Dr. Dermot Hayes, an Economist at Iowa State University, has projected the financial impact of introduction of African swine fever (ASF) if this infection enters the U.S. pork industry.  It is estimated that pork and to a lesser extent, the beef industries would experience an $80 billion loss. This would arise from depopulation of herds, a precipitous drop in export volume with diversion of pork to the domestic market, reducing wholesale prices.  Even if controlled, the effects would persist in excess of three years.  It is estimated that 60,000 industry workers would be threatened with job losses.

The review of the Iowa State report by Jennifer Shike in a May 18^th posting in Pork-Farm Journal notes that preventive measures do not address the entire financial impact of ASF). Given the projection by Dr. Hayes, it is suggested that prevention should be the major immediate objective requiring investment in programs that will interdict ASF virus at points of entry to the U.S.  Unlike HPAI in the poultry industry, pork producers are in the favorable situation that hogs do not fly.  This said, surveillance at points of entry including airports and harbors must be intensified.  It is noted that ASF initial was introduced to Portugal and Spain in the 1950s through discarded food from a flight from Angola to Lisbon.  Eradication of the initial outbreak and the subsequent 1960 cases that extended to France took more than a decade to eradicate. 

The USDA could train and deploy many more beagles to avoid an $80 billion loss.  Surveillance of passenger luggage at the airports at Bangkok, Singapore and Taipei have revealed widespread, inadvertent or deliberate smuggling of raw and partly cooked pork products that have yielded a ASF virus. Given that African swine fever is endemic in many Asian nations but also in Haiti and the Dominican Republic, special attention should be paid to incoming flights from these nations The problem of smuggling large quantities of traditional pork products from Asia in shipping containers is more difficult to prevent but again, the risks and consequences of introducing infection justify enhanced surveillance.

The National Pork Board has introduced AgView, a database and dashboard program, that will track movement of affected hogs in the event of a possible outbreak.  Traceability is an important consideration and records of the movement of herds will be critical to effective control of any outbreak. It is presumed that the pork industry and designated diagnostic laboratories have developed the ability to rapidly diagnose and report outbreaks of ASF paralleling the experience gained with HPAI.

Research on the persistence of ASF virus in grains and oilseeds and sacking have demonstrated the potential of introducing infection through imported feed ingredients.  Given the ability of ASF to withstand high temperatures, it is questioned whether the U. S. should import any ingredient from a nation with endemic or suspected ASF other than vitamin and mineral additives derived from pharmaceutical plants operating under good manufacturing practices.

EGG-NEWS has frequently pointed to the dangers of feral hogs serving as reservoirs of ASF.  The extent and number of free-living hogs will contribute to persistence of infection and mitigate against eradication as evidenced in western Europe.  A concerted program to eliminate feral hogs should be implemented since current programs conducted under state and Federal support are obviously inadequate to prevent extension of current populations of feral hogs.

It is self-evident that in the event of introduction of ASF into the U. S., an effective and safe vaccine will be required as an adjunct to slaughtering of affected herds.  The USDA gained considerable publicity following the announcement of a claimed effective vaccine developed by the ARS at the Plum Island research laboratory.  It is understood that this vaccine has been field tested in Viet Nam albeit with variable results.  The question is now posed as to whether this or other vaccines are effective in controlling the disease.  If so, stockpiles should be established.  If the vaccine is ineffective, then an alternative is obviously required.

It is hoped that USDA and the organized pork industry will learn from the experiences of poultry producers in the U. S. and worldwide regarding suppression but not eradication of HPAI.

USDA Weekly Egg Price and Inventory Report, May 24^th 2023.

Market Overview

• The average wholesale unit revenue values for Midwest Extra-large and Large sizes were higher by 14.5 percent this past week but representing a lower than seasonal late spring value. The plateau last week signified a market bottom, terminating the precipitous decline over the previous six weeks. Mediums were up 16.8 percent albeit above a sub-breakeven price with a 10 cent per dozen price differential from Large, indicating restoration in the balance between supply and demand in this size. This past week shell egg inventory was down a noteworthy 4.1 percent, compared to a fall of 5.4 percent last week. This is consistent with presumably higher demand although low wholesale prices are not reflected in the disproportionately high prevailing shelf prices. Over the coming three weeks the volume of retail purchases will be influenced by lower seasonal demand. If chains reduce margins consistent with wholesale prices, higher demand can be anticipated. Eggs are now highly competitive in price against the comparable costs for other protein foods despite unrealistic retail margins imposed by some chains.
• Total industry inventory was down by a substantial 5.2 percent overall this past week to 1.67 million cases with a concurrent 9.9 percent decrease in breaking stock attributed to diversion to the shell market and presumably higher demand during late spring from food service, manufacturers and increased exports. Volume this past week was stimulated by lower prices for egg products. Wholesale shell egg prices compare with 2020 and 2021, also characterized by low ex-plant unit revenue. Benchmark prices were $1.40 per dozen lower than for the corresponding week in 2022 that was influenced by flock depletions following HPAI.
• It is now apparent that the inventory held by chains and other significant distributors may be more important over the short term in establishing wholesale price than the USDA regional inventory figures published weekly. This is probably the reason for fluctuation in weekly industry stock. It is evident that the USDA undercounted hens in the national flock leading up to Easter given the report of a 2.9 percent compensatory increase in the size of the national flock three weeks ago, accounting in part for sharply falling wholesale prices. This past week USDA published data placing the producing flock up 1.7 percent or 5.0 million hens. This is inconsistent with the projected 21.9 million pullets reaching maturity during May The size of the producing flock was estimated by the USDA as down by over one million hens during the first two weeks of the month. The increase in producing hens cannot be ascribed entirely to hens molted after Easter coming back into production. The most likely explanations are either an under-count through mid-May or an over-count this past week. Given the latest figures it is estimated that the producing flock is still 10 to 12 million hens lower than before the onset of HPAI.
• Despite a lower flock size as a result of HPAI, relatively low unit revenue compared to pre-HPAI will now be a reality through June 2023. Sporadic outbreaks of HPAI are now unlikely given that the seasonal Spring migration of waterfowl is complete. The number and extent of outbreaks cannot be assessed until more information is available concerning the molecular and field epidemiology of spring and fall cases. The USDA has yet to identify modes of transmission for the 2022 epornitic including airborne spread. The USDA-APHIS has scheduled a release of the results of case-control studies on May 31^st. This report should identify possible deficiencies in biosecurity on affected complexes that contributed to infection. APHIS has been remiss in evaluating available data and providing timely practical guidance on prevention as evidenced by releasing a backdated report during the first week of March that was devoid of recommendations to prevent HPAI infection in flocks.
• The current relationship between producers and chain buyers based on a single commercial price discovery system constitutes an impediment to a free market. The benchmark price amplifies both downward and upward swings as evidenced over the past five weeks. A CME quotation based on Midwest Large, reflecting demand relative to supply would be more equitable. If feed cost is determined by CME ingredient prices then generic shell eggs should be subject to a Midwest Large quotation.
• According to the USDA the U.S. flock in production was up 1.7 percent or 5.0 million hens to 308.1 million during the week ending May 24^th. The flock in production included about 4.0 to 6.0 million molted hens that resumed lay during the past week plus 4.0 million pullets attaining production.
• The ex-farm price for breaking stock was up 6.1 percent this past week to 44 cents per dozen.Checks delivered to Midwest plants were up 6.3 percent to 34 cents per dozen. Prices for breaking stock will remain low until there is a substantial increase in wholesale price.

The Week in Review

Prices

According to the USDA Egg Market News Reports released on May 22^nd the Midwest wholesale price (rounded to one cent) for Extra-large was up $0.11 per dozen from last week to $0.90 per dozen. Large size was up $0.11 per dozen to $0.77 per dozen. The price for Medium size was up $0.12 per dozen to $0.78 per dozen as delivered to DCs. Prices should be compared to the USDA benchmark average 6-Region blended nest-run cost of 90.3 cents per dozen as revised by the EIC for April 2023. This excludes provisions for packing, packaging materials and transport, amounting to 47 cents per dozen in mid-2022, according to the EIC but now probably closer to 52 cents per dozen. Accordingly producers of generic shell eggs are operating with negative margins. The progression of prices during 2023 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

Weekly Commodity and Energy Report: May 25^th 2023.

OVERVIEW

At 15H00 on May 25^th CME corn was up 7.5 percent compared to the previous week to 591 cents per bushel for July delivery. This increase was despite a large predicted crop and high ending stocks projected for the 2023 season as documented in the May WASDE and cancellation of orders by China. Price was also influenced to a minor degree by ethanol production and higher demand.

Soybeans were down 0.3 percent from last week to 1,326 cents per bushel for July delivery. Soybean meal was down 4.6 percent to $398 per ton for July delivery but price will fluctuate to reflect the price of soybeans and demand for soy oil. The market has now accepted projections of crop size and higher stocks from the old crop as documented in the April 11^th WASDE Report and the projections included in the May WASDE report for the 2023 crop.

Commodity exports that fluctuated this past week were possibly influenced by a rise in the Dollar Index to 104.0.

WTI was 2.9 percent higher at $74.23 per barrel at close of trading on May 24^th despite the April announcement of an intended production cut by OPEC.

Factors influencing commodity prices in either direction over the past four

 weeks included:-

• A mild U.S. recession in 2023 appears more likely following turbulence in the bank sector in both the U.S. and Europe. The Federal Reserve increased the benchmark interest rate at the 10^th successive monthly FOMC meeting on May 3^rd by 25 basis points despite data indicating a gradual decline in inflation. This action was taken against evidence that progressively higher rates are stressing banks, depressing the housing market and impacting retail sales. On March 30^th the Bureau of Economic Analysis issued a revised Real GDP of 2.6 percent for the fourth quarter of 2022. This value is based on increased consumer spending offset by lower investment in housing and a 0.6 percent increase in personal income. The April 2023 CPI (up 4.9 percent) and the revised March WPI (down to 2.7 percent) were lower than forecast. On March 18^th initial jobless claims were 242,000 due to layoffs with the number lower than expected. Non-farm payrolls increased to 253,000 during April as documented by the Bureau of Labor Statistics on May 5^th with an unemployment rate of 3.4 percent. The April Producer Price Index was up 2.3 percent year-over-year and 0.2 percent down from March. These values were lower than expected suggesting a cooling in the U.S. economy. This is confirmed by the anemic first quarter GNP increase of 1.1 percent, lower than the 2.0 percent expected. (Transitory downward pressure on markets)

• It is evident that polarization in the closely divided chambers of Congress will result in conflict over spending. Passage of agricultural legislation including the 2023 Farm Bill will be contentious as SNAP eligibility and other entitlements represent 75 percent of the total. An 11^th-hour compromise is expected on raising the debt ceiling given White House negotiations with the Republican Party house leadership this past week ahead of a June 1^st potential default. (Ultimately, downward pressure if debt ceiling is not resolved).

• A cold snap in early May resulted in frost extending from the Northern Plains to the Texas Panhandle. Wheat and soybeans will be impacted but recently planted corn will be less affected. Rains have relieved drought on the southern plains. Wheat yield and acreage will be reduced in Kansas with an indirect effect on corn. (Variable pressure on prices with firmer indications in the June WASDE)

• Geopolitical tensions that impact wheat, corn, oilseeds and vegetable oil exports from Ukraine persist. Extension of the Black Sea Grain Initiative for an additional 60 days was reluctantly accepted by the Russian Federation on May 18^th against undisclosed concessions on sanctions. Implementation is intermittently obstructed by actions of the Russian Federation with threats of non-extension, roiling markets. (Upward pressure on corn and wheat and an indirect effect on soybeans if Black Sea shipping is interrupted)

• The May 12^th WASDE documented near record soybean and grain production for the 2023 season with increased world availability despite drought in the Argentine. The U.S. will export 12 percent of old crop corn resulting in a stable ending stock. Soybean exports will comprise 44 percent of the old crop with no change in ending stock.  (Lower domestic prices)

• There is an expectation that Brazil will attain a record soybean harvest of 153 million metric tons with export of 93 million metric tons. Corn harvests from Brazil for the 2022-2023 season will be higher than the previous season including the safrinha crop although recent dry weather reduced yields. Corn exports will attain 50 million metric tons (Lower prices in the future subject to favorable reports on crop progress and actual harvests)

• The Dollar Index (DXY) has ranged from 99 to 116 over 52 weeks but has recently shown an upward trend. The DXY was 104.0 on May 24^th a five-week high. The dollar index influences timing and volume of export orders. (Fluctuation in corn and soybean prices, high value depresses U.S. sales)

Status of 2023 Corn and Soybean Crops

The USDA Crop Progress Report released on May 21^st documented corn and soybean planting for the 2023 crop. Soybeans and corn are both ahead of the five-year average with respect to planting and emergence.

The extent of damage due to unseasonal frost in late April should be reflected in future projections of yield. Subsequent reports will also quantify damage in Kansas as a result of drought although it appears that the wheat crop was most affected.  The effect of the ongoing transition to an El Nino event will become apparent in mid- summer from USDA WASDE and Crop Progress Reports and pre-harvest field evaluations.

Subsoil and surface moisture levels were higher than the corresponding weeks in 2022 expediting germination and early growth. EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of the 2023 harvest in November.

Reference is made to the May 12^th WASDE Report #636 retrievable under the STATISTICS tab and the weekly Commodity and Energy Report documenting prospective planting in this edition. WASDE #637 will be posted in the June 16^th edition of EGG-NEWS and will provide an update on acreage of soybeans and corn

WEEK ENDING   Crop May 7th 2023 May 14th 2023 5-Year Average Corn Planted (%) 46 81 75 Corn Emerged (%) 30 52 45         Soybeans planted (%) 49 66 52 Soybeans emerged(%) 20 36 24
Crop Condition V. Poor  Poor Fair Good Excellent Corn 2023 (%) Corn 2022 (%) Soybeans 2023 (%) Soybeans 2022 (%)
Parameter V. Short Short Adequate Surplus Topsoil moisture: Past Week 7 19 65 13 Past Year 11 20 57 12 Subsoil moisture: Past Week 10 21 62 7 Past Year 14 21 55 10

Nath Morris, the Executive Vice President of USPOULTRY currently responsible for the IPPE, has been named as the next president of the U.S. Poultry and Egg Association by the Board of Directors.  He will succeed John Starkey, who will retire in August but will remain as an advisor through the remainder of 2023.

Morris was raised on a poultry farm in Georgia and has deep roots in the industry.  He earned a B.S. degree in Poultry Science from the University of Georgia.  His commercial experience includes serving as U.S. Sales Manager for Perdue Farms-Heritage Breeders, Territory Manager for Arbor Acres and a QA Manager at Seaboard Farms.

In commenting on his appointment, Morris stated, “I am happy to be part of the U.S. Poultry and Egg Association and I am excited about serving as president of a great organization and look forward to advancing our legacy as the All-Feather organization serving the poultry and egg industries in so many areas.”

Chairman of U. S. Poultry, Jarod Morrison, commented, “Nath’s experience in the industry along with his leadership and management of the IPPE and familiarity with our other programs will be a tremendous asset as U. S. Poultry continues to help shape the future of the poultry and egg industry.”

EGG-NEWS extends congratulations to Nath, and we wish him every success in his new position.

The Agricultural Ministry of Brazil has announced that avian influenza, presumably strain H5N1, was isolated from dead terns (Thalasseus acuflavidus) with eight cases reported to the World Organization for Animal Health.  Given that wild birds were involved, this should not impact exports of broiler products that attained close to $10 billion in value during 2022 representing 35 percent of total broiler production.  Most of the affected birds were in the coastal State of Espirito Santo, with a large egg-producing population but with few broilers. The state of Rio de Janeiro yielded one case in a wild bird.

Currently, Brazil is alone in maintaining an “influenza-free status” despite the fact that eight nations in South America including neighboring countries have reported outbreaks in wild birds, backyard flocks and commercial egg production and broiler parent and growout flocks. Most of the nations in the Americas have reported H5N1 in terrestrial mammals and in the case of Peru and Chile, extensive mortality in marine mammals,

It remains to be seen whether Brazil will successfully exclude H5N1 avian influenzas from both backyard poultry and commercial flocks, especially in areas with a high density of broiler production. Appropriate measures have been introduced to prevent, detect and control any possible outbreak according to Carlos Favro, Minister of Agriculture who has declared a 180-day nationwide Animal Health Emergency. 

Eggland's Best has been named the Official Egg of Little League Baseball and Softball.  In commenting on this promotional initiative, Kurt Misialek, President and CEO of Eggland's Best stated, "At Eggland's Best, we are dedicated to helping families achieve their overall nutrition and wellness goals by providing an egg with superior taste, nutrients and freshness".

Eggland's Best will share nutrition-focused advice, recipes and other information through print, visual and social media.  The company will sponsor a trip to the Little League World Series for a family.  The lead for the promotion will be dietician and nutritionist Dawn Jackson Blatner.

On May 25^th Costco Wholesale Corporation (COST) posted results for Q3 of FY2023 ending May 7^th. This big-box, club chain serves as a bellwether for retail in-store and on line spending and is a barometer of consumer confidence, offering groceries, household necessities in bulk in addition to discretionary recreational, home and electronic items.

For the quarter, the Company earned $1,302 million on revenue (including fuel and membership fees) of $53,648 million with a diluted EPS of $2.93. Results for the quarter included a non-recurring charge of $298 million attributed to cancellation of shipping charters, equivalent to $0.50 per share. For the corresponding Q3 of FY2022, Costco earned $1,353 million on equivalent revenue of $52,596 million with a diluted EPS of $3.05.

 Revenue was 2.0 percent higher than in Q3 of FY2022 but net earnings fell by 3.8 percent. Gross margin for Q3 FY2023 was 12.1 percent compared to 11.9 percent for Q3 FY 2022. Concurrently operating margin fell from 3.4 percent in Q3 FY2022 to 3.1 percent for the most recent quarter associated with the charge on shipping, in addition to transport, wages and utilities.

Comparable same-store sales for Q3 2023 (excluding fuel and foreign exchange) attained 3.5 percent. U.S. same-store sales were up 1.8 percent; Canada by 7.4 percent and the Other International category, 8.4 percent. E-Commerce was down by 10.0 percent

On May 7^th Costco posted total assets of $66,752 million. Long-term debt and lease obligations attained $11,471 million. Costco had an intraday market capitalization of $222,300 million on May 25^th. COST trades with a forward P/E of 34.3 and has ranged over the past fifty-two weeks from $443.20 to $564.75 with a 50-day moving average of $495.04. Costco closed pre-release at $482.78 on May 24^th but declined slightly on the open but closed at $486.65 on May 25^th. Twelve-month trailing operating margin was 3.4 percent and profit margin 2.6 percent.  The Company generated a return on assets of 7.6 percent and 28.4 percent on equity.

COST fell short of a consensus of $3.29 EPS and was light on expected sales of $54,600 million. This was attributed to lower volume in big-ticket and bulk items according to CFO Richard Gallanti.

At the end of Q3 FY2023, Costco operated 853 warehouses. There are 587 in the U.S; 107 in  Canada; 40 in Mexico; 32 in Japan; 29 in the U.K. and 58 others in seven nations among the E.U., Asia and Australia.

On May 23^rd, BJ's Wholesale Club Holdings Inc. (BJ) announced results for Q1 of FY 2023 ending April 29^th 2023. The Company disappointed against a consensus topline of $4,800 million in sales and a growth in comparable sales of 5.9 percent pulling the stock down 7.0 percent at the open on May 23^rd post-release.

For the period, the company earned $116.1 million on revenue of $4,725 million with a diluted EPS of $0.85.  Comparable figures for Q1 FY 2022 were net earnings of $112.5 million on revenue of $4,496 million with a diluted EPS of $0.82. For the most recent quarter, BJ’s achieved a gross margin of 18.6 percent (17.6 percent Q1, FY 2022) and an operating margin of 4.0 percent (3.3 percent Q1 FY 2022).

During the quarter, comparable club store sales excluding fuel increased by 5.7 percent compared to Q1 of FY 2022.  Digital sales increased by 19.0 percent.

In commenting on the quarter Bob Eddy, President and Chief Executive Officer stated “We reported a record first quarter in net income and adjusted EBITDA, demonstrating the power of our business model and the warehouse club channel,” said, He added “We drove topline growth bolstered by robust traffic and share gains. We also made significant improvements on our merchandise margins largely due to waning supply chain pressures and moderating inflation. We remain focused on our strategic priorities and believe that we are well-positioned to maximize long-term shareholder value.”

Guidance for FY 2023 issued at the end of FY 2022 was unchanged and included a 4 to 5 percent increase in comparable store sales; a 40 basis point improvement in gross margin but wit a flat EPS.

The Company operates 237 warehouse stores with 167 fuel stations in 18 states.

On April 29^th 2023 BJ’s posted total assets of $6,495 million including $1,123 million in goodwill and intangibles, offset by long-term debt and lease obligations of $2,677 million. BJ's had a market capitalization of $10,078 million at noon, May 23^rd. The company has traded over the past fifty-two weeks in a range of $53.43 to $80.41 with a 50-day moving average of $74.68. Over the trailing twelve-month period, operating margin was 3.9 percent and profit margin 2.7 percent.  Return on assets was 7.8 percent and return on equity, 60.7 percent.

BJ’s is a bellwether for the retail sector along with larger competitor big box warehouse clubs Costco and Sam’s. The current retail environment was characterized in the earnings call by comments that consumers are “trading down” and “more discerning.” These sentiments were implicit in the Target and Walmart calls.

Following the lead of many chains, H-E-B will promote recycling of plastic bags and film.  Curbside pick-up customers can now return single-use plastic in addition to brick and mortar shoppers who are able to dispose of plastic waste in collection bins within stores.  H-E-B operates a recycling center in addition to promoting the Keep Texas Recycling initiative.

H-E-B is ranked number 16 on the Progressive Grocer list of top food retailers and operates 430 stores in Texas, employing 154,000.

In a May 4th release, Zoetis Inc. (ZTS) posted financial results for the 1st quarter of FY 2023 ending March 31st. The Company can be regarded as a bellwether for enterprises manufacturing pharmaceuticals, biologics and nutritional additives for companion animals and livestock industries that market in the Americas, Asia and Europe. Along with competitors Elanco, Phibro, Merck, and Boehringer-Ingelheim, all are subject to the risks of currency fluctuation, disruption of supply-chains and increased costs for products, labor and transport in a competitive environment with livestock producers and consumers impacted by inflation and declining demand.

For the 1st Quarter of FY 2023 ending March 31st 2023, net income attained $552 million on revenue of $2,000 million representing a net margin of 27.6 percent.  Comparable figures for the 1st quarter of fiscal 2022 were net income of $595 million on total revenue of $1,986 million. Diluted EPS attained $1.19 for the most recent quarter of fiscal 2023 compared to $1.26 for the 1st Quarter of 2022.

In reviewing the components of revenue for the 1st quarter of FY 2023 the Companion Animal Segment represented 61.3 percent of Company revenue with Livestock accounting for 37.9 percent. Within this segment, cattle comprised 52.6 percent; poultry, 18.3 percent; swine, 18.7 percent with aquaculture and other species contributing to the total. Sales to the International segment of livestock amounted to 79.0 percent with the remaining 37.8 percent derived from the U.S.

Zoetis has expanded its poultry vaccine portfolio in the U.S. with the 2022 approval of Poulvac® Procerta® HVT-IBD-ND, a trivalent vector vaccine that protects against Marek’s disease, infectious bursal disease and Newcastle disease. This is the third recombinant vector vaccine from Zoetis, following the introduction of Poulvac® Procerta® HVT-ND in 2020 and Poulvac® Procerta® HVT-IBD in 2021.

In reviewing Q1 results Kristin Peck, CEO stated, “Today, we reported solid first-quarter results of 4% operational growth in revenue, as expected, based on our diverse portfolio and strength in international markets,” Ms. Peck added “Our International segment led the way, growing revenue 10% operationally, and was partially offset by a decline of 1% in the U.S. Our livestock portfolio drove our results, with 12% operational growth in revenue, while companion animal product revenues were flat operationally. The performance in livestock was based on double-digit operational growth for cattle, poultry, sheep and fish, while our U.S. companion animal portfolio was impacted primarily by short-term effects of distributors de-stocking."

In discussing future performance Ms. Peck opined “We continue to see strong end-market demand in companion animal channels, based on data from veterinary clinics, retailers and pet owners. While our sales into distributors declined in the quarter, our product sales from distributors out to the veterinary clinics were up approximately 8%, affirming a healthy petcare market in the U.S."

Ms. Peck concluded “We are reiterating our full-year guidance for operational growth of 6% to 8% in revenue and 7% to 9% in adjusted net income. Looking ahead, we see positive indicators and strong demand for our animal health products, and we remain committed to delivering strong growth in 2023, based on our market leadership, innovative franchises, and diverse portfolio, while continuing to invest for the future.”

Guidance for FY 2023 includes revenue in a range of  $8,575 to $8,725 million; net income of $2,345 to $2,400 million and a reported diluted EPS ranging from $5.03 to $5.14.

On March 31st 2023 Zoetis posted assets of $13,754 million of which $4,195 million comprised intangibles and goodwill against long-term debt and lease obligations of $6,329 million. The Company had an intraday market capitalization of $70,190 million on May 5th 2022. ZTS traded with a forward P/E of 31.7 and has ranged over the past 52-weeks from $125.15 to $187.82 with a 50-day moving average of $169.35. Twelve-month trailing operating margin was 36.3 percent and profit margin 26.2 percent percent.  Return on assets was 12.7 percent and 47.2 percent on equity. At close of trading on May 3rd pre-release ZTS was priced at $177.64 and closed on May 5th post-release at $186.25 on a market up-day with the S&P advancing 1.8 percent.

In an April 27th letter addressed to Christopher A. Wray, director of the Federal Bureau of Investigation, Representative Claudia Tenney (R-NY) an attorney by training complained of the illegal activities in her District (NY-24th) by representatives of Direct Action Everywhere.  She cites numerous instances of animal theft, trespass and intrusion by the organization, currently regarded as a domestic terrorist group.

Rep. Tenney points to the website of the organization stating their objectives and disregard for the rule of law. She stated firmly “Promotion of organized criminal activity cannot be tolerated.”

The letter states, “Basic constitutional rights must be upheld and basic property rights must be protected.  I urge the FBI to send a clear message that compliance with federal law is not a choice but an obligation and those who promote noncompliance will be held accountable.”

FreshRealm LLC will purchase the production facilities of Blue Apron Holdings in Linden, NJ. and Richland, CA. in a transaction valued at $50 million representing depreciated book value. Fresh Realm is a supplier of prepared meals to major chains including Amazon Fresh, Every Table, Kroger, Publix, Meijer and Walmart.

Michael Lippold founder and CEO of FreshRealm stated, “We are the only fresh-meals provider to deliver a national platform that simplifies fresh ready-to-eat and ready-to-cook and meal kits through a supply chain to consumers’ tables.”

Linda Findley, president and CEO of Blue Apron stated, “As we continue to evolve, we believe there is some opportunity to simplify our direct role in the fulfillment of our product allowing us to focus on growing our brand, our customer base and revenue in the long-term.”

Blue Apron will concentrate on product innovation and will leverage FreshRealm’s expertise and production capabilities to provide additional sales channels.

Over the past 52 weeks, the shares of Blue Apron (APRN) have declined from $8.22 down to $0.41.  The company has a market capitalization of $35.6 million and closed on May 17^th at $0.55.  Insiders hold 35 percent of equity with 19 percent owned by institutions. On April 28^th fifteen percent of the float was short. 

On May 4^th, Blue Apron Holdings released financial results for the first quarter of fiscal 2023.  The company lost $17.0 million on sales of $113.1 million. For the corresponding first quarter of fiscal 2022, the company lost $38.7 million on sales of $117.8 million.  Effective March 31^st, 2023, the company posted total assets of $159.7 million including intangibles of $30 million, and property and equipment valued at $54.7 million.  Current liabilities comprised $96.5 million and operating leases and long-term debt amounted to $28 million. On a trailing 12-month basis operating margin was -18 percent; profit margin -19 percent and return on equity -201 percent.

It is difficult to see how this company can remain in business having disposed of production facilities, based on the decline in share price and balance sheet. APRN is in danger of being delisted.

Amazon.com Inc. is being sued by Federal Realty Investment Trust LLC alleging technical default on a lease on a store in Willow Grove, PA.  Amazon was due to convert a Barnes and Noble store to an Amazon Fresh supermarket. The company has stalled all expansion in brick-and-mortar stores and formats including Amazon Fresh and Amazon Go. The parent company has yet to define a strategy for retail grocery having apparently abandoned building out the Whole Foods Market banner and closing experimental formats.

There is informed speculation that Amazon acquire as many as 500 supermarkets that will be divested if the Kroger merger with Albertsons is approved by the FTC.

The Kroger Company CEO and Chairman, Robert McMullen is defiant that the company will litigate any regulatory or other challenges to the proposed acquisition of Albertsons Company.  Kroger and Albertsons intend to close the transaction in January 2024.

Kroger has filed for dismissal of a class-action lawsuit involving consumers from eleven states who contend that the proposed merger violates antitrust law. Kroger and Albertsons jointly face legal action from the United Food and Commercial Workers Union.

 It is understood that the U.S. Federal Trade Commission is evaluating possible consequences of the proposed merger based on interviews with suppliers, competitors and the UFCW.

At the very least the merger will result in divestment of about 500 stores to qualified and financially sound competitors. Some observers believe that Amazon could acquire the entire group of stores to secure their brick-and-mortar presence in grocery retail.

A partly completed distribution center in Hanover County, VA was the subject of a ruling by the Supreme County of Virginia favoring opponents of the project. The distribution center was approved in May 2020 and was granted tax credits and state incentives amounting to $2 million.

The plaintiffs comprising homeowners near the site contend that the decision to grant approval violated local ordinances and that the project would “destroy wetlands, cause major traffic congestion and create noise and light pollution”.

The decision of the Supreme Court of Virginia sends the case back to a lower court for review.  The distribution center was due to commence operation during the summer of 2023 and planned to employ 700.

A report on mortality due to avian influenza H5N1 strain in California condors (Gymnogyps californianus) in the May 12^th edition of EGG-NEWS included a recommendation for vaccination.

In a May 17^th release, the USDA-APHIS approved the emergency use of an inactivated HPAI vaccine to prevent mortality.  The U.S. Fish and Wildlife Service requested a decision on vaccination in late March, six weeks and thirteen condors ago.  The inactivated product requested by the Fish and Wildlife Service has been available since 2016. A safety trial was carried out to demonstrate safety using domestic vultures in early May.

The approval by APHIS to allow vaccination was based on the fact that the species is critically endangered, closely monitored.  Vaccination will not affect the trade status of the U.S. since California condors are wild birds.

According to reports from environmental agencies in Brazil, the conservation policy of President Luiz Inacio Luna DaSilva has resulted in a 68 percent reduction in deforestation of the Amazon Rainforest as determined for April 2023 compared to the previous year.  Preservation of the rain forest was a key plank for his party campaign and reflected considerable concern from the electorate.  Under his predecessor, Jair Bolsonaro the rate of conversion of rainforest to agricultural land accelerated to the detriment of the environment of Brazil and the World.

The Amazon Fund dedicated to restoration of the Amazon rainforest recently received $100 million from the U.K. with additional contributions from Norway, Germany and the U.S.

The states of Arizona, California and Nevada have concluded negotiations among themselves and with the federal government on the use of water from the Colorado River.  Since the three states agreed to an approximately one-third reduction in abstraction from the river, they will receive $1 billion in federal funds through the Inflation Reduction Act. 

Reducing offtake by three million acre-feet of water over three years will preserve levels in Lakes Powell and Meade that are currently at 25 percent of capacity. The agreement will provide water for livestock and human consumption and maintain power generation.

Shortage of water in the Colorado River is pitting the lower basin states of Arizona, California and Nevada against the upper basin states of Colorado, New Mexico, Utah and Wyoming. 

Water use is prescribed by a century-old agreement that was concluded before the effect of climate change was recognized. In recent decades hotter and drier conditions have required modification of total quantities used and individual state allocations of water from the Colorado River system. The agreement ultimately has implication for large egg-producing complexes in Arizona and California through both supply and the growth of the regional market.

The Legislature of Iowa approved a bill to allow sale of raw milk by a vote of 64 to 35 in the House and 37 to 13 in the Senate.  Supporters of the Bill maintain that it now allows consumers freedom in the choice of foods they buy.  This freedom will extend to the inadvertent exposure to  salmonellosis campylobacteriosis, STEC and listeriosis. Pasteurization was introduced in the 19^th century to suppress milk-borne tuberculosis and later brucellosis, both infections having been eradicated from U.S. commercial herds. Given that many of the pathogens of human health significance are present in the intestinal tract of cattle, a flick of a tail during milking may result in contamination that would otherwise be inactivated by pasteurization.

According to the Bill signed by Governor Kim Reynolds, raw milk dairies will have to submit to testing and submission of monthly bacterial levels.  The law also requires raw milk to be stored at 45F and must be distributed within seven days.

An Iowa Representative, Dr. Megan Srinivas representing the urban constituency of Des Moines is an infectious disease specialist.  She opposed the Bill noting that the probability of acquiring a milk-borne infection is over 150 times greater than with pasteurized milk. As they say “freedom comes at a price”

Public health in the U.S. has been seriously compromised by a wave of “freedom of choice” legislation in many states.  There is no scientific evidence that raw milk is in any way nutritionally superior to pasteurized milk.  Passage of laws permitting the distribution and sale of raw milk is essentially a reversion to the 19^th century. EGG-NEWS maintains that providing unpasteurized milk to children is a form of abuse.

Based on frequent violations resulting in fines amounting to $16 million, Dollar General is now designated as a ‘Severe Violator’ by the Occupational Safety and Health Administration (OSHA).

Two investors will present proposals at the upcoming Dollar General annual meeting calling for improved worker safety and wellbeing.  Other investors including United Church Funds will participate in Dollar Tree Proposal #7 claiming inadequate wages and benefits for workers.

Problems encountered with both Dollar General and Dollar Tree stores include clutter, blocked fire exits, malfunctioning electric outlets and neglect of maintenance.  The Dollar Stores located in urban areas are subject to holdups, placing workers at risk.  Factors predisposing to theft include having only one clerk on duty in stores open through extended night hours, advertising over windows obscuring visibility of the interior, inadequate lighting in parking lots and failure to adopt common sense precautions as advised by local public safety agencies.

Meijer has officially opened a 159,000 square foot supercenter in suburban Elkhart, IN.  The store will feature produce, dairy, deli and meat sections and will incorporate a pharmacy and the usual departments associated with Meijer locations.  Electronic innovations include scanning of barcodes for the Shop and Scan system and the store offers home delivery and pickup.

Executive Chairman, Hank Meijer, stated, “This new store reinforces our ongoing commitment to serving the needs of local families who are looking for more value and convenience.”  He added, “We are honored by the warm welcome and will be a strong community partner while providing the best shopping experience to customers in the Elkhart area.”  To commemorate the opening, Meijer donated $30,000 to three local charities.

During late May, Meijer will inaugurate an additional two supercenters in Warren and Wooster OH.

At the present time, Meijer operates close to 500 supercenters in addition to Neighborhood Markets and Meijer Express stores in six Midwest states.

The California Department of Food and Agriculture (CDFA) has posted assurances for the pork industry that it will assist in implementation of Proposition #12 declared constitutional by SCOTUS on may 11th.  The CDFA “will continue to focus on implementation of distributor registration requirements, accreditation of third-party certifiers and an outreach to provide technical assistance to businesses throughout the supply chain”.

Third-party certifiers are now in the process of being evaluated for authorization to certify compliance for egg, veal and pork producers.

Proposition #12 will take effect on July 1st and the CDFA is willing to discuss with industry representatives any issues relating to implementation.

In a filing with the U. S. Securities and Exchange Commission, Sysco, Inc. announced that a data breach identified on March 5^th was probably operative from mid-January onwards.

The breach allowed hackers to access private data of employees, although the operation of the business was not affected.  It is believed that social security numbers, personal bank account numbers and other data have been compromised.

The company notified appropriate authorities and an investigation into the event is in progress.  Given that more than 125,000 names were subject to unauthorized access, litigation is anticipated, and Sysco will possibly face a federal investigation and sanctions.

The implications for large and intermediate-sized companies of this event and the need to protect the integrity of HR and other databases are self-evident.

Safeway, a subsidiary of Albertson's Company, has agreed to settle a class action lawsuit for $8.8 million.  The case arises from passing on a clean energy surcharge of one percent imposed by the city of Portland in 2019.  The pass-through continued from September 2019 through July 2020.

During the first week of May, Safeway agreed to pay $107 million to settle a buy-one, get-one-free meat promotion that was deceptive.

It would appear that past decisions by the management of Safeway relating to pricing and marketing have fallen below an acceptable standard of ethics.  This factor will be considered by the FTC in their review of the proposed acquisition of Safeway by the Kroger Company.

The Black Sea Grain Initiative (BSGI) was extended to a 60-day period from May 18^th.  The agreement was brokered jointly by the United Nations Food and Agricultural Organization and the Republic of Turkey.

During the past sixty days, there have been frequent interruptions in shipment of grain from Ukraine Black Sea ports. This was mainly due to obstruction imposed by Russia through delays in inspection of inbound vessels. Some bulk carriers have been forced to anchor for periods in excess of a week.

Maria Zakharova a spokesperson for the foreign ministry of Ukraine stated, “The extension of the grain deal is for a two month period. Thus there is a chance, not in words, but in deeds to help ensure global food security to help needy countries.”

If the BSGI has any influence on world grain availability and prices, it will depend on Russia complying with both the intent and spirit of the agreement.  Impeding shipments will result in artificial shortages of grains and oil seeds, raising prices of commodities and indirectly affecting livestock and food producers worldwide.

Giordano, a family-owned manufacturer of poultry equipment located in Italy has acquired the majority interest in Twinpack of Holland.  Giordano owns and operates GI-OVO BV manufacturers of the EggsCargo-System and HatchCargo System.

Twinpack is a prominent manufacturer of specialty packaging for the food industry including egg cartons and is located in Barneveld, the epicenter of the Dutch poultry industry.

To achieve synergy, Twinpack Special Products will be merged with GI-OVO operations.

Oscar Giordano, CEO of the holding company stated, "the main objective for the acquisition is to expand and strengthen our global market position through a unique and coordinated management that can now operate effectively in all areas of the world applying the existing Giordano network".

For Fiscal Year 2022, the American Egg Board posted revenue of $23.04 million of which 98.5 percent was derived from check-off assessments.  Total program expenses exceeded income by $340,000 or 1.5 percent of program expenditure. The various programs, the names of which are ‘cutesified’, include:-

• Egg’s Story represented 44.9 percent of expenditures
• Spark Innovation, 21.9 percent,
• Check-Off Awareness, 12.4 percent,
• Farmer’s Story, 11.1 percent,
• Consumer Insight, 7.8 percent
• Operational Excellence, 1.9 percent.

In future years, the American Egg Board should consider reverting to straightforward nomenclature identifying expenditures using conventional and familiar terms such as consumer promotion, industry outreach, research and development so that there is common understanding and the ability to compare with previous years.

Total administrative expenses amounted to $421,206 or 1.8 percent of total revenue representing careful control of industry funds. This amount obviously does not include the quantum of salaries that should be a line item as in any non-profit. From recent press releases confirming appointments this expenditure category will be considerably higher in FY 2023

Previously the AEB presented data derived by a commissioned consultant demonstrating the benefit to cost ratio for promotional expenditures and other activities undertaken by the Board.  The most reliable indicator of the value of activities is the domestic per capita increase in egg consumption that reflects consumer and industrial demand for shell eggs and egg products.  Numbers of impressions and engagements, social media activities and data on public perceptions demonstrate that the expanding staff of the AEB is active on behalf of the industry. Over the intermediate term the actual increase in egg consumption as quantified by the USDA-ERS is the critical parameter representing value from the check-off program.

Agri-Search has a listed opening for a Controller.  The position requires five years of financial management experience. A CPA or CMA qualification is preferred and a background in agribusiness will be a bonus.  The qualified candidate will work remotely but will be required on occasions to directly serve the clients of a specialist agribusiness financial services firm.  Responsibilities will include undertaking special projects and serving as a part-time controller.  Appropriate management, communication and supervisory skills are required in addition to analytical and organizational capability.  A compensation package commensurate with experience and responsibility is offered.  For additional details concerning this challenging position, contact Bob Pike at Agri-Search  (217) 543-5202.