The October 11^th edition of EGG-NEWS included a posting on the arguments advanced by the Federal Trade Commission (FTC) in cases heard in Oregon, Washington State and Colorado seeking to block the proposed merger between the Kroger Company and Albertsons Corporation.  The parties to the merger countered with arguments refuting FTC assertions and supporting the transaction.

Kroger and Albertsons contend that the FTC is conducting a “trial-by-anecdote” and that their justification for opposing the merger is based on faulty concepts and a distorted characterization of the grocery industry.  The two merger parties maintain that considerable competition exists in the grocery industry. This includes online purchasing through Amazon and the services operated by the major chains including Walmart and Target. Warehouse stores including Costco and Sam’s Club that have expanded now represent competition to conventional pure-play grocery chains especially in the suburbs of large population centers. The location of small independent and specialty grocers again in suburban areas compete with traditional chains. The ubiquitous dollar stores that serve inner city and rural areas, especially in the Midwest and Western states, do not in fact represent competition to Kroger and Albertson’s banners, despite representations advanced during the lawsuits in Colorado, Washington and Oregon.  The proposed merger would in many states with low-density populations, reduce competition especially with the potential failure of the divested stores, to the disadvantage of consumers in small towns and cities in rural areas.

Kroger presented evidence that the purchasing patterns of consumers have changed over a decade and that they are now less reliant on a single banner for their groceries, frequently patronizing many different stores within a week. This may be a valid contention but is probably limited to areas of high density including the suburbs of large metropolitan areas. This is not necessarily applicable to the residents of Logan, UT., Bozeman, MT., Kingman, AZ. and hundreds more locations offering limited choice.

Kroger has indicated that it will deploy $1 billion to reduce prices within a short time of the merger taking place and will invest in store upgrades and benefits for workers. A non-binding promise in anticipation of the merger might be viewed as an inducement to secure approval but would be repaid in any given year by increasing markup by a fraction of a percent on the projected combined FY 2024 sales of the two companies, approximating $250 billion. Kroger management recognizes the potential for increases in margin in the absence of viable competition in Western states coupled with the economies of scale from consolidated buying and transport.

Albertsons Corporation through its CEO Vivek Sankaran maintained that without the synergy generated by the proposed merger, Albertsons would be obliged to close stores and exit some markets resulting in layoffs and inconvenience to consumers.

The parties to the transaction noted their intention of divesting 579 stores, a requirement that would have been imposed by the FTC under any Administration. Evidence in the Colorado trial confirmed that both Aldi and SaveMart were intereted in acquiring the stores representing substantial competition. In the event Kroger-Albertsons selected C& S Wholesalers to acquire the complete package of stores and DCs.To ensure viability, C&S iwill be staffed through transfer of experienced managers and their teams headed by the COO of Albertsons to ensure viability but with the obvious prospect of continued control.  The intent is probably to sustain viability of C&S for a reasonable period  but not represent any meaningful competition. The recent history of the demise of Haggen following acquisition of divested Safeway stores in 2015 and the apparent "synthetic" divestiture of 579 stores will be considered by the Courts as a justification to reject the merger.

In the context of dairy, eggs, produce and even packaged foods, the combined buying power of Albertsons and Kroger, especially in western states would be detrimental to farmers and suppliers.

Decisions have yet to be rendered in the three cases, but informed observers believe that the application for a preliminary injunction preventing the merger will be granted by the Federal Court in Oregon. It is also more likely that adverse verdicts will be rendered in both Oregon and Washington State, effectively torpedoing the transaction.

Based on the reported evidence presented at the three trials coupled with press releases by Kroger, the merger would benefit Cerberus Capital Management, shareholders of the Kroger Company and executives with ‘golden parachutes’.  The proposal would appear to represent a zero-sum transaction with losers comprising farmers and suppliers of perishables including eggs and consumers deprived of alternative grocery retailers especially in underserved regions and areas in the rural U.S.

A recently published study* conducted by epidemiologists and molecular biologists affiliated with Utrecht University and Wageningen Bioveterinary Research confirmed that DNA from waterfowl could be detected in the incoming air stream of poultry houses.

The study involved two broiler houses and a layer house that were depopulated and decontaminated after confirmed cases of H5N1 HPAI. The area in which the study was conducted was known to have a noteworthy population of waterfowl. The houses selected for assay were devoid of flocks with the exception of a few sentinel chickens in the layer house. Ventilation systems were operated consistent to the respective requirements of flocks that would have been housed. Air sampling equipment was placed directly at the air inlets. In addition parallel samples were obtained from the exterior of the sampled houses. DNA was extracted and isolated from sample filters and was assayed by applying eukaryote DNA metabarcoding followed by deep sequencing.

In the case of the two broiler houses on the respective farms, 1 out of 5 and 1 out of 21 air inlet samples respectively yielded DNA derived from waterfowl. For the layer house, 2 out of 21 samples were positive.  One out of 21 exterior samples was positive for waterfowl DNA from only one of the two broiler farms and 2 out of 21 samples yielded waterfowl DNA in the vicinity of the layer farm.

The positive control comprised samples obtained from a waterfowl rehabilitation center.  All twelve out indoor samples and all 8 outdoor samples yielded waterfowl DNA. This was not unexpected, but confirmed the sensitivity of detection of waterfowl DNA using the sampling and assay technique.

Demonstration of HPAI virus in air samples is exceptionally difficult but has been demonstrated using spike-in experiments. In addition HPAI H5N1 was isolated from air samples obtained in the vicinity of wild waterfowl in a study conducted in Taiwan coincident with outbreaks in commercial poultry.  This study demonstrated that DNA from the plumage of waterfowl or their feces may be entrained in air streams with introduction into poultry houses operated with exhaust ventilation.  It is noted that air samples were obtained over distances ranging from 12 to 25m from each of the houses sampled over a period of four days.

The study demonstrated that commercial poultry confined to power-ventilated buildings may potentially be exposed to avian influenza virus since DNA from waterfowl was detected in the airflow at the air inlets to houses.  In the context of units holding 100,000 laying hens, air flow would correspond to 600,000 cfm assuming 1.5 cfm per pound live weight. Air inlet velocities would approach 600 ft/minute at the inlets depending on their collective area and the rating and number of fans in operation.  The introduction of HPAI virus into a large complex is obviously facilitated by the quantum of air introduced into houses under normal operation, environmental variables promoting survival of virus and proximity to concentrations of migratory waterfowl shedding virus.

HPAI virus can persist on moist soil for periods extending beyond a week.  The presence of waterfowl in vicinity of large egg-production complexes along the Mississippi Flyway is well established.  Effluent retention ponds in the vicinity of houses, and the presence of wetlands attract waterfowl.  In a recent evaluation of biosecurity of a complex in a Midwest state, gulls, were perching on the ridges of houses and Canada geese ranged to within yards of the perimeter of houses feeding on grass between houses.

The implications of the University of Utrecht/Wageningen study are self-evident.  Even with the highest standards of biosecurity, introduction of avian influenza virus cannot be absolutely prevented. This is consistent with anecdotal reports of exposure on complexes with high levels of structural and operational biosecurity in Colorado and other states.

Filtration of incoming air to exclude virus is currently impractical but the use of laser installations to deter congregation of wild waterfowl and other birds in the vicinity of farms should be beneficial.

With the recognition that HPAI is at least seasonally and regionally endemic in the U.S. and given the population of migratory waterfowl and resident birds potentially shedding avian influenza virus, eradication of the infection can only be regarded as a futile aspiration. With new evidence highly suggestive of aerogenous transmission of the virus, protection of both large and medium sized complexes and even individual houses would be enhanced by immunization. The World Organization for Animal Health has endorsed preventive vaccination in conjunction with high levels of structural and operational biosecurity to offer a more solid prospect of preventing large-scale outbreaks.

*Bossers, A., et al.  Detection of Airborne Wild Waterbird-Derived DNA Demonstrates Potential for Transmission of Avian Influenza Virus via Inlets into Poultry Houses, the Netherlands, 2021-2022. Euro Surveill. 2024:29 Doi.org/10.2807/1560-7917.ES.2024.29.40.2400350.

Currently, the poultry industry is in a relatively inactive stage with respect to incident cases of highly pathogenic avian influenza (HPAI).  This may change during fall months with the onset of southward migration of waterfowl and also dissemination of virus by domestic birds.  In addition, 2024 witnessed the emergence of bovine influenza-H5N1 with spillover to poultry complexes in Michigan and Colorado and probably responsible for the September case on a   turkey farm in Merced County, California.

Highly pathogenic avian influenza should be regarded as seasonally and regionally endemic if not by definition ‘endemic’ in the U.S. This is based on the duration of the epornitic and the geographic extent of outbreaks.

Recently, Marcus Rust, CEO of Rose Acre Farms, the second-ranked egg producer by volume, advocated for vaccination in an interview with Reuters.  Rust noted, “We are farmers, and we want our animals to live.” Along with competitors his family company has suffered losses from HPAI and has relocated a farm to establish conceptual biosecurity.  The USDA-APHIS should recognize that the infection is endemic at least regionally and seasonally. Since the virus can be spread over even relatively short distances by the aerogenous route, even the most intensive biosecurity is inadequate to provide absolute protection.

A number of legislators are pressing USDA to review their no-vaccination policy with respect to practicality and cost. Vaccination to protect flocks against HPAI is a bipartisan issue as denoted by the representations to USDA by Representatives Randy Feenstra (R-IA) and Jim Costa (D-CA). The Agency appears to be unresponsive, citing real or perceived concerns over export of broiler leg quarters. This is an important and valid consideration although whether absolute is subject to question. The export restraint should not be a deal-breaker to the detriment of the entire poultry industry.  In calculating costs, USDA appears to ignore the effect of HPAI on consumers.  It is calculated that with seven billion dozen eggs sold in 2022, and at an average increase of $2 per dozen over the year consumers paid an additional $14 billion for their eggs. The additional cost was due to disequilibrium between supply and demand with as many as 50 million hens depopulated as a result of HPAI over the year. Currently the U.S. hen population is approximately 18 million lower than the pre-HPAI level of 326 million despite routine repopulation and retention of flocks. Eggs demonstrate noteworthy price elasticity resulting in large fluctuations in either direction caused by small differences in supply.  Unfortunately, this reality is fueled by the prevailing price discovery system that enables buyers to bend the market over the short term by holding back on orders, inducing a fall in price and then restocking DCs and shelves.

USDA also appears refractory to the issue of possible emergence of a pandemic of a zoonotic strain of HPAI.  Mutations resulting in the emergence of the B3.13 variant capable of propagating in mammary tissue of dairy cows and resulting in mild conjunctivitis and upper respiratory infection should be an additional justification to reduce the number of susceptible commercial hens and turkeys through vaccination.

Commercially available vaccines could be purchased from multinational suppliers on an off-the shelf basis but this will require USDA approval for administration in the U.S.  Claiming that additional research for development of a new or specific “U.S. vaccine” would be necessary is simply a delaying tactic to avoid making a policy decision. Accepting vaccination would effectively recognize the futility of efforts by the USDA to eradicate HPAI since the 2015 epornitic.  Opposition to vaccination that appears inherent to APHIS thinking is now largely invalid given the availability of PCR assay to certify flocks free of infection and to distinguish between infected and immunized commercial flocks and regional populations.

It is hoped that reality will convince USDA administrators of the need to allow vaccination against HPAI as an adjunct to structural and operational biosecurity. It is envisaged that initially vaccination would be limited to turkeys, breeders and laying hens in high-risk areas. This would be coupled with surveillance and certification to meet the challenge of exports.

 For too long, USDA-APHIS has clung to an outmoded and ineffective policy of attempting to eradicate an endemic infection. Given the reservoir comprising domestic migratory waterfowl and introduction by migratory marine species of birds, USDA is ignoring epidemiologic reality at considerable cost to producers, consumers and the national debt.

The application by the Federal Trade Commission for a preliminary injunction to block the proposed merger between the Kroger Company and Albertsons Corporation concluded on September 17^th. U.S. District Judge Adrienne Nelson indicated that she would render her verdict in due course following a review of evidence and the written arguments to be submitted by the FTC and Kroger. 

The second case in which the state of Washington is attempting to block the merger commenced this past week to be followed by a similar action in Colorado both initiated by the respective state Attorneys General.

The Federal Trade Commission has scheduled a hearing on the proposed merger to take place in Washington, DC. before an administrative law judge.  Kroger has filed suit against the FTC alleging that the internal hearing would be unconstitutional.

Observers have suggested that in the event of an adverse verdict in Oregon, the proposed merger would be terminated.  Kroger has committed considerable resources to supporting the transaction and faces a “walk away” penalty if the merger is not concluded.

The evidence presented at the Washington State hearing brought by A/G Bob Ferguson to block the deal includes:-

• The reality that the two companies combined represent half of grocery sales in the state and are effectively competitors. Allowing a merger would decrease competition to the detriment of consumers
• Divestment of 124 stores in the transaction to C & S wholesalers is regarded as a non-viable strategy to maintain competition. This argument is based on the 2015 Haggen debacle in which stores divested in the Albertsons-Safeway merger reverted to Albertsons
• Both Albertsons and Kroger are able to compete profitably against Walmart, Amazon and the dollar stores as individual chains without a merger

From the narrow perspective of egg producers and other suppliers especially produce and perishables, the merger would expand the existing buying power of both chains to create a formidable adversary in pricing.  

Subscribers to EGG-NEWS are referred to the special edition mailed on September 23^rd  accessed using the link:

Kroger / Albertsons Merger

This edition reproduces selected reprints of articles posted since the 2022 announcement of the proposed merger. Articles detail the opposition by unions, and Attorneys General of impacted states. Arguments advanced by the FTC concerning competition and rejection of the plan to divest stores and distribution centers to C & S Wholesalers were topics reported among 47 postings.

According to Dr. Nirav Shah, Principal Deputy Director of the Centers for Disease Control and Prevention, laboratory investigations are continuing on the isolated and spontaneous case of H5N1 influenza diagnosed in a patient in Missouri.

In a September 13th release the CDC confirmed the  neuraminidase component of the virus as  N1.  Sequencing has yet to be completed although initial indications are that the virus belongs to clade 2.3.4.4b and is similar to the mammalian adapted H5N1 B3.13 strain circulating among dairy cattle and contacts including cats and rodents. The HA sequence disclosed two amino acid substitutions. According to a ProMED posting, Dr. Jesse Bloom at Fred Hutchinson Cancer Center, noted that the A156T mutation is associated with reduced neutralization of the H5N1virus with serum from a hyperimmunized ferret.

According to a ProMED Mail release, the patient presented with respiratory and itestinal symptoms including chest pain.  The initial hospital laboratory evaluation of the patient yielded a non-seasonal influenza-A virus that was referred to the Missouri State laboratory and then sent to the Centers for Disease Control. Treatment with antiviral medication and supportive therapy led to recovery and discharge. 

At this time, there does not appear to be any direct link between the patient and either livestock or consumption of unpasteurized milk.

The September 13th CDC release disclosed that a household contact developed respiratory symptoms on the same day as the patient subsequently followed by a health care worker. There were no attempt at isolation of an influenza virus from either of the contacts but it is hoped that subsequent serologic follow-up will determine whether malaise was attributed to previous exposure to H5N1. The patient and household member could have been infected from a common source. If the healthcare worker was in fact infected with H5N1, the suggestion of limited contagion in the hospital setting should be considered. 

Consistent with concerns over mutation of H5N1 to become zoonotic, the CDC has provided five companies with funding collectively amounting to $5 million to outsource influenza isolates for diagnosis and characterization.  Companies selected comprise Aegis Sciences, Arup Laboratories, Gingko Bioworks, Laboratory Corporation of America and Quest Diagnostics, all reputable clinical pathology or microbiological laboratories with experience in molecular assay of pathogens.

Health agencies led by CDC are obviously developing contingency plans and strengthening capabilities as a preemptive and precautionary measure in the event of an emergence of a zoonotic viral pathogen.  This is based on the deficiencies that were evident in 2020 following the emergence of SARS-CoV-19 virus responsible for COVID.

It is important to recognize that as of the present the Missouri case involving one individual who recovered represents an isolated event and that there is  no direct evidence of contagion to contacts.  There does not appear to be any upsurge in influenza in Missouri based on a review of the influenza database that will detect an increase in incidence rate.  It would be advisable to implement wastewater assay with specific attention to H5N1 strain influenza virus.

In an incisive article authored by Dr. Michael S. Sinha and colleagues, published in the New England Journal of Medicine*, he and his co-authors raised the question of whether the U.S. has learned the lessons of COVID and is capable of responding to the emergence of a novel epidemic. The most immediate risk involves additional possible mutation of the H5N1 avian influenza virus that has become adapted to mammalian hosts and has infected a limited number of humans in direct contact with infected flocks and dairy herds. Despite emergence as a zoonotic infection in Hong Kong in 1997, the H5N1 virus has not become a pathogen of significance but is most certainly on the radar of the World Health Organization and public health authorities in many nations, including the U.S.

Dr. Sinha and colleagues question whether the U.S. is in a more favorable position to respond to an epidemic than it was prior to the introduction of COVID. The U.S. was unprepared in 2020 despite recommendations by the Institute of Medicine and the National Academies of Sciences, Engineering and Medicine over 25 years ago.  The federal and state agencies responsible for public health did not responded appropriately and efficiently as evidenced by events during early 2020.  The early months of the COVID outbreak were characterized by institutional denial, a search for ‘quick fixes’, a lack of personal protective equipment and imperfect coordination among federal agencies.  These inadequacies should have been corrected in intervening years but it is evident that little has changed. In some respects, the legal environment is less conducive to a coordinated and scientifically appropriate response.

During the early weeks of acceptance that the H5N1 B3.13 mammalian-adapted strain was transmissible to humans, operators of dairy herds were disinclined to cooperate with either state or federal agencies to initiate appropriate surveillance.  In the state of Texas, the Commissioner of Agriculture was on record as characterizing the efforts by the Centers for Disease Control to determine the extent of exposure of workers as “overreach”.

Dr. Sinha correctly characterizes the response to H5N1 as uncoordinated with ill-defined areas of jurisdiction among the Department of Health and Human Services subsidiary agencies comprising the Centers for Disease Control and Prevention, the Food and Drug Administration, and the National Institutes of Health and the Departments of Defense, Agriculture and Homeland Security. In addition individual state governors created self-serving policies with their departments of health and of agriculture involved at the case and plant levels. Initially the White House designated the Secretary of the Department of Health and Human Services as the coordinator but this rapidly degenerated into a free-for-all with no indication of “who was in charge”. 

With the emergence of bovine influenza-H5N1 cooperation between state departments of agriculture and their public health counterparts expedited programs of surveillance. This involved both herds and workers and state agencies that undertook to educate owners of farms and their workers on protection.  Michigan and Colorado were preeminent in actively addressing the problem with Colorado introducing a mandatory testing program involving milk samples from all herds to detect the presence of virus and to impose quarantine measures.

In the event, it appears that H5N1 does not represent an immediate concern for public health.  Notwithstanding this fortunate circumstance, the threat of an emerging epidemic reveals obvious restraints to addressing what might occur in the future.  An outbreak involving a human-adapted pathogen that is also contagious has the potential to spread rapidly and extensively.  If a severe form of human influenza emerges it would probably affect children disproportionately. State and local authorities applying experience from COVID would be disinclined to close schools or to mandate masking, supported by state regulations and court decisions.  The initial response of state officials in traditionally conservative regions would be to place personal freedoms above sound principles of disease prevention especially in the early stage of an epidemic when control measures would have the potential for the most favorable outcome. 

A rising wave of science-skepticism and an unjustified lack of confidence in public health agencies including the Centers for Disease Control and Prevention would impair the development, coordination and implementation of containment measures following the emergence of an infection with epidemic potential.

Proposed changes affecting the tenure of federal employees together with traditional pressure to conform to institutional norms is likely to inhibit open discussion of alternative modalities and would stifle the development of appropriate policy. Attempts to impose censorship on scientists and public health specialists as occurred during the COVID period will become more intense and absolute in the event of a subsequent epidemic.  The recent overturn of the Chevron Doctrine eliminated deference to scientists and medical professionals and would impede their efforts to introduce emergency measures intended to reduce the incidence rate of an infection. Directives based on scientific principles would be subject to interdiction by courts and result in prolonged litigation as rulings are appealed. 

Expenditure on vaccine development as evidenced by the “warp speed” production of mRNA vaccines that effectively provided protection from COVID among those receiving vaccines will probably be politically unpopular.  Even if mRNA technology can be applied to developing a vaccine against a new virus, prevailing vaccine hesitancy supported by misinformation on social media would limit administration allowing an infection to spread among the susceptible proportion of the population.

It is hoped that the incoming administration, irrespective of political persuasion, will recognize the inevitability of a future epidemic and will respond to the obvious deficiencies that occurred during the early COVID period. Those responsible for our Government should take heed from the emergence of H5N1 among dairy herds albeit with only a few workers affected who were involved in depletion of infected egg-production flocks. Events since March suggest acceptance of the One Health principle with regard to the emergence of a zoonotic infection. Bovine influenza H5N1 was a warning—the next pathogen to emerge or a mutation of an existing benign human or animal virus currently circulating may not be as forgiving going forward.

There will be no simple and inexpensive solution to contain a future epidemic.  The economic implications of an outbreak in a susceptible population will inevitably lead to disruption in food and industrial production, will curtail everyday activities and represent the potential for extensive mortality. The consequences of a contagious infection of zoonotic origin can be ameliorated by preemptive planning and the application of proven epidemiologic practices. This will involve embracing science and selecting hard choices that may, in the short term, be politically unpopular. The U.S. and the World could face a 1918 “Spanish flu” situation at some time in the future.  We are woefully unprepared with respect to political and public acceptance of control measures. We are faced with a hostile legal environment to implement meaningful protection coupled with a fractured system of jurisdiction over public health.  We need to use whatever time is available before the next outbreak to develop action plans that are cohesive and epidemiologically valid.

*Sinha, M.S. et al. (2024) Déjà vu all over Again-Refusing to learn the lessons. New England J. Medicine 391:481-483.                         DOI 10.1056/NEJMp2406427.

The Aldi chain of supermarkets in the U.K. has announced that all eggs sold in its stores will be from flocks housed as cage-free.  Although fourth in size among U.K. supermarket chains, Aldi is a leader in free-range eggs produced on domestic farms.

In recent years, major U.K. chains have ignored requests for higher transfer prices especially after the Brexit misadventure that resulted in a sharp escalation in the cost of feed, energy and other inputs.  Failure to rise above breakeven resulted in many producers ceasing production as they exhausted working capital. This in turn resulted in shortages and rationing by specific chains that were unable to recognize the consequences of their myopia.

Through financial turbulence, Aldi maintained a practical business relationship with suppliers, invested up to $60 million the form of subsidies and entered into long-term contracts that sustained their supply farms through financial challenges.

Julie Ashfield, Managing Director of Supply Chains at Aldi U.K. stated, “Our British suppliers are at the heart of our business and without them Aldi would not be where it is today, and we are proud to work with so many U.K. egg farmers.”  She added, “By working with our suppliers we have been able to hit our cage-free target more than a year early.”

It is hoped that Aldi in the U.S. will follow the lead of its sister company in the U.K. and their policy will be emulated by U.S. chains.  It is noted that conversion from conventional cage housing to alternatives including barns, aviaries and to a lesser extent, free-range, have been financed by individual producers including family farms and companies despite prices being limited by straightforward supply and demand constraints.  For decades the supermarket chains have benefited from investments made by egg producers who are ill-served by the prevailing benchmark pricing system that favors chain buyers in negotiating prices.  Failure to allow producers to recover their fixed costs including fair depreciation and interest limits ex-plant margins and inhibits the installation of improvements and upgrades.  The policy of minimizing prices is especially to the disadvantage of smaller operators who do not have the benefits of scale of production.

The ongoing avian influenza epornitic since 2022 with seasonal pauses in incidence rate has resulted in an average reduction in the size of the producing flock by approximately 20 million hens.  This has contributed to an escalation in price attributed to disequilibrium between supply and demand and has in some measure reduced the bargaining power of chains.  With restoration of flock size given the maturation of 20 million pullets per month, prices will inevitably fall especially if additional losses do not occur in fall and early winter as in previous years.  As transfer prices decline, it is hoped that chains will reduce shelf prices proportionately to sustain demand.  Maintaining high retail prices with declining wholesale values is detrimental to both consumers and the production sector and represents a form of price gouging. 

There is concern that in public statements, Doug McMillion president and CEO of Walmart Inc. has indicated that producers and food manufacturers can expect price pressure from Walmart, the nation’s largest food retailer.  Although the initiative for lower prices by Walmart is directed in the first instance towards processed and dried food it is inevitable that produce and eggs will follow.  A spokesman for TD Cowen noted, “We expect pressure from Walmart for deeper price rollbacks to continue especially in categories where Walmart can flex its private label merchandising.” John David Rainey, CFO for Walmart stated, “We are advocating for our customers, we want to drive our everyday low prices and we are not intending to achieve any of our margin performance by passing this along to our customers and Sam’s Club members in the form of higher prices.” 

The implication is obvious, Walmart and by association all major chains want to keep prices low to maintain traffic but are obviously averse to smaller margins.  It does not take a CPA to determine who will bear the brunt of the initiative.  The situation will be exacerbated if the merger between Kroger and Albertsons were to become a reality since promises made to reduce prices in the short term would be coupled with intensified buying power affecting both national and regional producers.

Despite greater scrutiny of margins and profits generated by retailers, through their shelf prices, pressure on producers will continue for the foreseeable future. Appropriate approaches for the industry would be:-

• strive for greater efficiency,
• establish Capper-Volstead marketing cooperatives,
• promote a CME market for generic Midwest Large in place of the current benchmark    price discovery system that functions to the disadvantage of producers,
• diversify product range with more specialty eggs,
• develop new egg-based products for food service and QSR markets
• demonstrate restraint in expansion without participating in any form of collusion.

Enhancing returns to producers will require adoption of novel strategies to counter the power of the major chains.

18 weeks below breakeven in a down market

The rail strike in Canada, albeit of short duration has ended.  The Federal Government invoked Section 107 of the Canadian Labor Code requiring binding arbitration between the Teamsters Canada Rail Conference and the two major rail operators, Canadian National Railway (CNR) and Canadian Pacific Kansas City (CP-KC).

As noted in postings in the August 23^rd edition of EGG-NEWS, the Union demanded increased wages and benefits and above all, rationalization of work schedules especially affecting long- distance freight to enhance safety and morale.

The Liberal Party government that is generally Union-friendly was forced to act by the impact of a rail strike on all aspects of the Canadian economy.  Moody’s the multinational ratings agency estimated that the strike could impose a cost of $250 million per day.

Associations representing segments of Canadian agriculture including the Meat Council, Pork Council and others petitioned the Government for intervention since transport involving perishable commodities requires stable and reliable rail operation to support supply chains and avert waste.  The associations cited the 2023 strike in the Port of Vancouver that extended over 35 days and disrupted trade to the value of $8 billion.

It is not only Canada that would have been affected by a major rail strike.  The two operators intersect with U.S. operators, BNSF Railway, Union Pacific, Norfolk Southern and CSX.  Canadian National Rail links extend to New Orleans, LA. and CP-KC extends to Gulfport, MS. and on to Tampico on the east and Lazaro Cardenas on the west coast of Mexico. Approximately one-third of all traffic moved by the two major rail operators in Canada crosses the border with the United States.

Commodities affected by even a short-term rail strike in Canada would include ethanol, potash, grains, oilseeds, oils and above all fresh meat.  Apart from agriculture, industry would be impacted since Mexico manufactures automobile parts that are required to assemble vehicles in the U.S. and Canada. In turn, Canada exports wheat, meat and aluminum southward to the U.S. and Mexico.

In 2023, the U.S. exported $30 billion in agricultural products to Canada, balanced by imports of valued at $40 billion.  Combined trade between Canada and Mexico amounted to $40 billion.

The economies of Canada, the U.S. and Mexico are interconnected requiring reliable and efficient transport. Disruption in any of the three conjoined USMCA partners will have serious impacts on the economies of the other two.

The consequences of rail strike in Canada should generate a sense of urgency to conclude negotiations for a labor contract between longshoremen along East coast and Gulf ports and operators of these critical facilities.  Time is running out with a September deadline now imposed by the International Longshoremen’s Union.

As with Canada, strikes affecting major industries and especially the transport sector have political implications.  This is even more critical in a U.S. election year and also in Canada where the governing party has a tenuous hold on power.

In an August 16^th letter addressed to the USDA Secretary of Agriculture, United Egg Producers, the National Turkey Federation and the National Milk Producers Federation requested USDA to adopt “a sense of urgency and preparedness” to support vaccination of dairy cows, turkeys and egg laying hens.  In the joint request, the industry associations outlined the economic losses associated with H5N1 influenza experienced by producers, the public sector and ultimately by consumers.  The letter did not, however, add sufficient stress on the probability, even extremely remote, of the emergence of a zoonotic and possibly even contagious strain of H5N1 that could result in a devastating pandemic. The letter to the USDA Secretary made reference to the obstacles to adoption of vaccination represented by an inevitable but non-quantified impact on exports of broiler leg quarters and feet.

USDA has been less than enthusiastic in promoting adoption of vaccination among importers of U.S poultry products. Vaccination with appropriate surveillance is accepted by the World Organization of Animal Health as an adjunct to biosecurity.  The reluctance to embrace vaccination by the USDA is possibly due to the misplaced and by now discredited policy of attempting to eradicate HPAI in poultry flocks by stamping out each successive outbreak.  Despite depopulation of close to 90 million commercial birds, predominantly egg production flocks, over the past two years, the temporal occurrence has extended beyond the spring and fall migratory seasons for waterfowl and in addition a spatial and species expansion has occurred with confirmation of infection among free-living mammals, resident birds and dairy cows.

 It is axiomatic that it is impractical to attempt to eradicate an endemic disease over the short term when confronted with a large reservoir of infection and with constant reintroduction of the causal virus.  Vaccination should be adopted for egg production, and turkey flocks in high-risk areas under flyways transited by migratory waterfowl and in the vicinity of their nesting habitat. 

The requirements imposed by the WOAH regarding vaccination incorporate surveillance for infection among immunized flocks. With current technology including PCR, it will be possible to certify that flocks to be processed for export are free of infection within 24 hours of harvest and that product is also free of HPAI virus.  Reliance on serology and the oft-repeated canard that it is difficult to distinguish between vaccinated and infected flocks should be discounted as a restraint to preventive vaccination.

Perhaps the missionary work undertaken by USDA-APHIS within the World Organization for Animal Health has lacked intensity or has been misdirected.  In the first instance, turkey and egg producers and their new-found supporters in the dairy industry should concentrate their efforts on the NCC, representing broiler producers.  Simply stating that introduction of vaccination would seriously impair exports is a simplistic overreaction.  Close to 45 percent of nations receiving either leg quarters or feet either have endemic or seasonal outbreaks of avian influenza or have used or are using vaccination as a control measure. In the case of Canada and some other nations, bilateral agreements determine the extent and mechanisms for export usually with zoning as the determining factor.

Since federal agencies are congenitally opposed to change, especially when this requires admitting to failure of previous policies, we can expect the adoption of vaccination to be deliberately delayed by the USDA. As an institution the USDA will fall back on the expedient of conducting risk assessments or the need to develop  “new” vaccines or alternatively conducting time-consuming laboratory and field trials confirming that commercially available products as widely used internationally are effective. 

The need for action as requested in the August 16^th letter is regrettably about two years late.  It is only the emergence of bovine influenza H5N1 caused by the B3.13 mammalian-adapted variant that has stimulated a reappraisal of vaccination by the two most affected poultry industry segments.  There is no need to reinvent the wheel with new USDA-ARS vaccines or to “evaluate” the effectiveness of currently available commercial products from reputable multinational manufacturers. We have data from many nations including Mexico and France

This commentator, committed to the long-term wellbeing of the poultry industry has developed a perspective based on both professional training and then commercial experience since 1968, encompassing live-bird management, academia and the allied industry. Exposure to production on four continents has facilitated perceptions and understanding, integrating veterinary epidemiology with economics and practical considerations. Above all, application of the One Health principle raises caution over a possible mutation whereby H5N1 may become a human health issue, a concern expressed by the World Health Organization and numerous virologists in the U.S., Asia and Europe.

Let us therefore reject a parochial approach promoted by a single segment of the industry in applying pressure to deny vaccination for the egg-production and turkey operations in high-risk areas. A program can be developed to optimize benefits to producers, exporters of U.S. poultry products, veterinary regulators and consumers. Above all by creating an immune poultry population through vaccination, the risk of an emergent zoonotic strain of HPAI with epidemic potential will be markedly reduced. 

The August 16^th request for the USDA to consider vaccination is an important step, since this places the APHIS on notice that attempts at eradication are futile. Vaccination offers an alternative and contributory modality to biosecurity to prevent infection in poultry flocks and now in the dairy segment of the livestock industry.  Newcastle disease, in every way was as destructive as avian influenza during the 1960s and 1970s. This disease was successfully suppressed but not eradicated, by vaccination.  Avian influenza is effectively “the Newcastle disease of the 2020s” and should be addressed by creating immune poultry populations through application of currently available effective vaccines.

A typical “shakedown” lawsuit alleging deception was recently dismissed by the U.S. District Court for the Northern District of Illinois.  At issue was a meritless claim by a consumer who purchased eggs from Mariano’s Supermarket, a banner operated by the Kroger Companies.  The Plaintiff complained that he was “duped into paying more for farm-fresh eggs because he thought they were higher in quality”.  With incisive logic Judge Charles Kocoras dismissed the case accepting that the term “farm fresh” related to timing and location. The purchased eggs were derived from a ‘farm’ albeit from caged hens and were ‘fresh’ in that they were sold within the statutory use period. In his ruling, Judge Kocoras noted that, “No reasonable consumer would plausibly spin free-roaming hens on a grassy open field from the term, “farm fresh”.

This case, among many similar examples of litigation intended to extort settlements from producers and retailers and lacking in merit, highlights problems relating to nomenclature used on labels and at point-of-sale.

The USDA-AMS has been negligent in failing to define housing systems for egg and broiler production, resulting in confusion among consumers and to a certain extent, their exploitation by retailers and some producers.  Perdue Farms has petitioned the USDA for a clear and precise definition for “free-range” grown broilers. Enigmatically this company claims that its broilers are grown “cage-free” in the knowledge that all broilers in the U.S. are raised in barns with or without limited outside access.

The UEP has developed welfare housing standards for caged, aviary and floor-housed flocks. To add to the confusion of nomenclature relating to eggs various animal welfare organizations including the American Humane Association have issued standards with certification and the right to apply a seal on cartons against payment of a royalty.  USDA Certified Organic is the only statutory designation with statutory standards relating to production and housing including the use of non-GMO feed ingredients.  With respect to housing, new organic standards were recently adopted requiring outside access.

The industry should develop a set of unambiguous terms describing housing systems that should be incorporated into an AMS rule.  Neither the industry nor consumers can rely on fragmentation through a variety of organizations providing a range of certifications devoid of a legal basis. 

The UEP justifiably developed welfare standards that are regularly updated according to scientific findings. The UEP should now take the lead as the voice of the industry in developing the required definitions.  The UEP has standing to petition AMS and has the lobbying ability to motivate adoption of acceptable nomenclature.

It is interesting that the American Egg Board has been silent on the issue of definitions for production systems despite the fact that image of the industry and its products is an important component of promotion.  Given the resources of the UEP, a suitable list of descriptors could be developed and adopted in an AMS rule that would form the basis of promotion, labeling and point-of-sale claims.

Eugene Scalia former U.S. Secretary of Labor in the Trump Administration and previously the Chief Legal Officer of the Department of Labor considers that concerns over impending litigation are overstated following the invalidation of the Chevron Deference by SCOTUS in Loper Bright Enterprises v Raimondo.  The Chevron Doctrine established over 40 years ago allowed administrative agencies including the EPA to interpret federal laws with the judiciary deferring to the opinions of administrators in Agencies possessing specific technical, economic or procedural expertise.

Scalia considers that federal agencies will henceforth be more conservative in their action, recognizing that regulations and rules are now subject to challenge and that enabling legislation will be scrutinized to avoid agency overreach. Scalia believes that federal regulators will “be more careful than they’ve been in recent years to make sure they are acting within the authority that Congress gave them and to make sure that they are given thoughtful consideration to what the public tells them their concerns are.”

Basically the demise of the Chevron Deference will have a constraining effect on regulatory agencies, consistent with conservative opposition to the “nanny state.” Implications for the Loper Bright Decision include proposed and issued rules by the AMS under the Stockyards and Packers Act, the FSIS with respect to Salmonella contamination of poultry products and the EPA on the proposed WOTUS Rule.

The proposed Federal Food Administration Act would establish an independent federal food administration under the Department of Health and Human Services. The bill will be sponsored by Rep. Rosa de Lauro (D-CT) and Senator Richard Durbin (D-IL) to be introduced into the 119^th Congress

The need for a single dedicated agency has long been debated but is supported by food safety experts.  The U.S. Food and Drug Administration (FDA) is currently responsible for all food safety and nutrition programs other than for red meat and poultry falling under the Food Safety and Inspection Service of the USDA.  Rep. De Lauro points to the lack of emphasis on food safety by the FDA.  A frequent observation relating to the Agency is that the “F” in title is silent. 

Following a series of costly, disruptive and avoidable food safety events during the past two years, the FDA has reluctantly and belatedly appointed a Deputy Commissioner responsible for aspects of food safety.  Absent a profound change in agency culture, shifting of responsibilities and redrawing the organizational chart is analogous to moving deck chairs on the Titanic.

Rep de Lauro stated, “I have long said that food safety is a second-class citizen at the Food and Drug Administration.  I believe we need a single food safety agency solely focused on keeping the foods that we eat safe.  Creating a single food agency could prevent avoidable product contamination and subsequent recalls that disrupt the supply chain.”

Senator Durbin stated, “In recent years FDA have been plagued by one incident after another from a failure to protect babies from bacterial infection in their infant formula to a failure to protect children from lead-tainted applesauce pouches.”  He added, “The sad reality is that FDA has not used its authority to protect Americans from preventable illness and death.”

The proposed establishment of a Federal Food Administration was welcomed by a number of advocates for food safety including Brian Ronholm at Consumer Reports, previously an administrator at the FDA.

At present, sixteen agencies are involved in food safety according to  the General Accounting Office leading to lack of coordination, turf battles and divided responsibility.

The Federal Food Administration Act would remove all aspects of feed regulation and nutrition from the Food and Drug Administration including the Center for Food Safety and Applied Nutrition, Center for Veterinary Medicine, Office of Food Policy and Response and the Office of Regulatory Affairs.

Although the proposed Federal Food Administration Act would be an advance with respect to consolidating aspects of food safety currently divided among Federal agencies it avoids the obvious question of USDA-FSIS still retaining jurisdiction over red meat and poultry.  To achieve the ultimate objective of complete consolidation, it will be politically expedient to establish the Federal Food Administration as a functioning entity before attempting to transfer responsibility for red meat and poultry from the USDA. Currently the FSIS is strongly supported by producers, packers and processors who have created a harmonious working relationship not necessarily detrimental to consumers as is the case with all other foods administered by the FDA.

Opponents of a single Federal Food Administration have maintained that the proposed change would be too disruptive.  Following the 9-11attack, the Department of Homeland Security was established with extensive consolidation of responsibilities previously assumed by many agencies.  The implementation of a Federal Food Administration will be difficult given that vested interests and lobbying will influence the legislative process as it progresses through committees and both the House and Senate. 

The topic of legislation brings to mind the apt Mark Twain adage that “Nobody should watch sausages and laws being made”.  The proposed Federal Food Administration Act epitomizes both sausages, a potential vehicle of foodborne infection and creating legislation that will inevitably have unintended consequences. Establishing an independent agency to promote food safety and nutrition should however be a bipartisan issue.