Editorial


Simplistic Claims by the National Farmers Union Refuted

11/29/2021

The National Farmers Union (NFU) issues an annual release purporting to estimate the theoretical value that farmers receive for a traditional Thanksgiving meal in 2021. The NFU estimated that ranchers and farmers would receive approximately 14.3 cents for every dollar spent at retail  in 2021.

 

In their somewhat misleading and simplistic statement, the NFU noted, "even though consumers are paying more for food this year almost none of that is being passed on to America's family farmers and ranchers.  Multiple mergers and acquisitions during the last several decades have resulted in agriculture and food supply chains that are noncompetitive, fragile and underpay farmers". 

 

The NFU fails to recognize that farmers in large measure produce ingredients that require processing, packaging and transport before purchase.  The NFU consistently fails to recognize or acknowledge the contributions along the food chain extending from an ingredient whether it be a bushel of cranberries, a yam or a live turkey.

 

To illustrate the impact of the chain of processing and distribution the situation with regard to eggs should be considered. According to the USDA producers of generic shell eggs, during 2021 through October received a national average blended price of 80 cents per dozen for Large nest run eggs with a range of 58 to104 cents per dozen. The average cost of production over the first ten months of 2021 was estimated by the USDA at 71 cents per dozen including feed, pullet depreciation labor, housing and overhead. This implies a margin of 9 cents per dozen or 12.6 percent on a nest run basis. The cost of eggs delivered to a DC would include packing (13 cents), packaging (13 cents), transport (5 cents) and grading loss (5 cents) for a total of 107 cents per dozen. This corresponds to the 107 cents per dozen documented by the USDA as the simple average delivered to a distribution center. The average retail price for generic white eggs was calculated by the USDA to be 164 cents per dozen as a simple average for the four regions over the first nine months of 2021.  This would provide retailers with a gross margin of 57 cents per dozen or 35 percent to cover transport, merchandizing, overhead, store losses and operational expenses. Effectively egg producers received on average 65 percent of the retail price or 39 cents on the retail dollar. The complexities of the supply chain with respect to shell eggs clearly denotes the simplistic assumptions by the NFU in their calculation that evidently fails to consider processing and added value to farm-produced ingredients through the supply chain to retail.

 

The NFU points to integration and consolidation as being responsible for a lower proportion of retail unit price received by individual farmers.  Without economy of scale and processing at  high levels of throughput using capital intensive facilities and equipment, prices for food products including eggs, broilers and turkeys would be even higher given the efficiencies in producing feed, operating herds and flocks and processing animals with attention to welfare, food safety and sustainability. 

 

The NFU fail to define the term "farmer".  With two exceptions, U.S. egg producers are family-owned and operated despite large volumes of production.  In the case of broilers and turkeys, integrators provide chicks or poults, feed and technical service and harvest flocks at the end of the production cycle.  Farmers receive a fair income for providing labor and housing but do not bear the risk of inflation and feed cost or fluctuations in market price and do not make any investment in processing, marketing, overhead or distribution of product.

 

The National Farmers Union figure of 14.3 cents on the retail dollar, however it may be calculated, fails to recognize the multiple investments through the entire chain of processing, distribution and the markups imposed by retailers.  Consumers in the U.S. have the widest variety of food products available with the highest standards of food safety and spend less on food  as a proportion of total income than any other industrialized nation.


 

The ‘New’ SARS-CoV-2 Variant

11/26/2021

We awoke this morning to the news that a new variant of SARS-CoV-2, the virus responsible for COVID has been characterized in South Africa. This variant designated Strain B.1.1.529 with at least 30 mutations of the spike protein may or may not be more pathogenic but is obviously as infectious or even more so than the predominant Delta strain. The most important question is whether protection stimulated by two doses of mRNA vaccine (Pfizer or Moderna) will provide protection against infection with or without clinical signs. Based on international experience, the Delta strain is capable of infecting those vaccinated, albeit at a lower level and with quantitatively less production and dissemination of virus. This effectively reduces workplace and community spread of COVID. Data shows that non-vaccinated individuals have a ten to twentyfold probability of being hospitalized or dying especially with co-morbidities, as compared to those who are fully vaccinated

 

The emergence of a new strain of SARS-CoV-2, irrespective of characteristics was inevitable and was widely predicted.  The probability of a variant emerging and spreading is a function of the proportion of susceptible individuals in a population.  The vaccination rates for the continent of Africa suggest that COVID is not controlled and serves as an incubator for variants. Only one percent of the population in sub-Saharan Africa is immunized. Only one percent of the 2.7 billion doses of all COVID vaccines of all types have been administered to Africans. South Africa, the most advanced nation on the Continent has achieved a 35 percent administration rate among the 55 million population but with vaccines of inferior antigenicity to the two approved mRNA vaccines deployed in the U.S. The restraint to control in South Africa is independent of cost and availability of vaccines. Due to poor planning, ineffective logistics, and downright governmental incompetence, South Africa is currently administering vaccine to only 100,000 residents per day with an aging stock of 17 million doses that should be deployed to avert a catastrophe.

 

The immediate response to the news from South Africa was a 900-point plunge on the Dow index with travel, entertainment, financial and oil-related stocks disproportionally affected. This reflects the specter of shutdowns and  deterioration in the economy after signs of restoration to pre-COVID normality.  The situation in South Africa should reinforce the sound advice from the NIH, the CDC and prominent epidemiologists in academia concerning control measures. The U.S. should immediately intensify efforts in the following areas:-

 

  • Raise vaccination rates. Some counties in the U.S. have populations that are as susceptible as those in South Africa. This is due to misinformation, politicization and the misplaced concept of ‘freedom’.  A reading of the Constitution does not indicate any right to infect one’s fellow citizens.
  • Increase the rate of vaccine administration to residents of third-World nations. Unless COVID can be suppressed on an international basis industrialized nations will remain vulnerable.

 

  • Health authorities in the U.S. must intensify sequencing of SARS-CoV-2 isolates to identify emerging mutations that can represent enhanced infectivity and pathogenicity.

 

  • Commonsense protective measures to prevent transmission include masking, avoiding concentration in confined spaces and maintaining social distancing.

 

  • Home testing kits applying lateral immuno-flow technology should be widely available and subsidized to allow infected but asymptomatic or mildly affected individuals to self-quarantine.

 

  • The anti-vax lies and misinformation spread by COVID-deniers and pseudo-experts and those profiting from anxiety should be vigorously opposed. A coordinated publicity campaign involving sports and entertainment personalities, civic and religious and industry leaders, scientists, public health authorities and responsible media is required.

 

Those opposing scientific measures to control COVID including politicians on both sides of the aisle, operators of social media platforms, anti-vax pundits and charlatans have blood on their hands. The new variant is a wake-up call for the U.S. and other industrialized nations. If we wish to restore our pre-COVID way of life and economy now is the time for resolute action.


 

NRS Gender Selection Technology and Prospects

11/18/2021

NRS Poultry Sustainability and Transformation Inc.(NRS) has developed a genetic approach to the challenge of eliminating unwanted male chicks by applying a genetic approach coupled with the application of an optogenic system. The Company was founded by Dr. Uval Cinnamon of the Volcani Institute, the leading agricultural research organization in Israel and recognized as an innovator in agriculture.  The company includes specialists such as Dr. Yaarit Wainberg a molecular biologist and executives with experience in finance, technology transfer, regulatory affairs and quality assurance.  The company is assisted by Dr. Neil O’Sullivan appointed as the Senior Scientific Advisor previously a senior geneticist with one of the two major primary breeders of egg-laying strains Dr. O’Sullivan is well-known to the U.S and the World’s egg industries and bridges the academic avian genetics with practical production issues.  Dr. Cinnamon recently delivered a presentation in a webinar series dealing with the technology of his company and the potential to resolve a growing problem of negative public perception. He described the mechanism by which it is possible to hatch only pullet chicks at the commercial level with male embryos failing to develop at an early stage of incubation.

 

The egg industry is responding to criticism that male chicks at the commercial level are euthanized amounting to an annual disposal of five billion.  For the past decade, research institutes have attempted to differentiate between fertile eggs with either male or female embryos.  A variety of techniques have been applied including various forms of spectrometry most of which require the installation of sophisticated equipment and training of personnel.  Alternatives such as analysis of embryonic fluids for the presence of testosterone or estrogen as developed during the late 1980’s for gender separation of broiler chicks for separate-sex rearing have been updated and applied to fertile eggs at the commercial level.  As yet there has not been any suitable technical solution that is compatible with the operation of a hatchery producing in excess of 25,000 pullet chicks per hour.  Technical development funded by various agencies and governments with Germany an active promoter has yet to produce a practical system.  Unfortunately various startups have raised venture capital funding claiming applicable technology without achieving commercial acceptance.  Some of the claimants have raised funds without any proof of concept and are regarded as outright scams.

 

 

NRS has applied CRISPR-Cas9 to a sequence of the z chromosome, a co-determinant of gender in chickens. Males carry the zz chromosome and females are zw.  The construct developed by NRS comprises promoters adjacent to the 5’HA end of the sequence, and a lethal gene adjacent to the 3’HA end.  Lethality is activated by exposure to light of a highly specific wavelength.  The construct must be inserted into the pure line C strain to be passed to the grandparent C-line hen.  The female of the parent level (CD) will carry the modified z chromosome.  The male line AB parents are normal in all respects.  At the parent level, CD females carrying the modified z chromosome mated to AB males produce pullet chicks with a normal z chromosome and a w chromosome.  Eggs from the mating are subjected to blue light that is optogenic in its action on the z chromosome carrying the lethal gene. This results in inhibition of development of male (zz) embryos since they carry the lethal trait on the z chromosome acquired from the CD parent female (zw).  Female embryos carry an unaltered z chromosome and therefore hatch normally.

 

The NRS genetic approach to elimination of male chicks is elegant, based on established scientific principles and offer advantages with respect to cost, practicality and rate of implementation.  As yet there has been no inclination for primary breeders to adopt the system and the technology has not been patented.  Informal discussion with representatives of the two major breeding companies responsible for over ninety percent of the egg laying strains used in the U.S. have indicated a disinclination to embrace the NRS approach.  Despite the justifiable claim that pullet chicks are not genetically modified, the system relies on insertion of a construct into the pure C line.  Opponents of intensive livestock production will obviously use the application of GM to oppose not only the specific products that may be modified but to deprecate all commercial egg production.  It is obvious that neither of the two major primary breeders wishes to be the first to adopt the technology. 

 

The second problem relates to the point at which the optogenic light is applied.  Too save incubator space, eggs would have to be subjected to the activating light prior to setting. It is understood that in experimental scale application the light is applied after placement of eggs resulting in death of embryos in the early stage of incubation.  This would require removal of all eggs carrying undeveloped male embryos within a few days of incubation. Eggs with viable female embryos would be affected by non-uniform temperature as activation of the lethal gene by lighting is currently effected in the setter. Removal of eggs containing dead male embryos would have to be carried out by manual or mechanized candling or temperature measurement at approximately five days of incubation. This would impose an additional process in incubation requiring development of automated equipment and requiring capital expenditure, modification of hatcheries and additional time and labor. 

 

Despite claims to be a practical solution to the challenge of culling cockerel chicks, the NRS approach, although scientifically elegant will not achieve any commercial acceptance in the short term given the restraint of the “GMO association”.  It is possible that a nation such as China may adopt the technology given their volume justifying application.  China as yet does not have pure lines although it has aspirations to be independent of the major primary breeders and eventually become an international supplier of breeding stock.

 

NRS Poultry Sustainability and Transformation represents a company with excellent potential but with a major restraint to commercialization given the need for primary breeders to insert the construct into the z chromosome of the C-line. The future of the system would be assured if consumers would be willing to accept the genetic modification of the pure line as a compromise for eliminating the euthanasia of commercial cockerels. Similar ethical challenges are presented by accepting vaccines that were developed using human fetal tissue or willingness to consume irradiated foods that are free of pathogens.

 

For NRS technology to become a practical reality the first hurdle will be for one or more primary breeders to enter into a strategic alliance with NRS and incorporate the NRS construct into the C pure line. The second will be to convince consumers and regulators that the pullet chicks are effectively non-GMO. Since the issues are entwined the commercialization of NRS technology is truly a manifestation of the “chicken-or-the-egg” paradox.

 


 

Major Takeaways from COP 26 Conference in Scotland

11/11/2021

The 26th Conference of the Parties (COP) representing signatories to the United Nations Framework Convention on Climate Change is winding down in Scotland.  The event was attended by 20,000 participants, including politicians, scientists, environmental activists, media representatives and business executives.  Major world leaders attended promoting their national commitments to reducing the effects of global warming.  COP 26 required signatories to the 2015 Paris Agreement to report on progress. It is significant that neither Jair Bolsanaro, President of Brazil nor Vladimir Putin President of Russia attended in person or remotely although their lower-ranked diplomats and negotiators participated in meetings. The U.S. was in a difficult position since the previous Administration withdrew from the Paris Agreement and the President has yet to have his far-reaching climate agenda enacted.

 

The major topics that met with universal acceptance included:-

  • Recognition that it is necessary to restrict an increase in average global temperature to not more than 1.5 C (2.7 F) above pre-industrial levels.  Many climate models suggest that without drastic action, this goal will not be met by 2050 and that present manifestations of global warming including floods and hurricanes that have increased in intensity will become more frequent and more devastating.

 

  • Methane, a relatively short-lived but powerful greenhouse gas was a focus of concern with nations committing to reduce the presence of the compound.  The oil industry is a major contributor to methane release.  Corrective measures will include capping disused wells and methane capture in operating facilities. Nations are also committed to addressing agricultural release from ruminants and from landfills.  It is estimated that reducing methane emission by half could represent a reduction of between 0.2 to 0.3 C from the predicted global rise in temperature.

 

  • Coal-fired power generation is recognized as a major contributor to carbon dioxide release.  India and China are heavily committed to burning coal with Asia producing 16.5 gigatons, or half the world’s total. Despite pledges by China and more specific action taken by Japan and South Korea, the prospects of achieving a meaningful reduction in greenhouse gas emissions in China are remote.  China currently is responsible for close to 13 gigatons annually, India 3 gigatons tons, Russia 2 gigatons tons and Indonesia 1 gigaton.  India has no specific goals for reduction compared to China that intends reducing greenhouse gas emissions to zero by 2060.

 

  • The forests of the world are effectively the World’s lungs, absorbing carbon dioxide and releasing oxygen. Brazil is replacing swaths of the Amazon rainforest with soybeans and cattle and Malaysia is replacing hardwood forests to produce palm oil. Deforestation is rampant in west and central equatorial Africa to permit subsistence farming and logging.

 

  • It is considered essential that governments become involved in reducing carbon emissions through tax incentives and effective programs of environmental remediation.  Investors are currently scrutinizing projects that involve burning coal and it is anticipated that vast sums of investment capital will be used to leverage industries that will become beneficial to preservation of the environment.

 

  • COP 26 reviewed progresses in replacing fossil fuels using solar and wind as sources of power. Success stories include Hawaii that previously was dependent on oil for 90 percent of power generation now derives a high proportion from these sources. China is the World leader in wind generation at 220 Gigawatts followed by the U.S. with 97 Gigawatts. It is estimated that a 40-acre solar array can generate 5 Megawatts; this implies that over 10 million acres in the U.S. would be required by 2050 to replace existing coal-fired generation.

 

  • Dedicating extensive acreage to solar generation can be achieved in deserts where land is plentiful and otherwise unproductive. This will require extending grids to distribute energy. In other areas, it will be necessary to cultivate crops and to use small ruminant livestock to optimize the use of land displaced from conventional farming.  Agrivoltaics is emerging as a farming practice using sheep to graze among solar arrays and cultivating suitable crops that are compatible with operation of solar ‘farms’.

 

  • Sequestering carbon in soil will be achieved through more extensive use of cover crops and applying no-till cultivation.  The proposed climate provisions in the Build Back Better initiative proposed by the Administration, currently languishing in Congress, includes financial incentives for farmers to contribute to environmental remediation.

 

  • It is clear from deliberations at COP 26 that industrialized nations are now serious about climate change but are recognizing the costs of adopting climate-friendly initiatives in addition to supporting less-developed nations to abandon coal. 

 

  • ‘Buck Rogers’ programs including solar geo-engineering are way in the future.  The possibility of removing carbon dioxide from the atmosphere is technically feasible with pilot plants currently in operation.  Direct air capture would be required concurrently with programs to reduce anthropogenic carbon dioxide emission even if the world achieves a reduction of 2.9 trillion tons, considered necessary to maintain global warming at or below 1.5 C compared to the pre-industrial age.

For those that deny global warming, scientific data punctures the bubbles of self-delusion and overt denial.  The carbon dioxide content of the atmosphere remained between 275 ppm and 285 ppm for millennia before the industrial age. During the 1910’s the level reached 300 ppm and by 2020 the concentration had increased to 412 ppm.  From the mid 19th century onwards, average world surface temperature has increased by between 1.1 C and 1.2 C.  The area of multiyear ice on the Arctic Ocean is 90 percent lower and sea level is rising worldwide by 0.4 inches every three years. Since the mid-20th Century we have been running a climatic amber light, just getting through and ignoring the consequences. Now the light is red and we have to face the consequences of global warming and climatic disruption. Effectively COP 26 renewed the commitments of the 2015 Paris Agreement and has signaled the end of our dependency on fossil-fuels to maintain our accustomed way of life. We owe succeeding generations clean air, available water and a livable planet, since it is the only one we can bequeath.


 

Cost-Effective Recycling of Plastic Waste

11/02/2021

Recycling of plastic especially from egg cartons is appropriately a chicken and egg situation.  It is necessary to have an efficient and comprehensive collection system that is required to supply the plants equipped for either physical or chemical processing.  In establishing a technically and financially viable program the question is posed as to which component comes first?  Companies must invest heavily in reprocessing facilities often for a specific class of plastic. This requires high and consistent throughput to attain a satisfactory financial return, presuming efficient collection, accumulation, sorting and transport of waste. 

 

Effective collection presumes that there is a destination for the material that is collected from consumers and then accumulated and conveyed to a plant.  The situation in Japan was clearly described by Katsumori Matsuoka in the October 18th edition of Chemical and Engineering News.  Japan prides itself on “recycling” 85 percent of plastic containers.  This does not mean that material is effectively processed after collection.  It is a matter of record that Japan shipped up to 800,000 tons of waste plastic to China annually before 2017. In this year China imposed a ban on importation of waste plastic based on environmental degradation.  Plants in China were burning plastic to generate power or to dispose of the material resulting in atmospheric pollution.  A high proportion of the plastic shipped from developed nations was consigned to landfills creating a problem of persistence.

 

The shock of banning imports by China forced Japan and other industrialized nations to reassess both the technical and financial feasibility of recycling. The Government of Japan passed the Act on Promotion of Resource Circulation for Plastics in June 2021.  The law contains mostly stick and little carrot.  Major retailers and users of plastic products are obliged to incorporate increasing proportions of recycled plastic to a level of 60 percent by 2030.  In addition charges are imposed for plastic items to cover the costs of collection, transport and recycling.  Public opinion is also forcing food manufacturers and major companies to incorporate recycling in their ESG programs, a trend that is evident in most industrialized nations.

 

Supermarkets in Japan are obliged to receive and store washed plastic trays and containers returned by consumers.  Citizens of the Nation are recognized for their sense of conformity and willingness to participate in regional and national initiatives that are viewed as beneficial to society. There is a high level of planning and organization in collection of waste plastic.  In Metropolitan Tokyo, waste that can be safely burned is collected each Monday. Paper, glass containers and aluminum cans are collected every other Tuesday and designated days are assigned for polyethylene terephthalate (PET) bottles. 

 

Given the highly efficient system of collection, and the need to develop alternatives to shipping waste to China, large chemical companies applied existing technology to recycling. Re-processing plants already in operation in the E.U. served as a model.  Teijin a manufacturer of plastics will apply depolymerization technology to process PET.  The company is building on their experience gained in China where it operated a joint-venture processing plant in cooperation with local partners before the import ban was imposed.

 

Polystyrene is widely used for packaging of food and is suitable to be degraded to extremely pure styrene that can be incorporated into new packaging in combination with virgin plastic.     PS Japan is erecting plant with an initial capacity of 1,000 tons per year in cooperation with Toshiba Plant Systems and Services.  The plant under construction will be commissioned in December.  If successful as anticipated, PS Japan will erect a larger plant to process polystyrene for parent company Asahi Kasei a major producer of packaging.

 

Toshiba Plant Systems and Services established a polystyrene recycling plant in 2001 but was obliged to close the facility in 2005 because it was more profitable to ship waste plastic to China.  Now with the need to process polystyrene within Japan, financial viability is assured, encouraging the company to invest in a large plant that will be operational in 2024.  Industry observers anticipate processing 2.5 to 3 million tons annually replacing virgin plastic and obviating the need for either burning or especially in the case of Japan, establishing landfills. Space is at a premium in a nation of 126 million where less than 25 percent of the land area can be used for farming, industry, habitation and recreation.

 

Pressures in a nation such as Japan are paralleled in most industrialized nations.  Currently in the U.S. ExxonMobil is planning to process up to 30,000 metric tons of waste per year into a number of feed stock products.  Dow and Chevron-Phillips Chemical have established consortia to apply pyrolysis to degrade mixed plastic waste into olefins and polyolefin plastics.  Eventually, Exxon will establish a plant applying chemical processes to convert 500,000 tons of plastic waste by 2026.  Similar installations are planned for Canada, the Netherlands and Singapore.

 

Unlike Japan, it appears that U.S. processors are taking the initiative to plan and erect re-processing plants but will rely on strategic alliances with companies that are capable of collecting, accumulating and transporting plastic waste. The concept of recycling in a nation where consumers are content to dump containers and to object to restrictions will require a high level of both inducement and training.  As a nation we behave as solitary wasps compared to Japan where the public function like bees working for the communal good. 

 

Recycling of plastics and specifically polystyrene packaging will require simultaneous development of collection and processing.  In the short term there will be no positive financial return from a chain extending from consumer to supplier of recycled feedstock unless there are pricing incentives to use re-processed plastic. Recycling will have to be supported by consumer deposits or by federal grants or their combination.  The obvious concern is that petrochemical companies will establish plants that cease production after a few years due to inadequate raw material as occurred in Japan prior to losing China as a receiving nation.  We may have to be guided by experience in the E.U. which appears to be more advanced than the U.S., again based on consumer concerns over environmental issues and a collective desire for sustainability supported by government initiatives and empowering legislation.


 

Cost of Employee Turnover

10/22/2021

According to the 2021 NSI National Healthcare Retention and RN Staffing Report based on a survey of 226 facilities in 37 states, the 2020 turnover rate for staff nurses attained 18.7 percent.  What is significant is that the average cost of turnover for a bedside RN is $40,038 with a range of $28,400 to $51,700, resulting in a loss of $3.6 million to $6.5 million for each participating hospital.

 

The survey pointed to the high cost of recruiting, appointing and orienting RNs as a result of resignation or attrition.  By the same token are there hidden cost in replacing employees at a more menial level in live-bird and egg-packing operations?  Not only are there direct costs involved but hidden losses occur through unfamiliarity with work responsibilities by new hires, their accidents and an additional burden on HR personnel. 

 

Financial media report the availability of 10 million positions in the U.S. with 8 million unemployed.  Filling positions is more than simple arithmetic. The reasons why jobs remain unfilled and the reality that potential workers are not applying for positions is the subject of intensive investigation. 

 

With respect to female workers, child-care is an important consideration and must be addressed.  A second factor contributing to inability to fill positions relates to pay and benefits.  While some companies have adopted policies that reflect prevailing rates in their areas and have implemented benefit packages to attract and retain workers others are adopting unrealistic approaches to the current labor market. An example is a North Carolina QSR franchised to a national chain that has placed a banner offering positions at $10 per hour.  Within 500 yards a second QSR is offering $12 per hour with a sign-up bonus. It is evident that without matching the higher rate, the first QSR will be at a disadvantage with respect to hiring and retention of reliable and industrious workers.  At the other end of the scale, companies that pay higher salaries can demand more in education, communication skills, initiative and commitment among managers.

 

COVID and its impact on staffing have changed traditional approaches to remuneration and employee relations.  Increased wage rates and obligations to provide benefits have raised the costs of workers justifying automation and robotics.  The highest concentration of workers in an egg packaging plant involves transfer of packs to outer containers. Given 600 case per hour graders and 14 packer lanes, robotic transfer is considerably more attractive at a base rate of $15 per hour plus benefits and indirect costs.  Replacement of repetitive labor with appropriate mechanical equipment is a necessary approach to resolving problems of recruitment and retention. Over the long run automation will contribute to consistency of operation and enhanced margins in a competitive industry.  Investment in robotic equipment should be evaluated on the duration to payback or the net present value of the investment. Realistic costs of labor should be assumed with inclusion of both direct and indirect costs including the frequently overlooked expenditure on recruitment and training attributed to turnover.

The major manufacturers of grading equipment now provide robotic case packers that are as flexible as human workers and offer a payback of less than two years at current rates with less shell damage and a favorable return on investment from retrofitting.

 


 

Food Industry to Face Mandatory Plastic Recycling

10/21/2021

Multinational consumer brands are setting deadlines to recycle plastic packaging in response to consumer and regulatory demands.  Coca Cola has established a target of fifty percent recycled content on all packaging by 2030.  Nestle will recycle PET (polyethylene terephthalate) in all brands by the end of 2025.  Proctor and Gamble will substantially reduce the use of virgin plastic by 2025 and Unilever has a goal to recycle 25 percent of plastic by 2025 and reduce virgin plastic by half.  Unfortunately the current reality is far from the intent with most companies using up to ten percent recycled plastic with an emphasis on PET. On average ten percent of plastic is recycled in the U.S. compared to 33 percent in the E.U The two leading restraints to recycling comprise collection and processing.  

 

The PET segment of the recycling industry emphasizes collection as the major obstacle.  It is estimated that only 52 percent of U.S. household have access to a curbside recycling program with less than one-third of potentially recyclable plastics entering a reprocessing stream.  Collection intensity is highly variable according to location. In states or municipalities that mandate monetary deposits, collection can attain a level of seventy percent, as in California. At this time only ten states require deposits to encourage recycling.

 

Even with a high level of collection, segregation of potentially recyclable materials requires innovation since most municipalities and commercial companies use manual labor to reclaim specific products.  Advances in robotics coupled with application of machine vision and complemented by AI, allows installations to visually distinguish among diverse types of containers.  AMP Robotics has over 150 recycling installation in operation that can distinguish between polypropylene and polystyrene containers based on visual evaluation.

 

 

Advances in reprocessing technology resulted in the emergence of industries concentrating on specific plastic materials.  DAK Americas is the leading U.S. PET recycler.  Their process involves chopping containers in to flakes that are washed.  Flakes are then melted under a vacuum to remove volatile compounds from the molten resin.  Clarified resin is filtered before conversion to a solid state.  Although the process is expensive, potential purchasers of recycled PET are willing to pay a premium to claim recycled content that has marketing appeal.  Profitability among early recyclers was limited by narrow margins and low demand. This situation resulted in restructuring of the industry with only two remaining major competitors.  DAK has an annual current capacity of 400,000 metric tons with approximately one-quarter diverted into food and beverage containers and the remainder as carpet fibers and for other non-food applications. Following considerable investment, Indorama will have the potential to process 150,000 tons of PET by 2025.

 

Recycling of polystyrene has undergone advances through applying solvent extraction.  PureCycle Technologies is attempting to increase the rate of polypropylene and polystyrene recycling but the loop is limited by the apparent disinclination of municipalities to collect and separate these plastics that are widely used as packaging in the egg industry.  The PureCycle process was developed by Proctor and Gamble and uses super-critical butane for polypropylene.  Polystyvert of Canada uses p-cymene as a solvent for polystyrene.  Once in solution, the polymer undergoes filtration to remove contaminants. The clarified product is then precipitated by adding heptane.  A small commercial-scale plant is now in operation in Montreal to demonstrate technical feasibility.  The company is attracting funding to expand capacity since there is an increasing demand for recycled polystyrene.

 

It is evident that if the egg industry continues to use PET and polystyrene, both of which have obvious benefits as packaging material for eggs, recycling will be necessary. This will be required to satisfy the demands made by consumers and to avert restrictions that are currently in effect or are contemplated, as in Florida. In the interim manufacturers of polystyrene and PET packaging should develop collection programs based on in-store recycling bins to facilitate collection. Publix operates a convenient system that provides consumer satisfaction but more extensive collection programs are necessary to encourage processors to expand capacity and to erect new plants to balance availability of waste with demand for recycled plastic.


 

Trade with China Will Depend on Mutual Understanding through Firm Diplomacy

10/11/2021

China is an essential contributor to volume and hence profitability of segments of the U.S. poultry industry.  During the first eight months of 2021, China received 290,753 metric tons of chicken products including feet valued at $535.5 million with a unit price of $1,852 per metric ton.  China increased volume by 4.7 percent compared to 2020 but value rose a disproportionate 30.8 percent from the previous year.  As the second-ranked importer of chicken products, China is therefore important to both volume and value. China does not import either eggs or egg products since as the world’s largest producer of chicken and duck eggs the nation is more than self-sufficient. Over the first eight months of 2021, Hong Kong designated an “Autonomous Region” of China was the second largest importer of shell eggs from the U.S. receiving 36.3 million dozen representing 26.6 percent of exports valued at $31.4 million with a unit value of 87 cents per dozen Imports of shell eggs by Hong Kong increased by 13 percent in volume and 29 percent in value compared to the corresponding eight months of 2020. 

 

There has been a sharp deterioration in relations between China and the U.S. extending through the past Administration and continuing into the first eight months of the current Administration.  The issues of Taiwan, lack of action on the Phase-1 Trade agreement and aggression in the South China Sea are obviously areas of contention.  In March, Secretary of State Anthony Blinken met with State Counselor Wang Yi in Anchorage Alaska. Both sides aired their differences and traded less than diplomatic restatements of their respective positions. China characterized the U.S. approach to the meeting as ‘condescending’ and ‘grandstanding’.

 

Some restoration of mutual understanding was established on Wednesday October 6th in an extended discussion between National Security Advisor Jake Sullivan and Senior Diplomat Yang Jiechi in Switzerland. Topics reviewed at this meeting included trade, territorial expansion in the South China Sea, intimidation of Taiwan and human rights in Xinjiang Province.  Apparently the discussion was productive in that China was apparently willing to consider items of mutual concern including climate change and the discussions deviated from traditional talking points.

 

One outcome of the meeting was an agreement for President Biden to meet with President Xi Jinping in a virtual format this quarter.  The spokesperson for the Department of State stated, “We have an agreement in principle to hold a meeting and we think it’s important for the leaders to take more of a role in managing this relationship through ongoing discussions directly between the two of them.”  During September, the President spoke with Xi mainly to establish lines of communication and to facilitate the subsequent discussions in Switzerland.

 

Perhaps the Administration’s position on interaction with China is best exemplified by recent comments made by Trade Representative Ambassador Katherine Tai.  Addressing a meeting organized by The Center for Strategic International Studies, Ms. Tai stressed the need for the U.S. to become more competitive through R&D, advances in energy technology and promoting U.S. production capability.  Ms. Tai was determined that China should comply with commitments made in the Phase-1 Trade Agreement of February 15th 2020.  Her address provided an opportunity for the Administration to confirm that tariffs placed on goods imported from China by the previous Administration would remain at least for the short-term to serve as leverage in negotiations.  Ambassador Tai is promoting what she refers to as “smarter and more resilient trade”. China is less a trading partner than an adversary, given imposition of restraints on commerce and recalcitrance to modify coercive tactics and their indifference to U.S. and international concerns.

 

The meeting in Switzerland confirmed that the Phase-1 Trade Agreement benefited the U.S. agricultural sector.  The Administration is determined that China should fulfill promises and prevent China imposing any barriers to agricultural exports that would be contrary to the rules of the World Trade Organization.  It is evident that China must comply with conditions agreed to in the Phase-1 Agreement before proceeding with any extension to the existing pact.

 

The fact that U.S. and China are once again engaging in diplomacy is a welcome sign and should defuse tensions. It is questionable whether the two nations can ever participate in harmonious trade. Currently China needs to import soybeans, corn, sorghum, and energy. We in turn are dependent on a supply of manufactured goods and some critical raw materials. China has as far as possible sourced commodities from competitors in Latin America on the basis of more favorable currency and cheaper FOB prices from suppliers operating with freedom from environmental, labor, safety and related restraints. This now a time for reevaluation of the bilateral relationship with pressure to reverse injustices imposed by China. Good places to start will be rebuilding our infrastructure and improving our domestic manufacturing capacity.

 


 

It’s Flu-Shot Time Again

10/06/2021

Each February the World Health Organization (WHO) convenes a panel of epidemiologists and virologist to review influenza serotypes isolated and characterized by the Global Influenza Surveillance and Response System from patients in the Southern hemisphere.  Based on the results from as many as 120 collaborating influenza reference centers, the panel selects from among influenza A and influenza B strains to be included in the annual influenza vaccine.  For the 2021 -2022 season the strains in the U.S. vaccine are:-

  • A/Victoria H1N1
  • A/Cambodia H3N2
  • B Washington 2019-like Victoria lineage virus
  • B Phuket 2013-like virus

 

The selection of strains to be included in the annual vaccination is based on value judgment and risk assessment but the decision of the panel is not infallible.  The emergence and spread of influenza viruses during the upcoming 2021-2022 influenza season in the northern hemisphere may diverge from the pattern of previous years. The incorporation of influenza A and B strains may not be appropriate to the challenges that emerge. The precautions adopted in 2020 to prevent dissemination of SARS-CoV-2 responsible for COVID including masking, social distancing and home confinement limited the spread of influenza during the 2020-2021 season. Accordingly the WHO panel was limited in their decision on selection of strains.  A second problem relates to the fact that in the absence of influenza challenge, a high proportion of the population in the Northern hemisphere nations will have greater susceptibility to strains of the virus that may emerge.

 

Using egg-propagation with appropriate quality control and the restraints relating to distribution, the vaccine combination as selected by the panel is released each year in October and is now available for administration in the U.S.

 

Epidemiologic research has demonstrated that the severity of influenza as measured by incidence rate and mortality is greater in years following a mild influenza season. Every effort must therefore be made to immunize our population especially those working in confined spaces including egg packing plants, and facilities processing red meat and poultry.  Unfortunately COVID is still a problem despite a slight decrease in incidence rate attributed to vaccination and public health measures.  Notwithstanding progress in vaccine acceptance, 40 percent of our population is vulnerable to COVID many of whom are clustered in rural areas of southeastern and northwest states.  Co-infection with both influenza and SARS-CoV-2 does occur and would be expected to result in more severe clinical effects than either disease alone.  A winter surge in influenza complicated by COVID will create problems for diagnosticians especially if respiratory syncytial virus complicates an ongoing “twinfection” of COVID and influenza.  This will especially be the case for children since availability of an mRNA vaccine at an approved dose will probably not be available before late November.

 

In anticipation of a season characterized by severe respiratory complication from viral infections, a higher proportion of our population must be vaccinated against both COVID and influenza.

 

More antigen testing kits with high specificity will be required to enable physicians to rapidly distinguish among the three important respiratory viral infections in order that appropriate medication can be initiated.  Antiviral therapy is now available for both influenza and COVID, albeit at high cost for the latter disease.  Experience has shown that prevention through vaccination is far more effective and less expensive than treatment. This justifies campaigns to increase immunity among plant and farm workers and their families and the communities in which they live.

 

In years to come, we may have available mRNA vaccines against multiple strains of influenza and even against combinations of influenza and COVID.  In the interim we will have to rely on the traditional approach involving selection of most probable strains of influenza and the time restraints associated with either egg or tissue-culture propagation.

 

The bottom-line message is for public health authorities and employers to encourage vaccination against both COVID and influenza in advance of what may be a season characterized by severe respiratory disease with the potential for hospitalization and mortality.


 

The Value of “Organic” Certification Questioned

09/28/2021

A recent survey of 300 consumers confirmed their purchase of USDA certified organic foods as part of regular shopping. The survey disclosed that only 20 percent of those responding could actually define ‘organic’. With sales of organic products in the region of $60 billion annually, the survey results suggest that the USDA and the Organic Trade Association should reconsider their respective roles in advancing consumption of organic foods. 

 

The USDA defines “organic” as indicating that food has been produced applying approved methods.  The term organic does not necessarily represent freedom from infection and only implies that products are free of genetically modified components and were produced without specified fertilizers, additives and pesticides.

 

Pew Research has determined that three-quarters of adults purchased organic foods on the basis of health concerns.  The third motivation was concern over the environment and sustainability with the remainder claiming the inexplicable attribute of “convenience”.

 

As presently structured USDA organic certification relies entirely on a paper trail audited by designated third party agencies.  Consistently, analytical studies show the presence of pesticide residues in produce certified as organic. There is no structured program of selecting and assaying products.  A high proportion of organic certified foods and vegetables and all spices and many fruits and vegetables emanate from nations where USDA is reliant on local auditors.  The difference in price between conventional and organic products is an incentive for fraud that is impossible to control even with an effective blockchain system. Periodically the USDA-AMS publishes reports on actions taken against fraudulent certification.  As with drug trafficking and tax evasion, only small proportion of falsely labeled products are identified and apprehended.

 

If the USDA seal is to be regarded as a reliable gold standard, the USDA-AMS must establish a capability for laboratory testing for the presence of GM ingredients, pathogens, pesticides, and disqualified additives.  The core of the organic certification program comprises the exclusion of GM products.  This has resulted in the emergence of the competing Non-GMO Verified seal that operates in parallel with the USDA but effectively imposes an additional cost on producers that is passed onto consumers.

 

Organic food products are undergoing scrutiny based on the fact that organic agriculture is clearly less sustainable than conventional cultivation and livestock production.  FAO studies have shown that it will be impossible to feed a burgeoning population without the use of GM cultivars and the precision application of fertilizers and pesticides coupled with regenerative cultivation practices.  Notwithstanding this reality, the EU common agriculture policy is advocating organic production that will ultimately require importation of food from nations where control over production will be questionable.

 

Reevaluation of the objectives of the USDA Certified Organic program should be undertaken.  How products are certified and the procedures used to ensure conformity with reasonable and justifiable regulations should the subject of evaluation for relevance and practicality.

 

Effectively the USDA has done very little to promote organic certification.  The Board that administers the program comprises individuals with vested interest in maintaining a high price differential and low volume essentially to the detriment of the ultimate expansion of food production applying justifiable principles of organic production.  This is exemplified in the demand for outside access of hens producing under the organic program.  The measure is less directed towards “organic purity” than it is to disqualify complexes using aviary housing that represent the bulk of organic eggs produced.

 

By maintaining exclusivity, prices for organic products are maintained at an artificially high level depriving some consumers of their capacity to include organic items in their baskets.

 

Organic means different things to regulators, producers and consumers.  The fact that twenty percent of those purchasing organic products cannot define the concept and a far higher percentage do not understand the deficiencies is serious defect.  The USDA-AMS is providing an anticipation that products conform to non-GM, and freedom from pesticides but do nothing to inspect and regulate at an appropriate level. The USDA measures and establishes the quality of many products including milk, the weight of eggs and their grade and the FSIS monitors pathogen content of red meat and poultry and the FDA is concerned with drug residues in animal products.  The USDA-AMS should recognize its obligation to consumers and to honest conforming producers and develop a capability to ensure that products are compliant beyond a simple paper trail.


 

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.


 




















































































































































































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