Tom Vilsack, secretary of the USDA has announced the allocation of $400 million for regional food system coordination and capacity-building through regional food business centers. In announcing the program, Vilsack stated, “The USDA Regional Food Business Centers will be a new, critical asset as we continue our work to strengthen and enhance local and regional food systems across the nation.”

It is proposed that the USDA will fund six Regional Centers located on the U.S.-Mexico border, in the Mississippi Delta, Appalachia and a Tribal Center with priorities based on persistent poverty and community need.

Undersecretary for Marketing and Regulatory Programs, Jenny Moffitt noted that, “USDA is committed to supporting smaller producers, processors and distributors to diversify economic opportunities in underserved communities.”  Apparently, throwing a vast amount of money at areas with low family income will “decrease barriers and improve supply chain linkages for producers, processors and distributors and strengthen regional food systems networks.” representing USDA gobbledygook.

This initiative is yet another example of social engineering using public funds for which there will be little accountability and no prospect of continuing support under an alternative administration.

EGG-NEWS believes in a free enterprise market economy that promotes efficiency and productivity. Secretary Vilsack and his appointees should heed the comments of the late UK Prime Minister Margaret Thatcher who averred “The problem with socialism is that it soon runs out of other people’s money.”

It is estimated that the $400 million allocated to these “Regional Food Business Centers” would have supported the education and training of over 1,600 specialists in diverse fields of agriculture including agricultural engineering, extension services, veterinary medicine, nutrition, economics, agronomy, and livestock production each with an investment of $250,000.  These specialists would have received training that would extend through an entire career allowing them to contribute to scientific and practical advances that could in theory enhance productivity over the long term and contribute to alleviation of hunger and poverty.

It is also questioned why the U.S. has pockets of poverty while the nation has to issues H-2A visas to guest workers.  Perhaps the USDA should consider programs to support relocation, providing housing, schools, childcare and directed benefits to encourage participation in agriculture by the underemployed in current “underserved communities”. Displaced sharecroppers moved westward during the Great Depression to find work in California some with assistance from the WPA New Deal after arrival. Has Grapes of Wrath been abandoned in high school English literature?  

Attempting to artificially stimulate production of food using social engineering is analogous to attempting to push a piece of string.  Only market forces determine allocation of capital, survival of enterprises and their productivity over the long term.

Status of 2022 Corn and Soybean Crops

The USDA Crop Progress Report released on September 26th documented continued progress in both soybean and corn crops. Corn maturity is delayed in areas affected by drought and heat. Fifty percent of corn was mature on September 25th up from 40 percent last week and twelve percent has been harvested. The fact that a high proportion of the corn crop was planted over a two-week period created widespread vulnerability to heat and drought at the critical stage of silking and this had an adverse impact on corn yield in severely affected areas contributing to a low average national yield of 172.5 bushels per acre.

Sixty three percent of the soybean crop was dropping leaves on September 25th with eight percent harvested, five percent behind the corresponding week in 2021.

For the week ending September 25th topsoil and subsoil moisture levels are still lower than the corresponding weeks in 2021 although some central and easterly states in the corn-belt have had relief from drought.

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

WEEK ENDING Crop August 21st August 28th 4-Year Average Corn Dough (%) Corn Dented (%) Corn Mature (%) Corn Harvested (%) 100 87 40 7 100 92 50 12 100 94 61 14 Soybeans Setting Pods (%) Soybeans Dropping Leaves (%) Soybeans Harvested (%) 100 42 3 100 63 8 100 65 13
Crop Condition V. Poor  Poor Fair Good Excellent Corn 2022 Corn 2021 9 5  12  10 27 26 42 45 10 14 Soybeans 2022 Soybeans 2021 5 4 10  10 30 28 46 47 9 11
Parameter V. Short Short Adequate Surplus Topsoil moisture: Past Week 21 33 43 3 Past Year 19 31 46 4 Subsoil moisture: Past Week 23 33 43 1 Past Year 21 31 45 3

The August 2022 ProFarmer Tour estimated the corn crop at 13,759 million bushels with an average yield of 168.1 bushels per acre. Their estimate of the soybean crop was 4,535 million bushels with an average yield of 51.7 bushels per acre.

The September 12th WASDE #628 estimated the average U.S corn yield at 172.5 bushels per acre with a 2022 harvest of 13,944 million bushels. The soybean yield was estimated to attain 650.5 bushels per acre with a 2022 harvest of 4,378 million bushels.

The September WASDE #628 is posted under the STATS tab.

USDA Weekly Egg Price and Inventory Report, September 29th 2022.

Market Overview

• The average wholesale unit revenue for Midwest Extra-large and Large sizes were higher by a substantial 25.5 percent on average, maintaining the ongoing trend of unseasonal high prices. Mediums were up by 16.3 percent extending their upward trajectory although supply will increase as many pullet flocks enter production, placing price pressure on this size. Retail sales are projected to be relatively higher over the short-term given low stock levels and constrained production. Both retail prices and demand will continue higher than in previous years sustained by consumer perceptions of value in an inflationary environment with a high cost for protein. Availability and hence prices are influenced by depletion of close to 36 million hens in 15 large complexes in ten states extending from the last week in February through September 21st.
• Total industry inventory decreased 0.9 percent overall this past week to 1.54 million cases with a 3.5 percent increase in shell eggs and a concurrent 9.8 percent decrease in breaking stock. Wholesale unit prices during the first half of 2022 through July contrasted favorably with the corresponding periods in both 2020 and 2021 characterized by low ex-plant unit revenue. Generic eggs are still yielding high positive margins given the USDA benchmark average combined costs for nest-run of 82.5 cents per dozen in August (feed, chicks, housing, labor and fuel), In addition the average cost of grading, packaging and delivery amounted to approximately 50 cents per dozen according to the EIC.
• It is now apparent that the inventory held by chains and other significant distributors may be more important to establishing wholesale price than the USDA regional inventory figures published weekly, especially over the short term. The seasonal strategy of retailers is to adjust purchases only in response to retail demand and to hold down inventories in their DCs and stores while marking up shelf margins and pressuring suppliers for rapid replenishment of stocks to DCs and through DSD. Market data suggests that chains have priced generic white eggs in response to prevailing demand and are only seldom featuring Medium and Extra Large sizes.
• Due to the depletion of close to 36 million hens through September 21st as a result of HPAI, unseasonal high unit revenue will now be a reality through fall. Prices will progressively decline as flocks are restocked until the pre-Thanksgiving rise. The occurrence and extent of further outbreaks of HPAI cannot be assessed until more information is revealed concerning the molecular and field epidemiology relating to cases suggesting modes of transmission and possible deficiencies in biosecurity on affected complexes with identification of specific risk factors.
• The current relationship between producers and chain buyers based on a single price discovery system constitutes an impediment to a free market. The benchmark price amplifies both downward and upward swings as noted during March to the present. The benchmark functions to the detriment of the industry over the long term and a CME quotation based on Midwest Large, reflecting demand relative to supply would be more equitable. If feed cost is determined by the CME then so should generic shell eggs.
• According to the USDA the U.S. flock in production was down 4.5 million or 1.5 percent to 279.9 million hens during the week ending September 28th. The flock in production includes about 2.0 million molted hens that resumed lay during the past week plus 4.0 million pullets attaining production.
• There is some prospect of a return in the food service sector but with frozen and dried egg prices stable or moderately higher over the past three weeks. The ex-farm price for breaking stock was up 22.8 percent this past week to 263 cents per dozen. Checks delivered to Midwest plants were 35.9 percent higher to 265 cents per dozen. Prices for breaking stock will remain high in relation to season for the duration of the recovery period as replacement flocks are reared, reminiscent of 2015-2016.

Week in Review

Prices

According to the USDA Egg Market News Reports released on September 26th the Midwest wholesale price (rounded to one cent) for Extra-large was up 25.5 percent to $3.62 per dozen. Large size was up 25.5 percent to $3.60 per dozen; the Medium price was up 16.3 percent to $2.50 per dozen as delivered to DCs. Prices should be compared to the USDA benchmark average 6-Region blended nest-run cost of 82.5 cents per dozen (excluding provisions for packing, packaging materials and transport amounting to 50 cents per dozen according to the EIC) during August 2022. The progression of prices during 2022 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

WEEKLY COMMODITY REPORT: SEPTEMBER 29th 2022.

OVERVIEW

Over the past five trading days the price trend for December corn was down (2.9 percent) compared to the previous week paralleled by November soybeans that also moved lower (3.2 percent). The market has digested the projections of crop size and ending stocks in the September 12th WASDE #628. Despite fluctuating economic sentiment, the sixth week following restoration of shipping from Black Sea ports has temporarily reduced price pressure on wheat and other grains although bellicose statements by President Putin influenced the price of wheat. Commodity prices in the U.S. were also influenced by a rising Dollar Index, lower orders placed by China recovering from a national holiday and in anticipation of the 20th Congress of the ruling party and an apparent decline in the domestic U.S. demand for corn ethanol.

Factors influencing commodity prices in either direction included:-

• With renewed fears of a U.S. recession due to an aggressive Federal Reserve and following the Jackson Hole Economic Meeting, the September 13th CPI release and the September 21st upward rate adjustment, equity markets moved lower this past week. (transitory downward pressure on markets)
• Hot and dry conditions in extensive areas of the Corn Belt reduced the yield and quality of the late-planted 2022 corn crop. The size of the corn and soybean harvests were updated in the September WASDE and were reduced by 2.9 and 3.4 percent respectively from the August Report to 172.5 bushels per acre for corn and 50.5 bushels of soybeans per acre. (upward pressure with lower carryover)
• Geopolitical tensions that impacted wheat, corn, oilseeds and vegetable oil exports from Ukraine persist. The apparent restoration of shipments according to an agreement to lift restriction on Black Sea shipping brokered by Turkey and the U.N. is in jeopardy. Russia has inflicted extensive and deliberate damage on the agricultural infrastructure of Ukraine including elevators and crushing plants and has placed landmines in fields. Russia has destroyed 14 percent of grain storage capacity in Ukraine. (upward pressure on corn and wheat and an indirect effect on soybeans if Black Sea shipping is interrupted.)
• Expectation of high soybean and corn crops from Brazil for the 2022-2023 season. (lower prices in the future subject to favorable reports on planting and crop progress)
• Volatility of the Dollar Index (DXY) that declined from 105 on May 12th to 101 on June 2nd but rising again to 113 on September 28th has influenced timing and volume of export orders (contributes to fluctuation in corn and soybean prices, depresses U.S. sales)
• Speculation in commodities by hedge funds is declining consistent with falling equity prices this week coupled with a steady decline in the value of cryptocurrency. Concerns over a possible recession have re-emerged as the Federal Reserve is intent on raising benchmark funds rates to suppress inflation. (downward pressure)

Based on CME quotations on September 29th U.S. farmers are now receiving and conversely livestock producers and ethanol refiners in the Midwest will pay above $6.70 per bushel for corn delivered in December, down 2.4 percent from the quotation last week. Crushers will pay $14.16 per bushel for soybeans plus transport and basis for November delivery. December soybean meal fell 4.9 percent or $21 per ton, compared to the quotation last week. Prices continued their moderate inter-day fluctuation and continued the upward trend from the previous week reflecting both domestic and export demand.

EXPORTS

The restored ‘legacy’ FAS Export Report released on September 29th for the week ending September 22nd reflecting market year 2022-2023, confirmed that outstanding export orders for corn amounted to 11.38 million metric tons (44.85 million bushels) with 1.60 million metric tons (63.0 million bushels) actually shipped. During the past week net orders for the 2022-2023 market year amounted to 0.51 million metric tons (20.2 million bushels) with 0.57 million metric tons (22.6 million bushels) shipped. Early in the current market year outstanding sales of corn to date are 52.1 percent higher than at the corresponding week a year ago. For market year 2023-2024 outstanding sales this week amounted to 0.25 million metric tons (9.8 million bushels), with 0.16 million tons (6.3 million bushels) ordered for the 2023-2024 market year.

(Conversion 39.36 bushels per metric ton)

The FAS Export Report released on September 29th for the week ending September 22nd reflecting market year 2022-2023, recorded outstanding export orders for soybeans amounting to 25.52 million metric tons (937.5 million bushels) with 1.21 million metric tons (44.5 million bushels) actually shipped. Net weekly soybean orders attained 1.0 million metric tons (36.9 million bushels) with 0.27 million metric tons (9.9 million bushels) shipped. Early in the current market year to date outstanding sales of soybeans are 9.8 percent lower than at the corresponding week a year ago. Sales recorded for market year 2023-2024 are negligible at 30,000 tons (1.1 million bushels). (Conversion 36.74 bushels per metric ton)

For the week ending September 22nd 2022 net orders of soybean meal and cake amounted to 86,300 metric tons for the market year 2022-2023. During the past week 249,700 metric tons of meal and cake combined was shipped, representing 2.2 percent of the total 11,252,600 metric tons shipped during the previous marketing year. This quantity is 1.4 percent higher than the previous market year.

In a press release dated September 27th Cal-Maine Foods (CALM) announced results for the 1st Quarter of FY 2023 ending August 27th 2022. The Company exceeded the topline consensus estimate of $617 million and the projection of an EPS of $2.55. This report summarizes data provided in addition to the Q-10 Report

Cal-Maine serves as a bellwether for the shell egg sector as the only public-quoted pure-play company in the industry. 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)

Notes: $1.6 million ‘other income,’ Q1 2023 compared to $5.8 million in Q1 FY2022:

$33 million gain on disposal of assets, Q1 2023 compared to $213 million loss in Q1 2022.

$ 0.43 million Royalty Income, Q1 2023 compared to $0.27 million Q1 2022

$0.15 million from equity investment, Q1 FY 2023 compared to $0.14 million Q1 2022

$0.90 million interest income, Q1 FY 2023 compared to $).23 million Q1 2022

No acquisitions in Q1 2023

Trailing P/E 22.2

52-Week Range in Share Price: $34.29 to $61.83 50-day Moving average $54.89

Market Close, Tuesday, July 27th pre-release: $60.53.

After hours trading post-release: $60.40 (down 0.2 percent)

In reviewing the CALM quarterly report the following calculated values represent key data for the most recent Quarter. (Q1 Fiscal 2022 and percent difference in parentheses):-

• Shell egg sales attained $626,085 million in Q1 2023 based on this category representing 95.1 percent of total revenue. ($314,586 million in Q1 2022, based on 96.8 percent of revenue. Value up by 99.0 percent)

• Dozen shell eggs sold (thousands): 275,317 (254,622; +8.1%)
• Average selling price of all shell eggs calculated from data released: $2.27 per dozen; ($1.24 per dozen; +83.1%).
• Average selling price of specialty eggs (excluding co-pack) calculated from data released: $2.08 cents per dozen; ($1.87 per dozen; +11.2%).
• Average selling price of generic eggs calculated from data released: $2.38 cents per dozen; ($0.99 cents per dozen; +140.4%).
• Differential between generic and specialty eggs: -$0.30 cents per dozen; ($0.88 per dozen; -134.1%)
• Specialty eggs as a proportion of volume sold: 34.7%; (27.8%; +24.8%)
• Specialty eggs as a proportion of sales value: 31.8%; (42.0 %; -24.3%)
• Proportion of eggs sold that were produced by Cal-Maine and contract flocks: 93.6% (92.9% +0.8%;).
• Feed cost: 66.7 cents per dozen, (54.5 cents per dozen, +22.5%)

The following observations relate to the comparison of Q1 2023 with the corresponding quarter in 2022:-

• Cal-Maine Foods was not affected by the 2022 avian influenza epornitic as of the release.
• Q1 of FY 2023 represented a more favorable marketing comparison to Q1 2022 based on higher prices for shell eggs, as influenced by depopulation of 32.7 million hens prior to and during Q1, coupled with high demand. Restrictions due to COVID on institutional and consumer segments were in large measure removed during Q1 of FY 2023
• Gross profit was impacted positively by higher unit revenue for generic eggs but offset by significantly higher production costs including feed (66.7 cents per dozen) and obviously by inflation in labor, fuel and packaging (37.9 cents per dozen).
• In a market characterized by high unit prices, the relative contribution of specialty eggs is less important to net earnings in contrast to a down market as in Q1 of FY 2022. Enigmatically generic eggs generated a higher unit price and margin compared to specialty eggs.
• Responding to the shortage of available eggs and their cost in Q1 2023 (average price $2.57 per dozen), Cal-Maine reduced the purchase of nest-run eggs for packing and sale to 6.4 percent of sales volume compared to 7.1 percent during the corresponding 1st quarter of FY 2022.
• Apart from the Family-trust and other insider shareholding of 14.5 percent, institutions hold 92.7 percent of equity. Shares short on August 31st attained 9.3 percent of float.
• Cal-Maine Foods declared a dividend of $0.85 per share.

In commenting on results for the 1st Quarter of FY 2023, Dolph Baker, Chairman and CEO of Cal-Maine Foods, commented, “We are pleased to begin fiscal 2023 with record quarterly sales for Cal-Maine Foods. We benefitted from higher average selling prices and record specialty egg sales volumes leading to historic Company record revenue for both conventional and specialty shell eggs. We continue to focus on offering consumers a choice with a favorable product mix in line with changing demand trends. We believe this strategy has created momentum across retail channels and delivered a performance that has outpaced the industry.

Baker added “Our operations ran well during the quarter, and we are pleased with our ability to manage the business despite significant inflationary pressures contributing to rising costs for feed, labor, packaging, and distribution, among other costs. We remain focused on the aspects of the business we can control with a shared commitment across Cal-Maine Foods’ operations to be the most efficient and sustainable producer of fresh shell eggs and egg products in the United States.”

Max Bowman, CFO of Cal-Maine Foods, added, “Our financial performance over the quarter reflects our ability to execute our operating strategy in dynamic conditions, while continuing to meet the expanding needs of our customers. The significant increase in pricing and favorable volume trends in specialty egg sales, along with efficient expense management, led to improved profitability with a gross profit margin of 33.0% for the first quarter of fiscal 2023”.

The earnings release included information on future conversion to cage-free production: “Cal-Maine Foods continues to offer a differentiated product mix to meet the needs of our customers. The Company maintains its specialty egg business focus as a key driver of growth. In line with expanding consumer demand and state requirements for cage-free eggs, the Company has continued to make significant investments in production capacity to position Cal-Maine Foods as an industry leader to supply the growing demand for specialty egg offerings, including cage-free eggs. Cage-free egg sales comprised 20.3% of total net shell egg sales in fourth quarter 2022 and represented 22.1% of total net shell egg sales in fiscal 2022”.

The release addressed the issue of conversion to cage-free housing noting “Providing customers with a favorable product mix is an important differentiator for Cal-Maine Foods. Specialty eggs are an integral part of the Company’s growth strategy and remain a primary focus for fiscal 2023. Cal-Maine Foods continues to make significant investments in production capacity to meet the demand for specialty eggs, including cage-free eggs, as customer demand has evolved in line with state requirements”.

“A significant number of Cal-Maine Foods’ customers have previously announced goals to offer cage-free eggs exclusively on or before 2026, subject in most cases to availability of supply, affordability and customer demand, among other contingencies. Some of these customers have recently changed those goals to offer 70 percent cage-free eggs by the end of 2030. The Company’s customers typically do not commit to long-term purchases of specific quantities or types of eggs, and as a result, it is difficult to accurately predict customer requirements for cage-free eggs. The Company continues to engage with its customers in efforts to achieve a smooth transition toward meeting their announced goals and needs. Sales of cage-free eggs represented approximately 19.4 percent of shell egg revenues for the first quarter of fiscal 2023. Cage-free dozens sold increased 58% in the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022”.

“Cal-Maine Foods has invested significant capital in recent years to acquire and construct cage-free facilities and remains focused on future expansion projects that will include cage-free facilities. At the same time, the Company understands the importance of continuing to provide more affordable conventional eggs in order to provide its customers with a variety of egg choices and to address hunger in more communities”.

The Q-10 Report documented an approved capital investment of $293.9 million for cage-free conversions and upgrades to processing for FY 2023 through 2025. Of this total $143.0 million has been commited with $130.9 to be assigned in FY 2024 and 2025.

On the topic of HPAI the report commented, “Cal-Maine Foods continues to monitor the current outbreak of highly pathogenic avian influenza (“HPAI”), that was first detected in commercial flocks in the U.S. in February 2022 and, which was most recently detected in commercial flocks in the U.S. in September 2022. There have been no positive tests for HPAI at any Cal-Maine Foods’ owned or contracted production facility as of September 27, 2022. The USDA division of Animal and Plant Health Inspection Service (“APHIS”) reported that approximately 35.6 million commercial layer hens and 1.0 million pullets have been depopulated due to HPAI. The Company believes that HPAI outbreak will continue to have an impact on the overall supply of eggs through the balance of this calendar year and possibly beyond. According to LEAP Market Analytics, layer hen inventory is not projected to exceed the 320 million mark until October of 2023”.

“While no farm is immune from HPAI, Cal-Maine Foods believes it has implemented and continues to maintain robust biosecurity programs across all its locations. The Company is also working closely with federal, state and local government officials and focused industry groups to mitigate the risk of this and future outbreaks and effectively manage a response, if needed”.

An egg production farm in Spain with 600,000 hens was diagnosed with H5N1 strain highly pathogenic avian influenza on September 8th.  The outbreak was confirmed by the Central Veterinary Laboratory of Algete.  The farm is located in the municipality of Fontanar in the Province of Guadalajara and is the 35th reported outbreak in Spain this year.

Epidemiologic investigations are in progress, but the origin of the virus is presumed to be a defect in biosecurity allowing contact with wild birds.

Appropriate responses by the Junta de Castilla-La Mancha in compliance with E.U. directives and WOAH recommendations have been implemented.

The Ministry of Agriculture Fisheries and Food has advised producers to upgrade biosecurity and has intensified surveillance in wild bird populations.

On September 29th Cal-Maine Foods, Inc.  provided an update on the status of the Company’s facilities located in Florida following landfall of Hurricane Ian and the related flooding in the region. The Company reported that some of its farms and production facilities sustained only minor physical damage and light flooding, and several locations have lost power and are currently operating on back-up generators.

Dolph Baker, Chairman and CEO of Cal-Maine Foods, Inc., stated, “We are thankful that we have not had any reports of injuries to any of our employees as a result of this devastating hurricane. We have experience managing through catastrophic weather events and our top priority has been and will continue to be the safety of our employees, and the health and wellbeing of the animals under our care. We also want to acknowledge and commend our dedicated employees who worked tirelessly to prepare for the storm and will continue their efforts to fully restore normal operations. Hurricane Ian is a storm of historic proportions, and we are deeply saddened by the extreme devastation in Florida. We are grateful for the support from local authorities and the heroic work of first responders who are dealing with the aftermath of the storm as conditions allow.”

At this time, the Company does not anticipate any material loss in egg production. The Company is closely monitoring the storm situation and will provide additional information if there is a significant impact on its operations.

On August 17th the United States and Taiwan announced a roadmap in advance of trade negotiations to take place during the fall.  Sarah Bianchi of the Office of the Trade Negotiator stated, "we plan to pursue an ambitious schedule for achieving high-standard commitments and meaningful outcomes covering the eleven trade areas in the negotiating mandates that will help build a fairer, more prosperous and resilient 21st century economy".

 Areas that will be considered include trade facilitation, regulatory practices, anti-corruption standards, agricultural trade, removing discriminatory barriers to trade, labor and environmental standards and state-owned enterprises.

During the first half of 2022, Taiwan was ranked third among importers of broiler products attaining 140,967 metric tons valued at $159 million.  These values were respectively 64 percent higher in volume and 83 percent in value compared to the first six months of 2021.

Taiwan is not a noteworthy importer of either eggs or products but with appropriate pricing and ptpmotion this potential market should be developed

Over the October 14th and 15th weekend, the Bellinger Foundation will honor Dr. Gary Smith, an eminent scientist at Texas A&M University and an innovator in the meat industry.

The program commencing Friday, October 14th will begin with an appreciation to Dr. Smith at the Briscoe Western Art Museum in San Antonio.  On Saturday, a seminar will take place in his honor reviewing pathogens, sustainability and regulatory issues.

John Bellinger stated, "whether they know it or not, Dr. Smith's work has benefited the lives of nearly every consumer from keeping people safe to standardizing the way the industry grades carcasses to mentoring today's preeminent meat scientists. The effect Dr. Smith has had on the industry cannot be overstated”. 

The program will raise money for the Gary'68 and Kay Smith Meat Judging Team Excellence Endowment.

A groundbreaking ceremony was held for Veritas Agrilabs™ during the past week on the campus of Kalmbach Nutritional Services in Carey, OH.  The facility will provide analyses of animal feed ingredients, and forages.  Veritas Agrilabs™ will be an independent accredited laboratory dedicated to providing accurate and timely results for the feed and livestock industries of the U.S. Technology offered will include NIR spectroscopy, mycotoxin assay and proximate analysis.

Veritas Agrilabs™ will be managed by Joy Fetter with extensive experience operating pharmaceutical and feed laboratories.  In commenting on her appointment Joy noted that the laboratory will provide accurate and consistent results, outstanding customer service and rapid turnaround time.

Paul Kalmbach Jr. president of Kalmbach Feeds stated, “This laboratory, in addition to the multiple research and innovation sites that Kalmbach has added over the last two years is a continuation of our desire to create value for our customers and be able to better serve them for years to come.

The facility will be completed in December 2022 with full laboratory services extended to the industry during the first quarter of 2023.

QC Supply with thirty U.S. locations has issued their 2022 Fall catalog detailing available equipment, installations, consumables, disinfectants and items required to maintain and optimize the operation of live bird facilities.

For additional information on lighting, ventilation, welfare, pest control and biosecurity, access the company website by clicking <here> or onto the QC Supply logo on the right side of the Welcome page.

The Canadian Food Inspection Agency has issued a ban on private importation of raw, unprocessed poultry products or byproducts from any U.S. state that has reported an outbreak of highly pathogenic avian influenza.  This requirement presumably relates to both commercial and backyard outbreaks within 28 days of the date of importation, if the nation is following WOAH rules.

Specified products include raw turkey and chicken meat, table eggs, cooked leftovers from restaurants, raw pet food and feathers.  Fully cooked poultry products can be imported irrespective of outbreaks reported in the state origin.  Acceptable products include rotisserie chicken, hotdogs, deli meats, hard-boiled eggs and cooked kibble or canned pet food.

Restrictions on commercial poultry products are subject to a bilateral agreement between the U.S. and Canada in accordance with World Organization of Animal Health (WHOA) guidance including regionalization, compartmentalization, quarantine, depopulation and surveillance.

Darden Restaurants, operators of the Olive Garden and Long Horn Steakhouse, has committed to sourcing cage-free eggs by the beginning of 2027.  Darden operates 1,850 locations in North and Central America and Asia.  With respect to international franchisees, cage-free eggs will be purchased “as available by the end of 2027”.

The announcement by Darden follows similar commitments by Bloomin’ Brands, Restaurant Brands International, Yum Brands and JAB Holdings.

Restaurants and food service operations are able to pass on the incremental cost of cage-free eggs over cage-derived eggs to consumers.  The situation is obviously different with retailers that must price according to consumer income demographics.  It is however, significant that commitments by restaurants have extended the previous 2025 date and it is anticipated that further extensions will be announced.

Uncertainty over the status and constitutionality of California Proposition #12 and the equivalent ballot measure in Massachusetts has led to a moratorium on new conversions from cages to alternative systems. It is possible that numerous enrichable cages installed during the 2000s may be converted to enriched colony modules as a compromise acceptable to customers and consumers. If California Proposition #12 is declared unconstitutional as conflicting with interstate commerce, many existing aviary units will be operated with closed fronts becoming enriched colony modules depending on markets served.

District Judge Fernando Olguin of the U.S. District Court in Los Angeles denied a motion of dismissal filed by McDonald’s Corporationon Wednesday, September 21st. At issue is a lawsuit by media mogul Byron Allen, CEO of Entertainment Studios Networks, Inc. and Weather Group, LLC, claiming that McDonald’s Corporation constrained spending for minority-owned media.  Allen claims that McDonald’s Corporation used a separate ad agency with a small budget for what he designated as an “African American Tier”.

In his ruling, Judge Olguin noted, “Taken together and construed in the light most favorable to plaintiffs, they have alleged sufficient facts to support an inference of intentional discrimination.”

In rebuttal, the lawyer representing McDonald’s Corporation claimed that the lawsuit was about revenue, not race and that there was no discrimination.  Allen presented evidence that, although Black customers represented 40 percent of fast-food revenue, McDonald’s spent 0.3 percent of its $1.6 billion U.S. ad budget on Black-owned media in 2019.  Most recently, McDonald’s pledged to boost National ad spending with Black-owned media to 5 percent, suggesting that pre-trial submissions by the plaintiff had some substance.

On September 22nd Costco Wholesale Corporation (COST) posted results for Q4 and FY2022 ending August 28th. For the quarter, the Company earned $1,868 million on revenue (including fuel and membership fees) of $72,091 million with a diluted EPS of $4.20.  For the corresponding Q4 of FY2021, Costco earned $1,670 million on equivalent revenue of $62,675 million with a diluted EPS of $3.76.  Revenue was 15.0 percent higher than in Q4 of FY2021 and net earnings rose by 11.9 percent. Gross margin for Q4 FY2022 declined to 10.1 percent compared to 10.9 percent in Q4 FY2021 attributed to higher cost of goods sold in an inflationary environment. Concurrently operating margin fell from 3.6 percent in Q4 FY2021 to 2.2 percent for the most recent quarter associated with increased freight, transport, wages and utilities.

For FY 2022, the Company earned $5,844 million on revenue (including fuel and membership fees) of $226,954 million with a diluted EPS of $13.14.  For FY2021, Costco earned $5,007 million on equivalent revenue of $195,929 million with a diluted EPS of $11.27

Total adjusted comparable same-store sales for FY 2022 (excluding fuel) attained 10.6 percent. U.S. same store sales were up 10.4 percent; Canada by 12.1 percent and the Other International category, 11.2 percent.

On August 28th Costco posted total assets of $64,166 million, up 8.3 percent from Q4 FY2020. Long-term debt and lease obligations attained $43,519 million. Costco had an intraday market capitalization of $215,800 million on September 23rd. The Company has traded over the past fifty-two weeks in a range of $406.51 to $612.27 with a 50-day moving average of $528.68.

Twelve-month trailing operating margin was 3.5 percent and profit margin 2.6 percent.  The Company generated a return on assets of 10.1 percent and 38.8 percent on equity.

At the end of Q4 FY2022, Costco operated 838 warehouses. There are 578 in the U.S; 107 in  Canada; 40 in Mexico; 31 in Japan; 29 in the U.K. and 53 others in seven nations among the E.U., Asia and Australia.

Alltech, Inc. has appointed Tara McCarthy as the Global Vice-president of Environmental, Social and Corporate Governance.  In her role, Ms. McCarthy will support the advancement of the Alltech program of Working Together for a Planet of Plenty™.

In commenting on the appointment, Dr. Mark Lyons, president and CEO of Alltech, stated, “Agriculture is the sector most integral to planetary health from its role in the nourishment and well-being of humans and animals, to the capabilities it has to not only safeguard but to benefit our Earth’s environment.”

Prior to joining Alltech, Ms. McCarthy served as the CEO of the Irish Food Board, and she has 25 years experience in the food industry.  She has developed initiatives to support programs for students and early-career executives and entrepreneurs within the food industry.  In 2019, Ms. McCarthy co-founded Active AGDIF, encouraging diversity in the Irish food industry and motivated the establishment of the Green Global Council.

Ms. McCarthy received a baccalaureate degree in commerce from the National University of Ireland followed by a master’s degree in business studies from the Michael Smurfit Graduate Business School of the University College Dublin.  She is the recipient of a number of awards, including UCD Alumna of the Year for Business and Commerce in 2017 and the UCD Smurfit School Alumna of the Year in 2019.

Target Corporation anticipates hiring 100,000 seasonal workers in stores and distribution centers this Christmas Season.  Target will be offering starting wages ranging from $15 to $24 an hour, depending on location and skills.

Walmart plans to add 40,000 workers to its complement of stores and distribution centers.  The projected number is lower than the 150,000 who were hired in 2021.

The Canadian Food Inspection Agency recently issued a summary of outbreaks of H5N1 Highly Pathogenic Avian Influenza to the World Organization of Animal Health (WOAH).  According to a posting on September 20th, 65 infected farms have been depleted and are undergoing depletion and decontamination.  Sixty-six farms previously infected have been released from quarantine and are presumably being restocked. 

To date, 2,363,000 commercial poultry of diverse species have been depopulated with 43 outbreaks in the Province of Alberta involving 1,075,000 birds.  The second highest number of depopulations occurred in Ontario, with 27 outbreaks involving 561,000 birds.  Nine provinces, from the Maritimes to British Columbia, have reported cases.

It is presumed that recent cases are attributable to dissemination of virus by both migratory and domestic birds.  The extent of infection is noted in the isolation of the virus previously from foxes and seals.  The most recent report of an infection in mammals involved a bear in the Province of Quebec that was euthanized following demonstration of neurologic signs. An H5N1 virus was isolated and encephalitis confirmed by histopathology.

Recent outbreaks of H5N1 Highly Pathogenic Avian Influenza were diagnosed on poultry farms in Groningen in the north of the Nation and Overijssel in the east-central quadrant.  To date, there have been 70 outbreaks on commercial farms.  Quarantines imposed in accordance with EU directives and WOAH recommendations are disruptive since farmers cannot move eggs or live birds to prevent spread of the virus.

The Netherlands has 1,700 poultry farms divided among egg production, broilers and waterfowl.

Following the agreement between Russia and Ukraine to allow free passage of grain-carrying vessels in the Black Sea, approximately two million tons of corn with some soybeans, sunflower meal and barley have been shipped from the three designated ports of Odessa, Chornomorsk and Pivdennyi.  The port of Mykolaiv was excluded from the agreement but is the second largest export terminal.  The potential combined capacity of the three ports is 3.0 million tons per month. 

It is estimated that the 3 to 4 million tons of commodities stored in the three ports were moved during August through mid-September to make room for the incoming 2022 Harvest.  Approximately 20 million tons of wheat will have to be shipped in addition to approximately 20 million tons of grain stored in silos through Ukraine.  It is difficult to see how Ukraine will be able to export 6 million tons in each of October and November.  Export volume has been restricted to relatively small vessels to date. Ocean freight operators are concerned over safety of vessels and crews due to the presence of sea mines laid by both Ukraine and Russia, some of which are now free floating, representing a danger to navigation.  Insurance will only be offered to ship operators if vessels are assured of free passage and the absence of mines.  Lloyd’s of London is extending $50 million cover for every voyage but with high insurance rates that will be added to the cost of grain.

President Putin of the Russian Federation has indicated that the July free-passage agreement will be renegotiated, and he will evidently demand concessions for Russia in exchange for extending the agreement.  It is evident that the naval forces of NATO, including the U.S., may become involved in maintaining free passage of vessels, a situation that could escalate hostilities and disrupt world prices for commodities. 

The Ministry of Agriculture in Ukraine estimates a total corn harvest of 25 to 27 million metric tons down from 42.1 million in 2021.  Due to hostilities, total grain and oilseed production will be halved to approximately 50 million metric tons.  To date, 26 million tons of grain has been harvested from the 2022 crop, representing 60 percent of the seeded acreage.

Assembly Bill 257, known as the FAST Recovery Act, was signed into law on Labor Day.  This legislation increases wage rates for employees of “fast-food restaurants”. Specific provisions of the law will be implemented by a ten-person Council that will set standards for wages, hours and other conditions of employment.  According to the Bill, “fast-food restaurants” are defined by providing counter-service, food paid for before the order is delivered, and the chain having more than 100 locations.  This would include conventional QSRs and hybrid operation such as Chipotle Mexican Grill.

A filing for a ballot has been initiated and if sufficient signatures are gathered, that is considered inevitable, voters will consider repealing the FAST Act in November 2024 thereby invalidating the law.  Based on a recent ballot to overturn ride-sharing legislation, it is anticipated that both labor unions and restaurant operators will expend millions to engender support for their respective causes.

Alimentation Couche-Tard, Inc. of Canada, the parent company of the Circle-K chain of convenience stores, has embarked on a program to increase food sales.  This strategy is in part motivated by the projected decline in long-term demand for gasoline and diesel. It is estimated that in 2030, half of all new vehicles sold will be powered by electricity.

The chain currently derives the majority of income from fuel sales but plans to increase revenue from produce and from both unprepared foods and meals to generate 25 percent of North American sales in the intermediate term.

The company is drawing on experience gained in Europe to improve food offerings and is applying a concept derived from Holiday Station Stores of Minnesota acquired in 2017.

The Couche-Tard operation has 7,011 locations in the U.S., 13 percent of which are operated by franchisees.  The company has 2,076 stores in Canada and 3,070 units in Europe. Couche-Tard joined Kroger and Restaurant Brands International in July to fund Kitchen United, Inc. an  operator of “ghost kitchens”.

According to a ProMED report, an outbreak of H5N1 strain avian influenza involving 30,000 commercial poultry (type not specified) was diagnosed in Sint-Laureins in East Flanders, Belgium on September 18th.  It is presumed that the infection involved contact with wild birds as stated in the WOAH report. 

Outbreaks of H5N1 Avian Influenza persist in wild birds, backyard farms and commercial flocks through various nations in Europe. This week WOAH received a report of a limited outbreak in a small commercial farm near Lodz, Poland.  For 2022 to date, 35 outbreaks of HPAI have occurred on poultry farms in Poland with an additional 28 diagnosed cases in wild birds.

During previous outbreaks of Highly Pathogenic Avian Influenza, cases occurred at the beginning of the Fall migration of waterfowl, commencing in November and December and ceasing by March.  For 2021 through 2022, incident cases followed the early seasonal pattern but persisted through Summer and now into Fall.  This presumes dissemination of virus by non-migratory endemic birds and now small mammals. The incidence rate represents a major shift in the epidemiology of HPAI and hence, the need to reassess prevention relying on biosecurity and control comprising depopulation with quarantine and decontamination. These modalities are appropriate for an exotic disease but it must now be questioned whether HPAI has not become seasonally or continually endemic.

The Department of Justice has released details of criminal charges against 47 in Minnesota involved in a $250 million scam to divert COVID funding designated for feeding children to their personal gain. The DOJ characterized the actions of the accused as “the largest pandemic relief foods scheme charged to date”. At the center of the extensive misappropriation is “Feeding Our Future”, a Minnesota nonprofit that had limited experience in feeding children prior to COVID.

It is inevitable that with large amounts of money released in response to an emergency but with lax controls, that many unscrupulous individuals would attempt to divert and embezzle funds. The DOJ alleges that Aimee Bock was the central figure in establishing a pyramid that obtained and misappropriated close to $250 million in 2021. Her organization claimed that the funding was used to provide meals for children in need.  The fraudulent scheme generated illegal income used to purchase luxury vehicles, and real estate in the U.S. Kenya and Turkey.

If a federal or state agency erects numerous hen houses over a short period, it is necessary to guard against the numerous foxes that will be attracted.  The situation is even more serious when the foxes collude and attack hen houses according to a concerted scheme while farmers sleep. Aesop would have had a field day with the ineptitude of the federal agency responsible.

A broad, bipartisan consensus led by Senators Chuck Grassley (R-IA), Tina Smith (D-MN), Joni Ernst (R-IA) and Angus King (I-ME) to promote the Cultivating Revitalization by Expanding American Agricultural Trade and Exports (CREAATE) Act of 2022.  This legislation would increase the Market Access Program funding from $200 to $400 million annually and would raise funding for the Foreign Market Development Program from $35 million to $69 million. The Bill will be considered by both the House and Senate Agricultural Committees to be incorporated in the next Farm Bill.

According to the Coalition to Promote U.S. Agricultural Exports, the programs would generate an additional $44.4 billion in agricultural exports over a 5-year period, commencing in 2024.The Chair of the Coalition noted that Market Access Program funding has not been increased since 2006 and Foreign Market Development Program funding has remained constant for 20 years.

The efforts of the USAPEEC over the past three decades are self-evident, with effective promotion of exports of broiler, turkey and duck meat in addition to eggs and egg products. The Council has played a pivotal role in expanding exports of poultry products through trade shows, demonstrations, educational programs directed to importers and has coordinated responses to disease outbreaks by interacting with state and federal agencies and the World Organization for Animal Health.  Over the past two decades, federal funding through the MAP and the FMD programs have been supplemented by contributions from state and national agricultural associations. This has allowed the USAPEEC to develop programs for specific importing nations and to sustain promotional activities in competition with other exporting nations.

Zero Egg located in North Riverside, IL. has created a ready-to-eat frozen plant-based substitute for real scrambled egg.  It is claimed that Zero Egg Scoopable Scramble™ will have similar taste and texture to the product it intends to replace. The product will be marketed alongside Zero Egg patties and liqid in a pouch.

According to the Company press release, Zero Egg will be distributed to restaurants and institutional users positioning the scramble as a component of burritos and other breakfast products.

According to Liron Nimrodi, Co-Founder and CEO, Zero Egg Scoopable Scramble will be promoted with claimed benefits relating to sustainability.  No indications were provided regarding nutritional content or price in comparison to real eggs.

Recently, the International Fresh Produce Association commissioned a research company to conduct a survey of their industry with specific reference to employment and contribution to the U.S. economy.

Data assembled included:-

• Contribution of the fresh produce industry to the national economy
• Number of direct and indirect workers with annual trends and projections of post-COVID expansion of employment through defined components of the supply chain
• State and regional concentration of employment and secondary effects

It is possible that this data on the egg industry is available, but to date, EGG-NEWS is unaware of a comprehensive report.  It would be appropriate for UEP to consider funding a project to quantify employment and economic benefits from egg production.  Data would be useful in lobbying and justifying federal and state grants to educational institutions and other agencies.

Houston Methodist Hospital has reported a sharp increase in the number of cases of influenza.  Their ER treated 226 cases in the week ending September 15th.  According to the Medical Director of Diagnostic Microbiology, Dr. Wesley Long, “We experienced an early uptick in mid-September but these numbers we usually see in December, not now.”

The early rise in cases in Texas confirms previous warnings that the 2022-2023 season will be challenging.  This is based on experience in Australia during their winter that usually reflects future incidence rates in the Northern Hemisphere.

The past two influenza seasons have been relatively mild in the U.S. due to the public health precautions imposed to prevent COVID.  Dr. Lorraine Washer, Medical Director of Infection Prevention and Epidemiology at Michigan Medicine, noted, “With return to normal levels of social interaction, higher transmission of flu is likely this season.” 

Accordingly, egg-production companies are urged to arrange for immunization of all employees, especially those working with live poultry to prevent a possible recombination event. Delivery drivers have a high probability of exposure and should be protected. Packing plant workers are frequently in close proximity on packers and in break rooms. Comprehensive immunization reduces absenteeism and protects workers from undesirable complications of influenza especially for those with predisposing conditions.

The U.S. Food and Drug Administration (FDA) has issued a long-awaited internal report on the infant formula crisis.  The report was authored by a team headed by Dr. Steven Solomon, Head of the FDA Veterinary Division. The report identified a number of areas of concern involving delays in communication, obvious operational failures and “general lapses”. Recommendations by Dr. Solomon included improved information. technology, intensified training of staff and an updated emergency response system to deal with food safety issues as they arise.

Predictably, there will be little retribution for incompetence or dereliction of duty and the crisis will “be handled through the personnel process”. The culture of the FDA is characterized by the public statement by the Director, Dr. Robert Califf, who stated, “We are not going to spend a lot of time going back, we are going to spend our time taking into account what happened and move forward.” Dr. Califf considers that the report provides a “clear road map for the infant formula issue and provides a nice bridge to the overall food program’s evaluation”.

In contrast a more detailed and incisive report on the issue was published in Politico entitled, “The FDA’s Food Failure” by Helena Bottemiller Evich on April 8th to which readers are referred.

The shortages that emerged still persist with many stores and outlets having 20 percent out-of-stock rates. The FDA may well wish to bury failures at numerous levels leading to the crisis, including the glaring lack of response to a whistle-blower report over three months together with a de facto moratorium on plant inspections attributed to the COVID crisis. 

The Administration was obliged to arrange for military transport aircraft to bring in supplies of formula from overseas plants that were hastily approved.  Obvious problems identified in the internal FDA report and by media include extreme concentration of production among a few plants. The Evich exposé identified a preoccupation with achieving production goals and maximizing profit at the expense of quality and safety by Abbott Nutrition, the largest manufacturer of a range of specialty and conventional formulas.

Given the self-serving internal FDA report and the disinclination to hold managers within the Agency responsible for lack of response to a potential crisis and dereliction of duty, it is inevitable that a similar food-related crisis will occur in the future.

EGG-NEWS has consistently advocated for a dedicated U.S. food safety agency since the best interests of consumers would be served by a single entity suitably funded and staffed and provided with the authority to concentrate on the safety of domestic and imported foods.