Editorial


Ominous Words Expressed During Walmart Conference Call

05/24/2022

Following the May 17th Walmart Q1 release, analysts questioned CEO, Doug McMillon, and John R. Furner, President and CEO of Walmart U.S., during the subsequent conference call.  McMillon noted that, “We want customers to have lower prices on food and we will partner with suppliers on the food and consumable side to bring those costs down.”

 

McMillon believes that customers will be under pressure as a result of inflation opining, “They need our help” adding, “We will stay focused on opening price-point food items to assist customers at the lower end of the income scale to be able to afford to feed their families.”   Furner stated, “We’ve got to make sure we’re doing everything we can with our suppliers to manage our costs so that we can keep food pricing in a great spot for our customers.”  Furner committed the company to, “work together with our supply base in proteins and dairy to keep costs low”.

 

As the largest food retailer, Walmart will set the standard for a retail environment in which higher costs for food items cannot be passed onto consumers.  Analyst, Robert Moskow, of Credit Suisse, believes that Walmart will be less flexible with vendors on food pricing and that suppliers will be under considerable pressure to keep prices low so that Walmart can maintain revenue but at the same time, achieve acceptable gross margins.  This presumably will be at the expense of suppliers.  It is noted that for the first quarter of FY 2022, ending April 30th, Walmart gross margin fell by 3.2 percent to 24.5 percent and that operating margin was down by 24 percent to 3.8 percent compared to the corresponding quarter in FY 2021.

 

There was no mention in the conference call of the inflationary pressures experienced by suppliers.  Feed costs have risen and there is every prospect of future increases as a result of geopolitical events, late planting of the corn crop and continued demand for soybeans by China.  In addition, labor, power and fuel costs have increased. The USDA benchmark production cost of 84.5 cents per dozen for April understates fixed costs for new cage-free facilities, and does not include costs for processing, packaging and distribution.  The current high wholesale prices resulting from the depletion of 30 million hens due to HPAI has obscured in large measure, inflation in production costs.  Based on the events during the HPAI epornitic of 2015, supply of shell eggs will increase in relation to demand, reducing prices and hence, margins.

 

It is evident that Walmart will lead other retailers in aggressive purchasing, placing margins in jeopardy.  Shell egg producers will have little flexibility in negotiation under conditions of moderate over-production.  The current relationship between producers and chain buyers is based on a single price discovery system representing an impediment to a free market.  It is clear that the benchmark price amplifies both downward and upward swings as at present. Over the long-term the single benchmark price functions to the detriment of the industry. Grain-based pricing is not generally beneficial to all producers. EGG-NEWS has consistently advocated for a CME quotation on Midwest large as a more representative and equitable basis for pricing.  Analysts expect that Walmart will use their volume to pressure suppliers and adopt what Robert Moskow characterizes as an “inflexible stance” on pricing.


 

Reevaluation of HPAI Control--An International Challenge

05/15/2022

The traditional approach to stamping-out Highly Pathogenic Avian Influenza that occurs as sporadic outbreaks is outmoded. This is evidenced by the current H5N1 panornitic involving North America, Europe, Eurasia and parts of Africa.

 

Egg-News

Vaccination is under evaluation as a component of integrated control programs including biosecurity and flock depletion.  It is evident that once a flock is infected, removal and disposal is justified based on the need to prevent multiplication and dissemination of virus.  If, however, populations and especially those in areas with a high concentration of poultry are immunized, the rate of spread may well be diminished, reducing the financial impact of infection. 

 

Vaccines are used for many catastrophic diseases of livestock in combination with judicious depletion.  Fear of losing potential exports as a result of application of vaccine that implies an endemic status has limited the use of vaccines.  Oil emulsion products homologous with the hemagglutin of the infected virus have been moderately successful in suppressing strains of Avian Influenza in Mexico, China, Italy and other nations.  China has achieved success with H7 Avian Influenza vaccine specifically to prevent H7N9 infection of consumers of chicken purchased at wet markets.

 

Egg-NewsAdvances in vaccine technology offer the prospect of more effective immunization.  Boehringer Ingelheim has developed Volvac® B.E.S.T a bacculovirus vectored Newcastle disease and H5N1 avian influenza product now deployed in Mexico and Egypt against H5N1. Ceva has developed an RNA vaccine that is undergoing tests in domestic waterfowl in France under the control of the Agency for Food, Environmental and Occupational Health and Safety.

 

If importing nations recognize the World Organization of Animal Health principle of regionalization, embargoes following outbreaks of Avian Influenza can be confined to specific regions.  The fact that Avian Influenza is now a panornitic and is spread by migratory waterfowl implies seasonal endemnicity with recurring outbreaks over extensive areas. This situation now demands extremely expensive control campaigns with the inevitability of reintroduction on a seasonal basis.

 

With the evolution of HPAI as a panornitic new control modalities are required especially in areas with a high density of poultry.  An effective vaccine should be regarded as a component of an integrated system to suppress outbreaks of HPAI.  Eradication, even on a national basis, appears unlikely for extended periods.  Epidemiologic resources including genome sequencing, development of a new range of vaccines with recognition that HPAI is an international problem, should lead to new approaches based on prevention.  It is self-evident that programs should take into account that migratory waterfowl and other birds disseminate Avian Influenza viruses over extensive distances and shed virus over a relatively long duration.  The need for multi-billion dollar eradication campaigns conducted at more frequent intervals will justify flexibility in approaching a disease that has both impact on livestock  and zoonotic potential.  

Egg-News


 

FDA Failure to Respond to Contamination of Infant Formula Raises Congressional Concerns

05/09/2022

Egg-NewsA Whistleblower employed at the Abbott Nutrition plant in Sturgis, MI., addressed a 34-page expose of inappropriate practices to the FDA on October 19th 2021.  Copies of the statement were sent by FedEx to top officials in the agency including the Commissioner, Dr. Janet Wodcock, the Director of the Center for Food Safety and Applied Nutrition, Dr. Susan Mayne and to Katherine Hermsen, Assistant Commissioner of the Agency Office of Criminal Investigation. 

 

Egg-NewsAccording to Politico, the Whistleblower was not interviewed by the FDA until late December 2021.  The plant was subsequently inspected on January 31st 2022, disclosing deficiencies and confirming the substance of the allegations.  These included improper cleaning practices, falsified records and deviations from standard operating procedures all of which may be regarded as contributing to potential contamination of infant formula with Cronobacter sakazakii and  Salmonella Newport . This pathogen  was responsible for illness, hospitalization and fatalities in infants consuming Similac™, Alimentum™ and EleCare™ products.  Despite the findings on January 31st, batches of formula were only recalled more than two weeks later on February 17th.

 

The sequence of events and the obvious failure of FDA at a number of levels to respond was the subject of question in the House Appropriations Committee chaired by Rep. Rosa DeLauro who is concerned over food safety and related issues, based on her professional training. She stated, "I am deeply concerned about the practices at this Abbott facility and their apparent failure to implement and enforce internal controls".  She added, "I am equally concerned that the FDA reacted far too slowly to the report". This is based on the four-month period between the receipt of the report and the recall, during which infants may have been exposed to infection.

 

Egg-NewsThe structural and cultural problems at the FDA revealed in the Politico article reinforce the need for a dedicated Food Safety Agency that would incorporate the jurisdictions of both the Food Safety And Inspection Service of the USDA and the food-related remit of the FDA.  Establishing a dedicated agency as in the E.U. would create a center for scientists, regulators and inspectors experienced in aspects of food safety including imported and domestically produced items.  A new agency would be free of the restraints and culture of the FDA

 

The question remains whether a band-aid will be simply applied to the FDA in place of the required radical surgery involving transplantation.


 

Impact of 2021-2022 HPAI Panornitic- Implications for the Future.

05/04/2022

Egg-NewsIt is evident that the current H5N1 strain of avian influenza has resulted in more extensive outbreaks of highly pathogenic avian influenza (HPAI) and involved more nations over the past twenty months than at any time since the emergence of the Goose/Guangdong lineage during the late 1990s. Reports assembled by the World Organization for Animal Health (OIE) confirm 18,620 outbreaks of HPAI between 2005 and 2009 affecting 76 nations. During the current panornitic, 3,000 outbreaks have been reported, resulting in the loss of 15 million chickens, ducks and turkeys combined in Europe and approximately 35 million of all species in the U.S. and over one million in Canada year to date.

 

Extensive mortality in both poultry and free-living birds, due to the currently circulating strain of H5N1 expressing Eurasian genes, has occurred in Europe, North America, the Mediterranean littoral and sub-Saharan Africa, in addition to nations in Asia where the virus is endemic.  As reported in previous editions of EGG-NEWS, unlike previous panornitics the current strain has affected as many as 50 migratory or endemic species with extensive mortality in red knots (Calidris canutus) in the Netherlands, cranes (Grus grus) in Israel, barnacle geese (Branta leucopsis) in Scotland and Dalmatian pelicans (Pelecanus crispus) in Greece among other families.

Egg-News

 

Subscribers are directed to an excellent opinion article* on resurgence of avian influenza virus authored by Drs. Michelle Wille and Ian Barr of the University of Sydney, Australia.  Information on the evolution of the Goose/Guangdong lineage extending to the current 2.3.4.4 pathogen as discussed conforms to material presented in a recent webinar by Dr. David Swayne of the USDA-ARS National Poultry Disease Research Center. 

 

Egg-NewsEpidemiological evaluation subsequent to the 2014-2015 epornitic demonstrated the role of migratory waterfowl in the introduction and dissemination of HPAI, emphasizing the need for preemptive surveillance. Following trans-Atlantic introduction of the Eurasian H5N1 strain into the Maritime Provinces of Canada in late 2021 USDA-APHIS activated a program of sampling hunter-killed ducks. This demonstrated the presence of H5N1 virus in the Atlantic, Mississippi, and Central Flyways during the first quarter of 2022, with indirect evidence of virus shedding in the northern segment of the Pacific Flyway. Lessons learned during the 2014-2015 epornitic, led to enhanced biosecurity precautions that may have lowered the risk of infection in many areas with a high density of commercial poultry.

 

The types of farms and species of poultry affected in 2022 show some differences from 2014-2015. Many more backyard flocks, frequently the index cases in affected counties, were infected suggesting the widespread dissemination of H5N1 virus. Although a few very large egg production complexes were affected in both epornitics, it is evident that a number of potentially at-risk farms have been spared, suggesting that protective biosecurity measures have been effective.  An outstanding observation relating to the 2022 outbreaks is the predominance of commercial turkey flocks, far exceeding the number and their distribution in 2015. Large outbreaks in Iowa and Nebraska have occurred in the same counties or even the same complexes confirming risk factors such as proximity to wetlands and rivers and possibly correlated with possible predisposing deficiencies in biosecurity. The 2022 U.S. epornitic has also involved commercial ducks paralleling the situation in France.

 

Egg-News

The poultry industries in North America require updates on risk factors relating to introduction of infection, including duration of shedding by migratory waterfowl and other species, persistence of the virus in the environment and specific routes of introduction into commercial turkey, egg and broiler farms with reference to possible deficiencies in either structural or operational biosecurity.  Despite requests, USDA-APHIS has not provided any interim guidance based on available epidemiologic data collected following each outbreak.  Both observational and molecular information is required together with a provisional but logical interpretation of data in order to provide practical suggestions to enhance prevention.

 

The Science article referenced considers the possibility of H5N1 clade 2.3.4.4 becoming zoonotic.  Public health considerations relating to HPAI are obviously of extreme importance. The current risk is considered to be extremely low for the population of Europe as evaluated, even for those subject to occupational exposure. The World Health Organization and the OIE continue to monitor outbreaks of HPAI in poultry and wild birds and through member nations surveillance is extended to potentially exposed populations.  The Science article specifically noted that deploying an inactivated H7N9 vaccine in poultry destined for wet markets in China reduced the incidence rate of human infection from 759 cases in 2017 to only two cases in 2018. 

 

Currently, industrialized nations are following eradication policies, although inactivated vaccines have proven successful in suppressing mortality in outbreaks in Italy and Mexico.  Consideration must obviously be extended to new-generation vaccines as it is apparent that poultry industries worldwide will be subjected to more frequent panornitics given the extensive distribution of evolving viruses that have become endemic among migratory birds.

 

Egg-NewsIt is an unfortunate reality that HPAI is no longer a once-in-a decade event localized to specific areas. The approach to ‘eradication” of an exotic infection applying traditional measures will in the future be ineffective and expensive accepting the possibility of seasonal introduction. The approach to controlling the 2022 epornitic in the U.S. is no different to the more localized outbreak in 1984. The USDA-APHIS and their counterparts in Europe have upgraded procedures and logistics and expedited the control sequence comprising rapid diagnosis, flock depletion, disposal and decontamination, quarantine with zonal surveillance.  A new approach is required since HPAI is no longer exotic but seasonally endemic. The poultry industry is now faced with mass shedding of virus over large areas with both H5 and H7 strains potentially undergoing genetic drift in concentrations of migratory birds and mutations in large localized populations of commercial poultry.  HPAI is no longer a regional or national issue and the inevitability of recurrent panornitics will require a radical re-evaluation of control, prevention and trade policy at both national and international levels. Eradication is not a viable option so regulatory approaches should consider alternatives to the traditional approach to introduction of HPAI.

 

*Wille, M. and Barr, I. Resurgence of Avian Influenza Virus. Science 376: 459-460. (2022).


 

GAO Findings on Relocation of ERS-NIFA from Washington, DC.

04/24/2022

Egg-NewsFollowing the decision by the previous Administration to relocate the USDA Economic Research Service (ERS) and the National Institute of Food and Agriculture (NIFA) from Washington, D.C. to Kansas City, MO. Democrats on the House Science Committee requested the Government Accounting Office (GAO) to analyze the claimed cost-benefit justification for the action. 

 

At the time of the announcement by then Secretary of Agriculture’s Dr. Sonny Perdue, EGG-NEWS questioned the claimed financial benefit and suggested that the action was taken to “sanitize” both agencies that were generating data and reports that conflicted with Administration policy.  One of the claimed benefits for the move was that economists and scientists at both agencies would be closer to their constituencies.  This was refuted by the fact that in the age of E-mail and the internet, data was as readily available in Washington, D.C. as it was in Kansas City. Economists are not extension agents and do not have to walk through fields of corn and soybeans or meet with farmers on a day-to-day basis to perform their analyses.  To the Egg-Newscontrary, economists at ERS and the scientists at NIFA had close connections with the producer associations representing agricultural and commodity groups in D.C., were colaborating with academic institutions in a tri-state area and were interacting with think tanks and other government departments leading to synergy and creativity.

 

The GAO report refuted the cost-savings claimed to be $300 million over a number of years.  The GAO faulted the USDA for ignoring critical costs relating to the loss of highly-qualified staff. This may in fact have been the initial reason for the proposed relocation since senior personnel were studying and publishing on topics including the economic impact of climate change on agricultural productivity and food insecurity. 

 

The GAO found that the selection process by which 139 expressions of interest to receive the two agencies were whittled down to the final four possible locations was flawed since elimination disregarded stakeholder proximity and the ability to recruit and retain qualified staff.  Obviously, the proposal to relocate the agencies should have raised concern over disruption of ongoing projects and calculating the potential loss associated with the predictable consequences of the relocation.  The GAO report found, “High-quality analysis was absent including transparency around key methodological decisions and sensitivity analysis to assess the reasonableness of critical assumptions.”  Those responsible for developing the benefit-cost analysis deviated from guidance provided by the Office of Management and Budget based on the Foundation for Evidence-based Policy Making Act of 2018.

 

Egg-NewsDespite objections and protests by staff of the two agencies, cooperating academics, past directors of NIFA and ERS, the relocation became a reality resulting in a high number of resignations, especially among senior scientists and economists who did not wish to move from the D.C. area.  The predictable counterpart was a failure to recruit and appoint suitable replacements after the move to Kansas City, MO.

 

The GAO did not make any recommendation relating to the relocation but pointed to the need to use facts and substantiated evidence in developing an analysis on which to base policy decisions.

 

The questions that remain concern whether either or both of the agencies was weakened in their potential to serve stakeholders and whether savings will in fact accrue to the USDA and ultimately to taxpayers.  It is hoped that in future, irrespective of the party controlling the Executive and or Legislative branches of government, decision-making will be transparent, and methodical. An evidence-based approach should be applied to analyze policy decisions and actions that affect the lives of government workers and their ability to serve their constituencies.

 

At this time, the relocation is a fait accompli and probably will never be reversed. Let us hope that productivity at both Agencies has been restored and that there will not be a repetition of a destructive action to support a policy agenda.


 

APHIS Urged To Release Epidemiological Findings On HPAI Cases

04/19/2022

During the past eight weeks, nine noteworthy outbreaks of highly pathogenic Avian Influenza (HPAI)  in egg-production complexes have been documented resulting in depletion of more than 21 million hens in addition to close to a million pullets.  It is understood that, as with the 2015 epornitic, Egg-Newsepidemiological questionnaires were completed after each outbreak.  A review of these documents with or without case control studies could indicate deficiencies in biosecurity that contributed to the introduction of infection onto complexes requiring subsequent depletion.

 

Approximately twelve million hens ago, this commentator communicated with a senior APHIS Veterinarian responsible for aspects of control of HPAI.  In the absence of a response, a second E-mail was addressed to the APHIS contact urging action with respect to providing guidance derived from a review of the questionnaires.  Despite webinars and regular updates, APHIS has not provided any specifics as to the risk factors contributing to infection with the H5N1 strain expressing Eurasian genes that is prevalent in 2022.

 

It is accepted that the widespread distribution of the virus is due to dissemination by migratory waterfowl. This is confirmed by surveillance and the large number of turkey growing units and backyard flocks affected in the same states where outbreaks have occurred on egg production complexes. This presumes that most egg farms if present in affected states are at risk of exposure.  At this time, it is critical to know what factors were associated with the relatively limited number of outbreaks that have occurred despite the probability of exposure.  If a preliminary evaluation discloses a common factor or deviations from accepted standards of structural and operational biosecurity, this information would be valuable to producers that have not been affected.

 

Egg-NewsIf some specific defect or combination of deficiencies in either structural or operational biosecurity could be identified and publicized, it would benefit all producers who face exposure to HPAI.  Obtaining provisional information in real time may prevent additional outbreaks obviating costs to the public and private sectors.  While it is recognized that from a scientific perspective a detailed case-controlled study would be ideal and will be conducted, a considered opinion now, based on experience and insight as to possible deficiencies in biosecurity or causal factors would be highly beneficial to prevention. Recommendations from a preliminary evaluation may motivate remedial action and would allay concerns relating to potential outbreaks.

 

A preliminary opinion based on the review of the questionnaires relating to nine major outbreaks could be provided by APHIS with the understanding that a detailed study will be conducted after resolution of the present epornitic.  A preliminary report in late April would be far more beneficial than a comprehensive document in 2023 or later.  Given previous requests to APHIS, a provisional report would have had more impact when requested in late March.

 

APHIS has access to the required data and their epidemiologists with field training could rapidly review the questionnaires for possible factors contributing to outbreaks.  If APHIS is either disinclined to conduct an initial review or is overwhelmed, then it is respectfully suggested that coded questionnaires be provided to a competent team comprising poultry health professionals in academia and industry. Their review and comment could provide unaffected producers with observations and recommendations to reinforce biosecurity and to correct any obvious defects arising from the questionnaires and follow-up.

 

Egg-News

There are immense direct and indirect costs arising from an outbreak of HPAI on a large egg-production complex. Expenses accruing to the public and private sectors include flock depopulation, disposal and decontamination, surveillance, disruption of ongoing production, loss of revenue and goodwill and widespread impacts on individuals and communities. The inflexibility of APHIS with respect to conducting a much-needed evaluation of the epidemiological questionnaires is incomprehensible.  Preventing even one outbreak on a one-million bird complex would provide an infinite return on the time devoted to a review as compared to the cost of depletion, disposal loss of revenue and ultimately added cost to consumers.

 


 

FDA Negligence On Food Safety-The Problem Needs a Radical Solution

04/13/2022

Egg-NewsPolitico published an expose on deficiencies at the U.S. Food and Drug Administration on April 9th relating to oversight of food safety. The Agency is responsible for all food products other than red meat and poultry that fall under the purview of the USDA Food Safety and Inspection Service (FSIS)-but that’s another story. The incisive article The FDA's Food Failure by veteran food jouurnalist Helena Bottmiller-Evich documents numerous structural and organizational factors responsible for inadequate protection of the U.S. population.  Despite funding amounting to approximately $1 billion annually and an imperative from the Food Safety Modernization Act passed eleven years ago, U.S. consumers have probably less assurance of food safety than they did three administrations ago.

 

The Politico article was based on interviews with as many as 50 credible commentators, many of whom were previously senior administrators in the FDA and specifically in the Center for Food Safety and Applied Nutrition (FSAN) responsible for overview of food safety, nutritional labels and aspects of dietary health promotion. Comments advanced by those interviewed characterized FDA actions and culture as “byzantine”, “a joke” and “ridiculous”, representing a profound indictment of FDA capabilities and response to challenges.

 

During the past three years, the FDA has clearly demonstrated incompetence or indifference with regard to heavy metal content of infant foods, failure to respond to evidence of contamination of infant formulas, inadequate inspection of imported foods including seafood, spices and specialty products.  Despite annual outbreaks of foodborne infection attributed to leafy greens emanating from the Yuma Valley of Arizona and from the Imperial Valley of California, FDA has yet to devise a preventive program against contamination with STEC, Listeria, Salmonella and now Cyclospora.  Investigations of foodborne outbreaks as detected by FoodNet do not receive the diligent attention. The development of the 2010 Final Rule on prevention of Salmonella and subsequent implementation demonstrated an inability or disinclination to consult with poultry health professionals in industry and academia. The Final Rule ignored ST and SE vaccination that was universally in use. The first year of inspections by untrained FDA personnel reflected adversely on the Agency and but for delegation to state departments of agriculture the program would have been a failure.

 

The Politico article identified  structural issues contributing in part to the dysfunction demonstrated by the FDA with respect to food safety. Frank Yiannas, the Deputy Commissioner for Food Policy and Response, who reports to the Commissioner of the FDA has no line authority.  The Center for Food Safety and Applied Nutrition is directed by Dr. Susan Mayne reporting directly to the Commissioner.  By virtue of their respective training and management styles, there is apparentlEgg-Newsy a large measure of organizational and interpersonal conflict that impedes the mission of the Agency. Frank Yiannas has a background in commercial food production and distribution and is experienced in risk evaluation and applied aspects of food safety. He has been trained to rapidly evaluate problems and develop solutions followed by active implementation.  In contrast, Dr. Mayne, although with considerable training in epidemiology and microbiology, demonstrates an academic approach requiring consensus but deferring decisions and action.

 

The situation as revealed in the Politico article has motivated Senator Patty Murray (D-WA), the Chairperson of the Senate Health, Education, Labor and Pensions Committee to initiate an enquiry. She has addressed a letter to Dr. Robert M. Califf, the newly appointed FDA Commissioner requesting answers to a series of pertinent questions requiring a response by April 25th.  Senator Murray requested Dr. Califf to specify what organizational and structural changes he intends to make to improve performance and enforcement within CFSAN.  Ongoing problems including contamination of baby formulas, lack of action on sodium levels in food and contamination of leafy greens have persisted for years and accordingly, the letter demanded an explanation for delays and the action that is planned to resolve problems implicit in delayed decision making.  Senator Murray requested specific details on the number and frequency of food safety inspections conducted by the FDA according to food category and the intensity of analytical surveillance and results.

 

Egg-NewsRearranging areas of responsibility within the FDA, especially if accountability and authority are not defined, will be analogous to rearranging deck chairs on the Titanic.  The FDA has for many decades relegated food safety to the back burner, concentrating on drugs and medical devices. Even with this emphasis there are questions as to the frequency and rigor of inspections in pharmaceutical plants located in India and China that supply the bulk of generic drugs prescribed for our population. 

 

There is also the added problem of divided responsibility for food safety.  Red meat and poultry fall under the Food Safety and Inspection Service of the USDA, creating inter-agency conflict to the detriment of consumers. Given the evident farmer and packer orientation of FSIS and the ineptitude of FDA, U.S. consumers would be best served by a consolidated food safety agency as in the U.K. and the E.U.  For a number of years EGG-NEWS and sister newsletter, CHICK-NEWS, have proposed the establishment of a sub-cabinet agency dedicated to food safety that would function with a dedicated and qualified group of administrators, scientists and field personnel.  Activities conducted by FSIS and the FDA with respect to food safety would be combined for the benefit of efficiency and accomplishment.  Simply throwing more money at the FDA or restructuring reporting relationships will not solve the problem of an inappropriate culture and the perception of food safety within the FDA as a neglected step-child, irrespective of the best intentions or competence of the Commissioner.  Establishing a Food Safety Agency would be a radical change within the federal system but is probably justified by the incidence of foodborne outbreaks and the neglect of applied nutrition as a measure to promote public health.  The proposed Food Safety Agency would require appropriate enabling legislation but would imply greater Congressional oversight that is now lacking.

 

When circumstances denote deficiencies in organizations and a lack of interaction between federal agencies, a crisis creates impetus for change.  Over decades, we have seen the establishment of a Department of Defense coordinating separate Army and Navy Departments, the creation of the Department of Energy and most recently following the 9/11 event, the Department of Homeland Security.

 

It would be possible to combine the best resources and personnel within the existing USDA-FSIS and the FDA-CFSAN.  A dedicated agency would eliminate turf fights as evidenced by the delays over development of GM-derived foods or cell-cultured meat and would contribute to more effective and focused rules, oversight and a safer food system.

 

Whether or not a consolidated Food Safety Agency is created will depend on various pressures, both for and against.  There is generally reluctance by Congress to make radical changes.  Packers have developed a modus vivendi with FSIS and are disinclined to change given an understanding of systems and implementation of regulations.  Lobbyists that infest downtown DC in profusion will protect the interests of their clients including food processors and manufacturers in addition to consumer advocacy organizations.  There will be strong resistance from both the FDA and the USDA since a proposed food safety agency would result in a smaller area of turf. Budgetary allocations and numbers of employees are the basis on which departments and administrators measure their status in Washington. In the past when confronted with hints of consolidation the FDA the CDC and USDA sign memorandums of cooperation and then knowingly revert to the status quo, a real-life ongoing U.S. version of the BBC Yes Minister series.

 

The events of 9/11, similar to the launch of Sputnik were sudden in their event but resulted in rapid changes in administrative structures and resource allocation.  The problems of food safety and public health are insidious but require no less of a response in the form of restructuring and implementation. The system is so broken that it cannot be repaired with either duct tape or red tape. A radical approach in the form of a consolidated Food Safety Agency is long overdue.


 

Globalization Is An Outdated Concept- U.S. Must Become More Self-Sufficient

04/03/2022

Egg-NewsOn February 24th, the White House released a report on the disruption of supply chains resulting from the COVID pandemic.  Concurrently, the U.S. Departments of Defense, Homeland Security, Transportation, Health and Human Services and Commerce released specific reports relating to their areas of remit.

The reports were commissioned by Executive Order 14017 directing an in-depth review of critical supply chain deficiencies and identifying reliance on other nations for critical supplies.

 

It emerged that China represents the greatest risk to U.S. manufacturing and agriculture and hence, our economy.  The White House report included the statement, “We must reduce our dependence on China and other geopolitical competitors with respect to key products.”  In the short term, the U.S. will have to rely on China and other nations and accordingly, must continue diplomatic and trade relations referred colloquially as “friend-shoring”. Nations of the E.U., the U.K. and Japan are obvious partners given common concerns over the rise of China and its domination of critical areas.

 

  • The Department of Energy identified the dominance of China in solar power generation and mining and refining of rare earth elements necessary for electronic components.
  • The Department of Defense is concerned over sourcing of lithium batteries and microelectronics.
  • The Department of Homeland Security notes Chinese advances in information and communication technology and their activities in cyber-espionage through government and state-controlled companies.
  • The Department of Transportation noted that three State-affiliated companies in China are responsible for 95 percent of the manufacture of dry cargo containers.

 

Although the findings of the Department of Health and Human Services were not reviewed, it is evident that China and to a lesser extent India are responsible for synthesis of compounds that form the basis of the manufacture of pharmaceuticals.

China and also Russia are major producers of components required for fertilizers and with disruption of either production or world distribution of phosphates, the U.S. and E.U. agriculture may be impacted if not in yield, certainly as to cost.

 

Egg-NewsThe findings of the various departments under the direction of the White House suggest development of self-sufficiency and where possible, cooperation with friendly nations in mutually beneficial relationships. 

 

This sentiment was expressed by Ambassador Katherine Tai, U.S. Trade Representative, in testimony before a House Committee last week.  Ms. Tai pointed to the disruptions in ocean freight attributed to actions taken by China either deliberately or inadvertently during the COVID shutdowns that affected ports in China shipping to the U.S. and the E.U.  It is possible that a further round of disruptions will occur as China persists with an unsuccessful zero tolerance for COVID.  This has resulted in shutdown of metropolitan Shanghai.  It is considered significant that our Trade Representative, responsible for establishing agreements to promote international trade is now advocating self-sufficiency.  This is in recognition of the policies of China and other unfriendly nations on whom the U.S. has developed a reliance for critical supplies and commodities.

 

Egg-NewsAs a citizen, investor and contributor to our economy and certainly not an isolationist, I look forward to the day when a hammer in my local hardware store is imprinted with the proud words, “Made in the USA”. I look forward to driving past small manufacturing plants in the Midwest that have full employee parking lots and displaying “Help Wanted” signs. I anticipate a resurgence in U.S. design and manufacturing and an industrial renaissance such as occurred following the Great Depression.  For too long we have followed a policy of offshoring, taking advantage of low labor rates at the expense of our manufacturing infrastructure and committing to globalization.  This must change for the benefit of industry, agriculture, our national security and eventually our way of life.


 

We Needed an In-person 2022 Midwest Poultry Federation Convention

03/27/2022

In-person conferences were cancelled in 2021 due to COVID with the industry reverting to on-line meetings and webinars.  Although COVID concerns have abated, the series of highly pathogenic avian influenza outbreaks reduced attendance at the Midwest Poultry Federation (MPF) Convention. According to a March 27th post Convention release 2,300 registered and 280 companies exhibited in the Trade Show. Despite the lower than anticipated attendance those who came benefited from a wide range of activities, only possible with an in-person meeting.  This sentiment was reinforced by a statement from Ross Thorensen, the incoming MFP chairperson, who stated “The Convention provided incredible value to both attendees and exhibitors and we look forward to channeling this momentum into 2023”

 

The outstanding benefit was the emotional lift from renewal of friendships and establishing new acquaintances through direct participation in the educational and social events, the trade exhibition and concurrent programs. After two years of relative isolation and reliance on zoom meetings it was restorative to be able to shed masks and shake hands representing a welcome return to an approximation of normality.

 

 

As in previous years a full slate of activities was presented by the MPF including:

  • Educational sessions with separate focus presentations for egg production, turkeys, broilers and processing.  The MPF Congress provides an opportunity for academia to present the results of practical research to the industry.
  • The event was an opportunity for associations to hold their annual meetings. Organic Egg Farmers of America and The North Central Avian Diseases Conference held meetings concurrently with the MPF Congress contributing to participation and attendance.
  • The event provided a forum for university graduates to explore job opportunities and to match their skills with companies actively recruiting for technical and managerial staff.
  • The trade exhibit, with approximately 280 companies participating, was a valuable opportunity to review innovations in management, housing, health, sustainability and efficiency.  In contrast to the annual IPPE in Atlanta, the MFP Convention offers a more focused approach to the poultry industries in the Midwest with an emphasis on turkeys and egg production.  Interaction between manufacturers and suppliers with prospective and existing customers facilitated exchange of knowledge and allowed direct comparisons between alternative products.  Areas of concentration included aviary systems, ventilation installations, vaccines and nutritional additives.

 

It is unfortunate that the ongoing outbreaks of Avian Influenza limited attendance.  Participation in the meeting should not have represented any risk of introducing virus into the flocks of an attendee, providing common sense biosecurity procedures were followed.  It is hoped that in future years, with the almost inevitable return of avian influenza disseminated in late winter and early spring by migratory waterfowl, that participants will not be dissuaded from attending the MFP Convention. Appropriate precautions include refraining from visiting flocks for 48 hours after return from Minneapolis and following personal biosecurity procedures including showering that have proven effective against transmission of AI virus.

 

The organizers of the convention are to be complimented on the comprehensive program supported by the arrangements of Lara Durben and her colleagues at Empowered Events.  Moving the convention from the St. Paul venue to the larger Minneapolis Convention Center two year ago permitted expansion of exhibit space and consolidation under a single dome together with ample space for concurrent meetings.

 

The 2023 MPF Convention will be held from April 11th through April 13th.


 

The Wider Impact of the Russian Invasion of Ukraine

03/21/2022

In the immediate aftermath of the brutal invasion of Ukraine by the Russian Federation, exports of poultry meat by MHP and competitors and eggs and egg products from Avangard and Ovostar have ceased.  It is known that facilities operated by poultry producers have been extensively damaged, especially in the case of MHP, but the breakdown in logistics including power has also impacted production.  Avangard indicated earlier last week that it was unable to supply feed to as many as three million hens in the Kherson region in southeast Ukraine near the Crimean Peninsula occupied by Russia since 2014. Avangard actually donated as many birds as they could dispose of to citizens and the military.

 

Over the past decade both egg and broiler meat producers in Ukraine have supplied markets in western Europe and the Middle East.  This has now created opportunities for exports from Turkey, Poland, Brazil and the U.S.

 

The broader issues resulting from the invasion and resulting war relate to the supply of grains.  Ukraine is responsible for 13% of world trade in agricultural commodities most of which is loaded from Black Sea lowland ports. Extensive destruction has taken place in port cities including Odessa, Mykolaiv and now virtually destroyed Mariupol, all threatened by imminent encirclement. Recruitment of agricultural workers to resist the invasion and disruption of the transport infrastructure will affect the upcoming planting season for both sunflower and corn.  Limited availability of fertilizer, pesticides and diesel fuel are major obstacles for farmers and even if obtainable are offered at exorbitant prices.

 

Although not directly impacted by the war, production in Russia will be affected as banks will not extend loans and importers have ceased trading in Russian fertilizers and their ingredients including potash and natural gas. Financial sanctions against Russia have deprived that nation of export trade further creating artificial shortages in many nations reliant on both Russian and Ukranian commodities. Since 2021, sanctions have been imposed on Belarus, a major producer of potash, further restricting availability of fertilizer for world agriculture.

 

Interdiction of grain shipments from Black Sea ports will restrict the supply of wheat to major consumers, including Egypt, Saudi Arabia and Gulf states.  This is reflected in the volatility in the price of this commodity now approximately 50% above the 4-year average.  Since bread prepared from imported wheat is heavily subsidized in countries such as Egypt, escalation in price imposes financial challenges to autocratic governments that are also threatened with potential violent reactions by populations reliant on bread at low cost. The concept of available calories extends beyond the price of individual grains given the possibility of substitution under conditions of restricted supply.  Rabobank pedicts that even with the unlikely rapid resolution of hostilities, effects of the war will persist over an extended period as global food supply is impacted. 

 

The March 12th edition of The Economist notes the parallel between current restrictions on Black Sea shipping and the blockade of the Dardanelles Strait by the Ottoman Empire in the first months of World War I.  This action deprived Britain and France of wheat and was a major factor in the decision to invade Gallipoli by Anzac forces in February 1915 in an attempt to eliminate Turkey as a belligerent.

 

Kyiv and Moscow are thousands of miles from Chicago, but events in Eastern Europe are evident in trading at the CME and will directly affect the cost of U.S. production of eggs, pork and chicken during the current year.


 

PIGS Act Proposed to Establish Federal Housing Standard for Sows—Implications for Egg Production

03/13/2022

U.S. Representatives Veronica Escobar (D-TX) and Nancy Mace (R-SC) have introduced H.R. 7004, the Pigs in Gestation Stalls (PIGS) Act, that would establish a minimum-space requirement for all U.S. sows.  It is estimated that there are five million sows held for breeding in the U.S., with perhaps a third of them already out of conventional gestation crates into group housing.

 

Ten states have passed legislation banning gestation crates that confine sows to enclosures approximately 7 feet by 3 feet that effectively prevent these breeding animals from rotational movement.  California led the way with Proposition #2 in 2008 subsequently clarified and reinforced by Proposition #12 in 2018.  Similar legislation has been passed in Florida, Arizona and New-England states. Sales bans for pork from operations relying on gestation crates take effect in California following publication of standards and in Massachusetts, effective 2022.These states have nearly 50 million consumers. In addition, sixty major restaurant chains and retailers have committed to only sourcing pork from farms using group housing for sows.

 

The concept of a federal standard for sows revisits the previously abandoned "Egg Bill".  Prior to passage of Proposition #12, the UEP and HSUS agreed that enriched colony modules, floor systems or aviaries would be an acceptable alternative to conventional cages allowing hens 140 square inches in colonies and 1 square foot of useable floor space in alternative systems.  The federal standard that would have been incorporated in the "Egg Bill" foundered for a number of reasons including vigorous opposition and lobbying from pork producers but it may be worthy of reconsideration.  An interesting provision of the PIGS Act is that funds would be applied from the pork check-off to compensate farmers for expenditure involved in transition from gestation crates to group housing.  This would be unfair to the producers that have already committed to conversion and have invested in a more humane and consumer-acceptable system.

 

The blizzard of litigation initiated by the National Pork Producers Council (NPPC) and supported by other some other agricultural organizations in an attempt to limit Proposition #12 to California represents a waste of both time and money. The numerous petitions that have been rejected at federal district level and subsequent appeals to higher courts represent a disservice to the hog industry and ultimately for the producers who are determined to retain an archaic and patently cruel system of confinement.  Regrettably for the members of the NPPC the train has left the station.  Producers using gestation crates will have progressively greater difficulty in marketing their products. 

 

The U.S. egg industry recognized the inevitability of replacing conventional cages a decade ago and invested in alternative housing with one third of the national flock transferred to aviaries and floor systems at this time.  The total cost of conversion is estimated to be northward of $10 billion and rising, taking into account the necessary conversion of pullet housing and inevitable restructuring. Existing obsolete housing that is unsuitable for conversion or located on small farms requiring off-line processing will have to be replaced by new in-line aviary complexes requiring packing plants and feed mills.

 

Revisiting the Egg Bill to allow enriched colony modules, aviaries, floor housing and suitable alternatives under a federal standard would provide a level playing field for the entire U.S. egg industry. Extending the period for full replacement of conventional cages to beyond 2025 would facilitate planning and the acquisition of capital expended on conversion at a predetermined rate in accordance with a national program.


 

Implications Arising from the Russian Invasion of the Ukraine

03/03/2022

Current events in Ukraine, while still developing, suggest both direct and indirect effects on the U.S. and international commodities markets and hence cost of livestock production.

 

Ukraine has a population of 44 million and is regarded as an emerging free-market economy. Since the dissolution of the USSR, Ukraine has steadilly moved to democracy and has attempted to disengage from neighboring Russia. The Nation aspires to be a member of the European Union and ultimately NATO. Currently agricultural products are the major exports following a decline in chemical and steel production caused by a series of recessions attributed to mismanagement by previous administrations.  Ukraine has a land area of 233,000 square miles of which 130,000 comprise arable and highly fertile soil.  Ukraine is the World’s largest producer of sunflower seed with an annual crop approaching 15 million tons.  The Nation is the third largest producer of potatoes (23 million tons). Corn production ranks fifth at 36 million metric tons and Ukraine is seventh-ranked in sugar beets (14 million tons), barley (7.3 million tons), canola (2.7 million tons) rye (400 million tons).

 

If following the invasion, and presumably an occupation of the nation by Russia or installation of a puppet government, agricultural production will fall as infrastructure has been disrupted and a long-term intensive insurgency is anticipated.

 

If the Russian Federation as in past decades follows the Soviet practice of exploiting the potential of the Nation, current trading partners will be deprived of products.  This will have an inflationary effect on the cost of cereals and oilseeds throughout the world. We should not forget the Holodomor of 1931 through 1934 when 3.9 million Ukrainians starved to death as a result of bungled Soviet attempts to enforce collectivisation on a productive agricultural nation.

 

Sanctions imposed on Russia as a result of the invasion of Ukraine will also have secondary effects on the U.S. and its economy.  Since Russia is a major exporter of oil and gas, embargoing energy shipments even with continued supplies to sympathetic and autocratic nations such as China, will result in a rise in domestic prices. It is anticipated that a higher proportion of domestic fossil-derived fuels will be exported at ever increasing prices.  Prior to the invasion, economists predicted a rise in crude oil from the mid $80s to $120 per barrel. On  March 2nd  WTI closed at $113 per barrel supporting forecasts of higher energy prices although encouraging greater production.

 

Should there be any inference in Black Sea shipping, prices of commodities could rise exponentially.  Currently large multinational grain traders and processors, ADM and Bunge have suspended oilseed processing and shipping following an attack on a vessel under charter. Cargill and other multinationals operating  grain terminals near the port of Odessa that is threatened by Russian forces have suspended operations and withdrawn expatriates. There is concern over access to the port of Poti in the nation of Georgia that serves as an entry point for U.S. chicken shipments to that country and neighbors in Eurasia. Shipping rates for container vessels westbound from the E.U. have spiked 16 percent in a week, again contributing to inflation on both sides of the Atlantic.

 

Depending on the nature of restrictions on emigration that may be imposed by a Russian occupier, there is a huge talent pool of trained technical workers with an emphasis on software with more than 200,000 programmers in the Ukraine. Westward migration of this potentially productive workforce could be beneficial to the E.U and North America. Canada will be the most likely nation to welcome qualified engineers and others with skills and training unless U.S. immigration laws are amended and updated.

 

At this time farmers, industrial workers and professionals in the U.S. are showing a high level of support for their counterparts in Ukraine who are the victims of unwarranted aggression.  We earnestly hope that there will be a quick resolution to the crisis with minimal loss of life on both sides of the conflict although this currently appears unlikely.  Restoration of peace and resumption of agricultural activities and exports will be necessary to maintain long-term stability in world markets.

 

The E.U. is a significant importer of egg liquid from Ukraine and it is possible that demand may increase with short to medium term opportunities for the U.S.

 

This is no time for schadenfreude and we can but hope that diplomatic efforts and pressure by the U.S. and its allies in the E.U. and even internal opposition in the Russian Federation will bring an end to the invasion and restore an acceptable way of life for the people of Ukraine.

 


 




































































































































































































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