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A Wish List for 2022

12/04/2021

As we turn our calendars to the first month of 2022, we can look back on the events of the previous year and express our hope for changes that will improve productivity and profitability in the coming year.  Our hopes are:-

  • Freedom from avian influenza: The December report of a case of H5N1 avian influenza (AI) near St. John’s in the Province of Newfoundland and Labrador, confirms the presence of the virus among free-living birds in the Atlantic Flyway. This revives concern over AI and remembrance of the events of 2015. Standards of structural and operational biosecurity have improved since the epornitic but a number of factors persist that could result in a widespread infection especially with large complexes in close proximity. There is a risk that after introduction of AI to an area with a high density of chickens, direct and indirect transmission of virus would occur.  Unlike other catastrophic exotic diseases such as foot and mouth disease of ungulates or African swine fever, AI is carried by migratory birds and is therefore impossible to interdict at our borders.  Early detection and prompt intervention by state and federal authorities in cooperation with the industry will be necessary to confine any outbreaks and allow both domestic production and exports to continue.  Given increasing risks and awareness of the deteriorating situation in the E.U. it is evident that we must reinforce biosecurity and close any loopholes that represent a risk of introducing infection into egg-production complexes or centers of turkey and broiler production.  

 

  • Suppressing COVID: We have endured COVID since March 2020 and have adapted to numerous restraints in our daily lives, disruptions in supply chains and deferred opportunities in recreation, education, travel and industry meetings. As we move into 2022, we have the benefit of effective vaccines, a new range of antiviral therapeutics and hopefully greater availability of test kits.  Without suppressing COVID we will not be able to restore the economy or enjoy our lives as they were at this time in 2020.  Large areas of our Nation are populated by unvaccinated and partly-vaccinated residents. Protection against the severe clinical effects of COVID are provided by a full dose of three mRNA approved vaccines or their equivalent. Unfortunately only 70 percent of our population have received two doses and 30 percent have received a booster dose, now regarded as essential to develop durable immunity. As of the end of November in Washington State, unvaccinated individuals aged 35 to 64 had a probability eighteen-fold higher for hospitalization following COVID infection compared to fully vaccinated individuals. As of the beginning of December according to CIDRAP of the University of Minnesota 85 percent of all those hospitalized both with and from COVID were unvaccinated. Let us hope that the proportion of our population that is protected increases sharply consistent with the ongoing pandemic and the recent emergence of the Omicron variant.

 

  • The U.S. egg industry requires a fair benchmark price-discovery system: The commercial index on which both the industry but more especially, chain buyers use appears to provide an advantage for customers.  The current benchmark price is a self-fulfilling prophecy allowing buyers to negotiate lower prices and is a de facto mechanism for potential indirect but not necessarily intentional collusion among buyers.  The current relationship between producers and chain buyers based on a single price discovery system is an impediment to a free market.  The benchmark price amplifies both downward and upward swings as was demonstrated during the 2015 HPAI epornitic and through seasonal Easter and Christmas surges in demand and through summer slumps.  A CME quotation based on Midwest Large size responding to demand in relation to supply would be a more equitable method of establishing price.

 

  • The Industry needs stable ingredient prices. The cost of ingredients is the major determinant of profitability for both segments of the U.S. egg production industry.  The recent Q2 FY 2022 report released by Cal-Maine foods noted an increase in feed cost of 11.9 cents per dozen from 41.0 cents per dozen in Q2 of FY 2021.  EGG-NEWS calculated that escalation in the cost of corn and soybean meal alone collectively added 10.7 cents per dozen to the average algebraic cost of egg production across the five USDA regions in 2021.  This value did not take into account corresponding increases in the price of other ingredients including minerals, vitamin additives, fats and animal by-products.  A one million hen complex producing in conformity with national standards would sell 23 million dozen marketable eggs in a year.  Each one cent change per dozen in feed cost would represent $230,000 on the bottom line.  The price of ingredients is determined by availability as influenced by yield and acreage harvested. Demand represents the combination of domestic use and exports.  Unknowns in 2022 will include shipments of corn and soybeans to China and other nations. Diversion of corn to ethanol is a major demand factor but appears that it will be constant through the present year given the renewable fuel standard. Fortunately the 2021 harvests of soybeans and corn were bountiful suggesting adequacy in the current production year. A persistent mild La Nina suggests acceptable yields again in 2022.

 

  • Injudicious regulatory action.  Given the socialist tilt of the current Administration that has adopted a policy that disfavors large-scale (read, efficient) production, scrutiny of intensive livestock and poultry production is inevitable. The USDA is promoting an unrealistic 19th Century idyllic model based on small family-farms selling directly to consumers. Any move towards consolidation among major producers in the U.S. egg-production industry will certainly raise antitrust questions at the DOJ.  Going forward, Federal concern will be focused on red meat with alleged problems arising from oligopoly. The USDA and the DOJ will be preoccupied with red meat and poultry segments of agribusiness so eggs should not attract Federal intervention.  In other areas including labor, the environment and infrastructure, the Government will have the potential to influence the siting of new operations and expansion and operation of existing complexes.  The industry may be required to invest in manure processing installations, water treatment and other installations to mitigate environmental contamination. Our hope is that the egg-production industry will be left to operate and expand responsibly without any Washington agency or bureaucrat trying to fix something that is not broken.      

                

  •  Biodegradable and alternative packaging: Both inner and outer packaging represents the interface between producers and consumers who are demanding sustainability (unless they have to pay for this virtue).  Polystyrene is now subject to some state and local restrictions and there is a dearth of effective PET recycling.  This suggests that new biodegradable and more easily recycled plastics will be required during 2022.

 

  • Industry Statistics: The U.S. egg industry requires accurate marketing and production information.  Currently the USDA-AMS and ERS provide data that is heavily focused on cage production.  With the ongoing transition to alternative housing systems, more accurate and timely information and data will be required. Last year the EIC published on a survey of packing and packaging that was poorly supported by the industry.  If we are to have reliable data on which to base investment and operational decisions, more precise and representative figures will be required in response to surveys relating to volumes and costs.

 

  • Positive publicity: The U.S. egg industry has been free of adverse publicity relating to welfare, price-fixing, food safety or labor-related scandals that have impacted the red meat and poultry meat industries in past years. It will be critical to continue to maintain the goodwill of customers and consumers. The industry must follow high standards of business ethics and respond rapidly and effectively to unjust criticism raised by the opponents of all forms of livestock production.  EGG-NEWS applauds the activities of the Egg Industry Center, United Egg Producers and the American Egg Board in their efforts to promote a positive image of the U.S. egg industry.

 

The Team at EGG-NEWS wishes our subscribers and sponsors and all involved in the industry a safe and prosperous 2022.