Editorial


The China Impasse

01/05/2019

Negotiations have recommenced between the U.S. and China to resolve the trade war that has raised the cost of imported goods and disrupted the sourcing and supply of ingredients worldwide, adversely impacting U.S. farmers. The actions initiated by the U.S are apparently hurting the economy of China, so both sides have an incentive to reach an accommodation.

 

Negotiations have recommenced between the U.S. and China to resolve the trade war that has raised the cost of imported goods and disrupted the sourcing and supply of ingredients worldwide, adversely impacting U.S. farmers. The actions initiated by the U.S are apparently hurting the economy of China, so both sides have an incentive to reach an accommodation.

 

Simply agreeing to rescind mutually destructive tariffs would in itself represent an accomplishment by restoring trade to a pre-June 2018 status. This will not address the underlying structural issues that represent the intent by China to advance their economy at the expense of the U.S., the EU and nations subjected to neo-colonialism in Africa. For two decades China has advanced a program of State-sponsored actions to achieve the Made in China 2025 objective. Authorized policies include government support of quasi-independent industries dumping products on world markets; coercive joint-venture agreements with foreign manufacturers to share proprietary technology and ignoring established rules relating to intellectual property. More recently aggressive hacking of databases and company information by state agencies has escalated representing overt commercial espionage.

 

The recent action by the Administration to oppose the policies of China is not merely an expression of America-first unilateralists. The Economist published a commentary in the December 15th edition under the heading of Chaguan (literally a tea-house for discourse- named for the eponymous capital of Sichuan Province) that emphasizes the effect of China policy on other industrialized nations. The article notes that placating or cajoling the errant nation over two decades and hoping for a change have been disappointing. China recognized that the openness of the West and their reliance on the World Trade Organization and United Nations agencies was a vulnerability to be exploited to their advantage. The Economist refers to now disillusioned internationalists as “unhappy ex-doves reading intelligence reports”.

 

Our negotiators clearly appreciate the apparent challenge of rescinding bilateral tariffs, representing the easy part, but they also have an appreciation of the underlying structural imperatives motivating China. It is difficult to envisage how the U.S. team will reverse entrenched policies imbued in a generation of bureaucrats intent on maintaining growth by any means possible. Even in two months with the clock ticking. There is concern that a Band-Aid will be placed over tariffs and negotiators will talk past each other and avoid the deeper issues or accept insincere offers to reform.  

 

Hopefully the negotiations will reverse the immediate trade issues and restore exports of U.S. farm commodities to China. Certainly the slowdown in economic growth in China implies an incentive to make concessions. It would however have been beneficial not to have alienated our traditional allies since a concerted and coordinated response to the underlying policies pursued by China would be more effective than a unilateral approach.


 

Egg Industry News


REVIEW OF DECEMBER PRODUCTION STATISTICS AND COSTS.

01/11/2019
  • December 2018 USDA Ex-Farm Benchmark Price Down 5 Percent from November, Inconsistent with Seasonal Trends Due to Oversupply.

  • USDA Average Nest-run Production Cost Fractionally Higher than November at 60.9 cents per dozen.

  • Positive USDA Benchmark Nest-run Margin Decreased 14 Percent from November to 29.0 cents per dozen

 

INTRODUCTION.

Due to the Federal shutdown some monthly reports from December 26thwere not issued. EGG-NEWS has assembled available USDA market data to produce the December report. The normal format will be posted when USDA publications resume.

Summary tables for the latest USDA December 2018 statistics and prices made available by the EIC on January 9th 2019 are arranged, summarized, tabulated and reviewed in comparison with values from the previous December 10th 2018 posting reflecting November 2018 data.


 

USDA Weekly Egg Price and Inventory Report, January 9th 2018.

01/09/2019

Due to the Federal shutdown effective midnight December 24th some data required for this report was not updated by USDA-AMS. Updated data will be posted when the USDA resumes operation.

  • Hen Numbers in Production increased 3.0 million to 328.1 million from December 26th.
  • Shell Inventory Up by a substantial 9.4 Percent from Previous Week.
  • USDA Midwest Benchmark Generic Prices for Extra Large and Large Down by 11.4 and 11.5 Percent respectively. Mediums Down 16.6 Percent Compared to Past Week.

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on January 9 th the Midwest wholesale prices for Extra Large and Large were lower by 11.4 and 11.5 percent and Mediums were down 16.6 percent compared to the past week. The progression of prices during 2018 is depicted in the USDA chart reflecting three years of data, updated weekly.


 


USDA DATA ON CAGE-FREE PRODUCTION

01/11/2019

Based on the importance of cage-free production, the USDA-AMS issues a monthly report on volumes and prices for the information of Industry stakeholders. There is some doubt as to the accuracy of the monthly flock numbers and the question is raised whether it would not be more desirable to post accurate quarterly data in place of erratic quarterly figures with similar data for consecutive months.

EGG-NEWS summarizes and comments on data and trends in the monthly USDA Cage-Free Report, supplementing the information posted weekly in the EGG-NEWS Egg Weekly Price and Inventory Report.

The USDA Cage Free Report for the month of December 2018 released on January 7th 2018 documented constant flock sizes in hens producing under the Certified Organic seal and for cage-free flocks as compared to the values for September through November 2018. The respective numbers of hens in organic and cage-free flocks should reflect the realities of supply and demand in the market over successive quarters. Average flock production rose to 75.75 percent for both categories of non-caged hens (accepting USDA data):-

Flock size '18 (million hens)

May

June

July

Aug.

Sept.

Oct. Nov. Dec.

Certified Organic

15.6

15.6

15.6

15.6

15.7

15.7 15.7 15.7

Cage-free hens

38.9

39.1

39.1

39.1

41.4

41.5 41.5 41.5

Total non-caged

54.5

54.7

54.7

54.7

57.1

57.2 57.2 57.2

Average weekly production cases, December 2018 Δ

Certified Organic

231,042 was 230,279 Nov. +0.3%

Cage-free

610,819 was 608,803 Nov. +0.3%

Total non-caged

841,861 was 839,082 Nov. +0.3%

Average Wholesale Contract Price Cage-Free Brown

$1.56/doz. Unchanged from Nov.

Range unchanged at:

$1.15 to $2.10/doz. (Av. $1.41/doz)

FOB Negotiated price, grade quality nest- run, loose

Average up 19 percent from November with narrower spread

$1.20 to $1.51/doz. (Av. $1.36/doz)

was $1.20 to $1.51 (Av. 1.36/doz.)

Average Advertised National Retail Price C-F, L, Brown

$2.47/doz. (was $2.96 November)

USDA 6-Region

High: NE

$2.76/doz. $3.47 (Nov.)

 

Low: SC

$2.24/doz. $2.68 MW

 

Kindly refer to weekly USDA wholesale and retail prices posted in the EGG-NEWS Egg Price and Inventory Report E-mailed each Friday. The previous Monthly Cage-Free Report is available under the STATISTICS Tab.


 

WEEKLY COMMODITY REPORT

01/07/2019

The following quotations for the months as indicated were posted by the CME at close of trading on Friday Jan 4th together with values for the reference months in parentheses confirming a rising market for corn, soybeans and soybean meal in comparison to the previous week.

 

 

COMMODITY

 

Corn (cents per bushel)

March'19 383 (376)

May '19 390 (384)

Soybeans (cents per bushel)

Jan. '19 909 (883)

March '19 922 (897)

Soybean meal ($ per ton)

Jan. '19 316 (309)

March '19 320 (314)

Changes in the price of corn, soybeans and soybean meal were:-

COMMODITY CHANGE FROM PAST WEEK

Corn: March'19 quotation up 7 cents per Bu. (+1.9 percent )

Soybeans: Jan. '19 quotation up 26cents per Bu (+2.9 percent)

Soybean Meal: Jan. '19 quotation up $7 per ton (+2.3 percent)

  • For each 10 cent per bushel change in corn:-

The cost of egg production would change by 0.45 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

  • For each $10 per ton change in the price of soybean meal:-

The cost of egg production would change by 0.40 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

There is renewed optimism concerning the outcome of the dinner meeting at the G-20 Summit between the delegations from the U.S. and China led by their respective Presidents. The U.S. has agreed to a three-month delay ending March 31st before raising tariffs from ten percent to twenty-five percent on over $200 billion in annual imports from China. In return China has agreed to purchase an unspecified quantity of agricultural commodities in addition to energy and heavy equipment from the U.S. to offset the negative balance of payments. An initial order of 1.5 million tons was placed, three weeks ago, the first since June. The USDA announced on January 7th that orders have been placed for an additional 3 million tons to be shipped before February 2019.

According to the November 8th 2018 WASDE Report #583, which did not affect commodity prices, 81.8 million acres of corn will be harvested in 2018 to produce 14.62 Billion bushels. The soybean crop is projected to attain 4.60 Billion bushels from 88.3 million acres harvested. The levels of production for the two commodities are based on revised projections of yield and acreage harvested. Ending stocks were revised based on anticipated domestic use and exports.

See the WASDE posting summarizing the November 8th USDA-WASDE Report #583 under the STATISTICS tab documenting price projections and quantities of commodities to be produced, used and exported from the 2018 harvest. The January 2019 WASDE Report #584 will be delayed by the Government shutdown

Quarterly corn and soybean stocks were estimated by USDA in the last release for 2018 on September 28th to total 2.14 Billion bushels (14.7 percent of the 2017 harvest) and 0.44 Billion bushels (10.0 percent of 2017 harvest) respectively. Of the "old soy crop" 0.10 Billion bushels are held as on-farm storage, up 15 percent from the corresponding period in 2017. Off-farm storage is up 58 percent to 0.34 billion bushels. Disappearance from June to August was 0.78 Billion bushels, up 18 percent from the corresponding period in 2017. This reflects accelerated shipments in anticipation of increased tariffs imposed by China. From August through November soybean exports to China ceased.

Unless shipments of corn and soybeans to China resume in volume as projected the financial future for row-crop farmers appears bleak despite the release of two tranches amounting to $12 billion as "short-term" compensation. Farmers will not be placated by the promise of a year-round E-15 blend since the logistic problems of delivery to consumers and legal challenges will delay any positive price benefit. Oversupply of ethanol with the current 10 percent addition (=dilution) mandate is evident from the December 28th spot price of $1.30 per gallon compared with a 2018 peak in late March of $1.60. Exports have been constrained by the retaliatory tariffs imposed by China on U.S. ethanol. Some refiners are reducing production and mothballing corn- fermentation plants.

The loss inflicted on farmers by the trade war with China is a gain for livestock producers who will benefit from lower feed costs. It must be recognized that the hog and poultry industries have experienced higher costs for a decade as a result of the RFS, a gift that keeps on giving. The mandate is a boon to Midwest politicians, corn growers and ethanol refiners at the expense of anyone in the U.S. who eats or uses any form of transport.


 

Third Riverside County Egg-production Farm Diagnosed with vvND

01/11/2019

According to a January 10th APHIS release a commercial egg-production farm with 100,000 hens was diagnosed with vvND. The unit is located in Riverside County approximately five miles from the second case diagnosed last week.

 

Since the first infection in a commercial pullet-rearing farm was diagnosed during the last week of 2018 intensive surveillance has been carried out to detect emerging cases that are not readily apparent in vaccinated flocks within a week of introduction of infection. Epidemiologic studies are in progress to ascertain the factors involved in dissemination of the virus from the endemic reservoir represented by fighting cocks in Los Angeles, San Bernardino and Riverside Counties. The California Department of Food and Agriculture and APHIS did little other than diagnose over 240 individual cases and keep score from May through November 2018.

 

Many commercial farms in California lack investment in structural biosecurity and hence function with inadequate operational biosecurity. This situation creates vulnerability to introduction of catastrophic viral diseases. “Danish entry” systems are suitable for Denmark where family-operated farms of 10,000 hens are the norm. The risks and consequences of AI or ND dictate a higher level of protection in the U.S. including shower-on-shower-off protocols, thorough decontamination of vehicles and other precautions. “Feel-good” measures are effective only as long as there is no exposure!


 

American Egg Board Annual Meeting

01/10/2019

The AEB Annual Board Meeting will take place Monday through Wednesday March 25-27, 2019 at a resort in Scottsdale, AZ.  Details of the location, registration and reservations will be released in due course.


 

Plant-Based Egg Substitute Offered to Baking Industry

01/10/2019

Food Business News reports that Renmatix Inc. has established a strategic association with the Ingredient House LLC to promote Simple Cellulose™. This plant-based additive is claimed to be a substitute for liquid egg in baking.

 

The producer claims that the ingredient offers emulsification, texturizing and moisture retention for breads, muffins and cookies.

 

The egg industry through the Egg Nutrition Center and other components of the AEB should be constantly aware of substitutes especially in food service and baking applications and should constantly evaluate alternatives to determine technical vulnerabilities and potential nutritional contribution to formulas and diets.


 

USAPEEC Participates in BEXCO Yoga Event

01/10/2019

USAPEEC participated in the BEXCO Yoga Event in Busan, South Korea during late December 2018

 

The purpose of this promotion was to acquaint yoga instructors, many of whom are trendsetters, with the nutritional value and quality of U.S. turkey.  More than 500 yoga instructors visited the USAPEEC Korea booth to sample salads and other recipes.


 

National Restaurant Association Posts Increased RPI in November

01/10/2019

The National Restaurant Association recorded a 0.6 percent increase in the Restaurant Performance Index (RPI) in November.  The current Situation Index a component of the RPI increased by 1.3 percent in November compared to October to a level of 102.2.  This was based on strong same-store sales and customer traffic.


 

Autonomous Home Delivery in San Francisco

01/10/2019

DoorDash an established operator in home delivery has entered into a strategic relationship with Cruise Automation.  Cruise was established in 2013 and has partnered with General Motors to develop and deploy driverless vehicles.

 

Trials of home deliveries will commence in mid-2019 in the San Francisco metropolitan area.  It is proposed that the driverless vehicles will delivery both groceries and restaurant meals.


 

Ovotrack Appoints Agent for North America Region

01/11/2019

Matt Poole of International Egg Marketers has been newly appointed as agent for Ovotrack in North America. Matt has a long-standing presence in the North American egg industry. Initially, he operated as a plant manager for an egg-processing center and subsequently as a sales manager for manufacturers of grading installations.
Job Beekhuis CEO of Ovotrack looks forward to cooperation with International Egg Marketers, stating “Matt’s background makes him the perfect partner for us to support and expand our commercial activities in North America”. He added “during the IPPE, Matt Poole will be joining the Ovotrack sales team at booth C9314.

 

 Ovotrack develops and supplies traceability solutions for egg processing plants. Systems offer full traceability, labeling and control of egg and packaging material inventory. Since its inception in 2003, the company based in Amerongen, the Netherlands, has developed and installed systems at over100 egg processing centers across Europe, North America and Australia.


 

New Breakfast Items for 2019

01/04/2019

The National Restaurant Association surveyed 650 professional members of the American Culinary Federation to determine food trends in 2019.  Plant-based alternatives and globally-inspired menu items will emerge in 2019. Alternative sources of protein and locally sourced meats and seafood will become more frequent in menu offerings. 

 

Ethnic flavored breakfast items such as shakshushka were mentioned as a “globally-inspired breakfast item”.  This dish which is traditional in North Africa includes a poached egg overlaid on tomatoes, onions and peppers.  Spices include cumin, paprika and nutmeg.


 

Potential Spread of ASF from China to Taiwan

01/08/2019

Taiwan has reported the recovery of a dead hog on a beach on an off-shore island presumably having drifted from mainland China. Routine sampling demonstrated that the hog had died from African Swine Fever. This represents an immediate danger to the herd of approximately 5.5 million hogs on Taiwan and has the potential to disrupt the Nation’s supply of pork.

The Government of China is more alarmed over the epidemiologic and social implications of the current ASF outbreak that now involves 100 confirmed cases in 23 provinces and municipalities. China has demonstrated typical lack of transparency with regard to the number of hogs having been depleting in an attempt to control the infection. Apart from the 80,000 hogs in a joint-venture multiplier operation in Heilojiang Province during the last week of December, as many as 700,000 hogs have either died of the disease or have been killed. This is a small number compared to the 700 million on farms ranging in size from family units to integrations.

The Animal Husbandry and Veterinary Affairs Bureau of the Ministry of Agriculture and Rural Affairs is intensifying epidemiologic investigations as to mechanisms of spread and will punish producers who deviate from regulations relating to feeding swill, quarantine and disposal.

It will be remembered that with the advent of PED in China, disposal of dead hogs was a problem and in many cases, farmers resorted to dumping carcasses in rivers, which presumably is the origin of the dead hog which washed up on the Taiwan island.


 

NIR Technology to Evaluate Wholesomeness of Food

01/08/2019

Fraunhofer is developing a near infrared (NIR) spectrum scanner to evaluate the wholesomeness of food products. Currently the scanner is suitable for homogenous products such as tomatoes and ground beef but has not yet been adapted to complex foods with numerous ingredients.

An infrared beam directed onto the surface of a product is reflected and the spectrum is analyzed by the instrument. Scanned data is transmitted by Bluetooth to a cloud-based library of spectra. By comparison against known patterns, ripeness of a fruit or degradation in quality can be evaluated. It may be possible to determine spoilage associated with bacteria or even to detect the presence of pathogens with further refinement.

Fraunhofer is continuing development and will deploy a prototype unit for testing in supermarkets in late 2019.


 

Campylobacteriosis Common as a Food-Borne Infection in the E.U.

01/08/2019

According to a release from the European Center for Disease Prevention and Control, analogous to the U.S. CDC, there were 250,000 confirmed cases of campylobacteriosis in the E.U. in 2016. This is the most commonly encountered food-borne infection in the E.U. since 2005. Approximately 70 percent of E.U. cases are recorded in the Czech Republic, Germany, Spain and the U.K. The apparent low prevalence in Bulgaria, Cyprus, Poland, Portugal and Romania is possibly a function of diagnosis and reporting rather than an actual lower prevalence rate.

In 2016, the ECDPC recorded 62 fatalities with the majority in the elderly. As with previous studies, campylobacteriosis is a seasonal disease with the highest incidence during June to August.


 

Senator Pat Roberts to Retire in 2020

01/08/2019

U.S. Senator Pat Roberts (R-KS) has announced that he will not seek re-election in 2020 and will retire at the end of the 116th Congress.

The announcement made in Manhattan, KS included his statement “I will be forever grateful to the people of Kansas for allowing me to represent them.” He added “You can bet I still have a very long To-Do list. You can count on me to march forward and press the battle on behalf of our great state and Nation.”

Senator Roberts is the Chairman of the Senate Agriculture Committee and he is the only member of Congress that has served as Chairman of both the House and Senate Committees with jurisdiction over the Department of Agriculture.


 

Bilateral China-U.S. Talks on Trade

01/09/2019

The first face-to-face talks between China and the U.S. commenced on Monday, January 7th and concluded on January 9th having been extended by a day. The U.S. delegation was led by Deputy Trade Representative Jeffrey Gerrish and included Undersecretaries from the Departments of Agriculture, Energy and the Treasury. The U.S. delegation interacted with their counterparts of the Government of China.

The President tweeted on Monday that “talks with China were going very well”. Secretary of Commerce Wilbur Ross noted that the discussions at the appropriate staff level will determine how the Administration moves forward. It is evident that the trade aspects of the dispute could be expeditiously resolved. Unfortunately the underlying structural problems will represent a more substantial challenge since resolution would require profound changes in short- and long-term policy in China which would require the authority of senior officials reporting directly to President Xi.

Foreign Ministry spokesman Lu Kang agreed that the parties would hold positive and constructive dialog to resolve economic and trade disputes. The comment by President Trump that “the Chinese economy is weak and motivating Beijing to work towards a deal” was refuted by Lu. He stated “China’s development has ample tenacity and huge potential. We have firm confidence in the strong long-term fundamentals of the Chinese economy. Observers of the economy of China recognize that growth is slowing, albeit from a torrid place in past years. The Global Times of China which frequently serves as a outlet for government policy stated “Beijing would not cave into U.S. demands.” The editorial published on Sunday, January 6th included the statement “If China was going to raise the white flag, it would have done it already”.

The general impression from the bilateral talks was that progress was made on the trade issue with talks “extensive, in-depth and detailed” according to the Ministry of Commerce. The communiqué continued “a foundation was laid for the resolution of issues of mutual concern”

Further talks, hopefully at a higher level should soon resume as the March 2nd deadline for a resolution of the structural issues is fast approaching.


 

Arizona Lettuce Growers Facing Challenge of Waterborne E.coli Contamination

01/09/2019

Cooperation between the University of Arizona Extension Service and various producers’ organizations will hopefully result in meaningful monitoring of irrigation water for the presence of pathogens. The FDA identified contaminated water as the vehicle of infection in the STEC outbreak attributed to lettuce grown in the Yuma Valley in 2018.

The canal supplying a number of lettuce farms has apparently been repaired in advance of planting.

More than twenty organizations and individual agencies are represented on three new committees to review factors associated with contamination of Romaine lettuce. Producers’ organizations are still attempting to improve communication with operators of feedlots and various research projects have been initiated.

At the end of the day, if STEC is identified in water, it is inevitable that Romaine lettuce from the Yuma Valley will be contaminated and that outbreaks of food-borne infection will occur in 2019. It will take more than committees and research projects to ensure the safety and ultimately the image and viability of Arizona Romaine lettuce. Electron beam pasteurization is the only practical post-harvest prevention of food-borne STEC infection from lettuce.


 

E.U. Engaging in Trade Talks with U.S.

01/10/2019

The E.U. Trade Commissioner Cecelia Malmstrom will meet with U.S. Trade Representative Robert Lighthizer to discuss reciprocal trade. This move follows a commitment by the U.S. not to impose tariffs on E.U. auto imports. The concession followed a meeting between President Trump and the President of the E.U. Commission, Jean-Claude Juncker. Their deliberations opened the E.U. market for U.S. soybeans. Our farmers now have a 75 percent share of the market essentially based on lower prices from the U.S. relative to Brazil following cancellation of U.S. orders by China.

While in the U.S., Commissioner Malmstrom will engage in a three-way discussion with the U.S. and Japan. This is the first clear indication that the U.S. is engaging with traditional allies to confine the predatory trade activities of China that affect the E.U., Japan and other Asian nations.


 

Commentary


Multinational Agribusiness Companies Losing Significance in World Trade

01/01/2019

For more than a century, four multinational commodity and grain traders have dominated agriculture as middlemen between producers and consumers. The four comprising ADM, Bunge, Cargill and Louis Dreyfus referred to as ABCD, have brokered a high proportion of the World’s major commodities. This has been achieved through superior market intelligence, storage infrastructure and transport facilities including harbor installations and bulk vessels.

According to an insightful article in the December 14th edition of The Economist, the dominance of ABCD has been eroded over the past decade. Cofco was established by the Government of China to source and supply grains essentially from Latin America to producers in their nation. Glencore Agriculture emerged as a major competitor to ABCD backed by parent company Glencore, involved in multinational mining. Glencore was a potential acquirer of Bunge in 2017. Olam was established by a state-funded Singapore investment group and is active in brokering transactions between Africa and Asia.

The problem faced by international commodity traders is exemplified by the decline in profitability of Bunge that recently announced replacement of both the Chairman and the CEO. According to The Economist article, total commodity sales generated by ABCD declined from $350 billion in 2013 to $260 billion in 2017. The relevance of the four enterprises was enhanced by the tariff war with China. The advent of disruption in orderly marketing commencing in June resulted in a scramble to source alternatives to U.S. soybeans and the countervailing need for the U.S. to find new customers. The market price of Brazilian soybeans soared reaching a peak in October with a concurrent depression in U.S. prices which stimulated trade. By early December, with the end of the export season from the Southern Hemisphere, the world market price for soybeans in the U.S. and Brazil had converged close to $350 per ton. In the interim, razor-thin margins on trading increased, albeit fractionally, to improve profitability.

Companies such as ADM and Cargill have diversified with the former involved in ethanol production and the latter deriving two thirds of revenue from upstream activities including poultry in Latin America, the E.U., Asia and Central America. In addition Cargill is heavily involved in production of animal feed and further-processing of commodities.

Multinational commodity traders such as ABCD and their clones are a necessary component of the food supply chain. Going forward, their dominance will decline possibly representing an advantage for consumers in developing nations.


 

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Dr. Simon M. Shane
Simon M. Shane
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