Editorial

 

Europe Flipping over Fipronil: What can we Learn?

Aug 11, 2017

    

The scandal involving apparent widespread distribution of eggs containing potential adulteration with the insecticide fipronil has gained legs during the past week.

Starting two weeks ago as a limited event involving 12 egg-farms in Holland, the problem has escalated to involve over 200 farms affecting product in fifteen E.U. nations and Hong Kong resulting in massive recalls.

Not only are shell eggs being removed from shelves of major chains in the U.K., Germany, Belgium, France and Holland but attention is now being directed to food products incorporating egg liquids.

In the absence of assay data and figures on prevalence of contamination the reaction appears excessive from a technical standpoint but understandable from the perspective of brand image and consumer concerns.

  

Vytenis Andriukaitis

Feuding, recriminations, finger pointing and questions as to which Government knew of the contamination, when it was detected and what action was taken are swirling in Brussels, Berlin, Amsterdam and Paris. Dr. Vytenis Andriukaitis the E.U. Commissioner for Health has called a meeting of E.U. agriculture ministers and stakeholders to establish facts and to defuse rhetoric. He stated “Blaming and shaming will bring us nowhere and I want to stop this.”

The lessons to be learned from the event are:-

  • Only USDA/EPA pesticides should be used in strict conformity with statutory label directions
  • Delay in response to a problem and non-transparency will escalate a limited event into a national or even an international crisis
  • It is necessary to rapidly determine the extent and severity of any emerging contamination problem applying laboratory assays, traceback and risk analysis.
  • Authorities tasked with oversight of public health should issue clear and unequivocal statements based on facts and assays and advise consumers as to whether or not any danger exists. Since the public do not know the difference between a nanogram and a kilogram (a magnitude equivalent to 1015) all official statements should be concise direct and based on reality. In the present case there is conflict over the significance of as yet non-quantified levels of presumed contamination which is creating a negative image for all eggs.
  • The extent of trading and movement of eggs is apparent not only from this episode but also from the 2010 DeCoster Wright County Salmonella Enteritidis outbreak and the dioxin event in Germany which impacted eggs, pork and dairy in 1999. Traceback and epidemiologic follow-up are essential in establishing boundaries of involvement and prompt removal of product.
  • Contamination of food products is invariably expensive. Losses accrue to producers who are obliged to destroy eggs and deplete flocks with body residues. The supply chain is disrupted, stores loose sales and public confidence in the wholesomeness of eggs is degraded.
  • Above all the major lesson is to avoid any act of omission or commission which might in the slightest degree prove even remotely prejudicial to brand or product image, despite the often misplaced anticipation of a short-term gain. We have a collective responsibility to protect our consumers, customers and the egg-production industry from harm.

Egg Industry News

 

CME Prices

Aug 16, 2017

    

According to the August 10th WASDE release, 83.5 million acres of corn will be harvested to yield 14.15 billion bushels. The soybean crop is projected to attain 4.38 billion bushels from 88.7 million acres harvested.

 

On Friday August 11th at close of trading on the CME, the following rounded quotations for corn, soybeans and soybean meal were recorded, together with the bracketed value for the previous week.

COMMODITY

 

Corn (cents per bushel)

Sept. ’17   361     (367)     

Dec. ’17     375      (381)  

Soybeans (cents per bushel)

Aug.  ’17   935     (949)    

Nov. ’17    945      (957)  

Soybean meal ($per ton)

Aug.  ‘17   299     (304)

Dec.  ’17    305      (310) 

 

Changes in the price of soybeans and soybean meal this week were:-

  • Corn:                     Sept. quotation down by 6 cents.                    (-1.6 percent)
  • Soybeans:            Aug. quotation down by 48 cents                    (-1.5 percent)
  • Soybean Meal:    Aug. quotation down by $5/ton                    (-1.6 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

See posting on the August 11th edition of CHICK-CITE (enter WASD in SEARCH block) summarizing the August 10th USDA-WASDE Report #568, for a review of price projections and quantities of commodities to be produced during the 2017-18 season.

 

Status of 2017 Corn and Soybean Crops

Aug 16, 2017

    

The USDA Crop Progress Report released Monday August 14th  recorded progress in corn and soybean development relatively consistent with 2016 indicated in the tables below:-

 

                                                                            WEEK ENDING

Crop

August 6th

August 13th

5-Year Average

Corn Silking

Corn Dough

           93

           42

           97

           61

            98

            62

Corn Dent

             7

           16

            20

Soybeans Blooming

           90

           94

            93

Soybeans Setting Pods

           65                         

           79

            75

                  

Crop

V. Poor

Poor

Fair

Good

Excellent

Corn Condition

     3         

   9

 26

  49

     13

Soybean Condition

     3

   9

 29

  49

     10

 

Parameter

V. Short

Short

Adequate

Surplus

Topsoil moisture:  Past Week

    15

   25

53

 7

                              Past Year

    10

22

59

 9

Subsoil moisture:  Past Week

    14

   26

55

 5

                              Past Year

8

23

63

 6

 

 

How will Amazon Improve Whole Foods Profitability?

Aug 16, 2017

    

Analysts are evaluating possible changes in the structure and operations of Whole Foods Market following the acquisition by Amazon.  At the outset it is this Commentator’s opinion that nothing much will be done unless the current Board and top level of management is replaced. 

Some attempts were made by John Mackey to reduce operating costs and to introduce more efficiency but these efforts did not move the needle and made an acquisition inevitable given shareholder disaffection.

  

As reported by Mark Hamstra in the August 8th edition of Supermarket News, Amazon will have to concentrate on the supply chain.  Since Whole Foods Market created the image of “healthful, fresh and local”, the supply chain to support the company image was expensive, especially with regard to small-farm organic produce.  It is essential for Amazon to reduce the “whole paycheck” image of WFM. This will require restrictions on sourcing of products. 

This is especially important given that Walmart, Aldi, emerging Lidl and even mainstream supermarkets have managed to improve freshness and quality of their produce but have restrained price.  These companies have sharpened their pencils when dealing with suppliers and have introduced private labels where possible to reduce prices into the basket

The obvious challenge facing Amazon will be to improve the profitability of Whole Foods Market but at the same time preserve the image and prevent disaffection by loyal customers – a trend which was evident before the announcement of the acquisition.

 

AEB to Partner with Laurie Hernandez for Back-to-School Promotion

Aug 16, 2017

    

The American Egg Board has announced that it will engage the promotional services of Laurie Hernandez a gymnastic gold medalist to launch a national search for “incredible kids”.  The campaign will highlight high-quality protein including eggs to allow students to achieve their optimal potential.

Parents will be able to submit a photo or video of their child together with a caption explaining the exceptionality.

  

During the contest a winner will be selected each week for a monetary grant and back-to-school themed prize. Laurie Hernandez will visit the school of the grand prize winner.

Hernandez noted, “I am very excited to partner with the American Egg Board to search for incredible kids across the country who are doing amazing things for the lives of others.”  She added “I know first-hand how important it is to recognize children for their accomplishments and look forward to seeing the inspiring stories about remarkable kids submitted to the You’re Incredible BecauseContest.

 

 

USDA Weekly Egg Price and Inventory Report, August 9th 2017.

Aug 11, 2017

    

Hen Numbers Increase by 0.4 Million; Prices Stable Following a Modest Upward Trajectory.

OVERVIEW

Acording to the USDA Egg Market News Reports posted on August 9th the Midwest wholesale prices for Extra Large and Large sizes were unchanged from the previous week. The market will be influenced mainly by hen inventory on the supply side of the equation. The progression of prices during 2017 is depicted in the USDA chart reflecting three years of data, updated weekly.

  

The August 4th USDA Egg Market News Report documented a USDA Combined Region value of $0.91 per dozen delivered to warehouses. This price lags Midwest Weekly values by one week, and can be compared to a trailing peak price of $2.20 per dozen in late November 2015.  The USDA Combined range for Large, in the Midwest was $0.85 per dozen. At the high end of the range, the price in the Southeast and South Central Regions, attained $0.94 per dozen.

The current USDA Combined Price was approximately 65 cents per dozen below the corresponding three-year average. During the second Quarter of 2016 the average was inflated by the rise in prices attributed to the post-HPAI shortage of shell eggs and breaking stock.

The number of producing hens this week was 0.4 million higher at 305.0 million consistent with retention of flocks into the second cycle and by pullets placed 6 months ago attaining production. The hen population is high level relative to current demand. The total egg-flock comprises 312.0 million including hens in molt and small flocks, approximately 0.4 million more than last week.

Generic shell-egg stock rose by 0.2 percent compared to an increase of 2.9 percent for the previous week suggesting a balance between supply and demand albeit at a low price. Dried-egg inventory amounted to 27.6 million pounds (12,545 metric tons) as of June 30th 2017. This is extremely high, as is the National stock of frozen egg products reported on July 24th confirming a stock of 41.7 million pounds (18,960 metric tons) on June 30th

INVENTORY

 Cold storage stocks in selected regions on August 1st 2017 amounted to 3.320 million pounds (1,509 metric tons), 4.5 percent above the stock of 3.176 million pounds during the week of July 1st. 2017.

The latest monthly USDA Cold Storage Report released on July 24th documented a total stock of 41,712 million pounds (18,960 metric tons) of frozen egg products on June 30th 2017. This value was up 9.9 percent from June 30th 2016. Approximately 85 percent of inventory comprised the categories of “Whole and Mixed” (33.6 percent) and “Unclassified” (51.6 percent).

The national stock of generic shell eggs on August 7th was up by 0.2 percent, compared to a 2.9 percent increase in inventory during the previous week. Three regions showed increases in stock levels. The Midwest Region was up 2.0 percent compared to the previous week to 368,600 cases. This region was followed in decreasing order of stock level by the South Central Region with no change at 261,700 cases; the Southeast Region down by 0.4 percent to 246,900 cases; the Southwest Region down by 7.6 percent to 182,500 cases, the Northeast Region up by 0.7 percent to 126,300 and the Northwest Region up by 12.8 percent to 96,500 cases representing a 22.9 percent swing in a week.

The total USDA Six-Area stock of commodity eggs comprised 1,595,500 cases, of which 80.4 percent were shell eggs. The inventory of breaking stock was up 1.1 percent to 312,600 cases. The price of breaking stock this week reflects the availability of eggs from both mature and young flocks in relation to the demand for generic eggs.

Specialty egg inventory was up by 2.5 percent compared to a fall of 1.4 percent for the previous week to 179,300 cases with organic stock comprising 38.7 (was 43.8) percent of inventory. Recent data suggests a fluctuating build in the stock of USDA Certified Organic product. This is attributed to an apparent trend by consumers to purchase less-expensive brown cage-free product over organic eggs when there is a differential in price over $1.00 per dozen During the past week the USDA benchmark retail price of cage-free brown fell by 6.6 percent, or 18 cents per dozen to $2.56 per dozen while USDA Certified Organic rose by 14.1 percent or 51 cents per dozen to $4.11 per dozen, widening the price differential to $1.35 per dozen ($0.86 per dozen last week) suggesting larger purchases of the cage-free category in the coming week at the expense of  certified organic eggs.  Large week-to-week percentage fluctuations can be expected in the stock of specialty and organic eggs based on the small base of these categories.

  
 

JULY 2017 USDA EX-FARM BENCHMARK PRICE RISES: NEGATIVE MARGINS PERSIST.

Aug 11, 2017

    

 Introduction.

Summary tables for the latest USDA 2017 July statistics and prices made available by the EIC on August 10th 2017, are presented together with comparison values from the previous July 10th 2017 posting reflecting June 2017 data.

  

COSTS & REVENUE                                                                                         

Parameter

JULY 2017

JUNE 2017

5-Region Cost of Production ex farm (1st Cycle)

60.82 c/doz

59.89 c/doz

Low

56.00 c/doz (MW)

55.02 c/doz (MW)

High

76.21 c/doz (CA)

74.78 c/doz (CA)


Components of 6-Region 1stCycle Cost of Production:-

 

JULY 2017

JUNE 2017

Feed

32.81 c/doz

32.00 c/doz

Pullet depreciation

10.85 c/doz

10.75 c/doz

Labor

4.00 c/doz

 4.00 c/doz

Housing

5.30 c/doz

 5.30 c/doz

Miscellaneous and other

7.86 c/doz

 7.84 c/doz

Ex Farm Margin according to USDA values reflecting JULY 2017:-
51.0 cents per dozen1- 60.8 cents per dozen = -9.8 cents per dozen
(June comparison 39.5 1 cents per dozen – 59.9 cents per dozen = -20.4 cents per dozen.)
Note 1:  USDA Blended egg price

  
 

USDA- WASDE FORECAST #568, August 10th 2017

Aug 11, 2017

    

Overview

The August 10th 2017 USDA WASDE projections for the 2017 corn and soybean crops reflected planting data and estimates of yield based on crop progress. Harvest areas for corn and soybeans were unchanged from the July Report at 83.5 million acres (86.7 million in 2016) and 88.7 million acres (82.7 million in 2016) respectively.

The USDA lowered projected corn yield to169.5 bushels per acre from 170.7 bushels per acre (174.6 bushels in 2016). Soybean yield was raised to 49.4 bushels per acre from 48.0 bushels per acre (52.1 bushels in 2016). Ending stock for corn was lowered 2.2 percent from July and projected to be 2,273 million bushels (2,325 million in July WASDE Report). Ending stock for soybeans was adjusted up 3.3 percent to 475 million bushels (460 million in July 2017 WASDE Report).

  

Corn

The projection of the corn harvest was lowered from July attaining 14,153 million bushels, down 6.0 percent from 2016. None of the major categories of use were appreciably changed. The projected USDA range in farm price incorporated an 80 cents per bushel spread as is normal for a mid-year report with many uncertainties relating to weather until harvest. Price was unchanged from the July WASDE Report at 290 to 370 cents per bushel. At close on August 10th CME quotations for September and December 2017 corn were 360 cents and 373 cents per bushel respectively. September corn fell four percent after release of the August WASDE Report.

Soybeans

USDA projects a soybean harvest of 4,381 million bushels (was 4,260 million bushels in the July WASDE Report) due to an anticipated increase in yield to 49.4 bushels per acre. Use parameters were essentially unchanged from the July WASDE Report except that beginning stocks were decreased again by 40 million bushels to 370 million bushels and ending stocks were increased to 475 million bushels from 460 million bushels. USDA accordingly increased the August ex-farm price for soybeans for the 2017 harvest by 5 cents per bushel on the low end and decreased the projected price by 25 cents per bushel on the high end to a range of 845 cents to 1,015 cents per bushel. At close of trading on August 10th CME quotations for soybeans for July and September 2017 delivery were 1,023 cents and 1,031 cents per bushel respectively. September 2017 and January 2018 delivery were 938 cents per bushel and 954 cents per bushel respectively. Soybeans fell three percent after release of the August WASDE Report.

Projected output of soybean meal was adjusted downward to 46.1 million tons (was 46.3 million tons in the July WASDE Report). Estimated soybean meal prices were adjusted downwards by $5 per ton to $295 to $335 per ton. At close of trading on August 10th CME quotations for September and December 2017 soybean meal were $298 and $302 respectively.

  
 

Wendy’s Reports on Q2 of FY 2017

Aug 11, 2017

    

In a press release dated August 9th Wendy’s Corp (WEN) announced results for the 2nd Quarter of Fiscal 2017 ending July 2nd 2017.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as $ x 1,000 except EPS)

  

  
 

Passing of John Pedersen

Aug 11, 2017

John Pedersen

    

John Raymond Pedersen passed away on July 11th at the age of 83. He was born in Gibbon, NE. and attended the University of Nebraska – Lincoln graduating in 1956 with a BS in Agricultural Economics.  He subsequently earned a Master’s in Agricultural Economics from the University of Maryland while working for the USDA. 

He retired from the Department of Agriculture in 1969 and joined Ralston Purina and subsequently was associated with United Egg Producers from 1973 to 1976.  Since 1976 he operated Poultry and Egg Fax providing services in the area of economics to the U.S. poultry industry.

 

 

CME Prices

Aug 9, 2017

    

On Friday August 4th at close of trading on the CME, the following rounded quotations for corn, soybeans and soybean meal were recorded, together with the bracketed value for the previous week.

According to the July WASDE release, 90.9 million acres were planted to corn, three percent lower than the previous season with a predicted harvest of 14.3 billion bushels.

Farmers planted 88.7 acres to soybeans, up seven percent above 2016, with a crop of 4.3 billion bushels anticipated.

  

COMMODITY

 

Corn (cents per bushel)

Sept. ’17   367     (375)    

Dec. ’17     381      (387)  

Soybeans (cents per bushel)

Aug.  ’17   949     (997)    

Nov. ’17    957    (1,012)  

Soybean meal ($per ton)

Aug.  ‘17   304     (321)

Dec.  ’17    310      (336) 

 

Changes in the price of soybeans and soybean meal this week were:-

  • Corn:                     Sept. quotation down by 8 cents.                    (-2.1 percent)
  • Soybeans:            Aug. quotation down by 48 cents                    (-4.8 percent)
  • Soybean Meal:    Aug. quotation down by $17/ton                    (-5.3 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

See posting on the July 14th edition of CHICK-CITE (enter WASD in SEARCH block) summarizing the July 12th USDA-WASDE Report #567, for a review of price projections and quantities of commodities produced during the 2016-17 season.

 

Egg Breaking in 2017

Aug 9, 2017

    

According to the USDA Egg Products Report released on July 28, 2017, a total of 1.16 billion dozen were broken in Federally-inspected plants. This was five percent higher than during the comparable period in 2016. 

For the period January through June inclusive, 1.50 billion pounds of edible product was produced, six percent higher than in the first half of 2016.  The relative portions of edible products comprise whole eggs, 61 percent; white, 26 percent and yolk,13 percent.

  

 

China Reports Avian Influenza in Inner Mongolia  

Aug 9, 2017

    

Authorities in the Inner Mongolia region of China have reported outbreaks of H5N1 strain avian influenza, resulting in the depopulation of as many as 100,000 chickens. 

According to the Minister of Agriculture, “the outbreak is under control”.  The affected farms are located near Tongliao a city of 3 million.

  

 

CNBC Highlights Relative Under- Consumption of Cage-Free Eggs

Aug 9, 2017

    

In a five minute segment on CNBC at 14H00 on August 1st, Reporter Jane Wells commented on the reluctance of consumers to pay the differential between prevailing low prices for eggs from caged and cage-free flocks.  Visiting Chino Valley Farms in California, suitably attired Wells in Tyvek noted relative over-production of cage-free eggs.

  

This situation follows the rapid expansion in aviary and slatted floor housing during late 2016 and early 2017 in response to the commitments by QSRs, supermarkets and food service companies to transition from conventional to cage-free.  Unfortunately, consumers were not involved in decisions made on their behalf by the HSUS and if they were, they were unaware of the cost differential. 

The over-supply results from members of the FMI, the NRA and the NCCR having been “snowed” or coerced by the HSUS and kindred organizations in the absence of meaningful and structured consumer research relating the principal product attribute with willingness to pay.

The clip may be viewed at https://www.agdaily.com/video/cage-free-egg-trend-creates-pricing-problem-ends/?utm_source=twitter&utm_medium=social&utm_campaign=general

 

Status of 2017 Corn and Soybean Crops

Aug 9, 2017

    

The USDA Crop Progress Report released Monday August 7th  recorded progress in corn and soybean development relatively consistent with 2016 but showing a slight trend in deterioration in quality as expressed in the tables below:-

 

                                                                            WEEK ENDING

Crop

July 30th

August 6th

5-Year Average

Corn Dent

Corn Dough

             -

           23

            7

           42

            11

            44

Corn Silking

           85

           93

            94

Soybeans Blooming

           82

           90

            88

Soybeans Setting Pods

           48           

           65

            62

 

                    

 

Crop

V. Poor

Poor

Fair

Good

Excellent

Corn Condition

     4         

   9

 27

  47

     13

Soybean Condition

     3

   9

 28

  50

     10

 

 

 

Parameter

V. Short

Short

Adequate

Surplus

Topsoil moisture:  Past Week

    16

   28

52

 4

                              Past Year

    10

23

60

 7

Subsoil moisture:  Past Week

    13

   28

55

 4

                              Past Year

8

23

64

 5

 
 

Hampton Creek Sued Over Label

Aug 9, 2017

    

Just Goods Inc. is suing* Hampton Creek over a trademark dispute according to a Bloomberg posting on August 2nd.  Jaden Smith, the principal of Just Goods Inc. claims that Hampton Creek agreed in 2014 to a specific depiction of the word “Just.” used on their “Just Mayo” label.

 

In May, Hampton Creek changed labeling emphasizing the word “Just” conflicting with the previous agreement which stipulated that Hampton Creek should adhere to a specific design with cursive letters and a small font. Just Goods uses an uppercase “JUST” in its logo.

The Bloomberg posting reiterated the numerous legal and financial problems experienced by Hampton Creek relating to apparent unethical repurchasing of product from store shelves to create the deception of consumer demand, uncomplimentary postings by disaffected employees on the Glassdoor website, and numerous defections among senior technical and management personnel.

*Just Goods Inc., v. Hampton Creek Inc. CGC-17-559876, California Superior Court, San Francisco.

Shane Commentary

 

Recrimination over Fipronil Debacle

Aug 16, 2017

    

Following revelations that authorities in Belgium knew of Fipronil contamination of eggs in early June but only notified the EU in late July, beleaguered officials are now blaming the Netherlands.  The company allegedly responsible for supplying the insecticide cocktail containing Fipronil applied to as many as 200 farms was based in the Netherlands.  Belgium claims that Holland was tardy in their investigation delaying critical information until the end of July.

  

The Minister of Agriculture for Belgium Denis Ducarne addressing a Parliamentary investigation noted “One month without having any information from the Dutch Agency” --presumably the Dutch Food Authority.  Ducarne maintains the Dutch had been aware of Fipronil in eggs since November 2016 without any declaration.

It is significant that no official reports or media articles have actually quoted levels of Fipronil in eggs.  This data would be of interest to actually assess the risk to consumers. Actual assay results will be necessary to reconcile conflicting statements of low-risk made by Dutch, Belgian and U.K. officials in contrast to a more pessimistic interpretation by Germany.

It is hoped that investigations will soon be concluded which will reveal the duration of contamination, the levels in eggs from affected farms and the concentration of residual Fipronil in tissue from culled flocks.  Results from epidemiologic studies involving temporal and spatial considerations included in a comprehensive report should be forthcoming since there are lessons to be learned from this incident which is eerily reminiscent of the dioxin contamination in Germany and the Benelux Nations in 2011.

Agriculture Minister Dennis Ducarne of Belgium
reviewing aspects of the fipronil scandal with the media

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Dr. Simon M. Shane
Simon M. Shane
Contact     C. V.

Industry Prices: Wed Aug 16
 Corn3.67 $/bu
 Soybeans9.25 $/bu
 Soybean Meal298.10 $/ton
 Eggs, Producer57  ¢/doz
 Eggs, Warehouse 79-82  ¢/doz