In a September 28^th announcement, Cal-Maine Foods (CALM) announced the purchase of “substantially all of the assets of Fassio Egg Farms Inc.” located in Erda, Utah. The transaction includes land, a feed mill, rearing and laying housing and an egg packing plant supporting 1.2 million hens mostly housed cage free.

Fassio Egg Farms is a family owned enterprise established in 1915.

Weekly Economy, Energy and Commodity Report: September 28^th 2023.

 OVERVIEW

At 14H00 on September 28^th the CME price for corn was up 2.9 percent compared to the previous week to 489 cents per bushel for December delivery. Prices of commodities were influenced by weather conditions at the commencement of the harvest, export orders and indirectly by events in the Black Sea. Other factors included movement in the wheat market, with the crop in Australia projected one third down due to El Nino. During the past week, 58 percent of corn acreage was located in drought areas compared to 54 percent a week ago. Orders by China resumed at the end of the 2022-2023 market year extending into September. Despite concern over weather as the crop matures, the demand for ethanol and a projection for lower ending stock of corn, prices are remaining substantially unchanged week-to-week.

Soybeans were up 0.8 percent from last week to 1,300 cents per bushel for November delivery. Prices during the week generally responded to events in Ukraine, predictions of crop size and ending stocks and some profit taking.  During the week 53 percent of soybean acreage was located in drought areas up from 43 percent last week.

Soybean meal was up 0.8 percent to $392 per ton for December delivery, reflecting higher domestic and export demand. Price will fluctuate to reflect the CME price for soybeans and the demand for soy oil. The market has now accepted projections of crop size and higher stocks for the old crop as documented in the April WASDE Report and the forecast included in the September WASDE Report for the 2023 crop and the August 25^th report on the Pro Farmer crop tour.

 WTI was up 6.1 percent from last week rising $5.40 to $94.50 per barrel at 19H00 on September 27^th attributed to higher demand and strengthening of the U.S. Dollar. There was considerable fluctuation in price during the week with WTI trending upwards. The May announcement of an ‘agreed’ production cut by OPEC and an intended 1 million barrels per day voluntary cut by Saudi Arabia announced on June 4^th and extending through December is now materially contributing to inflation. Oil storage other than the Strategic Reserve is at 22.0 million barrels, seasonally down but at a five-year low.

Factors influencing commodity prices in either direction over the past four weeks included:-

• Variable weather conditions in areas growing corn and soybeans with projected lower yields despite reduced speculation in commodities.  (upward pressure).

• Geopolitical considerations moved markets this past week. Cancellation of the BSGI in July and ongoing attacks on Ukraine port facilities continue to impact prices of wheat, corn, oilseeds and vegetable oils. Exports from Ukraine will be severely restricted even with E.U. support. Russia has unsuccessfully attempted to implement a Black Sea blockade on Ukraine that raises prospects for further asymmetric responses by Ukraine and even possible NATO assistance or intervention. Loaded bulk vessels have sailed from Chornomorsk and Odesa and also Danube ports to various destinations. (Upward pressure on corn and wheat and an indirect effect on soybeans)

• Macroeconomic U.S. factors:-

• Most economists in academia and the private sector are forecasting a “soft landing” of the economy following upgraded forecasts for Q3 GDP and economic parameters as detailed below. Inflation has declined from 9.1 percent month-over-month to 4.0 percent as a result of 11 FOMC rate cuts without materially increasing unemployment. There is evident stability in the bank sectors in both the U.S. and Europe. Large U.S. banks passed stringent “stress tests” in June.
• The Federal Reserve held the benchmark interest rate at the monthly FOMC meeting on September 20^th.  The Fed. commentary indicated that the rate would be held high for a prolonged period in the range of 5.25 to 5.50 percent.  Chairman Powell in Congressional testimony and through FOMC minutes indicated that additional increases should be expected with observers anticipating one more rate hike in late 2023 or early 2024 to restore inflation to near an annual 2.0 percent target that is now being questioned for validity.
• The Department of Commerce announced that the inflation rate for Q2 attained 2.6 percent down from the Q1 level of 4.1 percent.
• The September 28^th announcement of Q2 GDP confirmed a 2.1 percent annualized increase, unchanged from the August revision and consistent with expectations. Growth estimates for the third quarter are now suggesting a 4.5 percent rate
• The September 13^th release of the August 2023 CPI confirmed an annualized increase of 3.7 percent  (3.2 percent July) with a core value of 4.3 percent. Food at home was up 0.2 percent from the previous month and 3.0 percent above July 2022. Food away from home was up 0.3 percent from July and up 6.5% from July 2022. Energy was up 5.2 percent, mainly due to gasoline, higher by 10.1 percent. The macro trend is clearly towards reduced inflation but with concern over escalation in energy prices.
• The August Producer Price Index (PPI) released on September 14^th rose 0.7 percent over July. The increase is attributed mainly to a rise in energy costs but with the core value excluding volatile fuel and food, was steady at 0.1 percent. Wholesale food was down 0.5 percent compared with a 0.4 percent increase in July.
• The September 14^th release of retail sales showed a monthly rise of 0.6 percent over August and 2.5 percent from August 2022. The Federal Reserve closely monitors this index as a measure of the trend in inflation. 
• The Conference Board Consumer Confidence Index released on August 29^th for July/August, declined to 106 points, down from 114 in June/July
• Non-farm payrolls increased to 187,000 during August, lower than the 12-month average of 240,000 as documented by the Bureau of Labor Statistics on September 1^st The unemployment rate rose to 3.8 percent from 3.5 percent in July. Average hourly wage rate in August was up 0.2 percent from July to $29.00. Wage rates are closely followed by the Federal Reserve FOMC. Job openings declined to 8.8 million on July 31^st down 4.4 percent from 9.2 million on June 30^th 2023.
• Initial jobless claims released on September 28^th attained 204,000 for the week ending September 23^rd, up 2,000 over a revision. The Bureau of Labor Statistics estimated 1.67 million continuing claims as of the third week in September.
• A Bureau of Labor Statistics report on September 7^th recorded a 3.5 percent increase in Productivity for Q2; Unit Labor Cost was up by 2.2 percent on a normalized basis and Hours Worked down by 1.5 percent in Q2
• The ADP reported on August 30^th that private payrolls increased by 177,000, down 52.2 percent from July compared with an estimate of 195,000. This decline will not directly influence the probability of short-term future rate hikes or pauses. The ADP is regarded by the FOMC as an unreliable statistic

FACTORS INFLUENCING COMMODITY PRICES

• Dry weather in the Midwest during early June transitioned to intermittent rain effectively lowering prices for corn and soybeans in July and early August. Drought conditions prevailed in 58 percent of corn areas and 53 percent of soybean acreage this past week. (Downward pressure on prices with firmer indications yields in the October WASDE)
• The Pro-Farmer crop tour recently lowered yield estimates for corn and soybeans from the revised September WASDE estimates by 1.0 and 0.8 percent respectively, based on adverse weather conditions.

• It is evident that both polarization in the closely divided chambers of Congress and intra-party conflict between and among both sides of the House will delay adoption of appropriations bills. Passage of the 2023 Farm Bill will be contentious and now most likely to be delayed until the end of the year over SNAP eligibility and other entitlements that collectively represent 75 percent of total expenditure. The August 2^nd downgrade of U.S. debt from AAA to AA+ by Fitch Ratings recognizes Congressional dysfunction. The Agency cited “a steady deterioration in the standard of governance”. The House has failed to pass 11 appropriations bills or a continuing resolution necessary to avoid shutdowns at the end of the Federal fiscal year. In contrast the Senate has completed its work through bipartisan cooperation. A September 31^st shutdown of the Federal Government except for essential services appears inevitable. This situation is creating uncertainty and will impact equity and commodity markets and the image of the U.S. governmental system.

• The September 12^th WASDE #640 updated soybean production and a near record corn harvest for the new crop with high world availability despite drought in the Argentine. The September WASDE confirmed the damage caused by the transitory drought in the Midwest during late May through early July by reducing the projected yields of both soybeans and corn from the August report. The U.S. will export 12 percent of both old and new crop corn resulting in lower ending stocks. Soybean exports will comprise 44 percent of the old crop and 40 percent of the new crop with a reduction in ending stock.  (See WASDE Report in this edition confirming availability, use and ex-farm price projections)

• There is an expectation that for market-year 2023-2024, Brazil  has commenced planting soybeans and expects to attain a record harvest of 159 million metric tons (5,842 million bushels) with export of 55 million metric tons (7,205 million bushels). A corn harvest of 131 million metric tons (5,156 million bushels) is anticipated with export of 55 million metric tons (7,205 million bushels). (Lower prices in the future subject to favorable reports on crop progress and actual harvests)

• The Dollar Index (DXY) was 106.6 on September 27^th,  up 1.0 point from last week. The DXY has ranged from 99.6 to 110.8 over the past 52-weeks. The dollar index influences timing and volume of export orders and the price of WTI crude.

USDA Weekly Egg Price and Inventory Report, September 27^th 2023.

Market Overview

• The average wholesale unit revenue values for Midwest Extra-large and Large were down 7.9 percent this past week below seasonal summer values. Medium size was down 3.6 percent from last week. This past week shell egg inventory was down 2.7 percent, following a rise of 1.3 percent the previous week. The decrease in inventory was attributed to higher demand with lower shelf prices for generics. Supply is increasing due to a small but progressive weekly increase in the national flock from July onwards and continuing through September. This past week chains narrowed the spread between delivered cost and shelf price that will result in a lower level of generic stock if retail prices remain low. Deep discounters are restraining prices on generics. Eggs are still highly competitive in price against the comparable costs for other protein foods.
• Total industry inventory was down by 2.0 percent overall this past week to 1.75 million cases with a concurrent 1.2 percent increase in breaking stock, compared to a decrease of 2.4 percent last week. Demand for egg products will presumably decline into fall with reduced travel and entertainment. Egg products are required for the food service and manufacturing sectors although exports are depressed. Wholesale prices compare with 2020 and 2021, also characterized by low ex-plant unit revenue. Benchmark prices were approximately $1.70 per dozen lower than the corresponding week in 2022, that was influenced by flock depletions following HPAI and extreme demand.
• It is now apparent that the inventory held by chains and other significant distributors may be more important over the short term in establishing wholesale price than the USDA regional inventory figures. Changes in stock held by DCs and in the pipeline as determined by weekly orders are probably responsible for relatively small cyclic fluctuation in weekly industry stock.
• Low unit revenue compared to pre-HPAI will persist through the remainder of September. Sporadic outbreaks of HPAI are unlikely given that the seasonal Fall migration of waterfowl is three weeks away. The number and extent of future possible outbreaks during late fall and early winter of 2023 cannot be assessed until more information is available concerning the molecular and field epidemiology of the 2022 spring and fall waves of HPAI. The USDA has yet to identify specific modes of transmission for the 2022 epornitic including possible airborne spread from wild birds and their excreta over short distances.
• The current relationship between producers and chain buyers based on a single commercial price discovery system constitutes an impediment to a free market. The benchmark price appears to amplify both downward and upward swings as evidenced over the past year. A CME quotation based on Midwest Large, reflecting demand relative to supply would be more equitable. If feed cost is determined by CME ingredient prices then generic shell eggs should be subject to a Midwest Large quotation.
• According to the USDA the U.S. flock in production was almost unchanged at 313.0 million during the week ending September 27^th. The total flock of 320.0 million hens included about 3.0 million molted hens that will resume lay during coming weeks plus 4.0 million pullets attaining production. Given the latest figures it is estimated that the producing flock is still 4 million hens lower than before the onset of HPAI.
• The ex-farm price for breaking stock was down 8.3 percent this past week to 83 cents per dozen.Checks delivered to Midwest plants were down 8.8 percent to 73 cents per dozen. Prices for breaking stock will remain low until there is a substantial increase in wholesale price for shell eggs.

The Week in Review

Prices

According to the USDA Egg Market News Reports released on September 25^th the Midwest wholesale price (rounded to one cent) for Extra-large was down 7.8 percent from last week to $1.18 per dozen. Large was down 7.9 percent to $1.16 cents per dozen. Mediums were down 3.6 percent to $1.07 per dozen delivered to DCs. Prices should be compared to the USDA benchmark average 6-Region blended nest-run cost of 82.9 cents per dozen as determined by the USDA for August 2023. This excludes provisions for packing, packaging materials and transport, amounting to 57 cents per dozen as determined in mid-2023, from an EIC survey with low response. Currently producers of generic shell eggs are operating with negative margins depending on region and customer-supply agreements. The progression of prices during 2023 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

The September 25^th 2023 edition of the USDA Egg Market News Report documented a decrease of 18.2 percent in the USDA Combined Region value rounded to the nearest cent, to $1.34 per dozen delivered to warehouses for the week ending September 22^nd 2023. This average price lags current benchmark Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.26 per dozen. At the high end of the range, the price in the South Central region attained $1.42 per dozen. The USDA Combined Price last week was approximately 40 cents per dozen below the 3-year average of $1.75 per dozen. This past week Midwest Large was approximately $1.70 per dozen below the corresponding week in 2022 that was elevated by low supply following losses due to HPAI and strong inflation-driven demand.

On September 26^th Costco Wholesale Corporation (COST) posted results for Q4 and FY2023 ending September 3^rd. This big-box club chain serves as a bellwether for hybrid retail in-store and on-line spending and is a barometer of consumer confidence, offering groceries and household necessities in bulk in addition to discretionary appliances, recreational, luxury and electronic items.

The Company beat consensus on both the bottom and top lines by 0.5 and 3.2 percent respectively. For the most recent quarter, the Company earned $2,160 million on revenue (including fuel and membership fees) of $78,939 million with a diluted EPS of $4.86. For the corresponding Q4 of FY2022, Costco earned $1,868 million on equivalent revenue of $72,091 million with a diluted EPS of $4.20.  Revenue was 9.5 percent higher than in Q4 of FY2022 and net earnings were up by 15.6 percent. Gross margin for Q24 FY2023 was 12.3 percent, higher than the corresponding Q4 of FY2022 at 11.8 percent percent. Concurrently operating margin was unchanged at 3.5 percent for both 4^th quarters despite increased freight, transport, wages and utilities.

For FY 2023, the Company earned $6,292 million on revenue (including fuel and membership fees) of $242,290 million with a diluted EPS of $14.16. For FY2022, Costco earned $5,844 million on equivalent revenue of $226,954 million with a diluted EPS of $13.14

Comparable global same-store sales for Q4 2023 (excluding fuel and foreign exchange) attained 3.8 percent. U.S. same store sales were up 3.1 percent; Canada by 7.4 percent and the Other International category, 4.4 percent. E-Commerce was down by 0.6 percent. According to CFO Richard Gallanti, on the investors’ call consumers made more trips to Costco with traffic up 5.0 percent but they spent less with the average transaction down 4.5 percent. According to Gallanti, customers selected groceries, household goods and clothing but avoided big-ticket items. Costco did not raise membership fees as expected but Gallanti commented this is a situation of “when and not if”. There are currently 32.3 million Executive Level memberships at $120 annually representing 45 percent of the total but accounting for 73 percent of sales.

On September 3^rd Costco posted total assets of $68,994 million. Long-term debt and lease obligations attained $10,353 million. Costco had an intraday market capitalization of $247,550 million on September 26^th. COST trades with a forward P/E of 36.5 and has ranged over the past fifty-two weeks from $447.90 to $571.16 with a 50-day moving average of $553.99. Costco closed pre-release at $552.96 on September 26^th but rose on a declining market attaining $561.74 at 13H00 on Wednesday 27^th. Twelve-month trailing operating margin was 3.5 percent and profit margin 2.6 percent.  The Company generated a return on assets of 7.9 percent and 27.3 percent on equity.

At the end of Q4 FY2023, Costco operated 861 warehouses. There are 591 in the U.S; 107 in  Canada; 40 in Mexico; 33 in Japan; 29 in the U.K. and 62 others in seven other nations among the E.U., Asia and Australia.

Governor Maura Healey of Massachusetts has issued an order banning the purchase of beverages and water in sealed plastic bottles.  In addition, executive offices and agencies in Massachusetts  must report each year on the action taken to reduce the sale of bottles at state properties including parks. 

This action follows bans enacted on disposal of plastic waste and textiles imposed by the Massachusetts Department of Environmental Protection.  The action by Governor Healey is supported by environmental groups active in preventing contamination of waterways and the Atlantic Ocean.

Following the collapse of the Black Sea Grain Initiative and deliberate attempts to destroy port installations by the Russian Federation, Ukraine has managed to restore navigation to facilitate bulk grain exports.  This is being achieved by the used of drones and remotely controlled surface weapons that have successfully attacked Russian naval vessels and port installations.

 During August, the Danube Delta ports Izmail, Reni and Kiliya collectively handled 3.2 million tons of cargo of which 2.5 million metric tons were commodities.  The Port of Odessa exported 4.2 million tons in August while the grain deal was still in operation.  Low water levels in the Danube Delta limit the size of shipments to 10,000-ton capacity, far below the Panamax vessels that load from the major Black Sea ports including Odessa. 

Extending the scope of asymmetrical warfare conducted by the Ukraine will allow resumption of unmolested navigation southward from the Black Sea ports to the Bosphorus. Recent initiatives include attacks on the Kerch Bridge, damage to naval vessels in dry dock and the attack on the headquarters of the Russian Black Sea fleet in Crimea. The deterrent effect on Russian capabilities would be even more likely if Ukraine could deploy air cover to support naval operations.

The USAPEEC office in Mexico organized a seminar entitled Technical and Sanitary Aspects of Day-Old Chick, Fertile Egg and Export Protocols from the U.S. to Mexico.  The event was attended by 162 representatives of the industry in Mexico.  Principal speakers were Dr. Quesada Fox and Dr. Alberto Torres who reviewed aspects of import regulations and the management of products.

The Federal Railroad Administration has approved 70 projects requiring $1.4 billion in federal grants.  The projects including 40 bridges were selected from 234 applications with funding provided from the $1 trillion Infrastructure Bill.

The grants were based on the probability of improving safety, increasing capacity and generating economic benefits.

Of the total, $600 million is allocated to freight-railroad projects and replacement of critical bridges that carry high levels of freight that are considered in need of repair.

Secretary of Transportation, Pete Buttigieg, noted, “It’s fair to say that people look at America’s rail system and correctly say that it needs improvement.”  He cited, “Derailments on freight lines, protracted blocked crossings and lagging intercity passenger rail as symptomatic of a decline in service.”

The freight railroads claim to have spent upwards of $23 billion annually on the networks according to their trade association.  Despite this claim, the nation has been impacted by numerous derailments some of which have involved hazardous cargos.

 It is questioned whether federal funds should be assigned to improvement projects for track owned by either private our public traded companies.  A prerequisite of the grants should be that companies refrain from buy backs equivalent to federal funding and that funding should require at least some Company match.

Irrespective of funding, a viable and functional rail system is critical to the operation of the poultry industry. This is currently even more important with a seasonal drought-related decline in capacity on the Mississippi River system accompanied by soaring freight rates.

Status of 2023 Corn and Soybean Crops

The USDA Crop Progress Report released on September 25^th confirmed moderate advances in soybean and corn development, with onset of harvest, both slightly ahead of their five-year averages.

Relief of drought conditions in the Midwest has stalled with corresponding deterioration in soybean condition this past week as a result of heat stress and drought. The quality of both corn and soybeans compared to the 2022 crop for the corresponding week, is quantified in the table below. The combined highest categories of “good” and “excellent” for corn amounted to 53 percent this past week up from 51 percent last week and compared to 52 percent for the corresponding week in 2022. Soybean condition for the two highest categories was 50 percent this past week compared to the previous week at 52 percent and 55 percent for the corresponding week in 2022. As of September 19^th, 58 percent of corn acreage (was 54 percent last week) and 53 percent of soybean acreage (was 48 percent last week) were located in drought-affected regions.

Based on the sum of the “adequate” and “surplus” categories, surface and subsoil moisture levels were only slightly changed compared to the corresponding weeks in 2022. For the past week surface and subsoil moisture values for 2023 were 48 and 43 percent respectively for the two highest categories. These levels were similar to the previous week with values of 42 percent and 41 percent respectively. The most recent values for surface and subsoil moisture can be compared to 46 percent and 44 percent respectively for the corresponding week in 2022. It is to late for the transition to an El Nino to affect crop condition in coming weeks but unseasonable rain may complicate the harvest.

Reference is made to the September 12^th WASDE Report #640 and the weekly Commodity, Economy and Energy Report in this edition, documenting acreage to be harvested, yields and ending stocks. The Pro Farmer crop tour released on August 25^th projected an average corn yield for the 2023 harvest of 172 bu. per acre, down 1.0 percent from the 173.8 bu. per acre as documented in the September WASDE. Soybean yield was projected at 49.7 bu. per acre, 0.8 percent below the 50.1 bu. per acre as documented in the September WASDE. The USDA incorporated the results of the NASS September survey of farmers to forecast yields for 2023 corn and soybean crops that were included in the Crop Production Report and September WASDE released on September 12^th.

WEEK ENDING   Crop Sept. 3rd 2023 Sept 10th 2023 5-Year Average Corn dough (%) 100 100 100 Corn dented (%) 90 95 93 Corn mature (%) 54 70 60 Corn harvested(%) 9 15 13         Soybean Status 18 States       Soybeans setting pods (%) 100 100 100 Soybeans dropping leaves (%) 54 73 62 Soybeans harvested (%) 5 12 11
Crop Condition V. Poor  Poor Fair Good Excellent Corn 2023 (%) 6 12 29 44 9 Corn 2022 (%) 9 12 27 42 10 Soybeans 2023 (%) 6 12 32 42 8 Soybeans 2022 (%) 5 10 30 46 9
Parameter 48 States V. Short Short Adequate Surplus   Topsoil moisture: Past Week 20 33 45 2 Past Year 21 33 43 3 Subsoil moisture: Past Week 23 35 40 2 Past Year 23 33 43 1

EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of the 2023 harvest in November.

Amazon plans to hire 250,000 workers for the holiday period representing a 67 percent increase over temporary positions in 2022.  Hourly pay will be increased to $20 in customer fulfillment and in transportation.  In anticipation of the holiday period, Amazon has opened fifty fulfillment centers including those dedicated to same-day delivery.

There is optimism over seasonal sales with spending anticipated to exceed 2022 by five percent with a sharp increase in the proportion represented by E-commerce.

EGG-NEWS has previously reported on pressure exerted by the Government of France on the major supermarkets to reduce the prices over a broad range of food items to lower inflation.  This has predictably resulted in the major supermarket chains transferring pressure onto suppliers in order to maintain margins. 

Major food manufacturers including Unilever and Nestle have imposed price increases based on raw material, energy and labor costs and claim that the recent escalations in wholesale prices are justified. 

Traditionally, discussions on price take place during the first quarter annually. The Government is now proposing that negotiations between suppliers and retailers should be brought forward and concluded by mid-January of 2024.

A draft regulation has been circulated to member states that if approved would extend the use of glyphosate for an additional ten years.  Member states opposed to this action have the opportunity to amend or block proposed regulations in October as the vote by the Standing Committee on Plants, Animals, Food and Feed.

The European Commission decision on glyphosate is based on an intensive review of the risks and safety of the compound which is the most widely used agricultural herbicide.  The E.U. Food Safety Authority notes that there are some deficiencies in literature relating to the possible toxicity or mutagenicity of glyphosate but this is common to all compounds.

 Stefan de Keersmaecker a spokesperson for the European Commission noted that the proposal to extend the registration of glyphosate was “based on scientific, solid information considering different active substances involved.”  In commenting on the apparent deficiencies in the literature, the Commission spokesperson stated that “the issues in question do not constitute a risk to human health or the environment.”

In all probability the registration of glyphosate will go forward but possibly with certain conditions or restrictions to satisfy those opposed to the proposed extension.  Continued use of glyphosate in the E.U. will be a prerequisite for adoption of GM cultivars that will enhance yield and effectively contribute to sustainability.  The E.U. does not currently allow propagation of GM varieties but imports GM corn and soybeans for animal feed, industrial and human food requirements.

EGG-NEWS has reported on opposition to glyphosate commencing with the contentious IARC report that glyphosate was potentially carcinogenic. (Enter ‘Glyphosate’in SEARCH block). The IARC document was subsequently criticized by environmental toxicologists affiliated to industry and academia. The principal author had an undisclosed conflict of interest since he was serving as an expert witness for attorneys representing plaintiffs claiming lymphoma from contact with the compound.  The FDA conducted epidemiologic evaluation among farm workers without ascertaining that there was any statistical correlation between exposure and any form of cancer.

Extension of the registration of glyphosate in the E.U. would in large measure invalidate the claims by the government of Mexico regarding the compound and by corollary their intent to ban importation of GM corn.

The USDA has announced a program to transfer $2.5 billion from the Commodity Credit Corporation to promote trade and provide food aid.  $1.4 billion will fund the Regional Agricultural Promotion Program, with some allocated to supplement the Market Access Program and the Foreign Market Development Program. An amount of $1 billion will fund commodity-based international food aid.

The USDA initiative was motivated by the Senate Agriculture Committee with the Chair Senator Debbie Stabenow (D-MI) and Ranking Member Senator John Boozman (R-AR) emphasizing the need for “better market opportunities for U. S. farmers by addressing trade promotion and in-kind international food assistance”.

The additional commodity promotion and aid funding is intended to move more agricultural products to developing markets and reduce the dependency on China.

Quantum Foods announced that it lost 1.5 million egg production and breeder hens during the current outbreak of H7 Highly Pathogenic Avian Influenza.  During April, the company lost close to 500,000 birds in an earlier outbreak on a complex in the Western Cape Province.  Quantum will post a loss in the current financial year.

Problems facing egg producers in South Africa extend beyond HPAI.  Power brown-outs and “load shedding” as a result of deficiencies in the national grid and inadequate power generation have impacted production and packaging. 

In an attempt to reduce dissemination of avian influenza, trade in culled hens has been banned.  Traditionally, the egg industry in the Republic of South Africa relies on sale of culled hens through a network of middlemen to offset the cost of rearing replacement pullets.  The regulation will deprive poor, rural communities of a source of protein, and deny producers of a source of revenue. An unintended and inevitable consequence will be unregulated clandestine distribution of hens further complicating control.

Given the situation in South Africa, deployment of vaccines will be the only effective method of suppressing infection.

Since the Russian Federation effectively reduced exports of Ukrainian grain through the Black Sea, product has flooded neighboring eastern European nations to the detriment of local farmers but benefitting livestock producers.  Despite initial unity in the face of Russian aggression, concern in the farming community has become a major political issue, especially with the ruling party in Poland facing an election that will require the support of farmers. 

Poland, Hungary, Slovakia and Croatia have banned some Ukrainian commodities resulting in a complaint by Ukraine to the World Trade Organization.   Andrzej Duda, President of Poland, noted, “Ukraine is behaving like a drowning person clinging to everything he can but we have the right to defend ourselves against harm being done to us.”

The resolution of this problem will depend on restoration of grain shipments from Black Sea and Danube Delta terminals. This will relieve pressure on the neighbors of Ukraine. Some bulk shipments along a new sea-lane have commenced.

According to a ProMed Mail posting on September 20^th, the Animal and Plant Health Agency of Scotland confirmed a diagnosis of HPAI in a commercial flock. The Agency oversaw depopulation of the 221,000 hen complex and initiated surveillance within a statutory control zone.

The source of the outbreak has yet to be determined but in all probability the virus was introduced by infected migratory marine birds.

Parties involved in the proposed Kroger – Albertsons merger have announced that as many as 420 stores would be sold to C&S. This action is intended to allay concerns by the Federal Trade Commission that the proposed merger would be noncompetitive.

Members of the United Food Commercial and Warehouse union have questioned the viability and legitimacy of the proposed transaction and point to previous experience with the acquisition of Safeway by Albertsons. Sale of stores to Hagen resulted in a filing for bankruptcy within months after the transaction.

Economists for the UFCW Union point to the apparent low price for the stores.  They estimate that eight warehouses in the transaction are worth between $400 to $800 million, and the 413 stores could have a collective value of $3 billion.  They regard the $1.9 billion sale price as unrealistic. The UFCW regards the proposed C&S sale as “Hagen 2.0” with a similar outcome.

The Union questions the ability of C&S to effectively manage over 400 stores.  Currently, the Company operates 55 acquired locations and franchises about 100 stores.  C&S has a history of eliminating union positions that would be to the detriment of workers if the transaction were to proceed.   

California has forwarded three bills to Governor Gavin Newsom, requiring severance pay for workers and providing for other protection in the event that the merger is concluded.

Amazon plans to hire 250,000 workers for the holiday period representing a 67 percent increase over 2022.  Hourly pay will be increased to $20 in customer fulfillment centers and in transportation.  In anticipation of the holiday period, Amazon has opened fifty fulfillment centers including those designated for same-day delivery.

There is optimism over seasonal sales with spending anticipated to exceed 2022 by five percent and with a sharp increase in E-commerce.

Authorities in Peru have reported a case of HPAI on a commercial duck farm in Chancay.  Affected ducks showed neural, respiratory and digestive abnormalities with initial mortality attaining 10 percent of the flock at the time of diagnosis.  Approximately 3,500 birds were depopulated.

The second case involved a commercial laying flock of approximately 6,000 hens in Grocio Prado.  The diagnosis was made following mortality in the flock with typical clinical signs of HPAI.

Brazil reported cases of HPAI strain H5N1 from migratory waterfowl but to date, has not reported any cases in commercial poultry.  Argentina and Uruguay have recently documented mortality in sea lions consistent with previous reports along the Pacific coastline.

According to official statements, the Philippines will introduce vaccination in an attempt to control highly pathogenic avian influenza.  The nation will purchase vaccine from PT Vaksindo Satwa Nusantara of Indonesia.

Ferdinand Martin Romualdez, spokesperson for the Presidential Communications Office, stated, “The early delivery of vaccine could spur the revitalization of our country’s poultry industry which has faced serious challenges due to the continuing threat of avian influenza.”

Following the depopulation of ten million hens, the nation has experienced a shortage of eggs with a proportional rise of 26 percent in market price.

The need for vaccine is recognized by President Ferdinand R. Marcos, Jr., who met with potential suppliers during the recent 43^rd ACEAN Summit in Jakarta.

The government intends funding an Institute of Virology and Vaccinology for the Philippines to conduct research and produce diagnostic kits and vaccines for human, animal and plant infections.

Arabella Schorghuber, an acknowledged vegetarian, is responsible for the Paulaner-sponsored Festzelt, one of the major tents serving attendees at the 2023 Munich Oktoberfest.  Ms. Schorghuber decreed that only organic chicken would be served at the event under her management. This decision resulted in a 50 percent increase in cost to $22 per half-Cornish hen. A liter of beer costs $16, up approximately six percent from 2022.  The decision relating to the cost of Paulaner-served chicken has evoked widespread criticism expressed as “woke wiesn”.

It is anticipated that the 2023 Oktoberfest, the first since the onset of COVID, will attract over seven million attendees over an 18-day festival that commenced on September 16^th.  Collectively, 500,000 chickens were served at the 2019 Oktoberfest that includes 15 large tents sponsored by individual breweries with a collective seating of 100,000.

On September 21^st Darden Restaurants Inc. (DRI) posted the results for the first quarter of fiscal 2024 for the period ending August 27^th beating consensus estimates on the top and bottom lines. Darden Restaurants is a bellwether for both casual and fine dining, confronted with problems of reduced discretionary spending, availability and cost of labor and food.

For the quarter, Darden earned $195 million on revenue of $2,731 million with an EPS of $1.59.  Comparative values for the first quarter of fiscal 2023 were net earnings of $193 million on revenue of $2,446 million with an EPS of $1.56.  Comparing the first quarters of 2023 and the previous fiscal year, revenue was up by 11.7 percent; Operating margin up by 2.0 percent to 10.2 percent but with a decline in profit margin by 10.1 percent.

The Company reported the following sales and segment contributions:-

Darden Restaurants operates 1,998 locations including 906 Olive Garden locations, 549 LongHorn Steakhouses, 77 newly acquired Ruth’s Chris Steakhouses and 452 other units including both casual and fine dining restaurants under seven brands. 

For the quarter, Darden posted a 5.0 increase in same restaurant sales with the fine dining group posting a 28 percent decline, offset by a 6.1 percent gain by the Olive Garden and 8.1 percent by LongHorn.

In commenting on performance, Rick Cardenas, president & CEO stated, “Looking across our entire portfolio, I am pleased with our first quarter results," He continued "Our strategy is working.  We continue to grow share, strengthen margins, and make meaningful investments in our business while returning capital to shareholders."

In reviewing strategy in the post-COVID period, Cardenas stated on the Investor’s call that the Company will reduce promotions and advertising “Whatever we do is going to elevate brand equity. If it means that our traffic is at the lower end of our guide, then it’s at the lower end of our guide. We’re not going to do things that are going to impact us in the long-term just for short-term.”

On September 20, 2023, the Darden Board of Directors unanimously elected Cynthia (Cindie) T. Jamison as Chair of the Board, succeeding Eugene (Gene) I. Lee, Jr. who, as previously announced, retired from service as a director of the Company on that date. Cardenas stated "I look forward to the opportunity to continue working with Cindie in her new role as Chair. She has been a tremendous steward of our company since joining the Board nine years ago”.

The Company confirmed guidance for FY 2024 with a projected diluted EPS range of $8.55 to $8.85.

Darden Restaurants posted total assets of $11,269 million of which $2,525 million comprised goodwill and trademarks.  The company carries long-term debt and lease obligations of $6,796 million.  Darden Restaurants had an intraday market capitalization of $18,070 million on September 21^st.  The company has traded over the past fifty-two weeks in a range of $120.20 to $173.06 with a 50-day moving average of $159.96 and with a forward P/E of 17.0

Over the trailing twelve months, operating margin was 11.4 percent and profit margin 9.4 percent.  Return on assets was 7.3 percent and on equity 44.7 percent. 

In anticipation of a fall outbreak of highly pathogenic H5N1 avian influenza and experience with the infection in previous years, the French National Agency for Health and Safety (ANSES) has established recommendations for vaccination of flocks:

• Commercial waterfowl can be vaccinated as a preventive measure
• All commercial poultry in an area undergoing an outbreak of H5N1 will be vaccinated as an emergency measure to create an immune population
• Culling will be restricted to affected farms. Flocks within the control zone will not be depleted as in previous years.
• Vaccines selected for the National Preventive Program are all based on the DIVA principle
• The Agency may deploy sentinels to detect a presence of virus although this can be accomplished by surveillance of wild migratory birds

The action taken by France to introduce vaccination as opposed to relying on depopulation as the only response is an evident shift within the E.U. from attempted containment to a more practical and progressive approach. 

Highly pathogenic avian influenza should be regarded as the Newcastle disease of the 2020's and should be suppressed, but not eradicated, using combining intensive immunization with biosecurity as in the 1970s and 1980s.

The Expanded Food Safety Investigation Act has sponsored by Senator Cory Booker (D-NJ) and Representative Rosa DeLauro (D-CT) has been introduced into their respective Chambers. The proposed legislation is cosponsored by Senator Richard Blumenthal (D-CT) and has widespread support from public health advocacy groups.

The proposed Act would allow investigators from both the Food and Drug Administration and the Centers for Disease Control and Prevention to enter farms and plants to collect samples to determine the source of foodborne infections and study the epidemiology of diseases especially associated with concentrated animal feeding operations (CAFOs).

The need for legislation is motivated by repeated outbreaks of STEC infection associated with leafy greens.  Plants are irrigated with water that is frequently contaminated by runoff from feed lots.  The Act would overcome the need for permission to be obtained for investigators to acquire samples in the course of outbreak studies. 

Senator Booker stated, “Public health agencies like the FDA and CDC face limitations in their ability to fully investigate and understand the problem since they lack the authority to enter farms and conduct microbial sampling.  The animal industry has also impeded investigators from accessing farms during outbreaks which further hinders their efforts to identify the source of outbreaks and develop preventive measures.”

Predictably, the legislation is endorsed by a number of activist organizations including the Center for Food Safety, Center for Science in the Public Interest, Consumer Federation of America, Consumer Reports, Food and Water Watch, the Natural Resources Defense Council and STOP Foodborne Illness.

The proposed legislation would have implications beyond investigation of any specific disease outbreak.  Applying whole genome sequencing to a pathogen isolated from both consumers and a feed lot will create opportunities for litigation.  The tort system would inevitably result in relocation of CAFOs that in many cases are in close proximity to fields used to grow leafy greens. Runoff with effluent to irrigation canals, presumably results in contamination of produce.  Since there is currently no absolute kill step for Salmonella, Listeria or E.coli responsible for extensive outbreaks of foodborne infection. The close proximity of CAFOs and irrigated fields creates a risk of contaminated leafy greens serving as a vehicle of infection. A similar situation may occur with Salmonella or Campylobacter infection acquired from consuming undercooked poultry. Breeder and growing farms and hatcheries for broilers and turkeys would be subject to warrantless entry by federal agencies performing microbiological sampling with unpredictable results creating to legal jeopardy.

USDA Weekly Egg Price and Inventory Report, September 20^th 2023.

Market Overview

• The average wholesale unit revenue values for Midwest Extra-large and Large were down 18.6 percent this past week below seasonal summer values. Medium size was unchanged from last week. This past week shell egg inventory was up 1.3 percent, following a rise of 4.0 percent the previous week. The decrease in inventory was recorded despite presumed lower demand with higher shelf prices for generics. Supply is increasing due to a small but progressive weekly increase in the national flock from July onwards and continuing through September. This past week chains widened the spread between delivered cost and shelf price with a trend to higher stock levels if retail prices remain high. Deep discounters are restraining prices on generics. Eggs are still highly competitive in price against the comparable costs for other protein foods.
• Total industry inventory was up by 1.5 percent overall this past week to 1.78 million cases with a concurrent 2.4 percent increase in breaking stock, compared to an decrease of 0.1 percent last week. Demand for egg products will presumably decline at the end of summer with reduced travel and entertainment. Egg products are required for the food service and manufacturing sectors although exports are depressed Wholesale prices compare with 2020 and 2021, also characterized by low ex-plant unit revenue. Benchmark prices were approximately $0.70 per dozen lower than the corresponding week in 2022, that was influenced by flock depletions following HPAI.
• It is now apparent that the inventory held by chains and other significant distributors may be more important over the short term in establishing wholesale price than the USDA regional inventory figures. Changes in stock held by DCs and in the pipeline as determined by weekly orders are probably responsible for relatively small cyclic fluctuation in weekly industry stock.
• Low unit revenue compared to pre-HPAI will persist through the remainder of September. Sporadic outbreaks of HPAI are unlikely given that the seasonal Fall migration of waterfowl is four weeks away. The number and extent of future possible outbreaks during late fall and early winter of 2023 cannot be assessed until more information is available concerning the molecular and field epidemiology of the 2022 spring and fall waves of HPAI. The USDA has yet to identify specific modes of transmission for the 2022 epornitic including possible airborne spread from wild birds and their excreta over short distances.
• The current relationship between producers and chain buyers based on a single commercial price discovery system constitutes an impediment to a free market. The benchmark price appears to amplify both downward and upward swings as evidenced over the past year. A CME quotation based on Midwest Large, reflecting demand relative to supply would be more equitable. If feed cost is determined by CME ingredient prices then generic shell eggs should be subject to a Midwest Large quotation.
• According to the USDA the U.S. flock in production was up 0.2 percent or 0.6 million hens to 313.0 million during the week ending September 20^th. The total flock of 319.4 million hens included about 5.0 million molted hens that will resume lay during coming weeks plus 4.0 to 5.0 million pullets attaining production. Given the latest figures it is estimated that the producing flock is still 4 to 5 million hens lower than before the onset of HPAI.
• The ex-farm price for breaking stock was down 2.2 percent this past week to 91 cents per dozen.Checks delivered to Midwest plants were unchanged at 80 cents per dozen. Prices for breaking stock will remain low until there is a substantial increase in wholesale price for shell eggs.

The Week in Review

Prices

According to the USDA Egg Market News Reports released on September 18^th the Midwest wholesale price (rounded to one cent) for Extra-large was down 18.5 percent from last week to $1.28 per dozen. Large was down 18.7 percent $1.26 cents per dozen. Mediums were unchanged at $1.11 per dozen delivered to DCs. Prices should be compared to the USDA benchmark average 6-Region blended nest-run cost of 82.9 cents per dozen as determined by the USDA for August 2023. This excludes provisions for packing, packaging materials and transport, amounting to 57 cents per dozen as determined in mid-2023, from an EIC survey with low response. Currently producers of generic shell eggs are operating at break-even or negative margins depending on region and customer-supply agreements. The progression of prices during 2023 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

The September 18^th 2023 edition of the USDA Egg Market News Report documented a decrease of 0.6 percent in the USDA Combined Region value rounded to the nearest cent, to $1.64 per dozen delivered to warehouses for the week ending September 15^th 2023. This average price lags current benchmark Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.55 per dozen. At the high end of the range, the price in the South Central region attained $1.71 per dozen. The USDA Combined Price last week was approximately 12 cents per dozen above the 3-year average of $1.50 per dozen. This past week Midwest Large was approximately $0.70 per dozen below the corresponding week in 2022 that was elevated by losses due to HPAI.

Flock Size 

According to the USDA the number of producing hens reflecting September 20^th (rounded to 0.1 million) was up 0.6 million hens (0.2 percent) to 313.0 million. The total U.S. flock includes about 5 million molted hens due to return to production with approximately 4 to 5 million new pullets reaching maturity each week based on USDA monthly chick-hatch data for 20-weeks previously. The increase is offset by routine flock depletion in addition to residual losses during the Fall phase of the 2022 HPAI epornitic. Based on inventory level and prices the hen population producing eggs should now be in relative balance with consumer demand. Industrial and food service off-take although increasing, has not reverted to pre-COVID levels. Prices will continue to fluctuate and are expected to stabilize at a low seasonal level through the remainder of September into October 2023.

According to the USDA the total U.S. egg-flock on September 20^th was up 0.6 million hens (0.2 percent) to 319.4 million including second-cycle birds and those in molt. The difference of 6.4 million hens between flocks in production and total hens is an approximate figure but denotes that many molted hens will resume production after molt. Despite benchmark wholesale prices up for three consecutive weeks older flocks have been molted or depleted. At present there are 4 to 5 million fewer hens in the total flock with the difference equivalent to about 1.5 percent of the pre-HPAI national flock of 325 million hens.

Food Safety Net Services Certification & Audit (FSNS C&A) is offering a 15 percent discount* on GFSI-benchmarked food safety certification audits The Company specializes in providing thorough, professional food safety certification audits with responsive service. GFSI food safety certification audits will include:

• FSSC 22000
• BRCGS Food Safety
• SQF

For information on the offer and to review the range of analytical, educational and analytical services offered access the FSNS website by clicking on to the Company logo on the right side of the welcome page.

*Discount applies to new customers who do not currently use FSNS C&A services.

The long-awaited and previously withheld September 19^th IPO of Instacart (CART) on NASDAQ presented no surprises. The share price trajectory followed that of ARM, the most recent IPO.

The set price of a CART share was $30 and shortly after trading commenced rose sharply to $42.95. Thereafter a decline set in and CART closed at $33.70 suggesting that the reduced set price was fairly offered. The IPO brought in $420 million for the 8 percent of equity offered.

Instacart had an intraday market capitalization of $9,300 million on September 20^th less than a quarter of the eye-watering private valuation of $39,000 million in early 2021 when COVID-related orders were fueling prospects for the enterprise.  The Company achieved a 12-month trailing operating margin of 13.9 percent and a profit margin of 25.7 percent. Return on assets attained 7.4 percent and 28.4 percent on equity. At 13H00 on September 20^th CART traded at $31.37 with a trailing P/E of 53.9.  

Federal Government Shutdown Looms

Given dissention within the majority party and their narrow margin in the House the Chamber has been unable to pass 10 of the 11 appropriations bills.

Accordingly most functions of the Federal Government will cease at midnight September 30^th and almost all Federal employees will be furloughed. The attempt to pass a Continuing Resolution with a blanket eight percent reduction in spending failed and would not in any event have passed the Senate. The possibility of a Discharge Petition is under consideration but this would be a complicated process requiring cooperation between the minority party and a suitable number of moderate members of the majority party who would break ranks with their leadership.

Following the Eastern Economic Forum during early September, China and Russia announced the Nizhneleninskoye-Teongjiang Grain Terminal that will be pivotal in transporting Russian grain and oilseeds from the Ural mountains eastward to China.  According to the South China Morning Post the new terminal will be part of the Russia-China Land Grain Corridor.

Russia is now attempting to secure new markets for grain including wheat with a projected export volume of 45.0 million tons for the 2022-2023 market year.  Russia is increasingly dependent on earning foreign exchange from nations such as China that do not subscribe to sanctions against Russia imposed after the invasion of Ukraine.  Since the termination of the Black Sea Grain Initiative and threats to impose an embargo on exports of grain from Ukraine, Russia has profited by taking markets from Ukraine and has benefitted from increased commodity prices as a result of generating an artificial shortage and selling wheat grown in occupied Ukraine.

Scientists at the Vaccine Research Center of the NIH National Institute of Allergy and Infectious Diseases are evaluating a second version of a “universal” influenza vaccine currently termed FluMos-v2.  The product comprises influenza virus hemagglutinin assembled in repeating patterns on a nanoparticle scaffold.  The fragments of virus simulate the immune system to respond to exposure to a viable virus.  The latest version of the candidate vaccine incorporates viral protein from six strains including four influenza A and two influenza B viruses to provide broad protection.

The latest clinical trial will enroll 24 volunteers aged 18 to 50 years.  Two intramuscular injections will be administered 16 weeks apart and subjects will be monitored for safety and response to the vaccine in comparison to 12 recipients of a placebo.

Dr. Hugh Auchincloss, Acting Director of NIAID, stated, “An ideal universal influenza vaccine could be taken less frequently than once a year and protect against multiple strains of influenza virus.  With each new universal influenza vaccine candidate and clinical trial, we take another step closer to that goal.”

The technology developed by NIAID could be applied to H5 AND H7 avian influenza viruses to develop an effective vaccine for administration in ovo that ultimately could provide protection for flocks in areas where avian influenza is likely to reoccur.

The Attorney General of the state of Missouri and the Missouri Department of Agriculture have filed a suit against Dollar General alleging unfair and deceptive pricing practices in stores located in the state.  The allegations relate to prices charged at checkout that are higher than indicated at point-of-sale.  Ninety-two Dollar General stores among 147 investigated failed the comparison. This suggests that errors were not simply related to a malfunction of checkout scanners or errors in placing shelf prices at a few specific stores.  The inspection involved 50 random products.  The Department of Agriculture inspectors determined that the average overcharge was $2.71 on a range of products and price discrepancies could amount to $6.50 per item.

Recently, Dollar General has come under intense scrutiny over wage rates, employee safety, having been cited by OSHA, and failure to supply fresh food and vegetables in so-called “food deserts”.  It is obvious that the chain has both a problem of ethics and a reluctance to respond to legitimate complaints relating to corporate activities.

In a recurrence of low water levels along the Mississippi River during the fall and winter of 2022, freight rates are rising sharply.  From St. Louis, MO. southbound, barge cargo now costs 70 percent more than the three-year average.  Operators are reducing loads on barges and now link fewer barges in tows.  The president of the Canal Barge Company located in New Orleans noted “We’re keeping things moving but could use some rain and help from Mother Nature.” There has been a sharp drop in river height South of St. Louis, commencing at the end of the first quarter.  Snow melt and heavy rains resulted in flooding from Iowa southbound to Illinois, but levels dropped in June, leaving behind a layer of silt on the bottom of the river requiring the Corps of Engineers to dredge channels. 

This situation has implications for the new crop with a high proportion to be shipped down the Mississippi for either export or for livestock production in the southeast.  In coming weeks, EGG-NEWS will monitor barge rates and river levels and export tonnage will be recorded in the weekly Economy, Energy and Commodity Report.

According to a recent posting in Supermarket News, Albertsons Companies has extended the Flash grocery service to more than 2,0000 stores including the Safeway, Vons, Shaw’s and Acme banners.  Shoppers can select designated Flash items that can be delivered within a 30-to-60-minute period.  Customers can also collect groceries within 30 minutes or less.

The service is offered through the Albertsons Companies websites and mobile apps that offer Flash-eligible items at the same prices as in-store purchases.  The Flash order costs $4 for pickup and $12 per delivery order.

Albertsons Companies has upgraded loyalty programs with FreshPass providing online grocery delivery against either an annual or monthly subscription.  The company claims 35 million members of the U Loyalty Program with Drive-up and Go operating in 2,000 stores fulfilling orders within two hours.

Mayor Brandon Johnson is considering a joint venture between the City of Chicago and a The Economic Security Project, a non-profit to establish grocery stores in areas currently underserved.  This is a bad idea from a business perspective but superficially of benefit to civic politicians.  The reason why there are few grocery stores in so-called food deserts is that they are unprofitable mainly due to theft, euphemistically referred to as “shrinkage” and colloquially as the “five-finger discount”.  A secondary consideration is security.  Both of these issues could be resolved by better technology and policing, benefitting the residents of West Englewood and East Garfield Park where more than half of the residents live more than half a mile from a grocery store. 

If the City of Chicago would ensure safety in and around stores stores and if the legal system could ensure a fair operating margin for stores, independents and chains would respond by re-opening stores to customers.  This is evidenced by the intention to establish a Save-A-Lot store in the Englewood neighborhood in an abandoned Whole Foods Market location. 

While it is acknowledged that grocery stores are an important anchor in communities providing fresh fruit, vegetables and reasonably priced food staples, public sector involvement in retailing is expensive to taxpayers is inefficient and invariably unprofitable.  This is evidenced by the high prices and losses incurred by state mandated and operated liquor outlets and other quasi-private sector enterprises.

In addition to appropriate policing and provision of services by the City residents could cooperate by supporting local stores and acting as a united community to suppress theft and vandalism.

According to the Canadian Food Inspection Agency, an outbreak of avian influenza (H5N1 strain) was diagnosed in a commercial mixed-species poultry flock on September 12^th. Given chickens and turkeys and the small size of the flock, outside access is presumed. A control zone was established around the farm with surveillance. 

The case occurred in Warner County, southeast of Lethbridge approximately 70 miles north of the border with the U.S. The County includes a length of the St. Mary’s River and has numerous expanses of water.

Through September 1^st 2023, Alberta recorded 57 previous cases of avian influenza requiring the depopulation of 1.4 million birds.  This is the first case of HPAI diagnosed in the province since mid-second quarter.

The outbreak just before the advent of fall is concerning as it indicates shedding by migratory birds.

The USDA National Institute of Food and Agriculture has awarded a $480.000 grant to the state of Mississippi for their Agricultural Science Professional Development Program (ACRE 2.0).

The program will acquaint existing and prospective teachers with familiarity with agriculture and will allow them to encourage students to consider career opportunities including the poultry industry.

Under the leadership of Stephanie Lemly, Associate Professor in the Department of Teacher Education and Leadership, the project will train three groups of teachers each year and will provide subsequent support.  The first group will comprise twenty-eight teachers from fourteen school districts across Mississippi who will be trained to create lesson plans and to mentor students.

The Animal and Plant Health Agency of the United Kingdom announced an outbreak in a pheasant-growing operation in Warrington, in the county of Cheshire.  Warrington is situated midway between Liverpool and Manchester and lies on the Mersey River in a region obviously attracting migratory waterfowl.

The flock was depopulated and a six-mile surveillance zone established.

Pheasants are reared as game birds and are maintained in enclosed flight pens before release.

An early outbreak before the onset of fall is concerning since it confirms the shedding of avian influenza virus by free-living birds.

 Weekly Economy, Energy and Commodity Report: September 14^th 2023.

OVERVIEW

At 14H00 on September 14^th the CME price for corn was down 2.3 percent compared to the previous week to 460 cents per bushel for September delivery. Despite the small weekly change, price was subject to large inter-day fluctuation with a sharp decline on Tuesday September 12^th following release of the WASDE with updates on yield, acreage and ending stocks. Prices of commodities were influenced by weather conditions and profit taking and indirectly by events in the Black Sea. Other factors included movement in the wheat market, with the crop in Australia projected one third down due to El Nino. During the week ending August 29^th, 49 percent of corn acreage was located in drought areas compared to 45 percent a week ago. Orders by China resumed at the end of the 2022-2023 market year. Despite concern over weather as the crop matures, the demand for ethanol and a projection for lower ending stock of corn, prices are remaining substantially unchanged week-to-week.

Soybeans were down 1.0 percent from last week to 1,336 cents per bushel for September delivery. Prices during the week generally responded to events in Ukraine, predictions of crop size and ending stocks and some profit taking with a sharp decline on Tuesday September 12^th. During the week 43 percent of soybean acreage was located in drought areas up from 40 percent last week.

Soybean meal was down 1.5 percent to $401 per ton for September delivery, reflecting higher domestic and export demand. Price will fluctuate to reflect the CME price for soybeans and the demand for soy oil. The market has now accepted projections of crop size and higher stocks for the old crop as documented in the April WASDE Report and the forecast included in the September WASDE Report for the 2023 crop and following the August 25^th report on the Pro Farmer crop tour.

WTI was up 1.8 percent from last week rising $1.55 to $88.95 per barrel at 18H00 on September 13^th attributed to higher demand and strengthening of the U.S. Dollar. On September 14^th WTI rose briefly above $90 per barrel before retreating by mid-day. The May announcement of an ‘agreed’ production cut by OPEC and an intended 1 million barrels per day voluntary cut by Saudi Arabia announced on June 4^th and extending through December is now materially contributing to inflation.

Factors influencing commodity prices in either direction over the past four weeks included:-

• Fluctuating weather conditions in areas growing corn and soybeans with projected lower yields despite reduced speculation in commodities. (upward pressure).

• Geopolitical considerations moved markets this past week. Cancellation of the BSGI in July and ongoing attacks on Ukraine port facilities continue to impact prices of wheat, corn, oilseeds and vegetable oils. Exports from Ukraine will be severely restricted even with E.U. support. Russia is attempting to implement a Black Sea blockade on Ukraine that raises prospects for NATO intervention. (Upward pressure on corn and wheat and an indirect effect on soybeans)

• Macroeconomic U.S. factors:-
• Most economists in academia and the private sector are forecasting a “soft landing” of the economy following upgraded forecasts for Q3 GDP and economic parameters as detailed below. Inflation has declined from 9.1 percent month-over-month to 4.0 percent over 11 FOMC rate cuts without materially increasing unemployment. There is evident stability in the bank sectors in both the U.S. and Europe. Large U.S. banks passed stringent “stress tests” in June.
• The Federal Reserve increased the benchmark interest rate at the monthly FOMC meeting on July 26^th by an expected 25 basis points and is expected to pause in September. Chairman Powell in Congressional testimony and in FOMC minutes indicated that additional increases should be expected with observers anticipating one more rate hike in 2023 to restore inflation to near an annual 2.0 percent target that is now being questioned for validity.
• The Department of Commerce announced that the inflation rate for Q2 attained 2.6 percent down from the Q1 level of 4.1 percent.
• The August 30^th announcement of Q2 GDP confirmed a 2.1 percent annualized increase compared to a previous projection of 2.4 percent.
• The September 13^th release of the August 2023 CPI confirmed an annualized increase of 3.7 percent (3.2 percent July) with a core value of 4.3 percent. Food was up 0.2 percent from July and energy up 5.2 percent, mainly due to gasoline higher by 10.1 percent. The macro trend is clearly towards reduced inflation but with concern over escalation in energy prices.
• The August Producer Price Index (PPI) released on September 14^th rose 0.7 percent over July. The increase is attributed mainly to a rise in energy costs but with the core value excluding volatile fuel and food, was steady at 0.1 percent. Wholesale food was down 0.5 percent compared with a 0.4 percent increase in July.
• The September 14^th release of retail sales showed a monthly rise of 0.6 percent over August and 2.5 percent from August 2022. The Federal Reserve closely monitors this index as a measure of the trend in inflation.
• The Conference Board Consumer Confidence Index released on August 29^th for July/August, declined to 106 points, down from 114 in june/July
• New home sales in July were up 4.4 percent over June despite +7% mortgage rates.
• Non-farm payrolls increased to 187,000 during July, lower than the 12-month average of 240,000 as documented by the Bureau of Labor Statistics on July 31^st The unemployment rate fell to 3.5 percent from 3.6 percent in June. Average hourly wage rate in July was up 0.4 percent from June to $33.74 and up 4.4 percent year over year. Wage rates are closely followed by the Federal Reserve FOMC. Job openings declined to 8.8 million on July 31^st down 4.4 percent from 9.2 million on June 30^th
• Initial jobless claims released on September14^th attained 220,000 for the week ending September 9^th, up 7,000 over the week. The four-week moving average for jobless claims attained 224,000. The Bureau of Labor Statistics estimated 1.68 million continuing claims as of the second week in September.
• A Bureau of Labor Statistics report on September 7^th recorded a 3.5 percent increase in Productivity for Q2; Unit Labor Cost was up by 2.2 percent on a normalized basis and Hours Worked down by 1.5 percent in Q2
• The ADP reported on August 30^th that private payrolls increased by 177,000, down 52.2 percent from July compared with an estimate of 195,000. This decline will not directly influence the probability of short-term future rate hikes or pauses. The ADP is regarded by the FOMC as an unreliable statistic

FACTORS INFLUENCING COMMODITY PRICES

• Dry weather in the Midwest during early June transitioned to intermittent rain effectively lowering prices for corn and soybeans in July and early August. Drought conditions prevailed in 40 percent of corn areas and 43 percent of soybean acreage this past week. (Downward pressure on prices with firmer indications yields in the July WASDE)
• The Pro-Farmer crop tour recently lowered yield estimates for corn and soybeans from the revised September WASDE estimates by 1.0 and 0.8 percent respectively, based on adverse weather conditions.

• It is evident that both polarization in the closely divided chambers of Congress and intra-party conflict between and among both sides of the House will delay adoption of appropriations bills. Passage of the 2023 Farm Bill will be contentious and now most likely to be delayed until the end of the year over SNAP eligibility and other entitlements that collectively represent 75 percent of total expenditure. The August 2^nd downgrade of U.S. debt from AAA to AA+ by Fitch Ratings recognizes Congressional dysfunction. The Agency cited “a steady deterioration in the standard of governance”. The House must pass 11 appropriations bills in 12 working days from mid-September to avoid shutdowns at the end of the Federal fiscal year. This situation is creating uncertainty and will impact equity and commodity markets.

• The August 12^th WASDE #640 updated soybean production and a near record corn harvest for the new crop with high world availability despite drought in the Argentine. The September WASDE confirmed the damage caused by the transitory drought in the Midwest during late May through early July by reducing the projected yields of both soybeans and corn from the August report. The U.S. will export 12 percent of both old and new crop corn resulting in lower ending stocks. Soybean exports will comprise 44 percent of the old crop and 40 percent of the new crop with a reduction in ending stock. (See WASDE Report in this edition confirming availability, use and ex-farm price projections)

• There is an expectation that for market-year 2022-2023, Brazil will attain a record soybean harvest of 156 million metric tons with export of 97 million metric tons. These values were increased by 2 percent and 4 percent respectively from May projections. Corn exports will attain 50 million metric tons (197 million bushels). Soybean exports in August will be 8.7 million metric tons (320 million bushels) (Lower prices in the future subject to favorable reports on crop progress and actual harvests)

• The Dollar Index (DXY) was 104.7 on September 13^th, down 0.1 points from last week. The DXY has ranged from 99.6 to 110.8 over the past 52-weeks. The dollar index influences timing and volume of export orders and the price of WTI crude.

EXPORTS

The FAS Export Report, the second released for market year 2023/2024 available on September 14^th for the week ending September 7^th reflected carry-over from market year 2022-2023. The report confirmed that outstanding export orders for corn amounted to 10.4 million metric tons (410.7 million bushels). Net orders for the past week covering the 2023-2024 market year amounted to 0.75 million metric tons (28.7 million bushels). Shipments recorded during the past working week amounted to 0.73 million metric tons (28.7 million bushels ). For market year 2024-2025 outstanding sales this week amounted to 0.15 million metric tons (5.7 million bushels), with sales of 25,400 metric tons (1 million bushels) recorded this week for the 2024-2025 market year. There were no sales this past week for the 2024-2025 market year

(Conversion 39.36 bushels per metric ton. Quantities in metric tons rounded to 0.1 million)

The FAS Export Report for the week ending September 7^th reflecting market year 2023-2024 with carry-over from the previous market year, recorded outstanding export orders for soybeans amounting to 16.2 million metric tons (590.5 million bushels) with cumulative shipments recorded for the new market year attaining 0.4 million metric tons (14.0 million bushels). Net weekly orders attained 0.2 million metric tons (25.9 million bushels). There were neither new or outstanding sales recorded for market year 2024-2025 (Conversion 36.74 bushels per metric ton)

For the week ending September 7^th 2023 net orders of soybean meal and cake amounted to a negative 201,600 metric ton value because of cancellations for the market year 2022-2023. During the past week 119,700 metric tons of meal and cake combined was shipped, representing 1.0 percent of the total 11.7 million metric tons exported during the current marketing year. This quantity to date is 2.9 percent higher than the volume for the corresponding period of the previous market year. For the next market year 2023-2024 outstanding sales have attained 2.9 million metric tons with 454,700 metric tons ordered this past week.

The September 12^th 2023 WASDE confirmed:-

• Corn area planted for all purposes in 2023 (‘new crop’) will attain 94.9 million acres, up 6.4 percent or 5.6 million acres from last year. Compared with the 2022 season, planted acreage is expected to be up or unchanged in 43 of the 48 estimating States. According to the September WASDE, yield was lowered to 173.8 bushels per acre with a resulting 2,221 million bushel ending stock. The USDA held the average season ex-farm price at 490 cents per bushel.
• Soybean area planted for 2023 is estimated at 83.6 million acres, down 5.1 percent from 88.1 million acres last year. Compared with last year, planted acreage is down or unchanged in 21 of the 29 estimating States. According to the September WASDE yield was reduced to 50.1 bushels per acre with a resulting 220 million bushels ending stock with the USDA projecting a higher average season price of 1,290 cents per bushel.
• The August 25^th release of the 2023 report of the Pro Farmer crop tour projected corn yield down 1.0 percent to 172 bushels per acre, compared to 173.8 bushels per acre included in the September USDA WASDE. Soybean yield was reduced by 0.8 percent to 49.7 bushels per acre from 50.1 bushels per acre due to recent dry and hot weather
• Crushers are expected to produce 53.98 million tons of soybean meal. Ending stocks will attain 400,000 tons increasing the USDA projected price from the previous season by $15 to $380 per ton.

The preference for corn planted was based on a favorable projection of the corn to soy benefit ratio in March 2023.

On Monday September 11^th, the Food and Drug Administration formally approved mRNA vaccines from Moderna and Pfizer that provide protection against the Omicron variant XBB1.5 of SARS-CoV-19 virus.

The decision to approve the monovalent vaccines that will replace the previous bivalent products was based on an intensive review of field data confirming efficacy and safety.  The technology used to produce the two new vaccines is similar to the previous products.  The new vaccine will effectively neutralize EG.5 and BA.2.86 strains and will provide protection against currently circulating COVID-19 variants.

The vaccines have been approved for:

• Individuals 5 years of age and older irrespective of previous vaccination.

• Individuals 6 months through 4 years of age who have been previously vaccinated.

• Unvaccinated individuals 6 months through 4 years of age

Following approval of the two vaccines by the FDA, the U.S. Centers for Disease Control and Prevention, Advisory Committee on Immunization Practices met on September 12^th and finalized recommendations for recipients including those who are immunocompromised or have other predisposing factors.

It is estimated that 23 separate disasters have occurred in the U.S. during 2023 to date, each causing over $1 billion in damage.

For the period June 1^st through August 31^st representing the meteorological summer the average temperature for the contiguous U.S. lower-48 states was 73.0 F.  This was 1.6 F above average and the fifteenth hottest summer on record.

Summer precipitation attained 8.35 inches, fractionally above average but with New Mexico and Louisiana experiencing the third driest summer on record and with Arizona, Minnesota, Texas and Wisconsin all among the top ten recorded.  In contrast New Hampshire, Vermont and Wyoming experienced their wettest summers on record.

Obviously it is not possible to draw definitive conclusions from only one summer, but evidence indicates that the world is undergoing a warming trend that has implications for the intensity of storms and the extent of damage caused by hurricanes, tornados, fires and flooding.

Responding to scientific predictions based on modeling of temperature, precipitation and other weather variables, designers of poultry facilities should evaluate standards of structural integrity, insulation and the capacity of evaporative cooling and ventilation systems and their controls.  Buildings, grain storage, drains and electrical installations to be designed and erected using current standards and codes may be prematurely obsolete requiring replacement or upgrading by the mid to late 2030s.

Effective January 1, 2027, California has banned a number of ingredients in food products sold in the state.  These include brominated vegetable oil, potassium bromate, propylparaben and Red Dye no. 3. The final version of the bill did not include titanium dioxide as recommended by some environmental toxicologists.

The period of grace before the deletion of the compounds will be mandated provides manufacturers with the opportunity to amend their formulations for affected products including candy.

Based on the size of the market in California, it is projected that manufacturers of national brands will amend ingredient lists for products marketed in states other than California.

Passage of the bill was strongly supported by ex-governor Arnold Schwarzenegger, an acknowledged fitness and health advocate.

A research team of epidemiologists, molecular virologists and wildlife biologists affiliated to the Pontificia Universidad Catolica del Peru in conjunction with scientists at the National Center for Biotechnology of Infection at the U. S. National Institutes of Health (NIH) recently published* on studies conducted on H5N1 isolates prevalent along the Pacific coast.  Samples were obtained from dead marine mammals and birds that yielded avian influenza strain H5N, lineage 2.3.4.4b. This pathogen was introduced to the Pacific coast of South America during October 2022 by migratory marine birds.

Sequencing of the isolates revealed the presence of a specific mutation PB2 V701N in samples from both sea lions and a human case in Chile.  This mutation is associated with adaptation of an avian virus to mammalian hosts and includes the capacity for enhanced transmission.

An immediate concern relates to mortality in endangered species including the Andean Condor,(Vultur gryphus), Humboldt Penguins (Spheniscus humboldti) and Marine Otters.(Lontra felina)  A further consideration relates to the possibility of adaptation to human hosts with person-to-person transmission. 

Accordingly, education programs have been initiated to warn beach goers of the danger of contact with dead mammals and birds.  The need for constant surveillance of avian influenza viruses responsible for mortality in avian and mammalian species is necessary to detect mutations and predict possible zoonotic outbreaks.

Studies conducted in Peru were funded by a grant from the NIH National Institute of Allergy and Infectious Diseases: -

*Leguia, N. et al. Highly Pathogenic Avian Influenza A (H5N1) in Marine Mammals and Sea Birds in Peru.  Nature Communications doi:10.1038/s41467-023-41182-0 (2023)

Dollar General has announced an initiative to install automation in a number of distribution centers starting with a location in Jonesville close to the Port of Charleston Inland facility in Greer, SC.

This location has been expanded to 1.35 million square feet with the incremental 250,000 square foot addition costing $45 million. Automation will expedite distribution of goods to more than 1,000 stores in the Southeast region including 650 in South Carolina.

Dollar General will extend the upgrade program to other company-owned distribution centers to increase efficiency and to reduce headcount.  The company truck fleet will be expanded to 2,000 trailers by the end of 2023.  Investment in warehousing and logistics should alleviate problems that have detracted from profitability during the current fiscal year.

With a labor strike against the major Detroit automakers and their supplier in progress, a wide range of unions in the U.S. are driving hard bargains to renew contracts.

Hormel Foods is the latest company to experience intransigence from unions with workers at the Austin, MN. plant about to vote on a company package incorporating increased wage rates, enhanced safety and improved benefits.

The bargaining committee of the United Food and Commercial Workers Union (UFCW), Local 663, recommended a rejection with the Chairman stating, “We believe we can win more if we stick together.”

Rick Williamson, a company spokesperson, stated, “Hormel Foods has had strong working relationships with the UFCW for decades including the Austin plant.”  He added, “Our representatives will continue to negotiate in good faith.”

Hormel Foods is optimistic that a deal will be concluded to replace a contract that expired on September 10^th.  Based on the respective comments from the union and the company, it appears there is a wide expanse of daylight between their respective perceptions of the likelihood of a contract in the near future.

McDonald’s Corporation will soon introduce “CosMc’s”, a small-format store with a small dining area.  By reducing size and hence cost of locations, McDonald’s believes it can expand in high-density population areas to take advantage of underserved patronage.  Concurrently, McDonald’s is emphasizing drive-thru sales and is introducing a number of technological innovations to expedite customer service, especially at the breakfast and early-dinner hours.

These changes, also contemplated by competitors, derive in large measure from the patterns of travel, work and social interaction originating during the COVID period and by most measures  persisting into the future.

As a direct consequence of reduced in-store dining, McDonald’s intends to remove their self-serve soda dispensers by the end of 2032, almost a decade into the future.

Chipotle and Subway will be the losers in this QSR transition since most of their locations lack drive-through lanes.  Chipotle has had difficulty in establishing an image of whether it is, in reality, a QSR, a cafeteria or a casual dining restaurant. On appointment as CEO, Brian Niccol, previously president of Taco Bell, recognized the competitive need for drive through lanes. Promotion of digital sales with pickup or home delivery and the installation of “Chipotlanes” is now contributing to greater consumer convenience and traffic.

Following passage of the worker-friendly California FAST Act that increased wages for QSR workers, employers elected to initiate a referendum that would have placed the issue before voters as a ballot proposal in November 2024.  An agreement between the organization representing employers and the Servers’ Employee International Union will establish a minimum starting wage of $20 per hour and will restrict the authority of the state-appointed Fast-Food Advisory Council.  In terms of the agreement, Councils can advance wage rates by a maximum of 3.5 percent through 2029.  In 2024, the minimum wage in California will rise to $16 per hour.

The agreement will be ratified in the form of legislation with Governor Newsom agreeing to sign a bill codifying the agreement since this will obviate the need for a referendum.

Had the proposition been placed before the electorate, both the unions and the franchise operators would have expended additional millions of dollars to engender voter support to overturn the FAST Act.  The referendum would, however, have taken place with a higher level of transparency concerning funding for both opponents and proponents of the proposition.

The First International Avian Influenza Summit organized by an international committee will take place October 16^th and 17^th as a hybrid in-person and remote event at the Center for Excellence in Poultry Science, University of Arkansas in Fayetteville, AR. 

The International Avian Influenza Summit is a global gathering of experts, scientists, policymakers, and stakeholders dedicated to addressing the challenges posed by Highly Pathogenic Avian Influenza (HPAI). The summit aims to foster collaboration, knowledge sharing, and coordinated efforts to mitigate the impact of HPAI on global public health, food security, and economic stability.

This conference is pre-approved by the ACPV for 14 credit hours and by PAACO for 12 CE credits.

Topics to be addressed include molecular biology of influenza virus, epidemiology with reference to migratory birds, vaccination and biosecurity.

For additional information and registration details access <internationalavianinfluenzasummit.usda.edu>

A Chick-fil-A® location in Bryan, TX. is testing a Wall-E robot to deliver customer’s meals on trays in the dining area.  The chain is testing robots to serve guests given labor shortages in many areas of operation.  The chain, obviously, will evaluate customer response to the innovation that will represent a capital investment that may not show a return even with high wage rates.  An important question is whether robot delivery of meals will be regarded as a curiosity by customers and whether the concept is consistent with the Chick-fil-A® culture of personal service.

According to a September 11^th posting in The Wall Street Journal, Walmart stores will reduce the starting wage rate with a new pay structure that will allow flexibility in staffing. Existing workers will not be subject to any pay cut and 50,000 employees will receive raises to conform to the new minimum of $12 to $14 per hour.  This compares with Amazon and Target both with a $15 per hour minimum.

The weekly Economy, Energy and Commodity Report posted in EGG-NEWS has documented the reduction in available U.S.  jobs to 8.8 million on July 31^st, down 4.4 percent from 9.2 million on June 30^th of this year.  Successive weekly non-farm payroll figures have shown a decrease in jobs created, although the unemployment rate is now at a historic low of 3.5 percent.

Walmart, Target and Amazon minimum wage rates can be compared to the July National Average Hourly Rate of $33.74, up 0.4 percent from June and 4.4 percent higher year-over-year.

Previously, EGG-NEWS has reported on mortality in marine birds on Marrowstone and Rat Islands in Puget Sound.  During the past week, the USDA- National Veterinary Services Laboratory confirmed that three harbor seals that died on Marrowstone Island during the last week of August yielded H5N1 strain avian influenza virus.

The sequence of marine birds dying of avian influenza followed by mortality in marine mammals has been documented on the northeast Atlantic coast of the U. S., along the southern Pacific coast of South America and in the Baltic Sea.

Hopefully, the virus isolated from seals will be sequenced to determine the specific mutations that have occurred allowing this strain to be infectious for marine mammals.  Surveillance is essential to monitor for the emergence of a potentially zoonotic strain of avian influenza virus.

Despite increased trans-Pacific traffic westward to the U. S., freight rates have stabilized after increases during the second quarter.  Shanghai to Los Angeles spot rates are now at $2,254 per 40-foot equivalent unit, up 43 percent from late June.  The FBX China to North America East Coast Index was at $3,062 per 40-foot equivalent unit, up 40 percent from late June.

Container traffic is increasing and has reverted to seasonal pre-COVID (August 2019) levels.  In August 2013, 2.2 million 20-foot equivalent units were imported, up 0.4 percent from July and 5.5 percent from June.

Drought-related restrictions imposed on traffic through the Panama Canal do not appear to delay transit.  Delays for eastern Gulf Coast ports did not increase in August, averaging 5.7 days, down 4.7 percent from July. A spokesman noted, “Conditions through the Panama Canal have had little impact on retail supply chains, and it is unlikely to be a problem as we head into the peak shipping season.”

It is indeed fortunate that the operators of West coast ports have reached agreement with the International Longshore and Warehouse Union for a five-year contract that will ensure continuity of operations

Westbound trans-Pacific container volume is important to maintain an adequate supply of returnable containers for eastbound shipments of U. S. agricultural products including broiler and turkey meat and eggs.

The bipartisan U.S. Surface Transportation Board (STB) recently voted unanimously in favor of a new rule to encourage and ultimately to enforce improved rail service.  The rule would require all six of the nation's Class-1 railroads to establish and reveal data relating to on-time performance.  The rule would also promote competition among railroads and would allow the more efficient systems to make use of reciprocal switching to serve customers.

Predictably, the railroad industry is opposed to reciprocal switching that would allow competing systems to make use of all available track.  The CEO of the Association of American Railroads stated, “Forced switching would not increase real competition but instead is regarded as being a backdoor attempt to drive down rates to below-market levels.”  Martin Oberman Chairman of the Surface Transportation Board countered that the freight industry had brought the proposed rule on itself through years of labor reductions that created a crisis during the COVID-19 lockdown.  The Surface Transportation Board is attempting to resolve the problem of shortages of both labor and rolling stock leading to cancellations and delays. Inefficient service was exemplified by the series of legal actions taken by Foster Farms to maintain supplies of corn.

The prospect of reciprocal switching was first proposed in 2016 but was not acted on until a Presidential Executive Order was issued in 2021 requiring federal agencies to act aggressively to enhance economic competition. The Surface Transportation Board was specifically directed to resuscitate the reciprocal switching rule.

As with all rule making, there will be a period for public comment before finalization although the STB is under political pressure to act expeditiously.

Reuters reported that dead wild boars found in the Municipality of Fagersta in Vastmanland county, Sweden, yielded African swine fever virus.  This occurrence is considered significant since the emergence of the disease 130 miles northwest of Stockholm cannot be attributed to migration of wild boars from known endemic regions in central and eastern Europe. It is evident that westward movement of African swine fever in wild boars from central Poland across the common border into eastern states of Germany is an acceptable explanation of the occurrence of ASF in boars in border states of Germany. Observers consider that human action through transport of contaminated pork may have been responsible for the isolated outbreak among scavenging wild hogs.

The role of humans in transmission of African swine fever by illegal or inadvertent transport of contaminated meat is well documented.  U.S. Customs and Border Protection (CBP) intercepted thirteen shipments of prohibited meat between August 20^th and 28^th at the Louisville, KY. port of entry. After this series of seizures, CBP confiscated 1,000 pounds of pork, 300 pounds of poultry and other prohibited foods that were illegally imported by a company in Bellerose, NY. from a consigner in Hong Kong. The CBP frequently confiscates bologna that travelers attempt to smuggle from Mexico.

During the initial stages of extension of African swine fever from China to neighboring nations in Asia, authorities at airports in Bangkok, Taipei and Singapore confiscated raw pork in the luggage of travelers from China. Some contraband pork yielded viable ASF virus. This situation is paralleled by ongoing seizure in U.S. points of entry with the Beagle Brigade responsible for surveillance of travelers’ luggage and the U.S. Customs and Border Protection monitoring for commercial shipments.

Importation of prohibited raw meat products represents a constant and obvious danger to U.S. livestock and poultry production.

Recently the New Yorker featured the career of Attorney Spencer Sheehan who initiates class-action litigation over label claims and ingredient composition of food products.

Since 2018 his law firm has filed over 500 consumer-protection class-action suits.  Some of the claims litigated by Sheehan include lack of real mint in Trident gum; the Snapple claim of “all natural” beverages that are devoid of real fruit and the case of frosted strawberry pop-tarts that do not contain strawberries.

Sheehan obviously employs personnel to scrutinize labels on packaged food with specific reference to “authenticity”. To quote the New Yorker “He is a folk hero”.  Essentially he initiates lawsuits that could be regarded as “shakedowns” resulting in negotiated payments since adverse publicity and the legal costs of going to trial outweigh the cost of settlement. 

Consumer-protection attorneys are the bottom-feeders of their profession and effectively impose additional costs on production without creating any benefit to either food safety or quality. Their nuisance suits detract from manufacturers’ ability to allocate earnings to R&D, employee benefits, capital improvement and shareholder dividends.

The 2023 Women's Leadership Conference sponsored by USPOULTRY was held on September 11th.  Main speakers included:

• Krista Warn, a specialist in leadership in organization development at ADVISA emphasized the need for technical knowledge as well as communication skills.  She noted that respected leaders should interact with employees and build relationships that contribute to a sound work culture.
• Dr. Alicia Walker, Senior Director of Quality Assurance and Food Safety for Wayne-Sanderson Farms commented on the importance of women to provide mutual support and to express self-advocacy for career success and fulfillment.
• Dr. Katie Shamoun, Corporate Veterinarian with House of Raeford Farms noted the preponderance of women in U.S. veterinary colleges and opportunities available in the poultry industry.

According to Reuters, the International Longshore and Warehouse Union (ILWU) has announced that their 22,000 members working in 29 West Coast ports have ratified a six-year contract by a 75 percent majority.  The agreement will be retroactive from July 1^st, 2022 and will terminate on July 1^st, 2028.  Concessions granted to workers include a 30 percent pay increase over the proximal six years and a COVID19 pandemic bonus.  During June, the leadership of the ILWU and the Pacific Maritime Association, representing employers agreed on the provisional contract after extensive negotiations extending over a year.

A brief strike in April resulted in diversion of shipments to Gulf and East Coast ports that have gained volume at the expense of major points of entry along the Pacific Coast.  This has created concern over job security and the long-term viability of all West Coast ports.  The main factor currently benefitting West Coast ports is the drought in Panama that has added to cost due to restricted volume and speed of transit through the Panama Canal.

The South Dakota Public Utilities Commission voted 3-0 to deny a permit to Navigator Heartland Greenway, LLC to build pipelines that will convey carbon dioxide from ethanol plants in the Midwest across the state to subterranean disposal facilities in North Dakota.

According to the statutes of South Dakota, standards for a project include compliance with existing laws, absence of any threat of injury to people and the environment, minimal or no social-economic impact on landowners and not unduly impacting future development by the public sector.

Although the concept of conveying carbon dioxide released by ethanol plants to claimed safe disposal id desirable, questions concerning safety dominated the application process.

The South Dakota Public Utilities Commission claims that Navigator Heartland Greenway, LLC was less than cooperative in responding to specific questions relating to the project raising concerns over future compliance with regulations.

It is noteworthy that the ethanol industry with a capacity of close to one million barrels per day from 192 plants has only recently established the need for a network of underground pipelines.  How does the industry dispose of carbon dioxide evolved during fermentation of corn to produce ethanol. If a high proportion is released to the atmosphere, the ethanol industry cannot claim that they are environmentally friendly, irrespective of the composition of tail pipe emissions of vehicles since a bushel of corn produces equal quantities of ethanol, DDGS and carbon dioxide. Disposal is an important component of the biofuel program since it is a major producer of a greenhouse gas.

According to an FDA notice, PBM Nutritionals, LLC is recalling Parent’s Choice and Tippee Toes brands of infant formula.  According to the June 16^th release, product that was rejected by internal quality control procedures was released to the market.  The question arises as to the nature of the rejection, whether due to identification of bacterial contamination, incorrect formulation or other issues.  The report did not indicate whether the recall was initiated as a result of an FDA audit or was self-reported by PBM Nutritionals.

Recalled product was distributed in 24 states throughout the East and Midwest. 

Speaking at the Goldman Sachs Communacopia + Technology Conference held in San Francisco during the first week of September, Tony Xu, CEO of DoorDash, acknowledged problems with delivery.  He noted that many consumers consider online ordering of groceries as being more onerous and less satisfying than purchasing in a brick-and-mortar store. Problems included out-of-stock and lack of alternative options to complete orders. 

According to Xu, DoorDash completed 532 million orders during the second quarter.  He claimed that his Company is continuing to expand in grocery delivery and is outpacing competitors including Instacart that recently filed for an IPO based on improved fundamentals.

On September 8^th The Kroger Company (KR) posted results for Q2 of FY 2023 ending August 12^th 2023.  Kroger is the second largest retailer of groceries in the U.S. and is a pure supermarket play subject to the pressures of escalation in food costs, logistics and labor and the impact of inflation in common with national and regional competitors. Kroger has announced an intention of acquiring competitor Albertsons Cos. Creating an enterprise with 5,000 stores subject to FTC and DOJ approval and inevitable divestment of some assets. To comply with anticipated regulatory scrutiny Kroger and Albertsons have proposed selling 413 stores in 18 states to C&S Wholesale Grocers for $1,900 million. It is possible that other bidders including Aholdt-Delhaize N.V. will emerge as potential purchasers of some, all or a greater number of stores as directed by the FTC.

 For the quarter, Kroger posted a reported loss of $(180) million on revenue of $33,853 million with a diluted EPS of $(0.25). The loss was attributed to increased SAG expenditure, a charge of $1,400 million to settle opiate drug claims and ‘shrinkage” attributed to organized theft. Kroger disappointed on the top line against a consensus revenue estimate of $34,640 million.

For the corresponding Q2 of FY 2022, Kroger earned $731 million on sales of $34,638 million with a diluted EPS of $1.00.  Comparing Q2 of 2023 with the corresponding quarter of 2022, revenue was 12.2 percent higher. Gross margin increased from 20.9 percent to 21.8 percent. Operating margin declined from $954 million to a negative $(479) million for the most recent quarter.

In commenting on quarterly results, Rodney McMullen CEO stated, “The strength and diversity of Kroger's business model is delivering consistent results in what remains a challenged environment. By investing in price and providing more personalized offers, we are helping customers stretch their budgets and manage the ongoing effects of reduced government benefits, inflation and higher interest rates. Kroger is funding these investments by collaborating with vendors to deliver exceptional value, managing costs and growing alternative profit businesses”.

He concluded, “We are growing households as our associates are providing a full, fresh and friendly shopping experience across our seamless ecosystem. While we expect the environment to remain challenged going forward, we are committed to delivering exceptional value for our customers and investing in our associates, and by doing so, we expect to generate attractive returns for shareholders."  

The Company release affirmed FY 2023 Guidance:- 

• Identical Store Sales growth of 2.5 to 3.5 percent (excluding fuel and adjusting for Express Scripts))
• Adjusted EPS of $4.45 to $4.60 
• Adjusted FIFO Operating Profit of $5.0 billion to $5.2 billion
• Capital expenditure of $3,400 to $3,600 million
• Adjusted free cash flow of $2,500 million to $2,700 million

Comparable same-store sales for Q2 increased by 1.0 percent (excluding fuel) compared to Q2 FY 2022 and digital sales were up by 12.0 percent.

On August 12^th Kroger posted total assets of $50,202 million of which $3,801 million comprised goodwill and intangibles. Long-term debt and lease obligations amounted to $21,190 million.  

The Kroger Company had an intraday market capitalization of $33,690 million on September 9^th 2023.  The Company has traded over the past fifty-two weeks in a range of $41.82 to $51.80 with a 50-day moving average of $47.47. KR trades with a forward P/E of 10.4. On September 7^h 2023 KR closed at $45.52 pre-release and opened on September post-release at $47.14

Twelve-month trailing operating margin was 2.1 percent and profit margin 1.1 percent.  The Company generated a return on assets of 3.9 percent and 16.2 percent on equity

At the end of FY 2022 The Kroger Company operated 2,726 stores with 2,252 pharmacies and 1,613 fuel centers, under 25 banners in 35 states and D.C. Kroger operates 34 food plants and 45 distribution centers with five Ocado fully automated fulfillment centers with as many as twenty planned.

Following a meeting with Turkish President Recep Tayyip Erdogan, the President of the Russian Federation, Vladimir Putin, emphasized that his nation has no intention of resuscitating the Black Sea Grain Agreement. Putin stated, “We are not against this deal; we are ready to immediately return to it as soon as the promises made to us are fulfilled.”

Putin demands lifting of sanctions on a number of agricultural exports from Russia and readmitting export banks to the financial community.  Sanctions are obviously hurting Russia that is limited to trading with an ever-decreasing number of friendly nations.

The Minister of Foreign Affairs of the Russian Federation, Sergey Lavrov, has rejected a United Nations proposal to restore grain shipments from Ukraine since no guarantees or concessions for Russia were offered.

Turkey, a member of NATO with ambition to join the E.U. has been walking a tightrope with Russia since the Invasion of Ukraine. Maintaining mutually profitable relations with Russia has facilitated evasion of some sanctions by the Russian Federation.

As Russia refuses to negotiate on a renewed Black Sea Grain Agreement, it has continued to bombard Ukraine export installations along the Black Sea and Danube Delta. This represents economic warfare and directly benefits the value of exported Russian grain.

Newsweek has ranked Publix as top supermarket in the retail food category for the sixth successive year. The award is based on customer surveys incorporating the range of services, interaction with employees, communications and willingness to recommend the chain.

In evaluating competitors, it is evident that the advantage demonstrated by Publix may be based on the fact that shareholding is, in large measure, vested in employees.  Company management obviously supports workers at all levels, especially those interfacing with the public. 

Not being a public-traded enterprise, the Board and Management of the chain can allocate capital and other resources to maintain the quality of service, cleanliness of stores, variety of offerings and satisfaction of consumers.  Pressure to “make numbers” and satisfy financial commentators and analysts are not valid considerations in the context of the company.  The minimal release of financial data suggests that same store sales growth and total sales may exceed those of public-traded competitors confirming the validity of an employee-owned model.

The American Society for the Prevention of Cruelty to Animals has released an inaugural animal welfare study assigning grades to major chains.  Criteria include cage-free eggs, pork derived from sows allowed group housing during gestation and compliance with the Better Chicken Commitment for Broilers.

It is significant that Whole Foods Market and Sprouts Farmers Market, the only chains receiving an A grade, cater to high-income demographics.

Five chains have ignored the ASPCA criteria including Trader Joe’s, Winn-Dixie and Piggly Wiggly.  Other chains received intermediate grades ranging from B through D.

Although welfare activist groups maintain that consumers are demanding higher levels of welfare, their surveys on which claims are based do not incorporate cost as a variable.  This is evidenced by the virtual cessation of conversion to cage-free egg production, which appears to have stalled at 35 percent of the total U.S. flock. This includes cage-free and certified organic eggs that by definition are required to be cage-free.  The differential in shelf price between eggs derived from conventional cages and alternative systems drives consumer choice and volume.  During times when consumers exhibit sensitivity to prices, demand for the least expensive food products transcends non-quantifiable attributes such as welfare and sustainability.

An Avian Influenza Summit will take place on October 16-17^th, 2023, available as both in-person and remote formats.  The program is organized by the Center of Excellence for Poultry Science at the University of Arkansas. Contributions from scientists and poultry health professionals in both the Northern and Southern Hemispheres will address the latest experience and research on the molecular biology of avian influenza viruses, diagnosis, epidemiology and biosecurity with reference to interventions.

Further information is available at www.internationalavianinfluenzasummit.usda.edu.

The Ahimsa Foundation has provided Eat Just with $16 million to resolve rumored cash flow problems.

Since the inception of a succession of business entities intended to displace eggs subsequently broiler meat, founder and CEO Josh Tetrick has relied on investors to supply working capital to support his efforts to replace conventional livestock production.  It is considered significant that funds are no longer acquired from U.S. venture capital companies and Tetrick sources financial support from entities in Asia.

Bloomberg has reported on the non-profitability of alternative egg and meat products with no evidence of the potential for profitability.

Just Egg packed in a 12 ounce container retails for $5. The contents are equivalent to 7 Extra- large size white-shelled generic eggs with a current shelf price of $1.70 per dozen. This is the equivalent of $1.00 for real egg with a high nutrient content and the cost is five times the price of the plant-based equivalent from Eat Just. During the height of the HPAI pandemic with eggs spiking at $5 per dozen over a brief period Tetrick claimed that his company had achieved parity with real eggs. This did not last long and in all probability whatever gains were achieved in sales have long since evaporated. 

Factors mitigating against long-term viability for Just Egg include the high costs of production relative to real eggs, failure to establish sustained customer loyalty based on inferior quality and lack of versatility in meal preparation.  Noncompetitive prices are a major deterrent to market acceptance and growth in an environment dominated by concern over expenditure on food. Only the affluent are willing to pay a premium for intangible attributes such as welfare and sustainability.

Red Robin Gourmet Burgers Inc. (RRGB) has entered into a sale and lease-back transaction with Essential Properties Realty Trust Inc. with respect to nine restaurants.  The infusion of $31 million will be used to pay down debt and allow the possible repurchase of $5 million of company stock.   Pete Mavoides, president and CEO of Essential Properties stated, “We are pleased to have the opportunity to partner with Red Robin and add another nine well-located restaurants to be leased on a long-term basis to a high-quality tenant.

Todd Wilson CFO of Red Robin stated, “Through this second tranche of properties we completed another step in our journey to create value for shareholders as we pay down debt and accelerate investments to drive growth.

On August 17^th Red Robin released financial results for the 2^nd Quarter of FY 2023 ending July 9^th. The Company generated a net income of $10.3 million on total revenue of $298.6 million with a diluted EPS of $0.24. The Company posted  $798.4 million in total assets, of which $18 million was represented by intangibles. Long-term debt attained $239 million against a market capitalization of $168 million on September 5^th. Trailing 12-month operating margin is -1.0 percent and profit margin -4.3 percent. The company generated a return on assets of -0.9 percent and -172 percent on equity.

According to Brick Meets Click, a major market research company, Walmart dominated E-grocery sales and attained 36 percent of the market during the second quarter of 2023.

Price considerations and convenience are driving Walmart E-sales that increased by 5 percent compared to the second quarter of 2022. Walmart has invested heavily in technology and personnel to achieve preeminence in E-commerce in the U.S.  Installation of drive-thru lanes for pickup has contributed to customer convenience and loyalty.

Target is also benefiting from improved ordering and both curbside and in-store pickup during the second quarter of 2023.  Target achieved 7 percent of E-grocery sales.  Notwithstanding the advances by the two national participants, there is a tendency to return to brick and mortar stores with R-commerce grocery orders declining by 1.1 percent during the second quarter compared to 2022.

The Center for Health Protection (CHP) in Hong Kong is investigating two clusters of presumed salmonellosis.  In total, five patients were affected with two hospitalizations after consuming pancakes at a specific restaurant.  The CHP suspects that eggs used to prepare pancakes were the source of infection and appropriate trace-back and field investigations are in progress.

Hamlet Protein in collaboration with Grupo Profil, their regional distributor for Central America, organized a seminar on monogastric nutrition relevant to hog and poultry production.  The seminar was presented as a webinar with simultaneous reception in El Salvador, Guatemala, Nicaragua and Honduras.

Dr. Alfred Blanch, Category Manager for Poultry with Hamlet Protein, reviewed anti-nutritional factors in soybean meal and their effect on the growth rate of young chickens and piglets.  He stated, “The presence of anti-nutritional factors in soybean meal can severely affect the development of the animal and is particularly damaging for piglets, chicks and poults.”

Dr. Jose Luis Laparra, Technical Sales Manager for Hamlet Protein, stressed the importance of satisfying nutritional requirements during the first weeks of rearing. He introduced the concept of feeding a specialty protein ingredient that is processed by enzymatic degradation of anti-nutritional factors to enhance performance especially in short-lived broilers.

Wendy's has introduced a two-for-$3 Biggie Bundle at participating restaurants nationwide.  Options are either a sausage and egg biscuit or an egg and cheese biscuit with medium hot coffee.  The breakfast mealtime introduction by Wendy’s is in response to increased demand with a general return to workplace trend benefiting egg consumption through the QSR channel.

The Russian Federation was responsible for termination of the Black Sea Grain Initiative (BSGI) that allowed Ukraine to export grain to customers, both in the E.U. and to impoverished nations in North Africa.

Since termination of the BSGI, Russia has continually attacked Black Sea and Danube Delta ports used by Ukraine for export.  Russia is currently negotiating with Turkey that would serve as a distribution point for Russian wheat, with the initiative partly subsidized by Qatar.

In their field and economic warfare against Ukraine, Russia regards any vessel heading to Ukraine as potentially carrying military cargo and therefore subject to search and seizure.  This has effectively stopped any shipments of grain by sea since insurance rates are now prohibitive.

Recent actions by Russia constitute economic warfare on Ukraine. In addition by reducing supply the value of grains harvested by Russia have become more valuable. Despite a proposal by the United Nations to restore the BSGI there is little incentive for Russia to accommodate international requests without relaxing sanctions.

The Center for Health Prevention (CHP) in Hong Kong is investigating two clusters of presumed salmonellosis.  In total, five patients were affected with two hospitalizations after consuming pancakes at a specific restaurant.  The CHP suspects that eggs used to prepare pancakes were the source of infection and appropriate trace-back and field investigations are in progress.

In compliance with the May 25^th ruling by SCOTUS in Sackett v. EPA, the Agency and the U. S. Department of the Army intend to issue a revised Waters of the United States Rule amending the 2023 definition.

Michael S. Regan, Administrator of the EPA, stated, “While I am disappointed with the Supreme Court’s decision in the Sackett case, EPA and the Army have an obligation to apply this decision alongside our state co-regulators and partners.”  He added, “We have moved quickly to finalize amendments to the definition of WOTUS to provide a clear path forward that adheres to the Supreme Court ruling.”

Supporting this statement, Michael L. Connor, Assistant Secretary of the Army for Civil Works, stated, “We have worked with the EPA to expeditiously develop a rule to incorporate changes required as a result of the Supreme Court’s decision.”  He continued, “With this final rule, the Corps can resume issuing approved jurisdiction of determinations that were paused in the light of the Sackett decision.

The amendments issued by EPA address only those parts of the 2023 Rule that were rendered invalid by SCOTUS.  The most important component is removal of the “significant nexus” test to identify tributaries and streams that are protected by the Clean Water Act.

The National Cattlemen’s Beef Association, a determined opponent of the WOTUS final rule has issued a statement in which they “look forward to working with the EPA to protect farmers and ranchers from burdensome regulations and provide them with lasting certainty on WOTUS”.

In accordance with Section 335 of the FY 2021 National Defense Authorization Act, the Department of Defense is required to advise farmers of the risk of PFAS contamination of water sources.  Over 4,000 agricultural operations have received a notification with 400 new advisories issued in a recent update.  States affected included South Carolina, California, Washington and Nevada.

The obligation of the Department of Defense is to notify all farmers within a mile of a military base if any of three PFAS compounds are present in ground water adjacent to the base or could be hydrologically linked to a local source of agricultural or drinking water.

In addition to the use of fire-fighting foam and industrial processes, PFAS contamination can occur from spreading sewage sludge as a fertilizer.  The three major PFAS compounds referred to as “forever chemicals” can accumulate in livestock resulting in violative levels of contaminants in milk and presumably eggs.

Six cases of highly pathogenic avian influenza were recently diagnosed in the Republic of South Africa.  An August 30^th report submitted to the World Organization for Animal Health noted that the cases were attributed to an H7 strain.

The report did not identify the type of birds, but the area to the east of the major Johannesburg metropolitan complex includes both broiler and egg production farms.  The largest flock contained 90,000 birds and the smallest 38,000 with a total approaching 240,000.

It remains to be seen whether the H7 isolate will become endemic in the Republic of South Africa and over time will spread northward to neighboring and sub-Saharan nations.  Surveillance of free-living waterfowl should be conducted to ascertain whether this H7 strain is carried by migratory birds since there is the possibility of transmission to North Africa, Mediterranean nations and the Middle East.

Instacart® filed Form S-1 on August 25^th with the Securities and Exchange Commission. The SEC filing outlined corporate strategy offering benefits to manufacturers of branded consumer packaged goods including digital advertising and enhanced sales impact.  The company stated, “We help customers advertise their products in a way that can enable an immediate purchase delivered to the consumer within hours.  The real-time nature of purchase and consumption allows brands to optimize their targeting and messaging to achieve compelling returns on investment.”

In 2022, Instacart® was responsible for delivery of goods valued at $29 billion.  The company earned $428 million on total revenue of $2.6 billion.  Net income included $358 million as a tax benefit.  In Fiscal 2021, Instacart® lost $73 million on revenue of $1.8 billion.

The filing also disclosed that Pepsico, Inc. has invested $175 million in Series A convertible stock representing recognition of the future value of Instacart® shares following their IPO.

According to Brick Meets Click, a major market research company, Walmart dominated E-grocery sales and attained 36 percent of the market during the second quarter of 2023.

Price considerations and convenience are driving Walmart E-sales that increased by 5 percent compared to the second quarter of 2022. Walmart has invested heavily in technology and personnel to achieve preeminence in E-commerce in the U.S.  Installation of drive-thru lanes for pickup has contributed to customer convenience and loyalty.

Target is also benefiting from improved ordering and both curbside and in-store pickup during the second quarter of 2023.  Target achieved 7 percent of E-grocery sales.  Notwithstanding the advances by the two national participants, there is a tendency to return to brick and mortar stores with R-commerce grocery orders declining by 1.1 percent during the second quarter compared to 2022.

Burger King, McDonald’s, Wendy’s and the Taco Bell subsidiary of Yum! Brands are currently defending lawsuits alleging deceptive advertising.  The common theme among the various cases is that depictions of sandwiches on media and menu boards purport to show greater quantities of protein and condiments compared to the products served.  In Coleman et al v Burger King Corp in the U.S. District Court for the Southern District of Florida, plaintiffs allege that portrayals of sandwiches show “ingredients overflowing the bun” creating the deception that the meat content is larger than in the delivered product.

U.S. District Judge Roy Altman rejected a motion by Burger King to dismiss the lawsuit, noting that it was up to jurors to decide what reasonable people might think with respect to advertising depictions.

Burger King will vigorously defend the claims that the company regards as spurious.

On a personal note, the difference between the menu board illustration of a chicken sandwich at a Atlanta Airport, Terminal B. McDonald’s was decidedly different from the bun and cold chicken patty that was delivered.  McDonald’s owes me some lettuce and a slice of tomato.  They can keep the pickle.

Panera Bread is testing a store menu with reduced offerings.  The objective is to increase speed of service and to enhance efficiency.  It is anticipated that fifty items including some sandwiches, soups, bagels and desserts will be dropped from the current summer menu that contains 100 items.

The intended reduction follows the appointment of CEO Jose Duenas who moved from affiliate at Einstein Bros. Bagels.  Simplifying the menu and increasing efficiency contributed to enhanced operating margins during his tenure.

Panera will evaluate customer response to menu reductions before finalizing the range of offerings.

It is anticipated that Panera Bread will file for an IPO late in 2023 depending on market conditions.

In an August 30^th release, Phibro Animal Health (PAHC) posted financial results for the 4^th quarter and Fiscal 2023. This multinational company with 52 locations in 33 nations can be regarded as an indicator of the status of enterprises involved in pharmaceuticals, biologics and nutritional additives for the World’s livestock industries. Along with competitors Zooetis, Elanco, Pfizer and Boehringer-Ingelheim, all are subject to the risks of currency fluctuation, disruption of supply-chains and increased costs for products, labor and transport in a competitive environment impacted by declining margins for livestock producers.

For the 4^th Quarter of FY 2023 ending June 30^th 2021, net income was $11.5 million on total revenue of $255.0 million, missing consensus estimates on the top and bottom lines.  Comparable figures for the 4^th quarter of fiscal 2022 ending June 30^th 2022 were net income of $7.5 million on total revenue of $255.3 million. Diluted EPS rose from $0.18 for the 4^th quarter of fiscal 2022 to $0.28 for the most recent quarter.

For Q4 2023 percentage values with corresponding figures for Q4 2022 in parentheses were:- Gross margin, 30.0 (30.7); Operating margin 9.3 (9.0) and Net margin 4.5 (2.9).

For the FY 2023 ending June 30^th 2021, net income was $32.6 million on total revenue of $977.9 million.  Comparable figures for FY 2022 ending June 30^th 2022 were net income of $49.2 million on total revenue of $942.3 million. Diluted EPS fell from $1.21 for FY 2022 to $0.81 for the most recent year.

For FY 2023 percentage values with corresponding figures for FY 2022 in parentheses were:- Gross margin, 30.4 (30.3); Operating margin 7.3 (8.4) and Net margin 3.4 (5.2).

The Animal Health segment represented 69.3 percent of total revenue for Q4 of 2023 compared to 65.2 percent for the corresponding quarter of 2022. Sales increased by 6.2 percent to $176.8 million; Within this segment medicated feed additives were up 2.5 percent to $104.2 million; Vaccines were up 25.6 percent to $28.0 million and Mineral Nutrition down 15.9 percent to $58.4 million.

In commenting on results Jack Bendheim, Chairman, president and Chief Executive Officer stated, “I am pleased that our business continues to grow year-over-year and we delivered fiscal year 2023 net sales and adjusted EBITDA results in line with our guidance,” He concluded, “I am excited about the opportunities on the horizon in fiscal year 2024, particularly related to vaccines and nutritional specialties. I am confident we have the team in place to grow the business and continue to realize a return on our ongoing strategic investments in key Animal Health product categories.”

The Company raised projections for FY 2024 financial performance with net sales ranging from $1,000 million to $1,050 million; net income $31 to $36 million, adjusted diluted EPS $1.12 to $1.27 and a tax rate of 34 percent.

On June 30^th 2021 Phibro posted assets of $971.4 million including $108.3 million as goodwill and intangibles, against long-term debt of $371.8 million. The Company had an intraday market capitalization of $587.7 million on September 1st. PAHC trades with a trailing P/E of 17.9 and has ranged over the past 52-weeks from $11.75 to $16.52 with a 50-day moving average of $14.61.  Twelve-month trailing operating margin was 7.4 percent and profit margin 3.3 percent.  Return on assets over the past twelve months was 4.7 percent and the return on equity 7.4 percent. At close of trading on Wednesday August 30^th PAHC was priced at $16.64 pre-release closing on Thursday 31^st at $14.03 down 15.7 percent.

The American Association of Avian Pathologists has announced that Dr. Randall Singer has been appointed as the Editor-in-Chief for Avian Diseases.  Dr. Singer is a professor of epidemiology in the Department of Veterinary and Biomedical Sciences of the College of Veterinary Medicine, University of Minnesota.

Dr. Singer previously served as a member of the editorial board of Avian Diseases from 2004 to 2011 and is an editor for other related scientific journals. 

The AAAP extended gratitude to Dr. Mo Saif of The Ohio State University for his years of dedicated service to the Journal as editor-in-chief.