Egg-News

Editorial


Epidemiologic Evaluation of Bovine Influenza Apparently Obstructed by States

From a statement issued by Dr. Nirav Shah, Principal Deputy Director of the Center for Disease Control and Prevention (CDC), there is unanimity between his agency and USDA but state agricultural departments and individual dairy operations are obstructing investigations relating to the prevalence of infection in herds and workers.

 

With an emerging infection such as bovine influenza-H5N1 it is critical to determine as rapidly as possible the prevalence rate and geographic extent of the infection.  Both field and molecular data must be obtained and analyzed to ascertain the rate of spread and modes of infection in order to implement counter measures. Epidemiologic data can be used to predict the progress of the disease in cattle and genomic evaluation can assess the risk of extension to the human population.

 

The CDC, with their focus on human health, is obviously concerned over the possible incidence rate of H5N1 infection among workers and should be allowed to conduct surveys.  Texas Agriculture Commissioner Sid Miller stated, “They don’t need to do that, it’s overreach.”  With respect to Commissioner Miller, he is in no position to comment on the epidemiologic realities of emerging disease and apparently is oblivious to the potential of extension to humans, although only one diagnosed case has been documented.  Anecdotal reports by veterinarians visiting affected dairy herds suggest that individual workers demonstrated influenza-like symptoms including conjunctivitis.  Colorado with only one case is following 70 workers to establish infection and possible transmission to contacts.  Based on data from the CDC only 220 farm workers have been monitored for symptoms suggesting that only 150 workers have been evaluated among eight states where outbreaks have occurred.  Texas with the most cases among dairy farms reported has only tested 20 workers with clinical signs and the results of diagnostic procedures have not been released. PCR assay results are available within 24 hours!

 

It is now five weeks since the index case of bovine influenza was diagnosed. Preliminary studies on the sequencing of isolates of H5N1 belatedly released by USDA-APHIS suggest that the disease has been present in dairy herds since late December 2023.  To date there has been no structured evaluation of H5N1 prevalence among dairy herds on a national basis and the appropriate epidemiologic surveys on workers have not been conducted. This is despite the presence of RNA consistent with H5 influenza virus in both milk and wastewater especially in areas where outbreaks in dairy herds have occurred.

 

The World Health Organization has designated H5N1 avian influenza virus as a potential pandemic strain.  The Agency has urged surveillance including documentation of outbreaks in avian and now mammalian species and the WHO maintains a database of outbreaks and the library of genomic sequences. 

 

The parochial but understandable concern of state departments of agriculture as expressed in their desire to protect the milk industry is self-evident.  This standpoint obviously conflicts with the greater need to understand the epidemiology of bovine influenza-H5N1 and to develop a national program to limit infection.  Of greater concern is the possible extension of a mutant virus to workers and then to the general population.  The distribution of PPE is perhaps an initial step in preventing infection but will be difficult to implement given the underlying deficiencies in structural and operational biosecurity in comparison to egg-production complexes. Practical and cultural issues exist with the deployment and use of PPE that requires availability and acceptance.  We need to know the numbers of workers that may have been infected from an affected herd, the duration of the clinical phase and of viral shedding.  Surveillance based on molecular epidemiology including gene sequencing will be critical to timeously detect mutations that may contribute to infection of humans and person-to- person spread. It is understood that up to $98 million will be distributed by the USDA to provide 3,500 dairy farms with up to $28,000 to “contain the spread of the virus between animals and humans and for testing milk and animals for the virus” This commentator suggests that grants should be conditional on cooperation with federal agencies with respect to herd and worker surveillance.

 

We are not China.  We should not suppress necessary epidemiologic investigations or the data collected.  Bovine influenza-H5N1 and its avian counterpart will not simply go away, irrespective of the intensity of hope, denial and prayer. Fortunately it appears that the risk of contracting H5N1 from direct contact with cattle is minimal but this assumption is based on the current circulating virus and inadequate surveillance.  Pasteurization obviously destroys the virus that is secreted into milk from infected mammary tissue. A mutation in the viral genome could profoundly alter present circumstances and could result in widespread infection as with “swine flu”.  Dr. Shah notes, “We have all seen how a virus can spread around the globe before public health is even had a chance to gets shoes on, that’s a risk and one we have to be mindful of.” It is not what we know that has the potential to hurt the industry and population—but what we do not know.

 

The dairy industry, state agriculture organizations, and federal agencies including USDA-APHIS and the CDC should cooperate according to a coordinated and agreed plan to determine the extent of bovine infection following “One Health” principles.  Currently the risk of mutation to a strain capable of infecting humans is very low based on accumulated knowledge. We are however in a situation of confronting a condition with a low probability of an adverse outcome for humans but with an extreme potential for morbidity and mortality and devastation of the Nation’s economy in a worst case scenario.  Let us learn from our unfortunate experience with COVID from 2019 onwards and not underrate the significance of the infection at a stage when practical control is still possible.

 


 

Egg Industry News


Egg Week

USDA Weekly Egg Price and Inventory Report, May 15th 2024.

 

Market Overview

  • The average wholesale unit revenue values for Midwest Extra-large and Large sizes were down 5.8 percent this past week. Medium size was down 5.7 percent. National wholesale price for large in cartons at $1.47 per dozen was approximately $0.15 per dozen above the 3-year average of $1.50 per dozen and up $0.90 from the corresponding week in 2023 at $0.75 per dozen. This past week shell egg inventory was down 7.8 percent, compared to a rise of 2.7 percent in stock the previous week.
  • Although there has been a weekly increase in pullet flocks transferred to laying houses, hen numbers are constrained by the loss of close to 13 million hens due to HPAI on twelve complexes holding from 250,000 to 2.6 million hens during the 4th Quarter of 2023. Losses have not yet been completely replaced. During April close to 8.4 million hens collectively were depopulated in a sequence comprising one complex in Texas and three related facilities under common ownership in Michigan in addition to a breeder complex in New Mexico.
  • This past week chains apparently widened the spread between delivered cost and shelf price. This could result in a continued rise in generic stock unless offset only by a proportional rise in demand that appears unlikely and only with constant re-ordering to fill the pipeline through the back-half of May. Discounters are holding prices on generics influencing mainstream retail stores. Eggs are still highly competitive in price against the comparable costs for other protein foods.
  • Total industry inventory was down by 6.0 percent overall this past week to 1.63 million cases with a concurrent 0.9 percent increase in breaking stock, following an 4.5 percent increase during the preceding processing week. Demand for egg products has fallen into May attributed to less home-baking and entertaining. Egg products are required for the food service and manufacturing sectors and for exports that increased in February.
  • 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 compared to the USDA regional inventory figures. Changes in stock held by DCs and in the pipeline as determined by weekly orders are probably responsible for small cyclic fluctuation in weekly industry stock, especially into and after a holiday weekend.
  • The number and extent of future possible outbreaks during the spring and fall months of 2024 cannot be projected but sporadic cases in backyard poultry, isolation from wild migratory and predatory birds and close to 40 dairy herds in nine widely diverse states is a cause for concern. More surveillance information should be released by USDA-APHIS as it becomes available concerning the prevalence rate of carriers among resident domestic free-living birds and a review of molecular and field epidemiology for the 2022 spring and fall waves of HPAI. The USDA has yet to identify and release specific modes of transmission for the 2022-2023 epornitic including likely 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 two years. 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 apparently down by 0.4 million hens (0.1 percent) to a new level of 305.8 million for the week ending May 15th The stated total flock of 311.1 million included about one million molted hens that will resume lay during coming weeks plus 4.5 to 5.0 million pullets scheduled to attain production. Given the latest figures it is estimated that the producing flock is at least 17 to 20 million hens lower than before the onset of HPAI in 2022. In January 2024 the USDA adjusted figures to account for depopulation of 13 million hens spread over the last quarter of 2023. There were evident discrepancies between published figures and the theoretical number of hens over successive weeks taking into account known losses and predetermined pullet replacements. The April loss of 8.4 million hens is not reflected in data released over the past five weeks. It is hoped that the USDA agency responsible for publication of flock size will get their act together and coordinate with APHIS to record the number of depleted flocks and promptly provide accurate data. Figures released on May 8th overestimate flock size
  • The ex-farm price for breaking stock (rounded to one cent) was down 9.7 percent to $1.02 per dozen.Checks delivered to Midwest plants were down 9.5 percent to $0.95 per dozen this past week. Prices for breaking stock should follow the wholesale price for shell eggs usually with a lag of about one to two weeks.

 

The Week in Review

 

Prices

 

According to the USDA Egg Market News Reports released on May 13th 2024, the Midwest wholesale price (rounded to one cent) for Extra-large was down 5.7 percent from last week to $1.49 per dozen. Large was down 5.8 percent to $1.47 per dozen. Mediums were down 5.3 percent to $1.43 per dozen delivered to DCs. Prices should be compared to the USDA benchmark average 4-Region blended nest-run cost of 75.6 cents per dozen as determined by the Egg Industry Center based on USDA data for April 2024. This value excludes provisions for packing, packaging materials and transport, amounting to 57 cents per dozen as determined in mid-2023 from an EIC survey (with a low response) and now realistically 60 cents per dozen.

 

Currently producers of generic shell eggs should be operating with small positive margins irrespective of region and customer-supply agreements. The progression of prices during 2023 and 2024 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

 

The May 13th edition of the USDA Egg Market News Report confirmed that the USDA Combined Region value (rounded to the nearest cent), was down to $1.64 per dozen delivered to warehouses for the week ending May 10th 2024. This average price lags current benchmark Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.56 per dozen. At the high end of the range, the price in the South Central region attained $1.72 per dozen. The USDA Combined Price last week was approximately $0.15 per dozen above the 3-year average of $1.50 per dozen. This past week Midwest Large was approximately $0.90 per dozen above the corresponding week in 2023 that was falling from a peak price of $3.70 per dozen seven weeks previously to a near 52-week low of $0.75 per dozen as production recovered from HPAI depletion but with declining market demand.


 

Commodity Report

WEEKLY ECONOMY, ENERGY AND COMMODITY REPORT: MAY 16th 2024.

 

 OVERVIEW

 

Prices for corn and soybeans diverged this week. For July delivery corn was down 0.4 percent but soybeans were up 0.8 compared to last week. Soybean meal was down 0.8 percent. Prices were influenced by technical selling arising from geopolitical concerns and revised projections for crop sizes in Brazil and Argentine. Secondary factors included disruption in shipping in the Red Sea and Panama Canal, carryover from the 2023 U.S. crop, export orders and the predicted ending stocks of corn and soybeans for the 2024 crop.  The May WASDE Report updated production forecasts and prices based on planting approaching the midway mark, and the possible transition to a La Nina event by the third quarter.

 

At noon EDT on May 16th the CME price for corn was down 0.4 percent compared to the previous week to 457 cents per bushel for July delivery. Corn price was influenced by ethanol demand and the proportionally high ending stock from the 2023 crop. Export orders for the current market year have increased in response to lower prices.  Volumes and prices are indirectly influenced by higher wheat prices, events in the Black and Red Seas. Orders by China resumed at the end of the 2022-2023 market-year and have extended through May despite a moderately high, but declining Dollar Index and increased ocean freight but offset by a low FOB prices. Total exports for the current market year are 28.2 percent higher than for the corresponding week during the 2022-2023 year.

 

Soybeans traded at 1,215 cents per bushel for July 2024 delivery, up 0.8 percent over the week. Slightly higher prices were attributed to trading, less farm selling and projections of availability from the 2024 Brazil and Argentine harvests. Total exports for the current market year are 17.8 percent lower than for the corresponding week in the 2022-2023 year.

 

 

Soybean meal traded at $371 per ton for July delivery, down 0.8 percent. Price was influenced by demand coupled with high crush volumes for consecutive months from December 2023 through March 2024. Price will fluctuate to reflect the CME price for soybeans and the demand for biodiesel despite the adverse financial situation in this sector. The market previously responded to the increased 2023 crop and higher stocks together with projections for 2024 extensively revised in the May WASDE Report .

 

 WTI was $1.09 (+1.4 percent) higher from last week to $78.87 on May 15th with moderate to lower world demand in relation to supply. Price is up on the balance between supply and demand despite the reduction in attacks on shipping in the Red Sea, and the cessation in hostilities between Israel and Iran. It is accepted that U.S. production is a moderating influence on price, attaining 12.9 million barrels per day in March with ample reserves. An upward trajectory in price may occur if production cuts by OPEC amounting to 2 million barrels per day and extended through June actually materialize. There was a small upward move in price during the week ( range $77.75 to $78.90). Crude oil inventory in the U.S., other than the Strategic Reserve, was down 1.0 percent to 35.0 million barrels last week. High U.S. production is constraining domestic and international prices but the rise in energy cost during past weeks is reflected in inflation restraining the FOMC from lowering the benchmark interest rate.

Economic data released during the past week (Q1 GDP; PCE, Confidence, Productivity, Employment) confirmed slower growth and persistent inflation. The data-driven Federal Reserve FOMC passed on a lowering of rates on May 1st and will be disinclined to reduce the benchmark interest rate until September at the earliest.

 

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

 

  • Weather conditions in areas of the World growing corn and oilseeds especially in Brazil and also Argentine with favorable rain recently under the influence of a strong El Nino event. The 2023 U.S. harvest was completed ahead of the corresponding weeks in 2022 with higher carryover and lower exports of soybeans. (Downward pressure on prices).  Planting is almost complete for the “new” crop of 2024 but has been disrupted by flooding in the southern production states.

 

  • Geopolitical considerations continue to move markets, especially in the Mideast. Ongoing attacks on Ukraine port facilities have impacted prices of wheat, corn, oilseeds and vegetable oils. Loaded bulk vessels are sailing from Black Sea and Danube River ports using the ‘Humanitarian Corridor” to various destinations. This route is operational despite threats by the Russian Federation to mine the entrance to ports and deployment of airborne missiles.  Exports from Ukraine are approaching 1.5 million metric tons per week with a total of 26 million metric tons market year through February, down 11 percent from the equivalent period for 2022-2023 year. Grain production in Ukraine during the current year will be lower than 2022/2023 (Downward pressure on corn and wheat and an indirect effect on soybeans)
  • Macroeconomic U.S. factors:-
  • Most economists in academia and the private sector are still confident of a “soft landing” for the economy despite the release of the Q1 2024 GDP and recent economic parameters including the ECI, CPI and PPI and with fluctuation in bond rates. Annual inflation as measured by CPI declined from 8.9 percent in June 2022 to 3.5 percent in March 2024. This is in part a response to a series of 11 FOMC rate raises that curbed inflation and cooled the labor market but without precipitating unemployment. There is evident stability in the bank sectors in both the U.S. and Europe. A rise in energy prices is contributing to persistence of inflation.
  • The Federal Reserve held the benchmark interest rate steady at the monthly FOMC meeting on May 1st 2024, the sixth sequential pause.  The Federal Reserve commentary indicated that the rate would be held at 5.25 percent until a pivot with possibly less than two reductions of 25 basis points each in 2024, after the September meeting at the earliest. Chairman Powell in Congressional testimony and documented in FOMC minutes has indicated that decisions would be based on demonstrated progress in reducing inflation as confirmed by a basket of key economic data, towards an annual 2.0 percent target by mid-2025. Market optimism with projections of five reductions during 2024 was evidently premature.
  • The April 25th Bureau of Economic Affairs reconfirmed the advanced estimate of Q1 2024 GDP at 1.6 percent, below the consensus estimate of 2.4 percent. The Q1 GDP value was influenced by spending by both consumer and government-sectors and with higher investment in housing. By comparison Q4 2023 GDP growth was 3.4 percent. Growth in GDP attained 2.5 percent in 2023 up from 1.9 percent in 2022. The Personal Consumption and Expenditure Index For Q1 (excluding food and energy) was up 3.7 percent annualized, higher than 2.0 percent in Q4 2023.
  • The April 26th Bureau of Economic Analysis released the March Personal Consumption and Expenditure Price Index. The core index (excluding food and energy) was up 0.8 percent from the previous month and 2.8 percent year-over-year. This was in line with estimates. The Headline PCE Index was up 2.7 percent year-over-year, above an estimate of 2.6 percent. On an annual basis the price of goods was unchanged, services were up by 4.0 percent, food by 1.5 percent and energy by 2.6 percent. The headline PCE is closely followed by the Federal Reserve and confirms persistent inflation holding above an annual target of 2.0 percent.
  • The May 15th Bureau of Labor Statistics release of the April 2024 CPI confirmed a 0.3 percent increase from March, 0.1 percent below forecast. The annual increase of 3.4 percent was unchanged from  March and consistent with the anticipated value. The increase in the core value (excluding food and energy) was up 0.3 percent from March and 3.6 percent for the 12-month period. Food at home was down 0.2 percent from the previous month. The category of ‘meat, fish and poultry’ was down collectively by 1.0 percent from the previous month. Food away from home was up 0.3 percent from March.  On an annual basis all food was up 2.2 percent with food at home up 2.2 percent and food away from home up 4.1 percent. Energy was up 2.1 percent due to gasoline (+1.2) and electricity (+5.1) offset by natural gas (-1.9 percent) in April. The shelter category was up 0.4 percent for the month and 5.5 percent over the past year. The macro trend is inclining towards reduced inflation but restrained by to a rise in energy prices detracting from deflation. The CPI heavily influences FOMC rate decisions.
  • The April Producer Price Index for Final Demand (PPI) released on May 14th was up by 0.5 percent from March compared to an expectation of 0.3 percent. The PPI was up 2.2 percent over the past 12-months. This is compared to a 6.4 percent increase in 2022. The core PPI value excluding volatile fuel and food, was up 0.5 percent for April compared with 0.4 percent for March and up 3.1 percent for the 12-month period. Food was down 0.7 and energy up 2.0 percent respectively.
  • A Federal Reserve release on April 16th confirmed that industrial production rose 0.4 percent in March. Capacity utilization was fractionally higher at 78.4 percent, 1.2 percent below the 1972-2020 average.
  • The April 24th report on Durable Goods Ordered during March 2024 was higher by 2.6 percent to $283 Billion compared to a revised value of 0.7 percent or $376 Billion in February. Transportation and specifically aircraft orders were up 7.7 percent. Excluding the Transportation component, new orders increased by 0.2 percent in March compared to February. Shipments of durable goods were essentially unchanged from February that in turn was up 1.2 percent from January 2024 impacted by severe weather.
  • The May 15th release of retail and food sales data showed a monthly rise of 0.4 percent in April down from 0.7 percent in February. Retail sales in April 2024 were up 3.0 percent from the corresponding month in 2023. The Federal Reserve FOMC closely monitors retail sales as a measure of the trend in inflation.
  • The May 1st release by the Institute for Supply Management (ISM®) documented the Manufacturing Index for April at 49.2 down from 50.3 in March and below the consensus of 50.0. New orders fell to 49.1 (54.6, March) and Production attained 51.3 (54.6 March).
  • On April 30th the U.S. Bureau of Labor Statistics reported a 1.2 percent increase in the Employment Cost Index (ECI) over the 1st quarter of 2024 against a consensus estimate of 0.9 percent.  The year-over-year increase was 4.4 percent compared to an estimate of 4.0 percent and with benefit costs up by 3.7 percent. The March ECI of 1.2 percent compares with a value of 0.9 percent for the 4th quarter of 2023. The ECI is closely followed by the Federal Reserve FOMC and further reduces the possibility of a rate cut before September at the earliest.
  • The April 23rd release of the S&P Global Composite U.S. Manufacturing PMI for April fell to 50.9 compared to revised 52.1 in March. The Global Services PMI fell from 51.7 in March to 51.7 in April.
  • The Conference Board Consumer Confidence Index released on April 30th for April, fell to 97.0 points from a revised 103.1 for the preceding four-week period. The index was lower than a consensus estimate of 104.0. The Present Situation Index was down to 142.9 in April compared to 157 in March. The Expectations Index fell to 66.4 in April from a revised 74.0 in March. Values below 80.0 suggest a future recession
  • The May 10th University of Michigan Preliminary Index of Consumer Sentiment for May fell sharply by 9.8 points to 67.4 for May, down from a revised value of 77.2 in April.  The Index was up 14.0 percent from the corresponding period in 2023. Both the Current Economic Index (68.8 down from 79.0 in April) and the Index of Consumer Expectations (66.9 down from 76.0 in April) denote a decline in consumer sentiment influenced by stable but high interest rates and inflation despite geopolitical concerns. Inflation expectations 12-months hence moved higher from 3.2 to 3.5 percent among those surveyed.
  • Non-farm payrolls added 175,000 in April, as documented by the Bureau of Labor Statistics in a May 3rd release. This was less than the anticipated 240,000, and should be compared to the revised March value of 315,000. The moderate increase was attributed to workers hired in the health care and government sectors. The unemployment rate rose to 3.9 percent with 6.5 million unemployed and with 1.3 million in the long-term category. Real average hourly earnings during April showed a 0.2 percent increase over March to $34.75 .  Average hours worked fell 0.1 percent to 34.7 per week in April. Labor participation was unchanged at 62.7 percent in April. Wage rates increased 3.9 percent over 12-months, the lowest gain since June 2021. Wage rates are closely followed by the Federal Reserve FOMC.
  • The Bureau of Labor Statistics Job Openings and Labor Survey report released on May 1st estimated 8.5 million job openings at the end of March, down 1,100,000 from March 2023 and consistent with estimates. The March job openings number was the lowest value in 35 months and compares with the March 2022 value of 12.2 million during COVID.
  • The seasonally adjusted initial jobless claims figure of 222,000 released on May 16th for the week ending May 11th falling 10,000. The Weekly value corresponded to the Reuter’s estimate of 220,000. The four-week moving average was up 2,500 to 217,750. The Bureau of Labor Statistics estimated 1.794 million continuing claims for the week ending May 3rd . There is evidence from data over the past three months that the labor market is cooling although still tight despite sporadic weekly fluctuation in new claims.
  • The May 2nd Bureau of Labor Statistics report recorded a 0.3 percent increase in non-Farm Productivity for Q1 2024 down from 0.7 percent in Q4 2023. Labor cost increased 4.7 percent over the past 12 months.
  • The ADP® reported on May 1st that private payrolls increased by 192,000 in April, down 16,000 from the revised 208,000 in March and compared to the Dow Jones estimate of 183,000 jobs. The increase in employment was mostly in the construction, services and hospitality sectors. Annual pay was up 5.0 percent year-over-year, down from 5.1 percent in March and the lowest value since August 2021. The increase will not directly influence the probability of short-term future changes in interest rate since the ADP® is regarded by the FOMC as an unreliable statistic

 

FACTORS INFLUENCING COMMODITY PRICES

 

  • The 2023 harvests of corn and soybeans were completed by late November 2023. The May 10th WASDE projected acreage to be planted, yields, crop size and ending stocks for the 2024 crop.
  • It is evident that both polarization in the closely divided chambers of Congress and intra-party conflict between and within both sides of the aisle in the House delayed adoption of appropriations bills. Passage of the 2023 Farm Bill will be contentious and is subject to a 12-month extension as a stop-gap measure. Progress on the 2023 Farm Bill has been impeded by contention over SNAP eligibility and other entitlements that collectively represent 75 percent of total expenditure. The August 2nd downgrade of U.S. debt from AAA to AA+ by Fitch Ratings recognizes Congressional dysfunction. On November 10th 2023 Moody’s downgraded U.S. credibility from ‘stable’ to ‘negative’ based on an inability to pass required fiscal legislation. After four Continuing Resolutions the House and Senate passed six appropriations bills including the FDA and USDA, avoiding a March 8th partial shutdown of the Federal Government. Agreement was concluded on the remaining appropriations bills on March 23rd maintaining Federal funding through October 2024. Currently the position of the Speaker of the House is more secure suggesting progress in passing needed legislation in the declining weeks of the 118th Congress.
  • The delayed 2023 Farm Bill is mired in conflict in both the House and Senate. There is no consensus on major issues comprising the magnitude of SNAP payments and eligibility and requested price supports for crops. The Chair of the Senate Agriculture Committee Sen. Debbie Stabenow (D-MI) is standing firm on maintaining both SNAP-WIC benefits and climate remediation funding even if the Farm Bill is delayed through to the 119th Congress  
  • The May 10th WASDE #648 Projected both corn and soybean production parameters with a potential record soybean harvest for the 2024 crop. There will be ample world availability of ingredients although inequitable distribution will result in shortages in some nations. Soybean exports will comprise 38.0 percent of the 2024 U.S. crop with a 30.7 percent increase in ending stock to 445 million bushels as compared to the April WASDE Report.  The projection of corn exports suggests that exports will amount to 13 percent  of the2024 crop with ending stocks down 0.9 percent to 2,102 million bushels.
  •  Rabobank projected the soybean crop in Brazil at 153 million metric tons on April 4th albeit before flooding. This value is higher than the projection by CONAB (the Soy production association in Brazil) at the midpoint of the soybean harvest, of 147 million metric tons  (5,401 million bushels) down from a previous estimate of 155 million metric tons (5,695 million bushels). Exports of 100 million metric tons (3,674 million bushels). It is anticipated that Brazil will crush 56 million metric tons (2,057 million bushels). If CONAB is correct the harvest will be 7 million metric tons (269 million bushels) lower than the 2023 record crop. Brazil exported 7.0 million metric tons (257 million bushels) of soybeans to China over the first two months of 2024, double the quantity shipped to this nation over the corresponding two months in 2023.
  • Corn production in Brazil for the 2023-2024 market year will attain 124 million metric tons (4,801 million bushels) from all three sequential harvests. But down seven percent from the previous year. Brazil is projected to export of 54 million metric tons (2,125 million bushels). Argentine will produce 50 million metric tons of corn (1,968 million bushels), double compared to the previous year impacted by drought. (Lower prices in the future subject to favorable reports on crop progress and actual harvests)

 

  • The Dollar Index (DXY) was 104.2 at close on May 15th, down 1.2 points from last week based on  a lower CPI and other data suggesting a possible reduction in benchmark interest rates in the fall. The DXY has ranged from 99.0 to 107.0 over the past 52 weeks. The dollar index influences timing and volume of export orders and indirectly the price of WTI crude.

 

EXPORTS

The FAS Export Report for corn, released on May 16th for the week ending May 9th confirmed that outstanding export orders for corn amounted to 12.97 million metric tons (510.50 million bushels). Net orders for the past week for the 2023-2024 market year amounted to 0.74 million metric tons (29.21 million bushels). Shipments recorded during the past working week amounted to 0.95 million metric tons (37.47 million bushels). For the current market year to date cumulative export of 35.40 million metric tons (1,392 million bushels) is 28.2 percent higher compared to the equivalent week of the previous market year. For market year 2024-2025 outstanding orders attained 2.31 million metric tons (90.72 million bushels) with 128,000 metric tons (5.05 million bushels) ordered this past week

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

 

The FAS Export Report for soybeans covering the week ending May 9th reflecting market year 2023-2024, recorded outstanding export orders amounting to 3.48 million metric tons (127.82 million bushels). Net orders this past week attained 0.27 million metric tons (9.76 million bushels).  Shipments for the past working week attained 0.44 million metric tons (16.28 million bushels). For the current market year to date cumulative exports of 39.12 million metric tons (1,437 million bushels) are 17.8 percent lower compared to the equivalent week of the previous market year.  Outstanding orders for the 2024-2025 market year amount to 0.89 million metric tons metric tons  (32.71 million bushels) with 25,200 tons ( 0.92 million bushels) ordered this past week.

 (Conversion 36.74 bushels per metric ton)

 

For the week ending May 9th 2023 outstanding orders for soybean meal and cake attained 2.87 million metric tons. Net orders this week for soybean meal and cake amounted to 300,400 metric tons. During the past week 211,200 metric tons of meal and cake combined was shipped. The quantity exported to date is 13.9 percent higher than the volume for the corresponding weeks of the previous market year. For the next market year outstanding sales have attained 398,000 metric tons with 31,100 tons ordered this past week.


 

Crop Progress

Status of the 2024 Corn and Soybean Crops

 

The USDA Crop Progress Report released on May 13th documented planting and emergence for the 2024 season for soybeans (23 percent in the ground) and corn (49 percent). Corn planting is 5 percent behind the 5-year average but soybeans are ahead by 1 percent. Farmers experienced relatively wet conditions in four of the nine major states producing corn and soybeans through May 12th. Planting progressed in the “big-nine” (IL, IN, IA, KS, MI, MN, MO, NE and OH) with a collective average of 3.1 days suitable for field-work, (last week, 2.7 days) ranging from 1.7 days (IA) to 5.0 days (KS)

 

Based on the sum of the “adequate” and “surplus” categories, surface and subsoil moisture levels were higher than during the corresponding week in 2023. For the past week surface and subsoil moisture values were 82 and 78 percent for the two highest categories of ‘Adequate’ and ‘Surplus’. These levels were higher than the previous year with values of 76 and 68 percent respectively for the two highest categories, demonstrating an acceptable planting situation.

 

It is to early in the expected transition to a La Nina event to predict any impact on crop condition in coming months. If prolonged dry and hot weather in corn and soy areas occurs, yield will be depressed depending on timing and severity.  A long-range forecast in the form of two charts is provided predicting rainfall and temperature during the growing season.

 

Reference is made to the May 10th WASDE Report #648 and the weekly Commodity, Economy and Energy Report, both in this edition, documenting acreage to be harvested, yields, weekly prices and ending stocks. The June WASDE will be reviewed in the June 14th edition.

 

  WEEK ENDING  

Corn Status (18 states)

March 31st  2024       

April 7th  2024

5-Year Average

Corn Planted (%)

36

49

54

Corn Emerged (%)

12 23 21
       
Soybean Status (18 states)      

Soybean planted (%)

25

35

34

Soybean Emerged (%)

9

16

10

       

 

Crop Condition 

(pending USDA reports)

V. Poor

Poor

Fair

Good Excellent

Corn  2024 (%)

         
Corn  2023 (%)          
           

Soybeans  2024 (%)

         
Soybeans  2023 (%)          

 

Parameter  48 States

V. Short

Short

Adequate

Surplus
Topsoil Moisture:        

Past Week

4

14

64

18

Past Year 7 17 63 13
Subsoil Moisture:        

Past Week

5

17

64

14

Past Year 11 21 59 9
         

EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through to the end of the 2024 harvest in November.


 

Aldi Pressing Suppliers Over Cost

To maintain the image and reality of Aldi as a deep discounter offering low prices on private brands, the Company is “urging suppliers to drive down costs”.  The secondary consideration is to enhance sustainability consistent with Aldi values.  In return, Aldi is offering long-term supply contracts and collaboration on business development.

 

The corporate policy of Aldi is exemplified in the comment by Scott Patton, Vice-president of National Buying who stated, “I can’t state the importance of reducing costs.” This is a logical and fundamental objective inherent to Aldi but should take into consideration the cost structure of many items including eggs for which feed represents over 60 percent of nest-run cost.

 

Aldi should be cognizant of the need for suppliers to generate an adequate margin to provide a return on investment and to allow for depreciation of equipment and facilities in the production of food items supplied to the company.  Recent experience in the U.K. where chains nickeled and dimed free-range egg producers into negative returns resulted in a sharp reduction and availability as producers ceased production. 

 

Generally, Aldi has a harmonious relationship with egg suppliers although the company wields a sharp pencil.  If Aldi requires producers to invest in sustainability including installation of solar panels or wind generation of power or other improvements to enhance welfare, then it must be prepared to provide a satisfactory return.  If margins shrink in response to higher specifications without compensation, Aldi may be deprived of supplies.  Eggs are an important component of the grocery basket, and supply cannot be compromised.


 

Disruption of Shipping in Red Sea Continues

To date 23 shipping companies representing both E.U. and Asian nations have suspended passage through the Suez Canal and the Red Sea due to the action of Houthi militants in Yemen that continue attacks on vessels in international waters transiting the Bab el Mandeb Strait. 

 

As an alternative, E.U. shipping companies in France, Switzerland, Germany, Denmark, Norway and in Asia including Taiwan, Japan and South Korea are diverting vessels around the Cape of Good Hope. This adds as much as 14 days and $1 million in operating cost per Panamax-sized shipment between Asia and the E.U.  Military action by the U.S. in cooperation with other NATO countries has apparently not resolved the problem of missiles and ordinance fired from mobile launches in eastern Yemen. With passage through the Suez Canal down by half, Egypt is loosing considerable revenue that supports the fragile economy.

 


 

Dairy Industry Discovering the Need for PPE

The U.S. Centers for Disease Control and Prevention is cooperating with state health agencies with regard to availability, distribution and use of personal protective equipment (PPE) for dairy farm workers.  State health agencies accumulated an inventory of PPE during the COVID years.  The CDC considers it appropriate that dairy farm workers and those in packing plants should be protected.

 

The fact that H5N1 avian influenza virus has been circulating in the dairy industry since late December and that only one mild case of conjunctivitis in a worker has been diagnosed, suggests that currently the risk of transmission to humans is low.  This of course may change with possible additional mutations.  The emergence of a zoonotic strain of H5N1 through the dairy industry seems remote. This is deduced from the history of highly pathogenic avian influenza in large egg-production complexes. Despite thousands of person-hours of exposure of workers involved in depopulation and decontamination apparently only one case was recorded over three years and this was without evidence of human-to-human transmission. Notwithstanding the current situation there is a risk of emergence of a zoonotic strain as noted by the World Health Organization that urges constant surveillance and sequencing of mammalian isolates.



 

Elanco Animal Health Posts Q1 2024 Results

In a press release dated May 8th, Elanco Animal Health (ELAN) reported on Q1 FY 2024 ending March 31st. Elanco beat on EPS and on the top line by 2.2 percent against consensus estimates. For the period, the company posted net income of $32 million on revenue of $1,205 million with a diluted EPS of $0.06. For the corresponding Q1 FY2023, The Company earned $103 million on sales of $1,257 million with a diluted EPS of $0.21.  Comparing Q1 2024 with Q1 202:-

 

  • Revenue declined by 0.6 percent
  • Gross margin declined from 60.7 to 57.3 percent
  • Operating margin declined from 28.2 to 22.1 percent

 

During Q1 2024 sales to the livestock sector attained $556 million, representing 46.1 percent of total company sales. Sales to the poultry sector amounted to $197 million representing 16.3 percent of Company sales. Sales of companion animal products attained $639 million or 53.0 percent of the Company total.

 

The Company recently announced the divestment of their aquaculture business with quarterly sales of $31 million to Merck Animal Health for $1,300 million in cash.

 

Guidance for FY 20234 included revenue of $4,460 to $4,519 million but with a net loss ranging from $(3) to $(45) EPS will range from a negative $(0.88) to $(0.96).

 

In commenting on results, Jeff Simmons, CEO stated, “Elanco's strong business momentum continued in the first quarter, reinforced by the diversity of our portfolio and balanced geographic presence. We delivered estimated revenue growth of 3% to 5% in the first quarter, excluding the impact of the ERP blackout from last year, and exceeded the topend of our guidance range for revenue, adjusted EBITDA and adjusted EPS in the quarter. These results follow the 5% revenue growth we delivered in the last two quarters of 2023. We are increasing our new product sales expectations, led by

 

Experior® and AdTab®, and our innovation is enhancing the durability of our base portfolio with customers, allowing us to raise our full year constant currency revenue growth range to 2% to 3%." He added, "Additionally, we improved operating cash flow by nearly $150 million year over year in the first quarter as a result of our disciplined focus on improving net working capital and the benefit of completing our ERP system integration."

 

Simmons continued, "We are encouraged by the strong progress of our late-stage pipeline, which has advanced significantly over the last several months. Based on our dialogue with the FDA and the status of packages submitted, we have increased certainty in the expected approval timing for Bovaer®, Zenrelia™ and Credelio Quattro™. We continue to expect to bring differentiated products to the market, with revenue contribution expected from all three new products in the second half of 2024."

 

This self-adulatory statement is at variance with the reality of continued losses, shareholder disaffection and loss of technical and marketing talent.

 

Ancora an investment group with three percent of the equity proposed a slate of independent candidates to be added to the 12-person Board to replace four retiring members. Ancora characterized the current Board and CEO as “barriers to success”.

 

On December 31st ELAN posted total assets of $14,019 million including goodwill and intangibles of $8,674 million with long-term debt of $6,201 million. On May9th the market capitalization attained $8,350 million The Company has traded over the past 52-weeks in a range of $7.88 to $17.38 with a 50-day moving average of $14.97.

 

On a twelve-month trailing basis, operating margin was 1.6 percent and profit margin -27.9 percent.  The company achieved a return on assets of 1.4 percent and -18.2 percent on equity.

 

After meeting with Ancora and following release of FY 2023 earnings, Elanco announced a program to enhance shareholder value. This included a shift from livestock to higher-margin companion animal products, cancellation of 420 positions with layoffs and changes in representation and distribution to reduce costs.  At the insistence of Ancora, Kathy Turner a veteran of IDEX and Craig Wallace were added to the Board.


 

Micro-Tracers Completes Phase II of Wastewater Treatment Study

During February 2023, Micro-Tracers, Inc. in collaboration with University of Arkansas, was awarded a USDA National Institute of Food and Agriculture (NIFA), Small Business Innovation Research (SBIR) grant as part of the Meat and Poultry Processing Research and Innovation (MPPRI) program. This program aims to improve the supply chain resilience of small and mid-size meat and poultry processors through emerging technologies, sustainability and food safety.

 

The collaborative project focuses on a chlorine-free method that safely and cost- effectively inactivates pathogens in poultry wastewater. Generating these disinfectants on-site, in wastewater reduces hazards associated with handling of chemicals and contributes to worker safety. This application also reconditions wastewater without toxic residues, making it environmentally friendly and ideal for water reuse applications while providing real-time process monitoring to ensure the safety of poultry products. 

 

In 2023, pilot-scale equipment was designed and built and utility was validated. Both E.coli and Salmonella were inactivated in treated wastewater through the in-situ generation of oxidants. These included hydrogen peroxide, hydroxyl radicals and singlet oxygen. Quantitative analyses of bacterial survival showed decreases in colony forming units by two to four orders of magnitude.

 

The principle of the application is the generation of reactive oxygen species (ROS) that induce oxidative stress leading to bacterial death.When molecular oxygen undergoes electrochemical reduction, the resulting molecules and metallic ions further reduce pro-oxidants to form highly-reactive hydroxyl radicals through the Fenton reaction. Simultaneous photodynamic reactions generate another ROS, singlet oxygen contributing to bacteriolysis.

 

Continuation of Phase III research in 2024 will focus on commercialization and integration of pilot equipment into existing poultry processing, sanitation and cleaning systems. Remote trials are in progress at the Agricultural Research and Extension Pilot Processing Plant of the University of Arkansas, Poultry Science Department in addition to the Natural State Processing Facility in Clinton, AR. 

 

Micro-Tracers, Inc. established in 1961 has acquired extensive experience collaborating with senior technical staff at poultry integrations in the U.S. and abroad. By adopting improved water reuse applications, small to mid-sized poultry producers can improve sustainability, supply chain resiliency and generate enhanced profitability.


 

Ovotrack Completes MPS Egg Farm Installation

During April, Ovotrack B.V. Completed installation of a comprehensive software system at the MPS Egg Farms plant in Loda, IL. The system harmonizes both Aeros and existing Ovotrack software.

 

Mark Casper, GM of MPS Egg Farms stated, “We have now started the implementation of      Ovotrack at Feather Crest in Texas and Country Charm in Georgia.  He added, “Inventory control and digitalization of our process was our main goal when we started this project that will allow us to comply with FDA traceability rules”.

Adam Jones of MPS Egg Farms stated, “We have weekly Teams meetings with the Ovotrack project team where we discuss progress and address issues.  We are actually up and running at all plants in Illinois and Indiana right now with real-time inventory control for packing material and finished goods incorporating scanning of pallets and generating printed packing lists that are provided through our Aeros installation”.

 

Recently Ovotrack received Microsoft Partner certification.  This enables the Company to access current technology distributed within the Microsoft Partner network.

 

With increasing demand for Ovotrack installations, the company has strengthened the customer support team appointing specialists in both the Netherlands and the USA to update software for labels and reports.  Ovotrack has the capability of taking over programs in real-time to effect changes and to provide assistance.

 

For further information access the Ovotrack website by clicking onto the company logo on the right side of the welcome page.


 

Legal Action by Greenpeace Contributes to Blindness in the Philippines

Following a lawsuit filed by Greenpeace, cultivation of Malusog Golden Rice will be banned.  The GM variety incorporates genes from corn and bacteria that contribute to a high level of available vitamin A in a diet incorporating the GM cultivar.

 

The strain was developed at the Philippine Rice Research Institute using technology developed over two decades ago in Switzerland to provide adequate vitamin A to consumers with a low standard of nutrition. Vitamin A is required to maintain the integrity of mucous membranes to resist respiratory infections and to prevent blindness, especially in children.

 

The Court hearing the case was unable to reach a conclusion based on conflicting scientific and evidence presented by the two parties.  The Government intends to appeal the decision that resulted from an apparent misinterpretation of the “precautionary principle”.

 

Greenpeace alleged that “GM crops have never been proven safe.”  As a matter of record, GM corn, soybeans and beets for sugar have been widely cultivated and consumed without any evidence of any deleterious effect.

 

Golden Rice has been approved in Australia, New Zealand, Canada and the United States and is now cultivated in Bangladesh.

 

When established, Greenpeace provided valuable service to ecologists and environmentalists in advocating scientific principles of land and marine resources.  In recent years, the organization has been hijacked by extremists and activists opposed to intensive livestock and crop production.  As with similar organizations opposed to increased productivity, they offer no alternative to beneficial technology.

 

Golden Rice is promoted by a humanitarian Board that grants patent rights to institutions without  payment of a royalty. There is no commercial benefit to any biotech enterprise from propagating the strain.

 

Those in Greenpeace should be ashamed of their dubious legal victory. There are thousands of impoverished children picking a livelihood on garbage dumps or working in fields whose vision will be impaired because they are denied access to a nutritious food staple.


 

Promoters of Seed Bank in Norway Awarded the World Food Prize

 

Jeffery Hawtin and Cary Fowler have been awarded the World Food Prize for 2024.  The citation cites “Their long-standing contributions to seed conservation and crop biodiversity”.   In 2001, the scientists were active in establishing an international plant treaty to preserve crop genetics.  Hawtin and Fowler were instrumental in establishing the Nordic Gene Bank (NORDGEN) in 1984 on the island of Svalbard in Norway, located above the Arctic Circle. The initial repository was a disused mine in permafrost maintained at -3.5C. Subsequently in 2008 a permanent building was completed to house the collection.  The Ministry of Agriculture and Food of Norway is responsible for managing the seed repository, supported by contributions from international donors.

 


 

China Approves GM Wheat

To date, China has followed a policy of growing non-GM crops but importing genetically modified ingredients mostly for animal feed.

 

The intended approval of GM cultivars for domestic production is regarded as a major shift recognizing the inherit value of the technology.  The GM wheat varieties will be used to produce pasta, noodles and bread.

 

The shift towards approval of GM crops is an acknowledgment that agriculture in China must become more efficient to reduce the Nation’s reliance on imports.  Insect-resistant strains of corn are now undergoing approval along with appropriate changes in labeling regulations. The phase- shift should eventually result in general acceptance of GM crops in China and will influence acceptance by holdout nations.


 

ADM Donates $1 Million to Kansas State University

The Global Center for Grain and Food Innovation at Kansas State University will receive $1 million in funding from ADM to support advances in food product development and food security.  Dr. Ernie Minton, Dean of the College of Agriculture and Director of K-State Research and Extension noted, “The College of Agriculture is consistently ranked as one of the top 10 higher education ag programs in the nation and this donation will help ensure we remain at the top in educating students in research and helping our partners feed hungry world”.

 

Tedd Kruse, President of ADM Milling stated, “We are excited to support the development of the Global Center for Grain and Food Innovation at Kansas State University.  The facility will not only foster new collaborations across the university, but it will enhance the student experience by way of research, creativity and innovation”.


 

Aldi Commits to Environmentally Friendly Refrigerants

According to a survey conducted by the Environmental Investigation Agency, Aldi has made considerable progress in replacing refrigerants with a low global warming potential, replacing hydrofluorocarbon (HFC) compounds.  Other retailers including Whole Foods Market, Target and Meijer have announced their intention to displace HFC refrigerants with stated public commitments and deadlines.  Many companies are now disclosing leak rates and efforts to enhance maintenance to eliminate the release of HFC compounds.

 

Aldi was assigned a score of 74 percent on the evaluation, reflecting the environmentally conscious policies of the parent company in Germany.  Aldi management recognizes the benefits of investment in sustainability including solar arrays, wind generation of power, reducing wastage, modifying packaging and installing LED lighting. Upgrading refrigeration installations is only one of a portfolio of strategies contributing to profit and consumer relations.


 

Post Holdings Q2 FY 2024 Release

On May 2nd Post Holdings Inc. (POST) reported on the 2nd quarter of FY 2024 ending March 31st 2023.  The Company beat consensus estimates for both top and bottom lines, with analysts subsequently raising the target for POST to $120.

 

For Q2 the Company reported net earnings of $97 million on sales of $1,999 million with a diluted EPS of $1.48.  Comparative values for Q2 of FY 2023 were earnings of $54 million on sales of $1,619 million with a diluted EPS of $0.92.

 

Revenue was 23.3 percent higher in Q2 2024 compared to the corresponding quarter in FY 2023.  Gross margin increased from 25.5 percent to 29.0 percent for the most recent quarter. Operating margin increased from 8.5 percent to 9.5 percent for Q2 2024.

 

Guidance for FY 2024 comprised a higher adjusted EBITDA in the range of $1,335 to $1,375 million. Capital expenditure of $420 to $450 million for FY 2024 will include $100 million to complete expansion and upgrades to the Norwalk, IA. egg processing plant and Phase II conversion to cage-free housing at the Bloomfield, NE. Complex.

 

Post Holdings operates subsidiary, Michael Foods producing shell eggs, egg liquid and derived products that are sold through the Refrigerated Retail and Food Service segments. Egg-related brands include Almark Foods, Henningsen’s, Abbotsford, Davidson’s, Crystal Farms and Egg Beaters.

 

 The Refrigerated Retail Segment includes cheese, sausage products, eggs and side dishes. For Q2 FY 2024, net sales for the segment amounted to $240 million, down 5.1 percent from Q2 in FY 2023. Operating profit attained $22 million up 23.1 percent.

 

The Food Service Segment comprising egg and potato products recorded Q2 FY 2024 sales of $555 million, down 2.2 percent. The Segment generated an operating profit of $64.5 million down 17.4 percent

 

The Post Consumer Brands and Weetbix (U.K.) Segments have no direct involvement with eggs.

 

The Company release and SEC 10-Q report noted the risks and consequences of HPAI infection on company-owned complexes and those of contractors.

 

On March 31st 2024 Post Holdings posted assets of $12,191 million, including $7,861 million as goodwill and intangibles, against long-term debt of $6,415 million. The Company had an intraday market capitalization of $6,430 million on May 15th. POST trades with a trailing P/E of 20.4. The share value has ranged over a 52-week period from $78.85 to $108.17 with a 50-day moving average of $100.26. POST closed at $104.90 pre-release on May 2nd and closed on May 3rd at $102.66.

 

 Twelve-month trailing operating margin was 9.9 percent and profit margin 4.4 percent.  Return on assets over the past twelve months attained 4.2 percent and the return on equity was 9.0 percent.


 

Dollar Stores Adversely Impact Rural Independent Groceries

A cooperative study by the USDA Economic Research Service and economists affiliated to North Dakota State University and the University of Connecticut have recently published on the effect of dollar stores on independent groceries*.  The study covered the years 2000 to 2019 and considered both urban and rural locations. 

 

It was demonstrated that when a dollar store opened in an area, existing independent grocery retailers were 2.3 percent more likely to exit the market.  Employment in these stores decreased by 3.7 percent and total sales by 5.7 percent on average.  The impact was however more pronounced in rural areas. Following the establishment of a dollar store, independent groceries were 5.0 percent more likely to cease operation, and employment was reduced by 7.1 percent and sales by 9.2 percent.  The negative effect in rural areas was approximately twice that of urban locations. The report noted that independent groceries were generally unlikely to reestablish operations given the presence of dollar stores. 

 

Because dollar stores carry a limited range of foods compared to independent groceries, their introduction into rural areas may affect nutrition based on limitation of selection especially in items regarded as “healthy foods” including eggs, dairy and produce.

 

 

*Lopez, R. et al Dollar Store expansion and independent grocery retailer contraction, Applied Economic Perspectives and Policy (2023) doi.org/10.1002/aepp.13398


 

Federal Coordinated Framework for Regulating Biotechnology

 

Based on legislation in 1986 and an updated 2017 Executive Order #14081, three federal agencies have established a memorandum of understanding relating to biotechnology.  The Executive Order entitled “Advancing Biotechnology and Biomanufacturing Innovation for a Sustainable, Safe and Secure American Bioeconomy,” has brought together the resources of the U.S. Environmental Protection Agency, the U.S. Food and Drug Administration and the U.S. Department of Agriculture.  The agencies are tasked with establishing a coordinated framework to address economic advancement through biotechnology.  This will include modified plants, animals and microorganisms and the development of pharmaceuticals and biologics.

 

The agencies intend to “clarify and streamline regulatory oversight for GM plants, animals and microorganisms.  The agencies will also share information and enhance inter-agency communication.

 

Given the history of delays in reviewing and approving GM modification for plants and animals, coordination and prompt evaluation of applications is obviously required.  Unfortunately, the Executive Order attempts to generate progress through engendering cooperation among three different agencies with entrenched and diverse cultures. This will be analogous to herding cats.  The FDA has no business in becoming involved with GM animals for food production although there is justification to regulate GM modification to produce biopharmaceuticals in milk and eggs. Neither the EPA nor FDA is competent to be an arbiter of aspects of food production.

 

It is generally conceded that other than the FSIS, the USDA with its farmer-oriented bias, cannot be relied on to protect public health by regulating food production.  Attempting to establish cooperation and synergy among three essentially competitive agencies each defending their respective turf does not auger well for the intent of Executive Order #14081. An independent food safety and nutrition agency is required.

 


 

Hormel Foods Inaugurates Childcare Center

On May 7th Hormel Foods Corporation opened the Inspired Beginnings Learning Academy for the children of company employees in Austin, MN. The center, extending over 13,000 square feet cost $5 million and will be operated by Bright Horizons, a major provider of employer-sponsored childcare.

 

Angie Bissen, HR Manager for Hormel Foods, stated, “We are always striving to ensure Austin, MN. and the surrounding areas are a prime destination for top talent.”  She added, “One of the main insights gathered from our research and from other employers in the area is the critical importance of accessible childcare options.”

 

The programs to be presented at the Beginnings Learning Academy will provide children with the socialization and skills to compete and excel when they enter elementary school.

 

The need for childcare is clearly indicated by the cost of both private and commercial services.  In many cases, it does not pay parents to both work given the costs associated with commuting and childcare for families with preschoolers.  The example established by Hormel Foods and other employers should be more widely emulated.


 

FDA Proposes Final Rule on Irrigation Water for Produce

The FDA has issued a proposed Final Rule relating to agricultural water for green produce other than sprouts.

 

The Rule specifically: -

  • Establishes requirements for agricultural water assessment based on proximity to sources of contamination.
  • Requires assay of pre-harvest water use for irrigation.
  • Requires farms to implement “effective mitigation measures within specific time frames”.
  • Provides options for mitigation with “additional flexibility in responding to findings from pre-harvest agricultural water assessments”.

 

Basically, the new rule dances around the reality that runoff from intensive livestock facilities contaminates water with a range of pathogens including E.coli O:157 and other STECs; Listeria; Salmonella and possibly pathogenic viruses. 

 

It is axiomatic that a foodborne public health problem attributed to contamination cannot be resolved by “testing”Contamination of irrigation water is inevitable and accordingly FDA are attempting to regulate the wrong end of the production chain” Emphasis should be placed on a possible kill step that will destroy bacterial pathogens since green produce is consumed raw.

 

The FDA is committed to an “educate before and while we regulate” approach that is essentially ameliorative and does little to provide absolute protection from contamination.  At present, eating green produce is effectively “lettuce roulette”.

 

The FDA should get serious over contamination of produce and abandon the current pas de deux with producers of leafy greens, face reality and develop an effective and durable solution at the processing and packaging level.


 

DxE Founder Ineligible to Practice Law in California

The California State Bar has placed Wayne Hsiung on involuntary inactive status.  This action results from his conviction in November 2023 in a case relating to two counts of misdemeanor trespass and one count of felony conspiracy to trespass.  The case involved protest actions in 2018 and 2019 on Sunrise Farms and Reichardt Duck Farm in Sonoma County.

 

Hsiung entered university at 16, graduated from the University of Chicago in 2001 and subsequently from the University of Chicago Law School. He was previously funded by the National Science Foundation as a graduate student at the Massachusetts Institute of Technology but did not complete his degree in economics. He was a Searle Fellow and served as a Visiting Assistant Professor at the Northwestern University School of Law. In 2020, he ran unsuccessfully for Mayor of Berkeley, CA. focusing on animal rights issues but gaining 24 percent of the vote. 

 

In 2021, Hsiung co-founded the Simple Heart Institute dedicated to “open rescue” (read intrusion and theft).  Despite his academic achievements, it is evident that Hsiung is an animal rights zealot lacking in perspective and with a self-centered preoccupation with opposition to livestock production coupled with a disdain for the legal process, hence the action by the California State Bar.


 

Response to Earnings of ASPCA CEO

The Center for the Environment and Welfare, a pro-industry lobby, has gained considerable traction from publicizing the apparent $1 million annual benefits of the ASPCA CEO, Matt Bershadker.  The ASPCA is no friend of the egg and livestock industries. The organization does not appear to support stray and abused companion animals despite the image portrayed in tear-jerking TV commercials.  A disproportionately low amount of their annual contributions is assigned to pet shelters in contrast to the lavish salaries and benefits accorded management of the organization.

 

The Center for the Environment and Welfare has successfully highlighted the deception and cynicism of both the ASPCA and PETA and kindred organizations that appear to exist for the benefit of their organizers, taking advantage of their collective IRS 501(c) (3) status.

 

A list of comments on the Center website were universally critical of SPCA salaries but many were surprised at the lack of support for local animal shelters.  This is understandable given the frequent television and mail solicitations for donations claiming to provide aid for abused animals.  A significant amount of the donations received are reassigned to professional fund-raisers and for lobbying.


 

Friends of the Earth Opposing Glyphosate Use

Friends of the Earth is circulating a petition opposing the use of glyphosate.  This environmental activist organization maintains, with justification, that glyphosate is responsible for the destruction of milkweed leading to a decline in population of endangered Monarch butterflies.  In addition, a claim is made that glyphosate is detrimental to bees by interfering with their intestinal biome and inhibiting reproduction.

 

The petition specifically implicates Home Depot and Lowe’s in the sale of glyphosate-containing herbicides for residential and limited commercial application.  Although there is considerable justification on the aspect of insect pollinators, implications that glyphosate is linked to hormone disruption, cancer and other metabolic problems are at this time unfounded and irrelevant to the opposition to the compound.


 

Vital Farms Posts Q1 FY 2024 Financial Results

In a May 8th release, Vital Farms Inc. (VITL), a Certified B Corporation posted financial results for the 1st quarter of FY 2024. Results far exceeded consensus estimates for revenue ($134 million, up 10.3 percent) and earnings (EPS $0.20). This specialty egg producer competes directly with Eggland’s Best and other producers and distributors of USDA Certified Organic and pasture-raised products including Pete and Gerry’s, Hidden Valley and Egg Innovations. The Company experiences the same pressures of feed cost, contractor remuneration, labor and transport as competitors in a fluctuating market environment still restrained by consumer concern over inflation.

 

For Q1 FY 2024 ending March 31st 2024, net income was $19.0 million on revenue of $147.9 million with a diluted EPS of $0.46.  Comparable figures for Q1 2023 ending March 26th were net income of $7.1 million on revenue of $119.2 million with a diluted EPS of $0.18.

 

Revenue increased 24.1 percent over Q1 2023. Gross margin was 39.8 percent for the most recent quarter (35.8 percent Q1 FY 2023). Operating margin was 16.3 percent (9.1 percent in Q1 2023).  

 

In commenting on Q1, Russell Diez-Canseco CEO stated:- “2024 is off to a very strong start with record net revenue in the first quarter of $147.9 million, reflecting net revenue growth of 24.1%. Thanks to our stakeholders, including farmers and suppliers, customers and consumers, communities and the environment, crew members, and stockholders, we are able to succeed in our mission of bringing ethical food to the table. As a result of the momentum we have seen so far this year and our improved visibility into the rest of the year, we are raising our fiscal year 2024 outlook. These first quarter results demonstrate our ability to expand our commercial presence as well as the Vital Farms brand’s growing resonance with consumers. This leads to growing demand for our products, and I am thrilled to announce that we have signed an agreement to acquire land for a new, state-of-the-art egg washing and packing facility in southern Indiana. This strategic investment is part of our commitment to expansion and innovation and is an integral part of our journey to achieve at least $1 billion in annual net revenue by 2027,” 

 

The Company increased guidance for FY 2024 projecting revenue of $575 million, an adjusted EBITDA of $70 million and capital expenditure of $35 to $45 million.

 

On March 31st 2023, VITL posted assets of $300.2 million, of which $4.9 million comprised intangibles against long-term debt and lease obligations of $16.5 million. The Company had an intraday market capitalization of $1,500 million on May 14th. VITL trades with a forward P/E of 208 and has ranged over a 52-week period from $10.23 to $39.25 with a 50-day moving average of $25.36.  Twelve-month trailing operating margin was 16.3 percent and profit margin 7.5 percent.  Return on assets over the past twelve months was 11.1 percent with 19.6 percent on equity.

 

At close of trading on May 8th pre-release, VITL was priced at $29.91. Post-release on May 9th VITL closed at at $37.97.

 

Approximately 36 percent of VITL equity is held by insiders with 64 percent owned by institutions, up 4 percent in a year. As of April 30th 4.4 percent of the float was short.


 

UCLA Pledges Serving Plant-Based Protein by 2027

According to a May 4th article in VegOUT, UCLA has committed to serving plant-based ingredients for half of meal servings by 2027.  The University claims advantages in both health and sustainability, neither of which is scientifically supported.

 

During recent years, it is apparent that HSUS has conducted a coercive campaign aimed at food service companies with contracts to supply dining halls of universities.  Some providers including Sodexo with affiliations to the E.U. have independently adopted policies of transition to vegetable-based protein that is effectively less nutritious and more expensive than animal-derived products.  Given that most students operate according to a meal plan, the additional cost is either borne by parents or is added to student loans.



 

Commentary


Extremist Animal Rights Advocates File Oregon Initiative 28

People for the Elimination of Animal Cruelty Exemptions have filed for Initiative Petition 28 to be decided by the voters of Oregon during the 2026 general election.  The ballot initiative would remove certain exemptions from animal cruelty laws prohibiting any activity other than self-defense or veterinary practice that intentionally injures or kills animals. Adoption of Oregon IP28 would effectively invalidate all livestock operations.

 

The intent as stated would be to “be protective of the needs of animals and to codify their right to life and bodily autonomy.” IP28 would also establish a “Humane Transition Fund” to provide grants to replace lost income, compensate farmers, to subsidize job retaining and permit conservation and re-wilding of livestock.

 

This extreme and unworkable proposition representing the most radical ideology should not pass.  It will however generate awareness of the negative aspects of livestock production and raise funds for the organizers.

 

Ballot initiatives were regarded as necessary as territories became states, but they are now anachronistic and run counter to the regular legislative process with inherent checks and balances.  It is far easier to bamboozle voters with complex and deceptively worded propositions that appear at face value to be elementary but have serious unintended consequences.  Did the voters agreeing with California Propositions #2 and #12 realize they were effectively voting for a $0.50 to $1.00 per dozen increase in the price of eggs when they were coerced into empathizing with cage-housed chickens?  The so-called “Pacelle-Tax” is an unintended consequence of passage of the two California propositions. The outcome was only possible through the system of ballot initiatives that has effectively distorted the government of our Nation’s most populus state with a population of 39 million and an economy ranking as the 5th largest in the world.

 

 It is now time to eliminate legislation by voter initiative through constitutional amendments. Unfortunately there are too many vested interests benefiting financially from the status quo to expect meaningful change. A starting point would be to increase the number of valid signatures required to allow a petition to be placed on the ballot and to allow legislatures or Governors the power to deny petitions.


 

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Dr. Simon M. Shane
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