U. S., freight rates have stabilized after increases during the second quarter.  Shanghai to Los Angeles spot rates are now at $2,254 per 40-foot equivalent unit, up 43 percent from late June.  The FBX China to North America East Coast Index was at $3,062 per 40-foot equivalent unit, up 40 percent from late June.

Container traffic is increasing and has reverted to seasonal pre-COVID (August 2019) levels.  In August 2013, 2.2 million 20-foot equivalent units were imported, up 0.4 percent from July and 5.5 percent from June.

Drought-related restrictions imposed on traffic through the Panama Canal do not appear to delay transit.  Delays for eastern Gulf Coast ports did not increase in August, averaging 5.7 days, down 4.7 percent from July. A spokesman noted, “Conditions through the Panama Canal have had little impact on retail supply chains, and it is unlikely to be a problem as we head into the peak shipping season.”

It is indeed fortunate that the operators of West coast ports have reached agreement with the International Longshore and Warehouse Union for a five-year contract that will ensure continuity of operations

Westbound trans-Pacific container volume is important to maintain an adequate supply of returnable containers for eastbound shipments of U. S. agricultural products including broiler and turkey meat and eggs.

A Chick-fil-A® location in Bryan, TX. is testing a Wall-E robot to deliver customer’s meals on trays in the dining area.  The chain is testing robots to serve guests given labor shortages in many areas of operation.  The chain, obviously, will evaluate customer response to the innovation that will represent a capital investment that may not show a return even with high wage rates.  An important question is whether robot delivery of meals will be regarded as a curiosity by customers and whether the concept is consistent with the Chick-fil-A® culture of personal service.

McDonald’s Corporation will soon introduce “CosMc’s”, a small-format store with a small dining area.  By reducing size and hence cost of locations, McDonald’s believes it can expand in high-density population areas to take advantage of underserved patronage.  Concurrently, McDonald’s is emphasizing drive-thru sales and is introducing a number of technological innovations to expedite customer service, especially at the breakfast and early-dinner hours.

These changes, also contemplated by competitors, derive in large measure from the patterns of travel, work and social interaction originating during the COVID period and by most measures  persisting into the future.

As a direct consequence of reduced in-store dining, McDonald’s intends to remove their self-serve soda dispensers by the end of 2032, almost a decade into the future.

Chipotle and Subway will be the losers in this QSR transition since most of their locations lack drive-through lanes.  Chipotle has had difficulty in establishing an image of whether it is, in reality, a QSR, a cafeteria or a casual dining restaurant. On appointment as CEO, Brian Niccol, previously president of Taco Bell, recognized the competitive need for drive through lanes. Promotion of digital sales with pickup or home delivery and the installation of “Chipotlanes” is now contributing to greater consumer convenience and traffic.

Effective January 1, 2027, California has banned a number of ingredients in food products sold in the state.  These include brominated vegetable oil, potassium bromate, propylparaben and Red Dye no. 3. The final version of the bill did not include titanium dioxide as recommended by some environmental toxicologists.

The period of grace before the deletion of the compounds will be mandated provides manufacturers with the opportunity to amend their formulations for affected products including candy.

Based on the size of the market in California, it is projected that manufacturers of national brands will amend ingredient lists for products marketed in states other than California.

Passage of the bill was strongly supported by ex-governor Arnold Schwarzenegger, an acknowledged fitness and health advocate.

The Animal and Plant Health Agency of the United Kingdom announced an outbreak in a pheasant-growing operation in Warrington, in the county of Cheshire.  Warrington is situated midway between Liverpool and Manchester and lies on the Mersey River in a region obviously attracting migratory waterfowl.

The flock was depopulated and a six-mile surveillance zone established.

Pheasants are reared as game birds and are maintained in enclosed flight pens before release.

An early outbreak before the onset of fall is concerning since it confirms the shedding of avian influenza virus by free-living birds.

The USDA National Institute of Food and Agriculture has awarded a $480.000 grant to the state of Mississippi for their Agricultural Science Professional Development Program (ACRE 2.0).

The program will acquaint existing and prospective teachers with familiarity with agriculture and will allow them to encourage students to consider career opportunities including the poultry industry.

Under the leadership of Stephanie Lemly, Associate Professor in the Department of Teacher Education and Leadership, the project will train three groups of teachers each year and will provide subsequent support.  The first group will comprise twenty-eight teachers from fourteen school districts across Mississippi who will be trained to create lesson plans and to mentor students.

Mayor Brandon Johnson is considering a joint venture between the City of Chicago and a The Economic Security Project, a non-profit to establish grocery stores in areas currently underserved.  This is a bad idea from a business perspective but superficially of benefit to civic politicians.  The reason why there are few grocery stores in so-called food deserts is that they are unprofitable mainly due to theft, euphemistically referred to as “shrinkage” and colloquially as the “five-finger discount”.  A secondary consideration is security.  Both of these issues could be resolved by better technology and policing, benefitting the residents of West Englewood and East Garfield Park where more than half of the residents live more than half a mile from a grocery store. 

If the City of Chicago would ensure safety in and around stores stores and if the legal system could ensure a fair operating margin for stores, independents and chains would respond by re-opening stores to customers.  This is evidenced by the intention to establish a Save-A-Lot store in the Englewood neighborhood in an abandoned Whole Foods Market location. 

While it is acknowledged that grocery stores are an important anchor in communities providing fresh fruit, vegetables and reasonably priced food staples, public sector involvement in retailing is expensive to taxpayers is inefficient and invariably unprofitable.  This is evidenced by the high prices and losses incurred by state mandated and operated liquor outlets and other quasi-private sector enterprises.

In addition to appropriate policing and provision of services by the City residents could cooperate by supporting local stores and acting as a united community to suppress theft and vandalism.

The Attorney General of the state of Missouri and the Missouri Department of Agriculture have filed a suit against Dollar General alleging unfair and deceptive pricing practices in stores located in the state.  The allegations relate to prices charged at checkout that are higher than indicated at point-of-sale.  Ninety-two Dollar General stores among 147 investigated failed the comparison. This suggests that errors were not simply related to a malfunction of checkout scanners or errors in placing shelf prices at a few specific stores.  The inspection involved 50 random products.  The Department of Agriculture inspectors determined that the average overcharge was $2.71 on a range of products and price discrepancies could amount to $6.50 per item.

Recently, Dollar General has come under intense scrutiny over wage rates, employee safety, having been cited by OSHA, and failure to supply fresh food and vegetables in so-called “food deserts”.  It is obvious that the chain has both a problem of ethics and a reluctance to respond to legitimate complaints relating to corporate activities.

According to a recent posting in Supermarket News, Albertsons Companies has extended the Flash grocery service to more than 2,0000 stores including the Safeway, Vons, Shaw’s and Acme banners.  Shoppers can select designated Flash items that can be delivered within a 30-to-60-minute period.  Customers can also collect groceries within 30 minutes or less.

The service is offered through the Albertsons Companies websites and mobile apps that offer Flash-eligible items at the same prices as in-store purchases.  The Flash order costs $4 for pickup and $12 per delivery order.

Albertsons Companies has upgraded loyalty programs with FreshPass providing online grocery delivery against either an annual or monthly subscription.  The company claims 35 million members of the U Loyalty Program with Drive-up and Go operating in 2,000 stores fulfilling orders within two hours.

In a recurrence of low water levels along the Mississippi River during the fall and winter of 2022, freight rates are rising sharply.  From St. Louis, MO. southbound, barge cargo now costs 70 percent more than the three-year average.  Operators are reducing loads on barges and now link fewer barges in tows.  The president of the Canal Barge Company located in New Orleans noted “We’re keeping things moving but could use some rain and help from Mother Nature.” There has been a sharp drop in river height South of St. Louis, commencing at the end of the first quarter.  Snow melt and heavy rains resulted in flooding from Iowa southbound to Illinois, but levels dropped in June, leaving behind a layer of silt on the bottom of the river requiring the Corps of Engineers to dredge channels. 

This situation has implications for the new crop with a high proportion to be shipped down the Mississippi for either export or for livestock production in the southeast.  In coming weeks, EGG-NEWS will monitor barge rates and river levels and export tonnage will be recorded in the weekly Economy, Energy and Commodity Report.

Following the Eastern Economic Forum during early September, China and Russia announced the Nizhneleninskoye-Teongjiang Grain Terminal that will be pivotal in transporting Russian grain and oilseeds from the Ural mountains eastward to China.  According to the South China Morning Post the new terminal will be part of the Russia-China Land Grain Corridor.

Russia is now attempting to secure new markets for grain including wheat with a projected export volume of 45.0 million tons for the 2022-2023 market year.  Russia is increasingly dependent on earning foreign exchange from nations such as China that do not subscribe to sanctions against Russia imposed after the invasion of Ukraine.  Since the termination of the Black Sea Grain Initiative and threats to impose an embargo on exports of grain from Ukraine, Russia has profited by taking markets from Ukraine and has benefitted from increased commodity prices as a result of generating an artificial shortage and selling wheat grown in occupied Ukraine.

The long-awaited and previously withheld September 19^th IPO of Instacart (CART) on NASDAQ presented no surprises. The share price trajectory followed that of ARM, the most recent IPO.

The set price of a CART share was $30 and shortly after trading commenced rose sharply to $42.95. Thereafter a decline set in and CART closed at $33.70 suggesting that the reduced set price was fairly offered. The IPO brought in $420 million for the 8 percent of equity offered.

Instacart had an intraday market capitalization of $9,300 million on September 20^th less than a quarter of the eye-watering private valuation of $39,000 million in early 2021 when COVID-related orders were fueling prospects for the enterprise.  The Company achieved a 12-month trailing operating margin of 13.9 percent and a profit margin of 25.7 percent. Return on assets attained 7.4 percent and 28.4 percent on equity. At 13H00 on September 20^th CART traded at $31.37 with a trailing P/E of 53.9.  

Food Safety Net Services Certification & Audit (FSNS C&A) is offering a 15 percent discount* on GFSI-benchmarked food safety certification audits The Company specializes in providing thorough, professional food safety certification audits with responsive service. GFSI food safety certification audits will include:

• FSSC 22000
• BRCGS Food Safety
• SQF

For information on the offer and to review the range of analytical, educational and analytical services offered access the FSNS website by clicking on to the Company logo on the right side of the welcome page.

*Discount applies to new customers who do not currently use FSNS C&A services.

Senator Josh Hawley (R-MI) has introduced the Strengthening Antitrust Enforcement for Meat Packing Act.  This in response to the announcement by Tyson Foods that plants in Dexter and Noel, Missouri will be closed along with plants in north Little Rock, AR and Corydon, IN.  The Missouri closures will affect 2,000 of Senator Hawley’s constituents, although many, being Hispanic, are probably not voters.  The proposed legislation would amend the Packers and Stockyards Act to allow antitrust action that results in market concentration.  The second objective of that the Act would be to restrict the ability of existing packers and poultry producers from acquiring competitors.

In 2000, Senator Hawley, who is facing reelection in 2024, urged the Federal Trade Commission to “investigate the growing concentration in the meat packing and processing industry and any anticompetitive behavior resulting from this concentration”.

Senator Jon Tester (D-MT) is concerned over concentration in the red meat industry, pointing to the disruption caused by a transitory cyber-attack impacting JBS.

Senator Chuck Grassley (R-IA) questioned the acquisition of Sanderson Farms by a consortium of Cargill, Inc. and Continental Grain with the subsequent merger of Sanderson farms with Wayne Farms.  Since the transaction, there has been no evidence of “an impact on consumer choice and price of poultry products”.  The concerns of Senator Grassley that “continued mergers and acquisitions in an already concentrated poultry industry” have not deleteriously affected prices or availability.

As we move into election mode, politicians in the Senate and all those in the House will become more voluble over the perceived but unproven allegations of the evils of consolidation that effectively are reflected in operational efficiency and competitive prices for consumers.