The Commodity Futures Trading Commission (CFTC) recently completed a comprehensive review of the effect of climate change on our economy.  The report entitled “Managing Climate Risk in the Financial System” was commissioned by the Board of the Commission comprising three Republican and two Democratic members who voted unanimously 12 months ago to create an advisory panel to report on the effects of global warming.  The document includes contributions by analysts affiliated to large investment firms including Morgan Stanley, S&P, and Vanguard, the oil-giants BP and Conoco Phillips and commodity trader Cargill with assistance from environmental and agricultural specialists in academia.

It has been the consistent policy of the Administration to downplay global warming despite credible scientific evidence from atmospheric, oceanic and terrestrial studies.  The report apparently notes the devastation associated with climate change including wildfires, storms, droughts, floods and hurricanes all of which affect insurance and mortgage markets, pension funds and other financial institutions. The report incorporates recommendations for some reversal of current Administration policy regarding environmental deregulation.

The question is whether the report will precipitate rethinking among the Administration, many of whom are climate change deniers despite the scientific evidence and facts. The second consideration is whether corporate or Congressional action will be taken as a result of the findings of the report.  The CFTC Commission has not yet voted to accept the report. A White House spokesperson commented that the report does not necessarily represent the opinions of the Federal government.

Irrespective of political inclination, those of us who have children and grandchildren must recognize that the World’s use of fossil energy over the past 150 years has degraded the environment. The reliance on coal, oil and to a lesser extent gas has resulted in quantifiable atmospheric and terrestrial changes that are influencing climate, health and availability of resources. The challenge will be to convert to more environmentally friendly sources of energy including nuclear power and renewables at a cost and within a time-line that does not disrupt our economy or degrade our standard of living. The first imperative is to recognize the problem and then to develop appropriate corrective measures. Since climate change is a global phenomenon it will be necessary for the U.S. to assume a leadership role in cooperating with other nations to resolve problems that are becoming readily more apparent.

• The financial and economic implications of the COVID-19 pandemic continue but gradual easing is expected as society returns to a “new normal” despite a recent noteworthy upsurge in cases in some areas of the U.S.

• Export data, the August 10th derecho storm and lower projections for 2020 crop yields developed from the Pro Farmer 7-state Tour and the September 11th WASDE Report influenced commodity prices this past week. Corn showed an increase of 5.5 percent for the week based on export orders from China reducing ending stocks. Soybeans rose 4.8 percent in price this week on orders booked by China and lower ending stocks attributed to a downward revision of yield.

• Since July 10th year-to-date exports and 2020/2021 market year orders for corn have attained 6.78 million metric tons [265.2 million bushels]. Exports and orders for soybeans amounted to 10.3 million tons (378.3 million bushels).

• Prospects for commodity exports to China during the 2020/2021 market year that began on September 1st have improved. China adjusted their domestic short-term demand for soybeans as a result of an apparent stabilization of the hog herd after severe losses in 2019 and early 2020 from African swine fever. White-feathered chicken production has now recovered after COVID disruptions and QSR demand. China is also taking advantage of shipping rates that are rising in order to build inventory.

The following quotations for September and December delivery were posted by the CME at 15H30 on September11th compared with values posted on September 4th  (in parentheses) reflecting specified months for delivery.

COMMODITY
Corn (cents per bushel)	Sept.  366  (347)	Dec.  369  (357)
Soybeans (cents per bushel)	Sept. 1,025  (978)	Nov.  997  (969)
Soybean meal ($ per ton)	Sept.    317  (311)	Dec.  325  (318)

Changes in the price of corn, soybeans and soybean meal over five trading days this past week were:-

COMMODITY            CHANGE FROM PAST WEEK

Corn:                  Sept. quotation up 19 cents per bushel          (+5.5 percent)              

Soybeans:          Sept. quotation up 47 cents per bushel          (+4.8 percent)

Soybean Meal:    Sept. quotation up $6 per ton                         (+1.9 percent)

• For each 10 cent per bushel change in corn:-

The cost of egg production would change by 0.45 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

• For each $10 per ton change in the price of soybean meal:-

The cost of egg production would change by 0.44 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

OVERVIEW

The September 11th 2020 USDA WASDE Report was updated from the August edition reflecting drought conditions and the August 10th derecho with consequences to corn and soybean harvests. September projections are based on updated estimates of harvest area and yield. The corn acreage to be harvested is currently estimated at 83.5 million acres, down 0.5 million acres from the August 12th WASDE report. Soybeans will be harvested from 83.0 million acres, unchanged from the August WASDE report.

The September 2020 WASDE estimate of corn yield was lowered 1.6 percent to 178.5 bushels per acre, (168.0 bushels per acre in 2019). The projection of soybean yield was lowered 2.6 percent to 51.9 bushels per acre. (47.4 bushels per acre in 2019)

The September USDA projection for the ending stock of corn was decreased by 9.2 percent to 2,503 million bushels. Due to decreased supply the ending stock for soybeans was reduced by 24.6 percent to 460 million bushels.

Projections for ending stocks of both corn and soybeans have influenced recent CME price quotations concurrently with increased compliance with the Phase-One trade agreement with China. The September WASDE projected the corn price at $3.50 per bushel and soybeans at 925 cents per bushel.

The USDA Crop Progress Report released on September 14th documented corn continuing to mature and soybeans dropping leaves close to or ahead of the 5-year averages despite the earlier start in 2020. Corn harvesting has commenced and is advanced in North Carolina (47 percent) and Texas (67 percent). The condition of both corn and soybean crops that were unaffected by the August 10th derocho, although having deteriorated during the past three weeks from drought, are recovering following rains in the Midwest and are superior to the 2019 season.

Subsoil and surface moisture levels denote some relief from drought conditions except in Western and Pacific states. Both topsoil and subsoil moisture improved this past week. The corn-belt has experienced unseasonal high temperatures in combination with elevated humidity that may predispose to mycotoxicosis in the 2020 corn harvest. CHICK-NEWS and EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of the 2020 harvest in October.

Reference is made to the September 11th WASDE Report #604 under the STATISTICS tab documenting projected 2020 acreage, yields and ending stocks for corn and soybeans.

The Pro Farmer 7-State Crop Tour projected corn and soybean yields of 177.5 and 52.5 bushels per acre respectively, lower than USDA August estimates that were revised to 178.5 and 51.9 bushels per acre respectively in the September 11th WASDE Report.

WEEK ENDING Crop September 6th September 13th 5-Year Average Corn Dough (%) Corn Dented (%) Corn Mature (%) Corn Harvested 100 79 25 - 100 89 41 5 100 82 32 5 Soybeans Setting Pods (%) Soybeans Dropping Leaves (%) 100 20 100 37 100 31
Crop Condition V. Poor  Poor Fair Good Excellent Corn 2020 (%) Corn 2019 (%) * * late planting 5 4 10 10 25 31 46 44 14 11 Soybeans 2020 (%) Soybeans 2019 (%)*  * late planting N/A 3 4 8 10 26 32 50 45 13 9
Parameter V. Short Short Adequate Surplus Topsoil moisture: Past Week 13 25 56 6 Past Year 11 22 55 12 Subsoil moisture: Past Week 14 26 55 5 Past Year 9 22 59 10

USDA Weekly Egg Price and Inventory Report, September 16th 2020.

• The U.S. flock in production was up 0.3 million from the previous week at 311.6 million, with molted hens resuming production and pullets reaching maturity.
• Shell inventory was down 0.7 percent after a 4.1 percent increase last week indicating higher demand. There is some evidence of a return in the food service sector as the economy cautiously reopens but the incidence rate of COVID-19 is increasing in some regions.
• USDA Midwest benchmark generic prices for Extra-large, Large and Medium were unchanged to averages of 81.5, 79.5 and 55.5 cents per dozen respectively. Prices will continue to fluctuate in a narrow range as molted hens resume production and pullets commence lay unless offset by proportional increase in demand past the Labor Day weekend.
• The price of breaking stock and checks in the Midwest were unchanged to averages of 46.0 and 36.5 cents per dozen respectively.

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on September 14th 2020 the Midwest wholesale prices for Extra-large, Large and Mediums as delivered to DCs attained averages of 81.5, 79.5 and 55.5 cents per dozen. Prices should be compared with the USDA benchmark average 5-Region blended nest-run, (excluding provisions for packing and transport) cost of 58.0 cents per dozen in August 2020. The progression of prices during 2018-2020 is depicted in the USDA chart reflecting three years of data, updated weekly.

The September 14th 2020 USDA Egg Market News Report (Vol. 67: No. 37) documented a USDA Combined Region value rounded to the nearest cent, of $0.89 per dozen delivered to warehouses for the week ending September 9th. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $0.80 per dozen. At the high end of the range, price in the South Central Region attained $0.95 per dozen. The USDA Combined Price last week was about 18 cents per dozen below the 3-year average and 20 cents per dozen below the corresponding week in 2019.

On September 11th, the Kroger Company (KR) reported on the second quarter of fiscal 2020 ending August 15th.

For the period, sales attained $30.489 billion with net earnings of $819 million and an EPS of $1.04.  The corresponding values for the second quarter of fiscal 2019 ending August 17th comprised sales of $28.17 billion with net earnings of $297 million and an EPS of $0.37.  Gross margin was 22 percent for the most recent quarter compared to 21.9 percent for the corresponding second quarter of fiscal 2020.

Same-store sales increased by 14.6 percent and digital sales by 127 percent compared with the second quarter of 2019.  On August 15th, Kroger posted total assets of $47.54 billion and carried long-term debt including leases and other obligations of $20.96 billion. 

In commenting on results, Rodney McMullen, Chairman and CEO stated, "our top priority is to provide a safe environment for associates and customers and as the pandemic continues, we will continue to rise to meet the challenge".  He added "we are more certain than ever that the strategic choices and investments made through Restock Kroger have allowed us to execute against our competitive obstacles.  Our Brands® have positioned Kroger to meet the moment especially as customers are recovering their passion for food at home”.

Kroger traded during the past 52 weeks over a range of $23.71 to $37.22.  The company closed on September 10th at $34.85 and was little changed by the release, closing on Friday at $34.37.  KR has a market capitalization of $26.74 billion and trades with a forward P/E of 12.5. Over the past 12 months, operating margin attained 2.51 percent and profit margin 1.66 percent.  Return on assets was 4.4 percent with 22.0 percent on equity.

In a press release dated September 10th 2020, Vital Farms, (VITL) a Certified B Corporation announced results for the 2nd Quarter of Fiscal 2020 ending June 28th 2020.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as $ x 1,000 except EPS)

 Range in Share Price since Aug 4th IPO: $34.04 to $43.03 

50-Day moving average $37.53

Market Close: 15th $36.63

Forward P/E: 357

Moba has upgraded the XF ”Extended Food Safety” grader with innovations available in models capable of processing from 125 to 700 cases per hour.

The XF2 is equipped with an improved infeed system with a tubular infeed frame for ease of cleaning allowing complete wash down.

Moba installations are supported by a strong service network and training programs.  Remote diagnosis and iMoba monitoring are available.

The August 31st expiry of the tariff-free quota (TFQ) for U.S. ethanol imported into Brazil has passed without a decision on imposing the 20 percent duty.  According to The Progressive Farmer, a possible agreement might be negotiated as a temporary measure until a more comprehensive bilateral trade pact is concluded.

Imposition of a 20 percent tax on U.S. ethanol would be yet another blow to the beleaguered ethanol industry that underwent a 30 percent decline in exports during July.  The Renewable Fuels Association ascribed this to the "spread of protectionist trade barriers around the globe impacting demand for U.S. ethanol.

In response to the expiry of the TFQ the Administration noted that reciprocal tariffs will be imposed on Brazil unless the duty remained in abeyance.  A tariff war as we have experienced would be mutually destructive.  The solution to a trade dispute is through diplomacy and establishing positive programs that can benefit both nations.  The biblical approach of an eye-for-an eye- and a tooth-for-a-tooth will result in blind and toothless parties.

According to a September 10th USDA-AMS press release, the Agricultural Marketing Service purchased 46 million pounds of egg products and 27 million pounds of shell eggs in fiscal 2020.  A total of 73.6 million pounds represented more than double the fiscal 2019 combined purchase of 35.6 million pounds. 

Based on the needs of the underprivileged, AMS purchased frozen whole egg in 2-pound packages to be used for poverty relief through Emergency Food Assistant Programs.  The proportions run counter to normal years when AMS acquires predominantly egg products.  During fiscal 2020, the volume of shell eggs purchased tripled and the volume of egg products doubled.

Albertsons Companies operating 1,276 pharmacies among their chain of 2,200 stores has established an alliance with a laboratory in New York to conduct PCR assays on samples submitted by customers.  Those wishing a test are required to complete a questionnaire that is reviewed by a pharmacist.  Saliva samples are collected and shipped to the laboratory using a pre-paid mailer or are forwarded by the store.  Results should be available within 72 hours from the time the lab receives the sample. Given delays involved it would appear that even when the initial logistic problems are resolved the turnaround time from onset of symptoms or concern over contact will be in the region of 4 to 5 days at best. This is useless in the context of preventing spread since the sampled person is unlikely to be isolated while awaiting the result and by then it would be too late to initiate tracing of possible contacts. All that will be achieved is confirmation of exposure at some point in time previous to submission of the sample.

Tests are performed on an out-of-pocket basis with patients submitting documents for reimbursement.  The laboratory tests conducted by Phosphorus Inc. are conducted in accordance with an FDA Emergency Use Authorization.

Essentially Albertsons are not offering a “test” but stores serve as collection points for saliva samples. The Company have not indicated the price for the assay.

The National Dairy Federation has issued an advisory for milk producers in the event that an employee contracts COVID-19.  Their recommendations are appropriate for egg production farms and packing plants.

• If the employee complains of fever, a cough or other symptoms in the workplace, the individual should be sent home and a sample should be submitted for diagnosis
• If an employee phones in from home claiming fever or symptoms consistent with COVID-19 they should be instructed to stay at home and arrange for testing.
• Employers have an obligation to inform ‘close contacts’ of the infected employee that they may have been exposed to the virus.  It is essential to maintain confidentiality with respect to the infected individual. Obviously in a small workforce the identity will become known but this should not be from the employer.  For the purposes of defining “close contact”, this would entail working within six feet over a prolonged period of time.  In the context of egg-packing plants this would obviously apply to workers transferring packs to outer containers where close contact is inevitable.
• A report to the Occupational Health Safety Administration may be required since the employee may have contracted COVID-19 in the workplace although this is virtually impossible to confirm.
• The Workman’s Compensation carrier should be informed of the infection and claim forms should be provided for the employee.

Prevention is obviously preferable to having to address an outbreak and accordingly the accepted precautions are required. These comprise providing masks, social distancing as far as possible, health screening at the beginning of the working day, hand washing and personal hygiene and education of workers.  It is self-evident that any written recommendations should be in the language understood by workers.

All workers should receive the seasonal influenza vaccine since concurrent COVID-19 influenza will predispose a severe disease and freedom from influenza from vaccination will expedite a clinical diagnosis of COVID-19.

OSHA proposed the maximum penalty of $14,000 on Smithfield Foods as a result of COVID-19 in their Sioux Falls, SD. plant for failing to protect employees from exposure.  In addition to OSHA citations, an extensive outbreak will inevitably lead to civil claims that will be expensive to defend.  Punitive damages could be assessed if wanton disregard for the safety of employees is demonstrated. State Departments of Occupational Safety such as in California have already issued citations and fines against small-scale meat processors in amounts far in excess of the Smithfield fine.

The National Association of Chain Drug Stores has initiated a campaign to encourage administration of seasonal influenza vaccines.  The problem of vaccination is intensified in 2020 given the prevalence of COVID-19.  Many supermarket chains with pharmacies will be offering vaccines to enhance protection for staff and recipients.  Wegmans will be offering influenza vaccination clinics including community events and drive-through programs.

Influenza is responsible for millions of cases each year, many requiring hospitalization and fatalities extend into many thousands depending on strain and weather conditions.  It is important to prevent influenza by vaccination to spare medical resources to treat COVID patients.

Again, EGG-NEWS strongly urges producers to ensure that plant and farm workers are protected against seasonal strains using available vaccines.  With the approach of Fall, vaccination clinics should be planned for September. There will be increased demand for vaccines in the next six weeks suggesting administration this month to ensure availability and to allow immunity to develop before mid-October.

According to a September 9th release by the USDA-Food Safety and Inspection Service, Egg Products Inspection Regulations will be modified by issue of a new final rule. This will mandate HACCP systems and Standard Sanitation Operating Procedures.  FSIS will continue to monitor for the presence of Salmonella and Listeria in egg products. It will no longer be necessary for plants producing egg products to have a full-time inspector. They will visit plants once per shift and as many as 83 facilities will operate in conformity with an HACCP program.

According to FSIS administrator Paul Kiecker, “Requiring egg product plants to develop food safety systems and procedures similar to meat and poultry requirements is a significant milestone in modernizing our inspection system.” 

FSIS will now extend regulatory authority over egg substitutes and freeze-dried egg products and will require inspection to ensure that standards of production and processing are equivalent to egg products. New regulations will address imported egg products with many supplying nations achieving equivalence through HACCP programs for their domestic production.

Placing the onus on plant operators to implement and maintain procedures that contribute to wholesome products parallels the approach with meat and poultry facilities.  Kiecker noted, “We feel very confident that, based on the once-per-shift approach, that we will still be able to verify that they are producing safe product.”

Inevitably opponents of intensified agricultural and livestock production are raising questions as to wholesomeness in the absence of continual USDA inspection. Given that egg products are pasteurized, regular monitoring of the documentation generated by a structured HACCP system should be adequate to maintain safety.

The California Occupational Safety and Health Administration recently cited DL Poultry and Olson Meat Company with failing to protect workers against COVID-19.  Fines of $52,000 and $9,000 respectively were proposed.

Doug Parker, Chief of the California OSHA stated, "we have identified certain industries as priorities in our strategic enforcement efforts to make sure employers have adequate COVID-19 infection prevention procedures in place".  He added " certain industries where workers have been disproportionately affected and these citations are the first of many to be issued in the coming weeks and months".

The State department noted that DL Poultry and Olson Meat put their workers at risk for serious illness because they did not ensure physical distancing of at least six feet in the processing areas, neither did they install barriers between the workers".

From this report it is apparent that California is more active in enforcing worker health and safety requirements than the Federal OSHA.  The magnitude of fines is obviously greater than the proposed $13,000 imposed by the Federal OSHA on Smithfield Foods, Sioux Falls hog plant and the JBS Greeley, CO. beef plant. The Smithfield plant, responsible for five percent of the nation's pork production recorded 13,000 cases of COVID-19 representing 18 percent of the workforce.

According to USDA-FAS GAIN report 2020-0013 released on September 10th, Saudi Arabia produced 5.2 billion table eggs in 2018.  Assuming an average flock production of 75 percent on a hen-day saleable basis, the national flock averages 19 million hens in production.

In February 2020, producers in Saudi Arabia were impacted by an outbreak of H5N8 that reduced output by 30 percent.  The decrease in production coincided with increased demand associated with a COVID-19 lockdown.  Accordingly, egg prices soared in response. The Saudi Agricultural and Livestock Investment Company, a state entity, imported table eggs from the Ukraine, the EU and Turkey in addition to some shipments from the U.S.  Flocks were replenished by the third quarter and market stability has returned.  Traditionally Saudi Arabia is more than self-sufficient in eggs although it is estimated that per capita consumption is at 150 eggs suggesting a potential for increased demand.  Surplus eggs are exported to other GCC nations with Bahrain predominating and the UAE representing the second largest importer.

On September 14th, three decisions were announced benefiting the renewable fuel industry and indirectly, corn farmers.  The first item was formal rejection by the EPA of a total of 54 pending gap-year small refinery exemptions.  This action was taken in accordance with the January decision of the Tenth Circuit Court that ruled that exemptions should be extensions and not new requests.

The second boon was the announcement by Brazil that the recently expired tariff rate quota on U.S. ethanol will be extended for 30 days awaiting negotiation of a more comprehensive bilateral trade deal.

Finally the White House announced that existing pumps dispensing E-10 (10 percent ethanol blend) could now be used to sell E-15 comprising a 15 percent ethanol inclusion (energy dilution) in gasoline, subject obviously to appropriate designation of product.  Details are however subject to state approval and modification of OSHA regulations and other requirements depending on location.  It is questioned how filling stations will offer E-10 as well as E-15 from available pumps since a high proportion of vehicles on the road cannot accept E-15. There are doubts as to whether there will be an increase in actual volume of ethanol consumed or whether the decision announced in the form of a tweet is more politics than substance.

On September 9th, the National Oceanic and Atmospheric Administration confirmed that a La Nina event has commenced and will last through the winter of 2020 in the northern hemisphere.  The effects of La Nina in the Pacific include an intense hurricane season, a cold, wet winter for the Midwest, dry weather in the southeast states, wetter conditions for northern Australia, Indonesia, and the Philippines, and extremely dry conditions for the Pacific coast region of South America.

NOAA issued a La Nina watch in July as reported by EGG-NEWS.  The global effects of a La Nina are due to lower ocean surface temperatures in the eastern Pacific and movement of the jet stream southward over North America.

NOAA is currently evaluating the effect of global warming that may interact with La Nina and El Nino events which occur in roughly three to five year cycles.  Brandon Miller, a meteorologist affiliated to cable news channel CNN noted, “2020 is already trending as one of the top two warmest years on record.”  He added, “top spots on the warmest years used to be reserved for the strong El Nino years, but human influence has long since overwhelmed the planet’s natural temperature regulators.”

Information on the La Nina event can be retrieved by accessing “El Nino” in the SEARCH feature

It is evident that if COVID-19 is to be eradicated, an effective vaccine will be necessary and should be applied to all of the world’s population with priority extended to frontline workers, the elderly and vulnerable individuals willing to participate in an immunization program.  Even if citizens in industrialized nations are protected, the persistence of infection in less-developed countries will represent a risk to all populations, given the volume and speed of international travel.

Recognizing the need to distribute vaccines equitably in an expeditious manner in the early stages of manufacture and with priority for the most vulnerable, the World Health Organization organized the Global Access Unitiative [COVAX] involving 170 nations.  The Coalition for Epidemic Preparedness Innovations and the Gavi Vaccine Alliance are also involved in the initiative backed by Japan, Germany, and the EU.

It is noted that the U.S. will not participate based on the refusal of the Administration to participate in any endeavor involving the WHO.  Judd Deere expressed the policy of the White House as, “The United States will continue to engage our international partners to ensure we defeat the virus, but we will not be constrained by multilateral organizations influenced by the corrupt World Health Organization and China.”

The policy of unilateralism is criticized by established global health authorities, including faculty at the Dartmouth Geisel School of Medicine, Georgetown University, and other institutions.  Dr. Suerie Moon, co-director of the Global Health Center at the Graduate Institute of International and Development Studies in Geneva stated, “It is a real blow when the U.S. says that it’s not going to participate in any sort of multilateral effort to secure vaccines”.

Smerconish, in his Saturday, September 5th CNN program surveyed  the attitude of viewers by posing the question as to whether it would be more advantageous to distribute available vaccine in limited supply on a priority basis internationally or to retain U.S. vaccines only for U.S. residents. As an indication of how far the Administration is from public sentiment, 80 percent of the 18,000 responding considered that an international prioritized approach would be preferable to a unilateral policy since it would do more to end the global pandemic.