Negotiations have recommenced between the U.S. and China to resolve the trade war that has raised the cost of imported goods and disrupted the sourcing and supply of ingredients worldwide, adversely impacting U.S. farmers. The actions initiated by the U.S are apparently hurting the economy of China, so both sides have an incentive to reach an accommodation.

Negotiations have recommenced between the U.S. and China to resolve the trade war that has raised the cost of imported goods and disrupted the sourcing and supply of ingredients worldwide, adversely impacting U.S. farmers. The actions initiated by the U.S are apparently hurting the economy of China, so both sides have an incentive to reach an accommodation.

Simply agreeing to rescind mutually destructive tariffs would in itself represent an accomplishment by restoring trade to a pre-June 2018 status. This will not address the underlying structural issues that represent the intent by China to advance their economy at the expense of the U.S., the EU and nations subjected to neo-colonialism in Africa. For two decades China has advanced a program of State-sponsored actions to achieve the Made in China 2025 objective. Authorized policies include government support of quasi-independent industries dumping products on world markets; coercive joint-venture agreements with foreign manufacturers to share proprietary technology and ignoring established rules relating to intellectual property. More recently aggressive hacking of databases and company information by state agencies has escalated representing overt commercial espionage.

The recent action by the Administration to oppose the policies of China is not merely an expression of America-first unilateralists. The Economist published a commentary in the December 15^th edition under the heading of Chaguan (literally a tea-house for discourse- named for the eponymous capital of Sichuan Province) that emphasizes the effect of China policy on other industrialized nations. The article notes that placating or cajoling the errant nation over two decades and hoping for a change have been disappointing. China recognized that the openness of the West and their reliance on the World Trade Organization and United Nations agencies was a vulnerability to be exploited to their advantage. The Economist refers to now disillusioned internationalists as “unhappy ex-doves reading intelligence reports”.

Our negotiators clearly appreciate the apparent challenge of rescinding bilateral tariffs, representing the easy part, but they also have an appreciation of the underlying structural imperatives motivating China. It is difficult to envisage how the U.S. team will reverse entrenched policies imbued in a generation of bureaucrats intent on maintaining growth by any means possible. Even in two months with the clock ticking. There is concern that a Band-Aid will be placed over tariffs and negotiators will talk past each other and avoid the deeper issues or accept insincere offers to reform.  

Hopefully the negotiations will reverse the immediate trade issues and restore exports of U.S. farm commodities to China. Certainly the slowdown in economic growth in China implies an incentive to make concessions. It would however have been beneficial not to have alienated our traditional allies since a concerted and coordinated response to the underlying policies pursued by China would be more effective than a unilateral approach.

The following quotations for the months as indicated were posted by the CME at close of trading on Friday Jan 11th together with values for the reference months in parentheses confirming a declining market for corn, soybeans and soybean meal in comparison to the previous week.

Changes in the price of corn, soybeans and soybean meal were:-

COMMODITY                   CHANGE FROM PAST WEEK

Corn:                     March’19 quotation down 4 cents per Bu.      (-1.1 percent )

Soybeans:              Jan. ‘19 quotation down 20cents per Bu        (-2.3 percent)

Soybean Meal:        Jan. ‘19 quotation down $5 per ton               (-1.6 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 0.40 cent per dozen

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

There is renewed optimism concerning the outcome of the dinner meeting at the G-20 Summit between the delegations from the U.S. and China led by their respective Presidents. The U.S. has agreed to a three-month delay ending March 31st before raising tariffs from ten percent to twenty-five percent on over $200 billion in annual imports from China. In return China has agreed to purchase an unspecified quantity of agricultural commodities in addition to energy and heavy equipment from the U.S. to offset the negative balance of payments. An initial order of 1.5 million tons was placed, three weeks ago, the first since June.  The USDA announced on January 7th that orders have been placed for an additional 3 million tons to be shipped before September 2019.

According to the November 8th 2018 WASDE Report #583, which did not affect commodity prices, 81.8 million acres of corn will be harvested in 2018 to produce 14.62 Billion bushels. The soybean crop is projected to attain 4.60 Billion bushels from 88.3 million acres harvested. The levels of production for the two commodities are based on revised projections of yield and acreage harvested. Ending stocks were revised based on anticipated domestic use and exports.

 See the WASDE posting summarizing the November 8th USDA-WASDE Report #583 under the STATISTICS tab documenting price projections and quantities of commodities to be produced, used and exported from the 2018 harvest. The January 2019 WASDE  Report #584 will be delayed by the Government shutdown

Unless shipments of corn and soybeans to China resume in volume as projected the financial future for row-crop farmers appears bleak despite the release of two tranches amounting to  $12 billion as “short-term” compensation. Farmers will not be placated by the promise of a year-round E-15 blend since the logistic problems of delivery to consumers and legal challenges will delay any positive price benefit. Oversupply of ethanol with the current 10 percent addition (=dilution) mandate is evident from the December 28th spot price of $1.30 per gallon again this past week compared with a 2018 peak in late March of $1.60. Exports have been constrained by the retaliatory tariffs imposed by China on U.S. ethanol. Some refiners are reducing production and mothballing corn-fermentation plants.

The loss inflicted on farmers by the trade war with China is a gain for livestock producers who will benefit from lower feed costs. It must be recognized that the hog and poultry industries have experienced higher costs for a decade as a result of the RFS, a gift that keeps on giving. The mandate is a boon to Midwest politicians, corn growers and ethanol refiners at the expense of anyone in the U.S. who eats or uses any form of transport.

• December 2018 USDA Ex-Farm Benchmark Price Down 5 Percent from November, Inconsistent with Seasonal Trends Due to Oversupply.

• USDA Average Nest-run Production Cost Fractionally Higher than November at 60.9 cents per dozen.

• Positive USDA Benchmark Nest-run Margin Decreased 14 Percent from November to 29.0 cents per dozen

INTRODUCTION.

Due to the Federal shutdown some monthly reports from December 26^thwere not issued. EGG-NEWS has assembled available USDA market data to produce the December report. The normal format will be posted when USDA publications resume.

Summary tables for the latest USDA December 2018 statistics and prices made available by the EIC on January 9^th 2019 are arranged, summarized, tabulated and reviewed in comparison with values from the previous December 10^th 2018 posting reflecting November 2018 data.

Due to the Federal shutdown effective midnight December 24^th some data required for this report was not updated by USDA-AMS. Updated data will be posted when the USDA resumes operation.

• Hen Numbers in Production increased 3.0 million to 328.1 million from December 26^th.
• Shell Inventory Up by a substantial 9.4 Percent from Previous Week.
• USDA Midwest Benchmark Generic Prices for Extra Large and Large Down by 11.4 and 11.5 Percent respectively. Mediums Down 16.6 Percent Compared to Past Week.

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on January 9 ^th the Midwest wholesale prices for Extra Large and Large were lower by 11.4 and 11.5 percent and Mediums were down 16.6 percent compared to the past week. The progression of prices during 2018 is depicted in the USDA chart reflecting three years of data, updated weekly.

Based on the importance of cage-free production, the USDA-AMS issues a monthly report on volumes and prices for the information of Industry stakeholders. There is some doubt as to the accuracy of the monthly flock numbers and the question is raised whether it would not be more desirable to post accurate quarterly data in place of erratic quarterly figures with similar data for consecutive months.

EGG-NEWS summarizes and comments on data and trends in the monthly USDA Cage-Free Report, supplementing the information posted weekly in the EGG-NEWS Egg Weekly Price and Inventory Report.

The USDA Cage Free Report for the month of December 2018 released on January 7^th 2018 documented constant flock sizes in hens producing under the Certified Organic seal and for cage-free flocks as compared to the values for September through November 2018. The respective numbers of hens in organic and cage-free flocks should reflect the realities of supply and demand in the market over successive quarters. Average flock production rose to 75.75 percent for both categories of non-caged hens (accepting USDA data):-

Kindly refer to weekly USDA wholesale and retail prices posted in the EGG-NEWS Egg Price and Inventory Report E-mailed each Friday. The previous Monthly Cage-Free Report is available under the STATISTICS Tab.

According to a January 10^th APHIS release a commercial egg-production farm with 100,000 hens was diagnosed with vvND. The unit is located in Riverside County approximately five miles from the second case diagnosed last week.

Since the first infection in a commercial pullet-rearing farm was diagnosed during the last week of 2018 intensive surveillance has been carried out to detect emerging cases that are not readily apparent in vaccinated flocks within a week of introduction of infection. Epidemiologic studies are in progress to ascertain the factors involved in dissemination of the virus from the endemic reservoir represented by fighting cocks in Los Angeles, San Bernardino and Riverside Counties. The California Department of Food and Agriculture and APHIS did little other than diagnose over 240 individual cases and keep score from May through November 2018.

Many commercial farms in California lack investment in structural biosecurity and hence function with inadequate operational biosecurity. This situation creates vulnerability to introduction of catastrophic viral diseases. “Danish entry” systems are suitable for Denmark where family-operated farms of 10,000 hens are the norm. The risks and consequences of AI or ND dictate a higher level of protection in the U.S. including shower-on-shower-off protocols, thorough decontamination of vehicles and other precautions. “Feel-good” measures are effective only as long as there is no exposure!

The AEB Annual Board Meeting will take place Monday through Wednesday March 25-27, 2019 at a resort in Scottsdale, AZ.  Details of the location, registration and reservations will be released in due course.

Food Business News reports that Renmatix Inc. has established a strategic association with the Ingredient House LLC to promote Simple Cellulose™. This plant-based additive is claimed to be a substitute for liquid egg in baking.

The producer claims that the ingredient offers emulsification, texturizing and moisture retention for breads, muffins and cookies.

The egg industry through the Egg Nutrition Center and other components of the AEB should be constantly aware of substitutes especially in food service and baking applications and should constantly evaluate alternatives to determine technical vulnerabilities and potential nutritional contribution to formulas and diets.

USAPEEC participated in the BEXCO Yoga Event in Busan, South Korea during late December 2018

The purpose of this promotion was to acquaint yoga instructors, many of whom are trendsetters, with the nutritional value and quality of U.S. turkey.  More than 500 yoga instructors visited the USAPEEC Korea booth to sample salads and other recipes.

The National Restaurant Association recorded a 0.6 percent increase in the Restaurant Performance Index (RPI) in November.  The current Situation Index a component of the RPI increased by 1.3 percent in November compared to October to a level of 102.2.  This was based on strong same-store sales and customer traffic.

DoorDash an established operator in home delivery has entered into a strategic relationship with Cruise Automation.  Cruise was established in 2013 and has partnered with General Motors to develop and deploy driverless vehicles.

Trials of home deliveries will commence in mid-2019 in the San Francisco metropolitan area.  It is proposed that the driverless vehicles will delivery both groceries and restaurant meals.

Matt Poole of International Egg Marketers has been newly appointed as agent for Ovotrack in North America. Matt has a long-standing presence in the North American egg industry. Initially, he operated as a plant manager for an egg-processing center and subsequently as a sales manager for manufacturers of grading installations.
Job Beekhuis CEO of Ovotrack looks forward to cooperation with International Egg Marketers, stating “Matt’s background makes him the perfect partner for us to support and expand our commercial activities in North America”. He added “during the IPPE, Matt Poole will be joining the Ovotrack sales team at booth C9314.

 Ovotrack develops and supplies traceability solutions for egg processing plants. Systems offer full traceability, labeling and control of egg and packaging material inventory. Since its inception in 2003, the company based in Amerongen, the Netherlands, has developed and installed systems at over100 egg processing centers across Europe, North America and Australia.