Editorial


Sustainability as a Marketing Imperative

09/23/2021

The report on sustainability in food retailing produced by the Coca-Cola Retailing Research Council of North America was reviewed at the Executive Conference of the National Grocers Association on September 18th.  This report stressed the extent of consumer concern over aspects of sustainability in relation to product packaging, processing and the role of participants in the food chain from production through to retail.

 

Sustainability means different things to diverse demographics. In essence sustainability as a concept represents the satisfaction of needs without damage to the environment and with special concern for future generations.

 

  • Sustainability incorporates social, human, economic and environmental components representing ‘Four Pillars’ that are in effectively interrelated in production.

     

    • Human sustainability concerns health, education, providing services and the development of skills for the wellbeing of communities.
    • Social sustainability relates to maintaining services and balance within communities including the rule of law and dissemination of accurate information.
    • Economic sustainability is necessary to preserve capital and contribute to an acceptable standard of living.  Businesses must apply assets to generate profit over the long-term.
    • Environmental sustainability protects land, air, water and other resources. Both enterprises and individuals can either contribute to environmental degradation or through specific actions they can reduce wastage, conserve water, lower greenhouse gas emissions and prevent pollution through appropriate disposal of packaging and unwanted items.

 

In the context of a business concern, it is necessary to integrate the four pillars of sustainability with appropriate compromises and trade-offs to achieve an optimal outcome.

 

The sustainability and food retailing study demonstrated that sixty percent of consumers believe supermarkets and retailers should cooperate with their local communities to advance sustainability.  The study indicated that most consumers would be willing to pay marginally more for food items and would preferentially patronize stores that demonstrate positive polices contributing to sustainability.

 

Examples of sustainability in the egg industry that exemplify the four pillars include:

  • Evidence that workers are well remunerated and are protected against of COVID.
  • Consumers need to be assured that eggs are produced in a sustainable manner.  This will be the responsibility of the Roundtable on Sustainable Poultry and Egg Production to develop quantitative levels of greenhouse gas emission, land and water use per unit of production as incorporated in a comprehensive life cycle assessment.  The broiler industry has already completed their evaluation and a corresponding egg study will be forthcoming.

 

In the context of egg production, packaging constitutes the most important aspect of concern for environmentally conscious consumers.  It is apparent that fiber is regarded as biodegradable as opposed to polystyrene foam and PET.  If polystyrene is used, in-store collection of empty containers is considered essential to obviate the negative impression that packaging remains on waste dumps in perpetuity or is destined for an ocean gyre.

 

Consumers indicate that they favor biodegradable bags for produce and are requesting a range of product sizes to prevent waste. 

 

The concept of ‘local’ production is favored by consumers. From the standpoint of sustainability remote but concentrated central cultivation of produce or production of protein, including eggs may require fewer resources than inefficient small-scale production and packaging.  In terms of USDA labeling, ‘local’ can extend over 400 miles.

 

With a greater emphasis on climate change policy and attendant publicity following a change in Administration, consumers, especially those under thirty years of age are concerned over environmental issues. Recent climatic events including hurricanes, wild fires, flooding and polar vortices have increased awareness of the impact of energy generation from fossil fuels on the environment.

 

The egg industry is fortunate in that feed conversion is favorable and that conservation of water, power and energy contribute to a small environmental footprint for the product, compared to other animal protein sources.  The challenge for the egg industry will be to develop and confirm quantitative data relating to sustainability and then to spread the message to consumers.  If opponents of intensive livestock production can use social media to deprecate intensive production then with commensurate effort it will be possible for the industry to present a more positive picture.  The activities at the American Egg Board with respect to social media are commendable and obviously will have to be expanded. 

 

Those who oppose our industry are losing welfare as an issue with progression in the transition to cage-free housing.  Salmonella as a secondary talking point is now of minimal importance since there has not been a SE outbreak attributed to eggs from a commercial complex since 2010.

 

The creation of the Roundtable, changes in packaging and inherent efficiency in conversion of resources to food place egg production in a favorable position with regard to sustainability.  We can be justifiably proud of our achievements but must build on this foundation with both innovation and enhanced messaging.


 

Understanding Supply and Demand Factors to Enhance Profitability in the Egg Industry

09/16/2021

The U.S. Egg Industry requires professional evaluation of available data to base decisions on flock size and placement, capital expenditure, mechanization and marketing programs. We are navigating with the aid of a rear-view mirror in a situation that demands forward-looking radar and computerized interpretation of models to correlate consumer, cost and operational inputs.

 

The weekly Egg Price And Inventory Report in each edition of EGG-NEWS documents the weekly USDA-AMS combined regional large egg price. This is compared to the previous year and the three-year average. From June through early August 2021 prices conformed closely to 2020 and the three-year average. Starting in mid-August there was a clear upward trend deviating from the corresponding weekly values for 2020 and the three-year average. The increase is attributed to reopening of the economy following COVID restrictions. During the most recent week the combined regional price was about 25 cents per dozen above the three-year average but regrettably showing a downward trend.  Current prices can be compared to the year-to-date peak recorded in April of this year.

 

As with all commodities, eggs respond to the basic laws of supply and demand. In 2021, the industry has demonstrated restraint with regard to flock size as evidenced by production data. For the first seven months of 2019, 8.21 billion table eggs were packed. In 2020 consumption declined by 2.5 percent to 8.00 billion with a fractional decrease for the first seven months of 2021 to 7.98 billion.  Given a 1.4 percent increase in average rate of lay to 81.6 percent in 2021, it is evident that flock size has been limited.  The USDA-NASS estimates that the seven-month average table egg layer flock has declined from 380 million in 2019 to 327 million in 2020 and averaged 323 million for the first seven months of the current year.

 

The supply side in the egg industry has undergone a profound change since the advent of COVID.  Traditionally the egg industry comprises two segments, respectively marketing shell eggs and egg liquid to separate defined markets.  Under unusual and extreme conditions, overlap or competition occurs between the shell egg and egg liquid segments of the egg industry.  In 2015 during the epornitic of highly pathogenic avian influenza, losses attaining approximately 40 million hens disproportionately impacted the egg liquid segment.  Until supplies of egg liquid could be imported and flocks replaced, eggs were diverted from retail shell egg sales to breaking.  Overall supply was reduced and both shell eggs and egg liquid soared in price. 

 

With the advent of COVID in 2020 the reverse situation occurred.  Demand for egg liquids plummeted as QSRs and restaurants closed in response to COVID control measures and unwillingness of consumers to patronize in-place dining.  Eggs that would have been destined for breaking were diverted to the shell channel despite the restraint represented by the availability of egg-packing material.  Prices underwent a sharp increase due to consumer fears of shortages resulting in a transitory spike to as high as $3 per dozen during April 2020. Since the apparent shortage was only a logistic restraint, market stability and hence prices were restored within weeks.

 

Despite their hard shell, eggs demonstrate price elasticity with extreme and rapid changes in wholesale price with relatively small changes in availability. The widely used price discovery system is clearly amplifying both increases and decreases in unit revenue.  The daily quotations are now used by chain buyers to effectively suppress revenue by spreading their  purchases over extended periods and preempting anticipated price rises before holiday weekends and the two major annual demand surges.

 

Demand for shell eggs is a function of family and individual dietary habits hopefully stimulated by the activities of the American Egg Board. Essentially consumers buy eggs when they run short in their refrigerators.  Reduction in price may stimulate limited incremental purchases, especially among the lower income demographic.  Regrettably stores are not featuring eggs to the extent that was evident in past years.  This is a direct effect of extreme competition among chains that post operating margins in the low single digits and with proportionately smaller profit margins.  The Kroger Company that can be regarded as a pure-play grocer posted a twelve-month trailing operating margin of 2.0 percent and a profit margin of 1.1 percent through the end of the second quarter of the current fiscal year ending August 14th.  The traditional chains have maintained high margins on eggs despite competition from the deep discounters. This has been to the disadvantage of the shell-egg segment.

 

The disturbances in the dynamics and interaction of the two major segments of the egg industry in 2015 due to HPAI and in 2020 following COVID represented extremes in pricing and supply.  The events have generated data that could be analyzed to determine the effects of extreme pressure on availability and demand of eggs in both shell and liquid form compared to the relatively cyclic seasonal fluctuations. Despite recommendations to initiate a comprehensive economic study on supply and demand considerations, funding has not been made available to the departments of agricultural economics at major Land Grant universities.  We must understand how volume of production and fluctuation in demand, albeit over a limited range, affect the production margins of the two major sectors.  Clearly we need the knowledge that could be acquired from both the extreme events and regular consumption patterns to understand the relationship of volume of supply level of demand and pricing.

 

 Traditionally the industry has operated at maximum housing capacity, manipulating flocks to anticipate periods when prices are presumed to rise and then to endure periods of negative margins. The shell industry has developed an acceptance that Easter and Christmas demand will compensate for losses during the remainder of the year.  Given that the industry is transitioning from conventional cages to alternative systems, requiring a realistic total of between $10 billion to $15 billion in new capital investment, producers and their lenders will require more information on the factors that determine price and hence profitability.  The decisions relating to investment in production, processing and distribution should be based on a clearer understanding of the effects of supply in relation to demand.  Appropriate decisions relating to capital expenditure and flock placement will be necessary in a future operating environment presenting challenges of inflation in feed, packaging, labor, transport and other costs, demands for sustainability, disease, increased regulation and industry consolidation.


 

Waukesha School Board Reverses Decision to Deprive Children of School Nutrition.

09/03/2021

The U.S. Department of Agriculture has extended the Seamless Summer option during the current COVID pandemic eliminating payments and allowing meals to be served in classrooms or outside to avoid congregating in lunchrooms.  Alone among 408 Wisconsin public school districts, the Waukesha Board voted to canceled the free program in June.  Joseph Como, President of the Board, stated “I would say this is part of normalization.”  Board member Karen Rhanicek said the free program “made it easy for families to become spoiled”. 

 

For the edification of Como, Waukesha and for that matter Wisconsin is not going back to “normal”.  Waukesha County has recorded a COVID rate of 13,718 cases per 100,000 with 169 fatalities per 100,000 of the county population.  This compares with 12,352 cases per 100,000 and 143 fatalities per 100,000 for the entire state of Wisconsin.  In comparing the figures it must be remembered that Milwaukee County, the densest populated in the state, has an extremely high level of COVID cases and fatalities.  Stating that Waukesha, or Wisconsin, or for that matter the U.S. is back to normal is an eggregious denial of reality.  To state that a free program providing nutrition for children encourages dependence on government largesse is cynical and depraved.

 

An administrator with the State Department of Public Instruction School Nutrition Team has advised the district to reconsider noting that the hunger rate in Waukesha County increased from nine percent in 2019 to 13 percent in 2020 during COVID.

 

The Board apparently was concerned over discrimination against low income families that would be required to complete forms for their children to participate in the program.  Surely this should be up to the parents to decide whether to take advantage of a USDA feeding program for their children.  The Board should not be presuming the desires of families since it is generally considered among conservatives that parental choice takes precedence over issues such as health, and education.

 

At the August Board meeting the decision was reservsed by a 5 to 4 vote, with the District continuing to participate in the Federal program. This was based on public opposition to the June decision. Board member Greg Deets quoted in the Waukesha Daily Freeman stated “The truth is that many of our students are hungry through the school day and we have the ability to do something about that” He added “These are stressful times and it is well known that hunger directly impacts our students’ behavior and their ability to learn”

 

It is indeed unfortunate that four elected officials of a school board saw fit to deprive students for whom they are responsible, of adequate available nutrition funded by the Federal government. If he were alive, Charles Dickens would have been inspired by the callous indifference and twisted logic expressed by these members of the Board.


 

EIC 2020 Survey of Processing, Packaging and Transport

08/30/2021

On August 25th the Egg Industry Center released the 2020 version of the National Egg Processing, Cartoning and Transportation Cost Survey. Compiled by Maro Ibarburu and Lesa Vold of the Egg Industry Center and Alejandro Plastina and Richard Gates of the Department of Economics, Iowa State University, the data as presented, updated the previous report reflecting 2018.

 

The response to the industry questionnaire was disappointing. Only 16 out of 100 surveys were returned. Notwithstanding the low compliance, the data reflected 80 million laying hens corresponding to approximately 35 percent of the presumed 224 million hens producing shell eggs. The data suggested that 74 percent of eggs processed by those responding to the survey were packed in line, 24 percent were acquired as nest-run and consequently were graded off-line and two percent were graded loose.

 

In comparing costs between the 2018 and 2020 surveys, median values expressed in cents per dozen were: -

 

COST INPUT

2020 2018
___________________________________________________________________
The 12-pack carton cost 9.95 9.80
Case cost (30 dozen) 3.60 4.00
Transportation cost to warehouse 5.56 5.50
Processing, in-line 1 2.90 13.27
Processing, off-line 5.47 16.47
Grade yield loss in-line* 5.52 7.04
Grade yield loss off-line* 6.97 10.00

 

*The report noted that the differences in grade yield loss were attributed to an alternative method of calculating data for 2020.

 

The estimated median cost of packaging, processing and transport for in-line eggs was 38.66 cents per dozen and for off-line eggs, 42.67 cents per dozen.

 

It is hoped that if the EIC conducts a 2022 survey the following aspects will be considered:-

  • Differences between alternative cartons including fiber, PET, 30-egg-tray and sleeve and other types in popular use.
  • Regional differences in cost with reference to labor rates
  • Packaging of cage-free product compared to eggs from caged flocks with specific reference to downgrades classified according to surface deposits and cracks
  • Comparison of labor complements and costs in plants using robotic packers
  • Comparison of packing generic compared to specialty eggs
  • Differences attributed to operational rate of packers, single shift, extended shift or double shift plant operation.
  • Differences attributed to plant throughput

The Egg Industry Center and their collaborators in the Department of Economics at Iowa State University are commended on their analysis given the restraint of the limited response. The relevance of the data is obviously subject to selection bias given the number of surveys returned by producers. The compliance rate for the survey in 2020 was 30 percent lower than in 2018. The more data that the EIC receives the greater will be the relevance and applicability of information derived from the analysis of data.

The EIC might be advised to consider specific aspects of packaging, processing and transport as an ongoing exercise rather than attempting to conduct a comprehensive survey of globular costs at two year intervals. Frankly an integrated egg producer would not be able to derive any direct operational or financial benefit from the 2020 survey unless they diverged significantly from any of the median cost categories, representing an unlikely situation.

 

The EIC should by now recognize the reluctance of producers to provide information to universities, government agencies and non-corporate entities. This is a function of the perception of minimal benefit from compliance compared to the obvious risks and consequences associated with disclosure of data. The Industry is all too aware that animal rights groups or customer associations may invoke the Freedom of Information Act to acquire data. The challenge for the EIC is to incentivize producers to comply by providing useful data. This would be analogous to the approach used by a commercial benchmarking enterprise that has actually failed to gain traction in the egg industry for reasons that are self-evident. Specific studies could be conducted personally on an in-plant basis subject to permission and cooperation to acquire and evaluate data. This would require more than a mailed out survey form with an office-centric approach and presumes familiarity with packing plants and their operation.


 

No More Excuses for Vaccine Hesitancy

08/24/2021

The announcement on Monday, August 23rd by the US Food and Drug Administration that the Pfizer-BioNTech mRNA vaccine has received full approval should reduce concern and reluctance to receive this COVID vaccine.  The FDA decision was based on extensive review of both safety and efficacy over nine months and was subject to the same rigorous standards as applied to all other vaccines.  Previously EGG-NEWS countered concerns that the mRNA vaccines were developed too rapidly. EGG-NEWS posted an editorial last week explaining that mRNA vaccines have been the subject of extensive research and development extending over two decades.  Recent breakthroughs in molecular biology and bioengineering led to the simultaneous development of spike protein antigens and also nanolipid technology to introduce the antigen into receptor cells.  The development and testing of mRNA vaccines was stimulated by government funding that expedited availability within nine months from the onset of the pandemic.  Emergency use authorization of vaccines in December 2020 by the FDA was possible only by close cooperation among scientists at the National Institutes for Health-National Institute for Allergy and Infectious Diseases, Pfizer and BioNTech, the Department of Health and Human Services supported by its affiliate agencies and the military, providing logistics.

 

Awarding permanent approval to the Pfizer vaccine and hopefully the Moderna mRNA equivalent, will allow government agencies, educational and health organizations and commercial companies to mandate vaccination for employees. This is especially necessary in work situations requiring close contact that facilitates infection with SARS-CoV-2 virus by the aerogenous route. A number of unions have indicated that they would recommend vaccination to their membership and also agree to mandates under collective bargaining agreements once any COVID vaccine received full FDA approval.

 

It is encouraging that President Trump encouraged attendees at an Alabama rally on Saturday, August 21st to be vaccinated, confirming his own immunized status.  Regrettably there were some boos from the audience suggesting that anti-vaccination propaganda has deeply poisoned the well.

 

In recent weeks, opponents of COVID vaccine have erroneously misquoted data from Israel concerning breakthrough infection.  A frequently cited figure that 60 percent of all patients currently hospitalized for COVID were previously vaccinated is subject to interpretation.  Out of 515 hospitalized patients in Israel, 301 had received two doses of the Pfizer vaccine.  This figure is used to disparage the vaccine and to provide support for the notion that the vaccine is ineffective. This is simply not supported by the facts.

 

In a recent ProMED posting, Dr. Mary J. Marshall interpreted data and provided an explanation for the apparent anomaly.  Her article noted that nearly 80 percent of all residents of Israel over the age of 12 years have been vaccinated.  There is at present a disparity in age among vaccine recipients with 90 percent of residents over 50 years old having been immunized. In contrast the  majority of those unvaccinated are under 30 years of age. Dr. Marshall correctly noted that older people are more likely to suffer respiratory infections whether from COVID or other respiratory and systemic pathogens, proportional to age.  It is accepted that respiratory viruses are twenty times more likely to result in hospitalization in people over 50 years of age and 1,600 times more likely over the age of 90.

 

Dr. Marshall adjusted data by stratifying for age demonstrating that vaccines have retained efficacy in the range of 85 percent to 95 percent against severe disease, even with exposure to the Delta variant.  Data showed that even one dose of the Pfizer vaccine reduced hospitalization resulting from severe disease over a range of 75 to 85 percent.  It is emphasized that in evaluating data, crude counts are misleading. In the specific situation in Israel where the majority of hospitalized patients are advanced in years and many with comorbidities, the apparent high rate of hospitalizations following breakthrough infections is far lower than crude figures would suggest.  When the data from Israel was expressed per 100,000 people the rate for severe cases was 16.4 per 100,000 in unvaccinated individuals compared to 5.3 per 100,000 in fully vaccinated patients.  The threefold higher prevalence confirms that vaccination suppresses severe disease.  The efficacy data relating to vaccination may be interpreted as accepting that two thirds of serious infections leading to hospitalization would be among unvaccinated individuals.  A full analysis of Israeli data confirms that vaccine efficiency against severe disease for younger individuals is 91.8 percent and for those over 50 years of age, 85 percent.

 

Data from Israel corresponds closely to current trends in southern states with low levels of vaccination.  It is calculated that over 95 percent of those occupying ICU beds were not vaccinated and the demand for hospital care is increasing sharply in the states with low rates of vaccination and concurrent policies mitigating against masking and social distancing.

 

It is encouraging that for the three last working days of the previous week, U.S. vaccination rates increased to one million per day suggesting that concern over the delta variant and its clinical consequences have swayed the inhibitions of vaccine hesitant people.  Unfortunately, our health facilities and resources will be stressed by those who are completely opposed to vaccination.  These individuals are prolonging the epidemic and at the same time delaying restoration of our economy. The Kaiser Family Foundation determined that health care for non-vaccinated people cost the U.S $2.3 billion in June and July and the cost is expected to rise further in August.

 

Let us hope that the timely action by the FDA will encourage more extensive adoption of the Pfizer vaccine in states and communities with low rates of protection.  EGG-NEWS has always maintained that COVID is a public health issue and regrets the political overtones applied to the infection. Appropriate preventive measures including vaccination that most certainly keep people out of hospital will in the short term reduce institutional care and fatalities, now running at over 1,000 per day, and will avert the persistent clinical problems attributed to "long COVID".


 

Urgent Need to Mitigate Climate Change

08/17/2021

August has been a wake-up month for those who deny the reality of climate change.  We have witnessed unprecedented once-in-a-thousand year floods in central Europe and China.  Vast areas of the planet are in flames including forests in our Western states and in Greece and Turkey. Australia has experienced severe and extensive bush fires in recent years.  The National Oceanic and Atmospheric Administration (NOAA) has forecast more and stronger hurricanes that will impact the Eastern seaboard and Gulf coast through November. There is evidence that the Gulf Stream is weakening in intensity. Droughts especially in the West are severe and are lasting for multiple years.  Water supply is diminishing as evidenced by the fact that the largest lakes in California are at less than one third of capacity and restrictions have been placed on consumption from the Colorado River system.  Coral reefs are disappearing as both water temperature and carbon dioxide content of oceans rise.  The Amazon Forest, regarded as the "world's lung" is now a net generator of carbon dioxide in the eastern quadrant due to deforestation by logging and burning with vast areas converted to livestock and crop agriculture.

 

Recognizing that average annual world temperature had risen 2.5F above the pre-industrial age, the Intergovernmental Panel on Climate Change convened a 2015 meeting in Paris. Participants agreed to limit global warming to below 3.4F by 2050 with a recommendation that, if possible, the rise in global temperature should be held to 2.7F.  The Climate Action Tracker established following the Paris meeting has monitored global temperature and other environmental effects and has determined that global temperature might rise by 6.7F above pre-industrial levels by 2100 without remedial action.

 

Environmental scientists have attempted to predict the possible effects of a 5F rise in temperature over the coming two decades. Models show that two thirds of the world's population will experience drier conditions with one-in-100-year events such as severe droughts occurring at two to five year intervals in Africa, Australia, Southern Europe and the central United States. With a 5.4F increase in average world global temperature, a quarter of the world's population would be subjected to starvation. A heat-related collapse of the rice crop in China has a probability of one over one hundred years with a 2F increase in seasonal temperature. The probability increases to one in ten years with a global rise of 5.4F. 

 

Increasing world temperature is responsible for the melting of ice caps.  An increase of 3.6F will melt the West Arctic ice sheet within a decade and collectively the release of water will result in a rise of as much as five feet in sea level before the turn of this century.  In late July, more than forty percent of the Greenland ice cap was covered with melt-water with a sharp reduction in summer sea ice in the Arctic.  With a 5F increase in global temperature, coastal cities will be uninhabitable by 2070.

 

World temperature increase will be unevenly distributed with regional values for North America and Europe increasing disproportionately to Africa and Asia, severely impacting crop production.  It is possible that nations with high humidity due to their proximity to oceans will experience wet bulb temperatures in excess of 63F producing heat index values in excess of 120F. This is inconsistent with long-term survival and health. The Intergovernmental Panel has concluded that each 0.9F increase in global temperature will result in "clearly discernable increases and intensity of heat and heavy precipitation as well as droughts in numerous regions.

 

Mitigation is obviously required to avert a global catastrophe.  Recently the U.S. in recognition of the consequences of malignant inactivity has rejoined the world community to address the overt problem of climate change.  Since the dawn of the industrial age, increased standards of living for those with resources were derived from burning coal. As we have become more dependent on electrical power the source of the energy we now take for granted should be the subject of profound change.  Technology to reduce carbon dioxide emission from coal-fired power generation is prohibitively expensive.  Alternatives such as natural gas, available in profusion in the U.S. and at a reasonable price is preferable to coal as evidenced by the trend in converting power generation to more environmentally friendly natural gas.  To meet standards of emission for greenhouse gases, methane release must be limited since this gas is more persistent and damaging to the environment then an equivalent quantity of carbon dioxide. 

 

The growing use of solar and wind generation, although currently expensive must be supported by public funding.  It is also time to reevaluate nuclear generation of power that is innocuous to the environment.  Impediments to greater use of this technology relate to disposal or reprocessing of spent nuclear fuel and also to rigorous and sometimes unnecessary regulatory oversight that requires a more rational and commonsense approach.  There have been no new nuclear plants proposed or erected in the U.S. in decades, and many facilies are facing decommissioning.  Japan and France that rely on nuclear power are reevaluating earlier decisions to transition from nuclear generation following the Fukushima Dai-ichi disaster in 2011.

 

Agriculture is responsible for ten percent of greenhouse gas emissions.  The egg and broiler industries have accepted that they are jointly, along with all agricultural enterprises, responsible for greenhouse gas emissions and adverse environmental effects.  Most poultry companies are now publishing sustainability reports with clearly defined goals to enhance conservation of water and energy and to reducing pollution and waste. The industry-wide collaboration in the form of the U.S. Roundtable on Sustainable Poultry and Eggs will incorporate a current life-cycle analysis for egg production. This will identify achievements and form the basis for future action. 

 

Areas in which sustainability of egg production can be improved include greater use of solar power as in the E.U. The Continent leads the U.S. in environmental concern and remediation.  Water use must be reduced through recycling and more efficient design of equipment and changes in production procedures.  The desirability of establishing multi-million bird units in desert areas that require vast quantities of water for evaporative cooling is questioned. These complexes will ultimately deplete aquifers and lower the regional water table unless replenished by rainfall. It is obviously preferable from an environmental perspective to produce eggs in more temperate regions and transport product to areas of market demand, despite the energy used to move eggs westward on interstate highways.  It is also noted that the energy required to transport ingredients is threefold more than the mass of shell eggs produced, so it is always environmentally and financially beneficial to produce eggs where corn, soybean meal and other ingredients are locally available.

 

Advances in genetics with complementary advances in disease control, nutrition and housing have made possible the production of eggs with reduced input of feed, energy and labor over the past fifty years.  Deviations from progress in sustainability are exemplified by organic production and free-range and non-confined housing systems that run counter to optimal use of resources to produce a food with high nutrient density. The affluent few who are environmentally conscious should recognize that their misplaced anthropomorphism conflicts with optimal sustainability. A moral compromise is therefore required to establish a balance between environmental sustainability and rational welfare in order to optimize production of eggs and derived products.

 

We are in a situation analogous to a frog in a pot of water at 35F.  Heating the water by 3F will not cause any physical concern for the unfortunate amphibian in the short term.  The predictions of environmental scientists of the longer-term consequences of 3F to 5F increases in global temperature should be heeded.  We owe succeeding generations the benefits of our stewardship of the environment and should not bequeath them a planet with mass starvation, flooding, hurricanes, droughts and warfare over resources leading to an ever-decreasing quality of life.


 

Hendrix-Genetics Executive Comments on Economic Sustainability

08/06/2021

In a July 30th article, Marcel Huijsmans, Director of Communications for Hendrix-Genetics identified three areas to achieve economic sustainability in poultry production.  He considers that placing parent and commercial and generation flocks with genetic characteristics appropriate to market needs as being critical to achieving financial return and optimizing use of resources.   He emphasizes that selection of strains should be based on climatic challenges citing the ongoing Sustainable Access to Poultry Parent Stock for Africa as an example.

 

Biosecurity is considered to be the second factor to deliver optimal results.  Primary breeders have eliminated vertically transmitted disease and commercial operators should implement appropriate structural and operational biosecurity to maintain the health of flocks.  Hendrix-Genetics has achieved World Organization for Animal Health Compartment Status for grandparent farms and hatcheries both in their home base in the Netherlands and in their breeding operation in Brazil. 

 

Huijsmans notes that innovations should improve both efficiency and sustainability.  Gene deletion may be applied in the future but it is evident that public and government concern over GMO technology will limit commercial adoption.  It is emphasized that no primary breeder including Hendrix-Genetics has ever applied any form of genetic modification in breeding programs. Improvements in genotype are based on programs applying index selection although molecular assays are universally applied to identify families with superior characteristics. 

 

Enhanced efficiency through a combination of improved genetics, superior management, prevention of disease and optimal nutrition will contribute to sustainability. Phenotypic expression of superior production of egg and poultry meat relative to inputs, including ingredients, utilities and labor benefits both farmers and consumers. Optimizing genetic potential with other inputs makes available food at a competitive price that provides consumers with a nutritious product while allowing producers a return on investment in facilities and resources.


 

Creativity and Flexibility Required to Recruit Workers and Supervisors

08/05/2021

Despite the relatively wide range of unemployment figures in U.S. states ranging from 2.7 in Utah to 7.9 percent in new Mexico with an average of 5.9 percent for the Nation, there are millions of job opportunities available, especially in positions requiring little or no training.  Irrespective of the reason for the discrepancy between job opportunities and applicants, the food production, distribution and service sectors are short of workers. Solutions require creativity coupled with realism to recruit and retain workers.  Essentially the apparent problem requires application of the principles of marketing.  Employers have to define the needs of workers and develop remuneration and benefit packages that are both appealing and competitive to generate satisfaction and loyalty.

 

Supplementary payments by the Federal Government and specific states will end in September, but structured research has shown that this largesse has not materially served as a deterrent to seeking employment.  Small-scale employers with less than fifty workers may be at a competitive disadvantage if they are in an area where a large employer, such as Amazon or an auto plant is hiring. This will especially be the case if a large company offers a high starting wage, superior benefits, union representation and a congenial workplace compared to an agricultural enterprise. 

 

Recently EGG-NEWS posted a report on McDonald’s Corporation assisting franchisees with supplements to be passed on to workers.  In contrast, a private company such as Chick-Fil-A® has not reported any problem with either recruitment or retention.  This is based on a long history of paying above standard wage in an area. The Company has provided health and educational benefits together with training, Sunday closing and permitting flexibility in work hours to accommodate family and scholastic commitments.

 

With regard to workers in laying houses and packing plants, producers are obliged to recruit from the area where they operate.  With increasing scrutiny of eligibility for non-nationals, HR departments should evaluate the feasability of H-2A visas.  Congress is currently responding to pressure from the agricultural sector to increase the number visas offered in this category allowing 12-month employment consistent with the needs of egg production and packing where training is required. 

 

There are limits to flexibility that may be offered by QSRs, since egg production and packing require fairly rigid daily hours of operation.  Start and finish times could however be adapted to the needs of workers, especially with regard to weekends given that our industry operates on a 24-7 basis.

 

Wage rates in the case of workers and salaries for supervisors are the principal determinant of whether prospective employees will consider a position.  Obviously starting rates are important.  Recently a QSR in Durham, NC, posted a ‘workers wanted’ banner offering $10 per hour.  Given that the going rate in the area for similar positions exceeds $12 per hour, the store concerned would be scraping the bottom of the barrel even if potential employees considered the lower rate. COVID has disrupted employer-employee relations and it is doubtful whether wage rates will ever return to 2020 levels. Many companies are offering sign-up bonuses payable one to three months after commencing work.  These may serve as inducements especially for skilled employees, including maintenance personnel and those with skills who have a wide range of industry options.

 

Health benefits are an important incentive as noted in union-employer negotiations that frequently place this benefit higher than base wage.  Educational benefits are significant as denoted by the response to the Pilgrims Pride/JBS USA program which attracted more employees than their dependent children.  Working conditions are important in the context of egg production, this might include provision of PPE, that in any event is necessary in the context of biosecurity, congenial rest areas and break rooms and installations and equipment that limit fatigue and physical stress.

 

Childcare is an important consideration in segments of the egg-production industry that employ women.  Supplements to compensate for the high cost of childcare or participation in communal facilities may contribute to a satisfied and stable workforce.  On-site accommodation could be provided for critical employees required to perform night checks or maintenance on farms.  Although a significant investment, appropriate low-cost but comfortable accommodation for families either on-site or in the vicinity of farms or packing units may ultimately be required, especially for foreign workers holding H-2A visas. Many potential workers lack transport to plants and farms. Van pooling or transport supplements may facilitate recruitment if this problem is identified as a restraint to employee enrolment or attendance.

 

Employers should be aware of the restrictions relating to collusion in establishing wage rates and “no poach” agreements.  The Administration has indicated that any activities that could be construed as restricting employment options or setting wages in an area are illegal and will be subject to investigation and penalties will be imposed if non-competitive practices are confirmed.

 

Given the profound change in the worker-employer equation, innovation and flexibility will be required, balancing wage rates, benefits, bonuses and work conditions going forward.  Evaluating the specific needs of workers and developing remuneration packages are required now and in the post-COVID environment.


 

Global Warming Requires Urgent and Concerted Action

07/19/2021

On July 16th, the U.S. Roundtable for Sustainable Poultry and Eggs issued a draft sustainability framework for chicken, turkey and egg production. Following public comment, the sustainability framework will be revised to form the basis of concerted action by the poultry industry to avert waste and conserve resources through the entire cycle of production, processing, packaging and distribution.  Conservation of resources is only part of the comprehensive approach to restoring the environment that has been sadly abused by industry, governments and consumers, all bearing responsibility for degradation.

 

Scientists have warned of the effects of industrialization with consequential emission of greenhouse gases.  The level of atmospheric carbon dioxide has steadily increased since the beginning of the industrial revolution in the mid-1880's mainly due to the use of fossil fuels including coal and petroleum products. Admittedly intensification of farming and worldwide deforestation have added to environmental degradation. Industrial-scale production has provided adequate and relatively inexpensive food for industrialized nations with only a small proportion of their populations involved in agriculture and livestock production and processing. 

 

Industrial chemicals including refrigerants have damaged the ozone protective layer and plastics have accumulated in our oceans and on land adding to a variety of secondary impacts.  The damage caused by global warming has been disproportionately borne by underdeveloped nations. Their populations have experienced desertification in Africa and the Pacific littoral, irregularity of monsoons in Southeast Asia and periodic famine and climate-related diseases Africa and Asia.

 

During the past year, the entire world has witnessed climatic and environmental events that have affected nations in temperate climates and have created problems for industrialized nations. In mid-July severe flooding regarded as the worst in a thousand years occurred in Western Europe.  Concurrently extreme drought in the Pacific states of the U.S. has intensified.  There are currently 78 active fires in Western states that have burned two million acres. Deforestation in the Southeastern Amazon has resulted in the region becoming a net generator of carbon dioxide instead of serving as a sink for this greenhouse gas.  Export of grains from Argentina has been impeded by low water level on the Parana River, a direct consequence of drought in Brazil.  The National Oceanic and Atmospheric Administration and the National Weather Service forecast more extreme hurricanes in the 2021 season with powerful storms fueled by higher water surface temperature.  It is obvious to any reasonably informed and thinking person that climate change is a reality and will inevitably degrade our standard of living and change our way of life in less than pleasant ways.

 

An international agreement on mitigating climate change named the Kyoto Protocol was signed in 1997 by eighty-four nations, extending the 1992 United Nations Framework Convention on climate change.  Subsequently in 2015 a group of 196 nations agreed in Paris on goals to reduce greenhouse gas emissions and to conserve resources. The intent was to constrain the increase in global temperature to not more than 2.7F above pre-industrial levels. This would be achieved through application of financial resources and technology to reduce greenhouse gas emissions and to encourage transparency in action.  The Paris Agreement required parties to strengthen national efforts on emissions controls and mitigation procedures.

 

In 2017 the U.S. withdrew from the Paris Agreement based on prevailing political sentiment.  The U.S. rejoined the Paris Agreement in February 2021 following release of a Presidential Executive Order.  The U.S. is on track to reduce greenhouse gas emissions by 17 percent by 2025 compared to a base level 2005 levels. Scientific data on oceanic and atmospheric temperature and levels of greenhouse gas emission are irrefutable.  Atmospheric and climatic changes are quantifiable and recent weather events worldwide conform to the predictions of scientists made before the turn of the century. 

 

Reversing the effects of climate change will require decades of investment and action. Acknowledging the extent and severity of the problem on both a national and world basis is the first step towards resolution. It is essential that our Nation should achieve unanimity on the need to change how we produce food, manufacture goods and consume and dispose of products essential to our way of life.  The Roundtable for Sustainability should provide practical measures that can be adopted by the poultry industry.  Recent sustainability reports from Tyson Foods, JBS USA, Sanderson Farms and other broiler integrators and by Cal-Maine Foods and Herbruck’s Poultry Ranch and others in the egg industry confirm positive action to conserve water and energy and increase efficiency in production. These efforts are supported by genetic progress in broiler, turkey and egg production strains that show improved growth rate and feed conversion through scientific selection. 

 

If our planet is to be hospitable to our grandchildren, sacrifices will have to be made by the present generation.  Denial of climate change is not an appropriate strategy, the phenomenon is not a hoax nor will it simply go away. By the same token precipitous action through placing curbs on sourcing of carbon energy will be destructive in the short term.  We need politicians with wisdom, acting on responsible scientific advice to establish and implement policy that will have long-range prospects to mitigate global warming This will constrain the rise in global atmospheric and oceanic temperature with its attendant problems of severe weather, drought, destruction of our coastal regions, famine and emerging diseases of humans, animals and plants.


 

Southeast Amazon Rainforest Net Generator of Carbon Dioxide

07/19/2021

A nine-year study conducted by the National Institute for Space Research in Brazil (equivalent to U.S. NOAA) reported that carbon dioxide concentrations in columns of air above the southeast quadrant of the Amazon rainforest is releasing more carbon dioxide then it accumulates.  Previously models have not detected the reversal from absorption and storage of carbon dioxide to release. More precise measurements using specially designed sampling vessels deployed in aircraft detected the change that is attributed to both burning and deforestation especially during the August to October quarter.

 

The southeastern Amazon rainforest is vulnerable to elevated ambient temperature and drought and is therefore more sensitive to burning.  The southeastern rainforest is approximately 28 percent deforested. During the months of August through September 2020 the region had 24 percent less precipitation and ambient temperatures increased on by 5F compared to historical records.

These alarming results have implications extending beyond Brazil. The integrity of the Amazon rainforest is an important to countering the release of carbon dioxide worldwide by absorbing this greenhouse gas. If burning and deforestation continue the Amazon will pass a tipping point and will no longer generate the microclimate that maintains precipitation required to support the number and diversity of trees that serve as the “World’s lung.” EGG-NEWS has previously commented on the need for international action to slow the degradation of the Amazon rainforest. Deforestation by both legal and clandestine logging and burning is carried out to clear areas for cattle grazing and then subsequently for soybean production. Multinational grain buyers and meat packers are initiating programs to discriminate against illegal production but it remains to be seen if there is a decline in the rate of depredation of this valuable resource for short-term financial and political gain. 

 

Gatti, L.V.et al Amazonia as a carbon source linked to deforestation and climate change Nature. 595;388-393 (2021)


 

Reestablishing Profitability in the U.S. Egg Industry. Can Shell learn from Shale?

07/13/2021

After successive years of compiling articles on weekly and monthly production data and reviewing quarterly financial performance of U.S. and international egg production enterprises it is evident that profitability across the industry is limited by overproduction of shell eggs and liquids relative to demand.  There are limitations on marketing with price unfortunately serving as the major determinant of the volume of sales in the shell egg segment. 

 

It is frequently beneficial to review the challenges faced by other industries and to analyze their solutions to low pricing power in relating to volume of production.  The Schumpeter commentary in the July 10th edition of The Economist describes the response of the Permian Basin shale industry to overproduction, fluctuating and low prices and limitations on cash flow.  The article highlighted the contribution of Scott Sheffield, Founder and CEO of Pioneer Natural Resources, the leading company operating in the Permian Basin.  Maintaining high levels of production through the past decade contributed to U.S. energy independence. Predictably the concurrent extensive production by OPEC and the Russian Federation resulted in progressive erosion in market price consistent with the laws of supply and demand.  In 2019, Sheffield returned from a short retirement to re-take the helm of Pioneer and restore profitability for his company and indirectly, his competitors.

 

Recognizing reality and without evident collusion, the major producers of shale gas and oil reduced levels of output.  The previous model in the Permian Basin was to reinvest revenue into further exploration and production.  This required ongoing acquisition of working capital to drill and to maintain rigs at high levels of output.  With a downturn in the price of crude due to world oversupply, profits plummeted and many shale operators were forced to cap wells.  The major producers recognized the need for restraint both in current production and future expansion.  The leaders including Pioneer and ConocoPhillips pledged to constrain expansion to a range of three to five percent annually.  This approach allowed the price of both crude and gas to rise, generating $350 billion in free cash flow for the U.S. shale industry this year.  Both ConocoPhillips and Pioneer posted 40 percent increases in their respective share prices in 2021.

 

Consolidation is the second strategy implemented by shale-oil producers.  Efficiencies of scale and marketing strength have accrued from acquisitions and mergers.  It is estimated that in the U.S. the top-five egg producers represent 38 percent and collectively the top-ten contribute to 55 percent of production.  In contrast the top-5 broiler producers represent 78 percent of production.  There is clearly potential for a more profitable egg industry characterized by fewer and more efficient producers.  Consolidation especially when coupled with reduced production would serve as an efficient counter to the pressures imposed by chain store buyers using the benchmark price discovery system and major processors to hold down unit price. 

 

An important lesson from the petroleum industry is that within limits, higher prices do not materially reduce demand. Admittedly petroleum fuels are not readily replaceable by available alternative sources including renewables, coal and nuclear power.  To a considerable extent eggs are in a similar position. This was evidenced in in 1984 during the HPAI outbreak in Pennsylvania affecting the Northeast markets, again in 1995 during the Midwest epornitic and the episode of panic buying in March and April of 2020 following the emergence of COVID. Experience showed that consumers were willing to pay higher prices for shell eggs and egg products as do all consumers in Europe and the U.K.

 

Conversion from battery cages to alternative housing of hens provides an opportunity to reduce national flock size and achieve consolidation and greater efficiency.  Small operations with 50,000 to 250,000 hens currently use battery cages to supply packers. A high proportion of these farms producing generic eggs will cease production as they will be unable to raise capital to install aviaries or floor-housing.  Some large producers will continue to close obsolete operations, a trend which became evident this year.  From the perspective of banks and other financial institutions, the situation of many small-scale producers of generic eggs reflects the experience of a hypothetical producer who won a state lottery.  When asked what he would do with the money he indicated that he would just go on producing eggs until it was all spent! Many operations will be forced to sell their facilities if buyers are available or close as they exhaust working capital.

 

Producers, many of whom are third-generation egg farmers, live in eternal confidence that "the market will pick up before before Christmas".  While this is historically true, the amplitude of the rise is progressively less pronounced each year and higher feed, labor, fuel and packaging cost are eroding profits.

 

The industry cannot look to some phase-shifting event or trend to radically increase demand. The American Egg Board mounts campaigns to promote consumption by both the consumer and institutional segments, but this is reflected in only incremental increases. Demand has increased annually by 2.4 eggs per capita on average since 2017. The valuable efforts and programs implemented by the AEB cost $25 million each year representing 0.3 cents per dozen as a check-off fee. It may well be that without promotion by the AEB sales would have declined over the past ten years. Certainly the AEB managed to dispel the cholesterol myth and arrest the decline in consumption during the 1980's.

The U.S. egg industry must come to terms with reality.  There are too many hens and too many producers allowing chain buyers to manipulate the benchmark wholesale price to depress unit revenue.  Those who lead the industry should independently be considering strategies that involve flock reduction, industry consolidation and greater pricing power.


 

Ransomware Attacks Must be Suppressed

07/08/2021

It is apparent that hundreds of companies and institutions in the U.S. have paid ransom to cyber criminals to restore IT operation and to avoid disclosure of sensitive documents. The latest incidents affecting Colonial Pipeline, JBS USA and the recent revelations concerning the clients of IT-service provider Kaseya confirm the need for immediate and concerted action.

The question arises as to whether governments should ban the payment of ransom as it is felt this encourages and emboldens criminals.  The fact that in recent weeks, JBS USA paid $11 million in ransom following Colonial Pipeline paying $4.4 million with accompanying disruption in services has renewed debate over appropriate responses to cybercrime.  When faced with a demand, most companies perform a benefit-to-cost analysis to determine whether the ransom is less than the cost of disruption of ongoing activities and restoring function with backups and intensive IT efforts.

From recent history it appears that businesses and institutions cannot expect much technical help from the U.S. Government.  Following disclosure of the Solar Winds breach, it became apparent that multiple government agencies were penetrated by agencies of the Russian Federation.  The topic of institutionalized cyberespionage was the subject of discussion at the recent summit between the Presidents of the U.S. and Russian Federation.  Cybercriminals cannot operate in the Russian Federation without the tacit approval by their government.  Accordingly many of the gangs have moved to former Soviet Republics from where they function with impunity. 

 

Appropriate responses to recent attacks should be considered, including:-

 

  • Strengthening defense against cyberattack- This topic was the subject of a presidential Executive Order requiring upgrading of cybersecurity.

 

  • Making it illegal for insurance companies to reimburse clients for payment of ransom, as in the U.K.

 

  • Disqualifying ransom payments as a permitted tax deduction

 

  • International action and agreement on stricter regulation of cybercurrency

 

  • Obligatory reporting of cyberattacks whether or not ransom is paid.  This will enable government agencies to analyze attacks and develop appropriate countermeasures.  In the case of the Colonial Pipeline event the FBI recovered the Bitcoin tendered, suggesting that this capability serves as a deterrent to cyber criminals. This however requires the complete cooperation of victim companies.

 

  • Companies should upgrade IT resources and make use of specialist consultants and service providers capable of strengthening defenses and developing backup systems.

 

Using available data it is evident that there are fewer but more sophisticated gangs such as REvil operating as cybercriminals.  Their focus has shifted from numerous small concerns and institutions with relatively low payment to large companies with multi-million dollar demands.  As large companies have strengthened their defenses, it is evident that the emphasis will revert to smaller entities and institutions with lower levels of protection as evidenced from the Kaseya breaches. 

 

Consumers and also cybersecurity professionals consider that restrictions on payment of ransom should be enforced.  This approach is totally justified until an event occurs that demands an immediate response.  Although cyber criminals appear to be “honest” in their follow-up on release of documentation following payment of ransom, a recent survey noted that 80 percent of businesses that paid a ransom suffered a subsequent attack.

 

The U.S. agricultural industry along with energy, pharmaceuticals, travel, banking and finance are now looking to the Federal government for assistance both in the form of technical support, policy and legislation in addition to aggressive diplomacy to resolve the issue of ransomware attacks. Perhaps it is time to exercise some of the presumed cyberoffensive capability of the U.S. to back up statements issued by the Administration. Shutting down the oil industry of the Russian Federation for a few days will certainly encourage cooperation in eliminating the endemic criminal element in Russia and neighboring kleptocracies.


 




























































































































































































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