Egg-News

Editorial


U.S. Economy Currently Strong – But Will it Last?

It is axiomatic that a strong U.S. economy is beneficial for the poultry industry.  Availability of capital allows for investment in expansion and installation of equipment that promotes efficiency.  Increased spending power encourages consumption reflected in higher demand and margins.  At the end of the first quarter of 2024, the U.S. economy is strong but is vulnerable to inappropriate fiscal policy and political pressures.  Over the past five years, the U.S. economy has grown eight percent in real terms compared to the E.U. at three percent, Japan at one percent and negative growth among other nations.

 

Despite successive rate increases as determined by the Federal Reserve FOMC, unemployment has remained at an exceptionally low level, currently 3.9 percent and the economy is moving towards a “soft landing”.  Economists suggest that despite proving “sticky” inflation should decline to approximately 2.2 percent on an annual basis by the end of 2024 with a concurrent forecast of a 3.2 percent growth in GDP.  This, in large measure, has been achieved through increased productivity with a 2.6 percent increase in the non-farm categories and 0.6 percent overall.

 

The U.S. achieved the current, favorable position through injection of capital during the immediate post-COVID years.  This largesse was accompanied by an average deficit of 14 percent of GDP in 2020 and 2021 compared to less than half this level among Euro nations.  Other factors contributing to a favorable situation include energy independence and the relatively low cost of the range of fuels used compared to the E.U.  The labor force has increased to approximately 160 million workers, up four percent from 2019.  This has been driven by immigration with the foreign-born component up by 16 percent since the advent of COVID.  Despite immigration, unemployment is at a low level under 4 percent with 10 million positions open albeit with moderate wage increases.

 

Despite the current favorable situation, there are certainly clouds on the horizon.  Stimulation of the economy through government spending is widening the national deficit.  In 2022, the deficit was 4.0 percent of GDP but rose to 7.5 percent in 2023.  The nation is now spending as much on annual interest as it does on defense.  One concern is the high proportion of debt held by China that is experiencing a decline in their economic growth and the holdings by other “unfriendly” nations.  Problem areas include delinquency on credit cards suggesting that consumer spending, a major driver of the economy, will falter.  This is despite the fact that high-income consumers representing 20 percent of earners are responsible for 45 percent of consumption. It is inevitable that this demographic will tighten their purse strings.  Restrictive climate-related legislation is imposing costs on the economy.  As an example the U.S. is currently the world's largest supplier of LNG.  Executive orders limiting expansion of export terminals will be detrimental to reversing the foreign trade deficit.  The property market appears vulnerable to sustained high interest rates and post-COVID factors including work-from-home have reduced occupancy rates for commercial property that cannot be converted to housing to provide an equivalent return.  This may reflect on the stability of regional banks that are vulnerable to now questionable security and the performance of their loan portfolios.

 

Of greatest concern will be the policies implemented by the eventual winner of the 2024 Presidential election.  The opposing candidate is expressing views that promise extreme protectionism with high tariffs.  This would be detrimental to the economy. Concurrently an anti-immigration bias would deprive U.S. industry of necessary workers.  Interference in the independence of the Federal Reserve would also be detrimental to the standing of the U.S. as evidenced by the economies of nations such as Turkey where injudicious political pressure over interest rates has proven disastrous to the value of the Nation’s currency.  Promises to lower taxes if they eventuate will markedly reduce revenue and widen the national debt as has occurred under the present and previous Administrations.

 

 

The incumbent candidate is promising to raise taxes on corporate earnings and on high-income earners who are the most innovative and productive.  In many respects the programs to be implemented are also protectionist although it is questioned as to whether pronouncements during the 2024 State of the Union address were political rhetoric or a firm intention of policy during a second term.  The proposed program of spending would intensify the magnitude of the national debt. Attempts to reverse climate change would have profound impacts on the energy industry, vital to the economy. Injudicious spending on social programs will add to the national debt especially if “investment” is not realized over the short or even intermediate term.

 

Policies and programs implemented by the USDA in recent years using funding from the CARE Act that are intended to encourage local production and assist the “disadvantaged and under-represented” may not even contribute to intermediate-term productivity.  Attempts to restructure the meat industry are quixotic and contrary to the realities of economies of scale and efficiency. From the perspective of providing inexpensive protein, oligopolies should be tolerated with appropriate protection for farmers, given the needs to supply the domestic and export markets, some of which are eroding.

 

Despite the favorable economic situation as quantified each week in the EGG-NEWS Economy, Energy and Commodity Report, some changes will be necessary to ensure a “soft landing” as anticipated.  Both candidates for the Presidency should now moderate their rhetoric and adopt acceptable and productive economic policies based on sound economic principles.  The Federal Reserve should address the issue of the delay in reducing interest rates given the trajectory in the decline in inflation to three percent.  It is noted that eleven previous cycles of suppressing inflation by increasing interest rates, the economy entered into recession ten times. A repetition could be averted by three rate cuts from June onwards.  Currently, the economy is in good hands.  Let us hope prudence and sound judgment resist the temptation to impose isolationism or to continue with intemperate government spending, throttling the energy industry and failing to introduce a rational program of immigration.  Hopefully, politicians and economists will see common ground and continue to guide the progress of our Nation for the benefit of both producers and consumers.


 

Egg Industry News


Egg Week

USDA Weekly Egg Price and Inventory Report, March 20th 2024.

 

Market Overview

  • The average wholesale unit revenue values for Midwest Extra-large and Large sizes were up by 0.9 percent and Medium size was up 13 percent this past week. Wholesale prices for Midwest in cartons were approximately $0.25 per dozen above the 3-year average for mid-March. This past week shell egg inventory was down by 2.2 percent, following a rise of 2.1 percent the previous week. Although there has been a progressive weekly increase in pullet flocks transferred to laying houses, hen numbers are diminished by the loss of close to thirteen million hens due to HPAI on twelve complexes holding from 250,000 to 2.6 million hens during the 4th Quarter of 2023. Pullets are in short supply with losses of 2.5 million growing birds mainly in California.
  • This past week, chains widened the spread between delivered cost and shelf price. This could result in a potential increase in generic stock unless compensated by a proportional rise in demand and constant re-ordering to fill the pipeline through mid-month. Discounters are holding prices on generics influencing mainstream retail stores. Eggs are still highly competitive in price against the comparable costs for other protein foods.
  • Total industry inventory was down by 3.0 percent overall this past week to 1.66 million cases with a concurrent 6.0 percent decrease in breaking stock, following a 1.3 percent rise during the preceding processing week. Demand for egg products will presumably increase during the two weeks preceding Easter (March 29th Good Friday) with more home baking and entertaining. Egg products are required for the food service and manufacturing sectors although exports are at a moderate to low level attributed to domestic price. USDA Benchmark wholesale price for eggs in cartons was approximately $0.75 per dozen lower than the corresponding week in 2023.
  • 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 compared to the USDA regional inventory figures. Changes in stock held by DCs and in the pipeline as determined by weekly orders are probably responsible for small cyclic fluctuation in weekly industry stock, especially into and after a holiday weekend.
  • Cases of HPAI in the commercial poultry industry and backyard (non-commercial WOAH) flocks have tapered, coincident with the end of the Fall migration of waterfowl that was extended in late 2023 by mild weather. The number and extent of future possible outbreaks during the spring and fall months of 2024 cannot be projected but the epornitic appears to be over with migratory birds having moved south following colder weather in January. Unfortunately sporadic cases in backyard poultry in diverse states continue. A case of HPAI was diagnosed in turkeys a week ago in Missouri. More surveillance information should be released by USDA-APHIS concerning the prevalence rate of carriers among resident domestic free-living birds and a review of molecular and field epidemiology for the 2022 spring and fall waves of HPAI. The USDA has yet to identify specific modes of transmission for the 2022-2023 epornitic including likely 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 two years. 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 down by 0.2 million hens (<0.1 percent) to a new level of 302.1 million for the week ending March 20th The total flock of 306.4 million included about one million molted hens that will resume lay during coming weeks plus 5.0 million pullets scheduled to attain production. Given the latest figures it is estimated that the producing flock is at least 17 to 20 million hens lower than before the onset of HPAI in 2022. It is evident that USDA has now provided a more realistic figure of flock size having adjusted figures to account for depopulation of 13 million hens spread over the last quarter of 2023.
  • The ex-farm price for breaking stock (rounded to one cent) was up 0.3 percent to $1.52 per dozen.Checks delivered to Midwest plants were unchanged at $1.39 per dozen this past week. Prices for breaking stock should follow the wholesale price for shell eggs usually with a lag of about one to two weeks.

 

The Week in Review

 

Prices

According to the USDA Egg Market News Reports released on March 18th 2024, the Midwest wholesale price (rounded to one cent) for Extra-large was up 0.9 from last week to $2.18 per dozen. Large was up 0.9 percent to $2.16 cents per dozen. Mediums were up 13.0 percent to $2.01 per dozen delivered to DCs. Prices should be compared to the USDA benchmark average 4-Region blended nest-run cost of 76.0 cents per dozen as determined by the Egg Industry Center based on USDA data for February 2024. This value 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) and now realistically 60 cents per dozen.

 

Currently producers of generic shell eggs should be operating with positive margins irrespective of region and customer-supply agreements. The progression of prices during 2023 and 2024 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

 

The March 18th edition of the USDA Egg Market News Report confirmed that the USDA Combined Region value (rounded to the nearest cent), was down $0.11 per dozen to $2.23 per dozen delivered to warehouses for the week ending March 11th 2024. This average price lags current benchmark Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $2.14 per dozen. At the high end of the range, the price in the South Central region attained $2.30 per dozen. The USDA Combined Price last week was approximately $0.27 per dozen above the 3-year average of $1.95 per dozen. This past week Midwest Large was approximately $0.75 per dozen below the corresponding week in 2023 that was rising on demand to $3.00 per dozen as production recovers from HPAI depletion and with declining to stable market demand.


 

Egg Projection

Updated March 2024 USDA Projection for U.S. Egg Production and Consumption. 

 

On March 14th 2024 the USDA Economic Research Service issued updated values for egg production during 2022 with a projection for 2023 and a forecast for 2024. Production, consumption and prices were only slightly revised from the previous February 14th 2024 report.

 

Projected egg production for 2023 was reduced by 23 million dozen from the February 2024 Report to 7,864 million dozen This will be 0.5 percent higher than in 2022 due to progressive replacement of the 44 million hens depleted due to HPAI over the period extending from early spring through mid-December 2022. The per capita consumption of shell eggs and liquids combined for 2023 will be 0.6 percent lower than in the February report to 279.3 eggs but up two eggs (0.7 percent) from 2022. The projected average 2023 benchmark New York bulk unit price was unchanged from the February report at 192 cents per dozen. This was 31.9 percent lower than in 2022 attributed to a comparison with unseasonal high prices from the end of March through the 2nd Quarter of 2023.

 

Subsequent USDA projections will provide greater clarity on the recovery in consumption in an economy that is undergoing deflation. The 2023 Midwest in-carton wholesale price peaked at $5.17 per dozen on January 3rd 2023 but fell precipitously to a market bottom of $0.78 per dozen on May 8th 2023. Price was restored in February 2024 but settled to $2.34 on March 8th 2024. This was above the USDA/EIC projection of the combined nest-run February 2023 cost of 76.0 cents per dozen for caged white Large, plus a provision for processing, packaging and transport of 60 cents per dozen amounting to $1.36 cents per dozen delivered to a distribution center.

 

Restoration in flock size after HPAI flock depletions in 2022 progressed at a rate of approximately 0.5 million per week but was limited by the availability of pullet chicks for replacement and in some companies the rate of conversion to alternative housing systems. Restoration of the national flock was compromised by a resurgence of HPAI with 13.0 million layers depleted during the 4th quarter of 2023 representing 4.0 percent of the nominal producing flock of 325 million hens, mainly on complexes averaging over one million hens. The cost of ingredients will influence margins and may result in cessation of production by some small-scale producers that run out of working capital since financial losses were incurred through summer up to mid-fall. Unpredictable factors affecting price will include the extent of losses during the spring of 2024 due to a predicted reemergence of avian influenza; the supply and cost of ingredients as influenced by world and national availability and the intensity and persistence of domestic consumer demand. Exports of eggs and products at approximately two percent of total production will not materially affect the domestic price.

 

The forecast for 2024 includes production of 7,990 million dozen, up 1.6 percent from 2023. Consumption will attain 283.3 per capita, up an optimistic four eggs or 1.4 percent above the projection for 2023. This will naturally depress prices with the NY-Large price dropping by 12 cents per dozen or 6.3 percent from the average for 2023.

 

In 2023 egg exports as shell and products combined attained 5,161 million dozen shell-equivalents, or 2.2 percent of production. During 2022 egg imports as a result of HPAI depopulation, some in shell form but predominantly products, attained 25.9 million dozen shell-equivalents, up 42.8 percent from 14.9 million dozen and 26.4 percent from 2021.

 

During 2023 shell egg exports attained 89.4 million dozen, up 28.6 percent compared to 2022 when high domestic prices prevailed. Egg products were up 18.2 percent to 20,814 metric tons compared to 2022.

 

March 2024 USDA data is shown in the table below:-

Parameter

2020

(actual)

2021

(actual)

2022

(actual)

HPAI

2023

(projection)

2024

(forecast)

% Difference

2023-2024

Production (million dozen)

8,070

8,031

7,825

7,864

7,990

+1.6

Consumption (eggs per capita)

279.0

282.5

280.5

279.3

283.3

+1.4

New York price c/doz.)

112

119

282

192

180

-6.3

Source: Livestock, Dairy and Poultry Outlook released March 14th 2024

 

Subscribers to EGG-NEWS are referred to the postings depicting weekly prices, volumes and trends and the monthly review of prices, exports and related industry statistics.


 

Commodity Report

WEEKLY ECONOMY, ENERGY AND COMMODITY REPORT: MARCH 21st 2024.

 

OVERVIEW

 

Prices for corn and soybean meal were relatively unchanged compared to last week. Prices were influenced by short covering arising from geopolitical concerns and revised projections for crop sizes in Brazil. Secondary factors included disruption in shipping in the Red Sea and Panama Canal, carryover from the 2023 U.S. crop, export orders and predicted ending stocks of corn and soybeans for the 2024 crop. There was minimal response to the March WASDE that retained projections for production and ending stocks from the February report prior to release of planting intentions.

 

At 12H00 on March 21st the CME price for corn was down 0.7 percent compared to the previous week to 434 cents per bushel for May delivery. Corn price was influenced by higher ethanol demand and the proportionally high ending stock of corn from the 2023 crop. Export orders for the current market year have increased in response to lower prices. Volumes and prices are indirectly influenced by events in the Black and Red Seas. Orders by China resumed at the end of the 2022-2023 market-year and have extended through to March with a stable Dollar Index and low FOB prices but with higher ocean freight. Total exports for the current market year are 30.0 percent higher than for the corresponding week during the 2022-2023 year.

 

Soybeans traded at 1,206 cents per bushel for May 2024 delivery. Gain was attributed to short covering and projections for the 2024 Brazil and Argentine harvests. Total exports for the current market year are 18.3 percent lower than for the corresponding week in the 2022-2023 year.

 

Soybean meal traded at $343 per ton for May delivery compared to $335 per ton for March delivery last week. Price was influenced by demand coupled with high crush volumes for consecutive months from December onwards but with volume restored in February after the impact of cold weather in January. Price will fluctuate to reflect the CME price for soybeans and the demand for biodiesel despite the adverse financial situation in this sector. The market previously responded to the increased 2023 crop and higher stocks together with projections for 2024 unchanged from February in the March WASDE Report.

 

WTI was 2.2 percent higher from last week to $81.44 at 16H00 EDT on March 21st with static world demand in relation to supply. The rise in price reflects disruption of shipping in the Red Sea, turbulence in the Middle East but is countered by U.S. production of 13.3 million barrels per day in February with ample reserves. The upward trajectory in price may continue if production cuts by OPEC amounting to 2 million barrels per day and extended through June actually materialize. There was little inter-day fluctuation in price during the week ($79.30 to $82.16 range) with a uniform upward trend. Crude oil inventory in the U.S., other than the Strategic Reserve, was down 0.8 percent to 31.4 million barrels last week following the seasonal trend. The U.S. production is constraining domestic and international prices

 

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

  • Weather conditions in areas of the World growing corn and oilseeds especially in Brazil and also Argentine with favorable rain recently under the influence of a strong La Nina The 2023 U.S. harvest was completed ahead of the corresponding weeks in 2022 with higher carryover (downward pressure).
  • Geopolitical considerations continue to move markets, especially in the Mideast. Cancellation of the BSGI in July and ongoing attacks on Ukraine port facilities impacted prices of wheat, corn, oilseeds and vegetable oils. Loaded bulk vessels are sailing from Black Sea and Danube River ports using the ‘Humanitarian Corridor” to various destinations. This route is operational despite threats by the Russian Federation to mine the entrance to ports and deploy airborne missiles. Exports from Ukraine are approaching 1.5 million metric tons per week with a total of 26 million metric tons market year through February, down 11 percent from the equivalent period for 2022-2023 year. Grain production in Ukraine during the current year will be lower than 2022/2023 (Downward pressure on corn and wheat and an indirect effect on soybeans)
  • Macroeconomic U.S. factors:-
  • Most economists in academia and the private sector are confident of a “soft landing” for the economy following the release of revised Q4 2023 GDP and recent releases of economic parameters including the CPI and anticipated PPI and a decline in bond rates. Annual inflation as measured by CPI declined from 8.9 percent in June 2022 to 3.2 percent in February 2024. This is in part a response to a series of 11 FOMC rate raises that curbed inflation and cooled the labor market but without precipitating unemployment. There is evident stability in the bank sectors in both the U.S. and Europe. Large U.S. banks passed stringent mid-year “stress tests”. There is now concern over regional banks with exposure to commercial real estate.
  • The Federal Reserve held the benchmark interest rate steady at the monthly FOMC meeting on March 20th 2024, the fifth sequential pause. The Federal Reserve commentary indicated that the rate would be held at 5.25 percent until a pivot with possibly three reductions of 25 basis points each in 2024, after the June meeting at the earliest. Chairman Powell in Congressional testimony and documented in FOMC minutes has indicated that decisions would be based on data and demonstrable progress in reducing inflation to achieve an annual 2.0 percent target by mid-2025. Market optimism with projections of five reductions during 2024 was premature.
  • The February 28th Bureau of Economic Affairs announcement of the advanced estimate of Q4 GDP confirmed a value of 3.2 percent, slightly below the consensus estimate of 3.3 percent. The rise was attributed to increased consumer and government sector spending and investment in inventory.
  • The February 22nd 2024 S&P Manufacturing Purchasing Managers’ Index Report (PMI) rose to a 21-month high of 52.5 in February from 52.2 in January 2024. The PMI is 4.5 percent higher over 12 months. The recent upward trend suggests recovery after five pauses in increases in the Federal Reserve benchmark interest rate.
  • On February 29th the Bureau of Economic Analysis released the January Personal Consumption and Expenditure Price Index (excluding food and energy) that was up 0.1 percent from the previous month. This was in line with estimates. Food prices increased 0.5 percent but energy was down 1.4 percent. The Index was up 2.4 percent year-over-year also corresponding to estimates. Food prices were up 1.4 percent and energy down 4.9 percent year-over-year. The PCPI is closely followed by the Federal Reserve and confirms declining inflation.
  • The March 12th Bureau of Labor Statistics release of the February 2024 CPI confirmed a 0.4 percent increase from January, and 0.1 percent above forecast. The annual increase of 3.2 percent was up from 3.1 percent in January and higher than the anticipated value. The increase in the core value (excluding food and energy) was 0.4 percent from January and 3.8 percent for the 12-month period, in line with estimates. Food at home was unchanged from the previous month. Food away from home was up 0.1 percent from January. On an annual basis all food was up 2.2 percent with food at home up 1.0 percent and food away from home up 4.5 percent. Energy was up 2.3 percent in February and down 1.9 percent over 12-months, mainly due to a decline in gasoline (-3.4 percent) and fuel oils (-5.4 percent). The shelter category was up 0.4 percent for the month and 5.7 percent over the past year. The macro trend is clearly towards reduced inflation due to a fall in energy prices but this category is moving up, detracting from deflation. The CPI heavily influences FOMC rate decisions.
  • The February Producer Price Index for Final Demand (PPI) released on March 14th was up by 0.6 percent from January compared to an expectation of 0.3 percent. The PPI was up 1.6 percent over the past 12-months. This is compared to a 6.4 percent increase in 2022. The increase in February was due to a 4.4 percent rise in energy and 1.2 percent for finished goods. The core PPI value excluding volatile fuel and food, was up 0.4 percent for February and up 2.8 percent for the 12-month period. Food was up 1.0 percent compared to a 0.3 percent decrease in January.
  • Retail sales in February were up 0.6 percent over January compared to an estimate of 0.8 percent and compared to a decline of 1.1 percent for the revised January value compared to December 2023.
  • A Federal Reserve release on March 15th confirmed that industrial production rose 0.1 percent in February. Production was adversely affected by inclement weather during January with plant closures. Capacity utilization was unchanged at 78.3 percent, 1.3 percent below the 1972-2020 average.
  • The February 26th report on Durable Goods Ordered for January 2024 was unexpectedly lower by 6.1 percent against a consensus estimate of a 4.5 fall. Transportation and specifically aircraft orders were down 16.2 percent. Excluding the Transportation component, new orders decreased by 0.3 percent in January impacted by inclement weather. Shipments of durable goods decreased 0.9 percent following a fall of 0.6 percent in December 2023.
  • The March14th release of retail sales data showed a monthly rise of 0.6 percent in February. This value is compared to the revised 0.4 percent rise in December 2023. Retail sales in January were affected by harsh winter storms and a change in the basis of calculation. The Federal Reserve FOMC closely monitors this index as a measure of the trend in inflation.
  • The March 1st ISM® Manufacturing Index for February attained 47.8 down from 49,1 in January.
  • The Conference Board Consumer Confidence Index released on February 27th for January/February, declined to 106.7 points. This reading was down from a revised 110.9 for the preceding four-week period.
  • The March 1st University of Michigan Index of Consumer Sentiment fell to 76.9 for February down from a revised 79.0 in January. The Index was up 14.9 percent from February 2023. Both the Current Economic Index (79.4 slightly down from 81.9 in January) and the Index of Consumer Expectations (75.2 down from 77.1 in January) denote a cautious increase in consumer sentiment influenced by lower interest rates and moderating inflation despite geopolitical concerns.
  • Non-farm payrolls added by 275,000 for February, as documented by the Bureau of Labor Statistics on March 9th. This was more than the anticipated 200,000, and compares to the revised January value. The increase is attributed to workers in the business, health care and government sectors. The unemployment rate rose to 3.9 percent with 15 million unemployed. Real average weekly earnings for January showed a 0.1 percent increase over January. Average hourly earnings rose 0.1 percent to $34.57 in February up 4.3 percent over 12 months. Wage rates are closely followed by the Federal Reserve.
  • The Bureau of Labor Statistics Job Openings and Labor Survey report released on March 6th estimated 8.9 million job openings at the end of January, down 100,000 (-0.1 percent) from December 2023 and consistent with estimates. The January job openings number was the lowest value in 33 months and compares with the March 2022 value of 12.2 million during COVID.
  • The seasonally adjusted initial jobless claims figure of 210,000 released on March 21st was down 2,000 from the revised seasonally adjusted 212,000 for the week ending March 14th but lower than the Reuter’s estimate of 215,000. The four-week moving average rose 2,500 to 211,250 The Bureau of Labor Statistics estimated 1.807 million continuing claims for the week ending March 8. There is evidence from data over the past three months that the labor market is cooling despite sporadic weekly reduction in new claims.
  • The February 1st Bureau of Labor Statistics report recorded a 3.2 percent increase in non-Farm Productivity for Q4; Unit Labor Cost was up by 0.4 percent on a normalized basis and Hours Worked was up by 0.4 percent in Q4
  • The ADP® reported on March 6th that private payrolls increased by 140,000 in February, up 29,000 from the revised 111,000 in January and compared to the Reuters estimate of 150,000 jobs. The increase in employment was mostly in the construction, transport and trade sectors. Annual pay was up 5.1 percent year-over-year compared to 5.3 recorded for January. The increase will not directly influence the probability of short-term future changes in interest rate since the ADP® is regarded by the FOMC as an unreliable statistic

 

FACTORS INFLUENCING COMMODITY PRICES

  • The 2023 harvests of corn and soybeans were completed by late November 2023. The March 8th WASDE provided a projection for acreage to be planted, yields, crop size and ending stocks for the 2024 crop.
  • It is evident that both polarization in the closely divided chambers of Congress and intra-party conflict between and among both sides of the aisle in the House will delay adoption of appropriations bills. Passage of the 2023 Farm Bill will be contentious and is subject to a 12-month extension as a stop-gap measure. Progress on the 2023 Farm Bill has been impeded by contention over SNAP eligibility and other entitlements that collectively represent 75 percent of total expenditure. The August 2nd downgrade of U.S. debt from AAA to AA+ by Fitch Ratings recognizes Congressional dysfunction. On November 10th 2023 Moody’s downgraded U.S. credibility from ‘stable’ to ‘negative’ based on an inability to pass required fiscal legislation. After four Continuing Resolutions the House and Senate passed six appropriations bills including the FDA and USDA, avoiding a March 8th partial shutdown of the Federal Government. Agreements have yet to be concluded on the remaining appropriations bills before March 22nd
  • The delayed 2023 Farm Bill is mired in conflict in both the House and Senate. There is no consensus on major issues comprising the magnitude of SNAP payments and eligibility and requested price supports for crops. The Chair of the Senate Agriculture Committee Sen. Debbie Stabenow (D-MI) is standing firm on maintaining both SNAP-WIC benefits and climate remediation funding even if the Farm Bill is delayed through to the 119th Congress
  • The March 8th WASDE #646 Projected both corn and soybean production parameters with a potential record corn harvest for the 2024 crop. There will be ample world availability of ingredients although inequitable distribution will result in shortages in some nations. Soybean exports will comprise 39 percent of the 2024 U.S. crop with a 12.5 percent increase in ending stock.
  • There is a projection by CONAB (the Soy production association in Brazil) that at the midpoint of the harvest the 2024 soybean crop in Brazil will attain 147 million metric tons (5,401 million bushels) down from a previous estimate of 155 million metric tons (5,695 million bushels). Exports of 100 million metric tons (3,674 million bushels) are anticipated and Brazil will crush 56 million metric tons (2,057 million bushels). The harvest will be 7 million metric tons (269 million bushels) lower than the 2023 record crop. Brazil exported 7.0 million metric tons (257 million bushels) of soybeans to China over the first two months of 2024, double the quantity shipped to China over the corresponding two months in 2023.
  • Corn production in Brazil for the 2023-2024 market year will attain 124 million metric tons (4,801 million bushels) from all three sequential harvests. But down seven percent from the previous year. Brazil is projected to export of 54 million metric tons (2,125 million bushels). Argentine will produce 56 million metric tons of corn (2,204 million bushels) up 56 percent from the previous year impacted by drought. (Lower prices in the future subject to favorable reports on crop progress and actual harvests)
  • The Dollar Index (DXY) was 103.4 on March 20th, up 0.1 point from last week but under a three-month high. Fluctuation is attributed to uncertainty over future interest rates. There is concern over a delay in the anticipated pivot by the Federal Reserve FOCM expected in June. The DXY has ranged from 99.0 to 107.0 over the past 52 weeks. The dollar index influences timing and volume of export orders and indirectly the price of WTI crude.

 

Transmission of HPAI to Goats

In a March 18th report to the World Organization of Animal Health, the USDA confirmed H5N1 HPAI in a herd of goats diagnosed in late February. Five of ten neonatal affected animals died out of 165 in the herd. Goats and poultry were in biological contact and shared a common water source.

 

The implicated multi-species farm in Stevens County, in western Minnesota recorded a February 27th outbreak of H5N1 among diverse poultry species including 23 chickens, with the infection presumed to have been introduced by wild bird reservoirs.

 

It is a matter of record that numerous mammalian species are susceptible to H5N1 including marine mammals and farmed mink where evident animal-to-animal contact was responsible for transmission of infection.  In addition, terrestrial mammals, mostly scavenging carnivores, have been infected in the Americas and Europe possibly due to consuming dead birds.

 

It will be important for the USDA National Veterinary Services Laboratory to determine the type of mutations that have occurred in isolates from the farm that increased susceptibility of goats and possibly other mammals to H5N1. The antibody status of the herd should also be investigated given the low attack rate but a high case fatality rate.

 

This incident emphasizes the need for all people coming into contact with live poultry to receive the current multivalent seasonal influenza vaccine to prevent a possible recombinant event between avian and human viruses that could result in a zoonotic strain of avian influenza.


 

ADM Posts Q4 and FY 2023 Financial Results

In a March 12th release, Archer-Daniels-Midland Corp. (ADM) posted financial results for the 4th quarter and FY 2023. The Company can be regarded as a bellwether for ‘Mega-Ag’ and the commodities trading and processing sector. Along with competitors Bunge, Cargill, Cofco and Dreyfus, all are subject to the risks of currency fluctuation, geopolitical events, climatic extremes, and increased cost of ingredients, labor and transport in a competitive world environment influenced by inflation, conflict and disparity in the quality of life between industrialized and developing nations.

 

For the 4th Quarter of FY 2023 ending December 31st, net income was $565 million on total revenue of $22,978 million. Comparable figures for the 4th quarter of fiscal 2022 ending December 31st 2022 were net income of $1,019 million on total revenue of $25,939 million. Diluted EPS fell from $1.84 for the 4th quarter of fiscal 2022 to $1.06 for the most recent quarter.

 

Comparing the 4th quarters Revenue was down 11.4 percent in FY 2023. Gross margin was up from 6.8 percent in Q4 2022 to 7.6 percent for Q4 2023 and operating margin up from 3.3 percent to 3.6 percent.

 

For the FY 2023 net income was $3,483 million on total revenue of $93,935 million with a diluted EPS of $6.43. Comparable figures for the 4th quarter of fiscal 2022 were net income of $4,340 million on total revenue of $101,556 million with a diluted EPS of $7.74.

 

Segment operating profits combined totaled $1,399 million with respective contributions:-

 

  • Ag Services and oilseeds           $954 million. (Crushing, $389m; Ag. Services, $214m)
  • Carbohydrate solutions              $309 million.
  • Nutrition                                    $ (10) million. (Human, $(25m); Animal, $15m)
  • Other businesses                        $146 million

 

Juan Luciano Board Chair and CEO commented, “ADM’s results speak to the resiliency of our business. Supported by our unparalleled global footprint and capabilities, we delivered another solid year of execution. Our team continues to focus on delivering high-quality products and services for our customers and is driving our productivity and innovation agenda, while generating strong cash flows that allow us to accelerate the return of cash to our shareholders.”

 

The Company release included a comment on the Nutrition Segment: “Operating profit was negative $10 million during the fourth quarter of 2023, down 110 percent compared to the prior year period. The Human Nutrition segment operating profit was negative $25 million, approximately $112 million lower versus the prior year period, as operational challenges led to lower volumes and increased manufacturing costs. The quarter also included negative impacts of $64 million related to deconsolidation and write-down of a joint venture, and an investment valuation loss. Unplanned downtime at Decatur East was also a negative impact. Animal Nutrition operating profit of $15 million was 17 percent lower versus the prior year, driven largely by lower amino acid margins and lower sub-segment volumes overall”.

 

“For the full year, Nutrition segment operating profit was $427 million, 36 percent lower versus the prior year. Human Nutrition results of $417 million were 25 percent lower than the prior year, as higher pricing was more than offset by weaker volumes and increased costs. The full year also included negative impacts of $64 million related to deconsolidation and write-down of a joint venture, and an investment valuation loss. Unplanned downtime at Decatur East was also a negative impact. Animal Nutrition results of $10 million were 91 percent lower compared to the prior year primarily driven by the normalization of amino acid margins and lower volumes”.

 

Guidance for FY 2024 included an adjusted EPS of $5.25 to $6.25

 

ADM, has apparently “identified and corrected” recording of sales between the Ag. Services and Oil Seeds Segment and the Nutrition Segment.  The adjustments will have no ultimate effect on the balance sheet and statements of earnings reflecting the period January 2018 through September 2023.

 

ADM noted “material weakness” in internal controls over financial reporting and accounting practices relating to intersegment sales.

 

Juan Luciano, Chairman and CEO, stated, “We have developed a remediation plan with respect to the identified material weaknesses to enhance reliability of our financial statements with respect to the pricing and reporting of sales.”  He added, “We remain committed to strong internal controls and we look to continue our focus on execution.”

 

ADM experienced a 24 percent drop in share price from $68.02 following the Friday January 19th disclosure that Vikram Luthar, the CFO, had been placed under administrative leave.

 

On December 31st 2023, ADM posted assets of $36,075 million of which $6,341 million comprised goodwill and intangibles, against long-term debt of $8,260 million. The Company had an intraday market capitalization of $30,800 million on March 19th. ADM trades with a forward P/E of 11.3 and has ranged over a 52-week period from $50.72 to $87.30 with a 50-day moving average of $57.32.  Twelve-month trailing operating margin was 3.3 percent and profit margin 3.7 percent.  Return on assets over the past twelve months was 4.3 percent and the return on equity 14.1 percent.


 

Dollar General Posts Q4 and FY 2023 Results

n a March 14th release, Dollar General, Inc. (DG) announced Q4 and FY 2023 results for the period ending February 2nd. The Company beat on both the top line and on earnings compared to concensus estimates.

 

For Q4 Dollar General Inc. posted net income of $402 million on total revenue of $9,858 million with a diluted EPS of $1.85.  Comparable values for Q4  FY 2022 ending February 3rd were net income of $659 million on revenue of $10,203 million with a diluted EPS $2.96.

 

Revenue was down 3.4 percent in Q4 2023 compared to Q4 2022. During the most recent quarter, Dollar General attained a gross margin of 29.4 percent (30.9  percent in Q4 2022) and an operating margin of 5.9 percent, down from 9.1 percent in Q4 2022.

 

For FY 2023 Dollar General Inc. posted net income of $1,661 million on total revenue of $38,692 million with a diluted EPS of $7.55.  Comparable values for FY 2022  were net income of $2,416 million on revenue of $37,845 million with a diluted EPS $10.68.

 

The classification of revenue by category in FY 2023 comprised:-

  • Consumables  including food,   81.0%
  • Seasonal items,                          10.6%
  • Home requirements,                    5.6%
  • Apparel,                                       2.8%

 

For Q4 2023, consolidated comparable store sales, increased by 0.7 percent despite lower average transaction values partly offset by increased traffic.

 

In commenting on results, Todd Vasos, the recently re-instated CEO stated, “We were pleased to deliver fourth quarter top and bottom-line results at the upper end of our internal expectations. ”He added, “With customer traffic growth and market share gains during the quarter, we believe our actions are resonating with customers as they turn to Dollar General for our unique combination of value and convenience.” He concluded, “We have made solid progress executing on our Back to Basics strategy, which we believe supported our improved operational performance during the quarter. While we are pleased with the operational improvement we have seen, we believe that significant opportunity remains, as we continue to focus on enhancing the way we support our teams and serve our customers.”

 

Guidance for FY 2023 included net sales growth of 6.0 to 7.0 percent; same-store sales growth of 2.0 to 2.7 percent; and diluted EPS ranging from $6.80 to $7.35.

 

During FY 2023 Dollar General opened a net 882 new stores, remodled 2,007 and relocated 129 units. As of February 2nd the Company operated a total of 19,986 stores representing 151,095 square feet, a 5.7 percent growth over the year.

 

Effective February 2nd 2024, Dollar General posted total assets of $30,706 million including $5,539 as goodwill and intangibles. The Company carried long-term debt and lease obligations of $16,118 million.  DG had a market capitalization of $33,810 million on March 20th 2024. The share has traded over the past 52 weeks from $101.09 to $222,99 with a 50-day moving average of $151,095. DG closed at $148.24 on March 14th, pre-release, closing at $155.76 on March 15th Dollar General trades with a forward P/E of 21.5.  For the trailing 12-months the company posted an operating margin of 5.9 percent and a profit margin of 4.3 percent, returning 5.1 percent on assets and 27.0 percent on equity.


 

Dollar Tree Posts Q4 and FY 2023 Results

In a March 13th release, Dollar Tree, Inc. (DLTR) announced Q4 and FY 2023 results for the period ending February 3rd 2024.  The holding company operates Dollar Tree and Family Dollar banners. Dollar Tree Inc. posted a net loss of $(1,710) million on total revenue of $8,640 million with a negative diluted EPS of $(7.85).  During Q4 the Company recorded a $950 million impairment of goodwill and a $594 million charge for stores following a review of the portfolio.  Comparable values for Q4 FY 2022 ending January 28th were net income of $452 million on revenue of $7,740 million with a diluted EPS of $2.04.

 

Comparing the respectivequarters, revenue was up 11.9 percent in Q4 2023. During the most recent quarter, Dollar Tree attained a gross margin of 32.2 percent (31.0 percent in Q4 FY 2022) and an operating margin of negative 21.9 percent, compared to 8.0 percent in Q4 2022.

 

 

For FY 2023 Dollar Tree Inc. posted a net loss of $(998) million on total revenue of $30,582 million with a negative diluted EPS of $(4.55). Comparable values for FY 2022 were net income of $721 million on revenue of $28,318 million with a diluted EPS of $7.21.

 

For Q4, consolidated comparable store sales, increased by 3.0 percent, with Dollar Tree achieving 6.3 percent and Family Dollar, 1.2 percent decline.

 

In commenting on results, Rick Dreiling, Chairman and CEO stated, “We finished the year strong, with fourth quarter results reflecting positive traffic trends, market share gains, and adjusted margin improvement across both segments,” Jeff Davis, CFO added, “As an organization, we continue to execute at a high level. Our core operating performance was strong in the fourth quarter, despite some unanticipated developments related to general liability claims.”

 

Guidance for FY 2024 included consolidated sales of $31,000 million to $32,000 million; a mid-single-digit percent increase in comparable store sales and an EPS ranging from $6.70 to $7.30.

 

Effective February 3rd 2024, Dollar Tree posted total assets of $22,023 million including $3,063 as goodwill and intangibles and carried long-term debt and lease obligations of $8,874 million.  DLTR had a market capitalization of $2,793 million on March 20th. The share has traded over the past 52 weeks from $102.77 to $161.10 with a 50-day moving average of $138.91. DLTR closed at $149.88 on March 12th, pre-release, closing March 13th at $127.10, down 15.2 percent. Dollar Tree trades with a forward P/E of 19.0.  For the trailing-12 months the company posted an operating margin of negative 9.9 percent and a profit margin of negative 3.3 percent.  The company returned negative 0.5 percent on assets and negative 12.4 percent on equity over the past twelve months.

 

Effective February 3rd the company operated 16,622 stores (Dollar Tree, 8,272; Family Dollar 8,350). During Q4 the company continued renovations and added a a net 147 stores. The Company intends to close 600 stores in FY 2024. Responding to complaints from civic organizations Dollar Tree added frozen and fresh foods to additional stores during the previous quarter in areas deemed “food deserts”  

 

In the investors’ call the company commented on theft as a headwind and announced preventive measures.


 

Florida Passes Legislation Restricting Heat Protection Measures

Florida has enacted House Bill 433 that prevents counties or local regulatory agencies from imposing protective measures for outdoor agricultural workers.  With increasingly higher temperatures workers are susceptible to heat prostration that can be prevented by available water, shade and rest breaks.

 

The law expresses a cynical indifference to the safety and welfare of workers and will ultimately be to the determent of productivity and the availability of H-2B workers who are in any event subject to exploitation.

 

The onus for protection of workers rests with the Department of Labor, Occupational Safety and Health Administration (OSHA).  In 2021 the Administration ordered the Agency to develop workplace standards that have yet to be published.

 

A State Representative opposed to the bill noted, “We have generations of folks who are experiencing heat stress because they are outside and also suffer kidney damage because there are no bathroom breaks.  Preempting safety requirements in a state as hot as Florida does not make sense.”

 

The action by the Florida Legislature was initiated by lobbying from industry groups concerned over local ordinances mandating protective measures. In 2023, Texas enacted a similar law preempting city and county governments from passing workplace safety mandates. Texas HB-2127 is now in effect but has been ruled unconstitutional.

 

 Irrespective of any mandated legal protection afforded agricultural field and plant workers, it is hoped that a sense of decency and compassion will encourage employers to implement measures against heat stress and fatigue.

 


 

Aldi to Continue Expansion

In a recent announcement, Aldi will expand by 800 stores nationwide by the end of 2028.  This projection includes the acquisition of Winn-Dixie and Harvey’s supermarkets some of which will be converted to the Aldi banner.

 

Jason Hart, CEO of Aldi stated, “With this commitment to add 800 stores in the next five years means we’ll be where our shoppers need us while positively impacting the communities we serve.”  He added, “Our growth is fueled by our customers, and they are asking for more Aldi stores in their neighborhoods nationwide.”

 

 Approximately 300 stores will be added in the Northeast and Midwest and the Company will also expand in Southern California, Arizonia and Nevada.

 

The program will involve an investment of $9 billion representing an expression of confidence in the U.S. grocery market despite competition from larger retailers including Walmart, Kroger and Amazon.  Aldi has established a significant niche market through low-cost private label brands of superior and consistent quality engendering customer loyalty, despite the limited range and occasional non-availability.

 


 

Transition to La Nina Anticipated

The U.S. National Ocean and Atmospheric Administration (NOAA) is predicting a transition from an El Nino to a La Nina event by mid-2024.  The effect of this change will be drier and hotter weather in the Midwest affected crop yields.  The situation will become more clear in coming weeks and may be reflected in yield estimates in the May WASDE.

 

A description of the Southern Oscillation events may be retrieved by entering El Nino into  SEARCH


 

Litigation over Kroger Albertson’s Merger Scheduled

A hearing on the Federal Trade Commission (FTC) Injunction to block the planned merger between The Kroger Company and Albertson’s Corporation will commence on August 26, 2024.  The FTC will be joined in the action by the Attorneys General of eight states.


The hearing will take place before an Administrative Law Judge in Washington, DC.  There will be numerous lawsuits relating to the proposed merger including a private anti-trust lawsuit filed on behalf of consumers.  This case may be delayed until after the results of the FTC case.

 

It is possible that delays may scuttle the merger, although both parties would benefit through maintaining their commitment to a satisfactory conclusion even if this requires an extension into the next Administration.


 

McDonald’s Experiences International Computer Outage

On Friday March 15th McDonald’s Corp. operations experienced a widespread loss of function affecting their mobile app., kiosks and digital menus. Systems failures were experienced in  Europe, Australia and Asian nations including the major markets of Japan, Taiwan and China that were impacted. The problem was self-inflicted, attributed to a “third party provider introducing a change in configuration” and was nor the result of a cyber-attack.

 

McDonald’s reported the outage in a release to the SEC. Previously the Company stated “We are increasingly reliant upon technology systems. Any failure or interruption of these systems could significantly impact our or our franchisees’ operations, or our customers’ experiences and perceptions.” In the precautionary statement the Company advised, "The artificial intelligence tools we are incorporating into certain aspects of our restaurant operations may not generate the intended efficiencies and may impact our business results."

 

 

In December 2023 McDonald’s Corp. entered into an agreement with Google to host computer systems involving global data storage and retrieval allowing the deployment of a generative AI system to promote service and facilitate market research.

 

Obviously, an investigation is in process and hopefully will yield results that will be applied to avert similar occurrences both for corporate McDonald’s and its franchisees.


 

Hardee’s Franchisee in NC. Invests in Upgrades

Boddie-Noell, a family-owned franchisee of Hardee’s has announced an investment of over $20 million in new restaurants and upgrades for their 72 restaurants in the North Carolina, Greater Triangle region.

 

Concurrently, the company will be offering the Hardee’s new menu selections featuring chicken tenders.

 

 

Mike Boddie, president of the Company noted, “this is our home market, and it includes the most restaurants of any region where we operate.  We are showing our commitment by introducing the new Hand-Breaded Chicken Tenders™ Platters and fries.  Over a 62-year association with Hardee’s, Boddie-Noell has innovated Made from Scratch ™ Breakfast Biscuits, Fresh Fried Chicken and Hand-Breaded Chicken Tenders.

 


 

Argentine Increases Production of Oil Seeds

According to USDA-FAS GAIN report AR2024-03 released March 14th, Argentine will almost double production of oil seeds during the 2023-2024 market year compared to the previous year impacted by drought.

 

The revised projection is for a soybean crop of 49.5 million metric tons (1,819 million bushels) up to 141 percent from the previous market year.  Soybean crush will increase by 47 percent to 39.0 million metric tons representing 67 percent of available supply amounting to 57.91 million metric tons including the 2024 harvest and imports.

 

A bountiful harvest coupled with an improvement in the economy under the new Administration will benefit both domestic producers and through increased supply will indirectly constrain prices for soybean meal in the U.S.


 

California Considering Expanding Ban on Food Additives

Jesse Gabriel, the State Assembly member representing Encino, has introduced Bill 2316 that would ban titanium dioxide and six dyes from food served to school children in California.

 

The bill is co-sponsored by the Environmental Working Group and Consumer Reports.  FDA has previously reviewed the six dyes having previously reaffirmed their use during the 1980s.

 

The Environmental Working Group maintains that the dyes are toxic without presenting specific scientific justification.

 

If California extends the previous ban on Red Dye to other coloring agents problems would be created for food manufacturers and candy and confectionary will become very drab in appearance.

 


 

New York State Price Gouging Suit

Following the supply disruptions caused by COVID, the price of food products soared across the U.S. responding to the universal law of supply and demand. During the post-Covid period, New York Attorney GeneOral, Letitia James initiated lawsuits against both egg and meat producers alleging price gouging.

 

 

Tyson Foods as a major supplier of beef, pork and chicken received a subpoena demanding records of products sold, extending from December 2019 through April 2022, including prices and production costs.

 

After providing preliminary information, Tyson has yet to comply in full, maintaining that the applicable New York State law does not apply to product introduced into the state in interstate commerce.



 

Dollar General Cutting Back on Self-Checkout

Dollar General (DG) will immediately remove self-checkout stations in 300 of its stores that have recorded a high level of shoplifting and “shrinkage”. In 9,000 other stores self-checkout will be phased to conventional cashier-operated lines. In the interim use of self-checkout will be restricted to five items.

 

Self-checkout was introduced to reduce even further the staffing level of stores that are operated at a bare minimum to conserve cost.

 

 

Tom Vasos, CEO of Dollar General noted in an investor call that the company used AI (artificial intelligence) to analyze purchases and determine that a critical number of stores were mostly affected by either deliberate theft, by inadvertent failure to scan items or errors in scanning.  Perhaps just NI (natural intelligence) should have been applied to predict that installing self-checkout to reduce store personnel would not necessarily benefit the bottom line.  Perhaps that is why Tom Vasos was brought back from retirement as CEO to restructure and rejuvenate the company.


 

Farmers in Poland Protest E.U. Environmental Regulations

Following protests in the Netherlands and France, farmers in Poland have blocked border crossings with Germany to publicize their concern over E.U. policy on the environment.  In addition to blocking border crossings, Polish farmers staged mass demonstrations in major cities including provincial capitals.  At issue is the E.U. Green Deal that will place restrictions on disposal of waste and mandate land usage.

 

A secondary consideration is the concessions extended to Ukraine following the invasion of that nation by the Russian Federation.  Grains from Ukraine shipped by train and road have impacted the prices of commodities produced in neighboring countries and especially Poland and Romania, representing unfair competition.

 

It is understood that the European Commission is offering some concessions relating to farming practices but this will not satisfy producers who are intent on continuing their traditional ways irrespective of the possible detrimental effects on the environment.


 

Chris Kempczinski Appointed Chairman of McDonald’s Board

Following the retirement of Board Chairman Enrique Hernandez after a 28-year tenure as a Board member, Chris Kempczinski will assume the position of Chairman in addition to his major responsibility as CEO.

 

Kempczinski will implement a program of expansion leading to 10,000 new restaurants globally over the next three years.  It is intended to increase sales through a loyalty program and to raise the number of customers to 250 million.

 

Expectations of increased sales are currently dampened by events in the Middle East and in the U.S. by competition and frugality shown by customers with smaller purchases per visit.



 

Formaldehyde Under Review by EPA

A draft risk evaluation for formaldehyde has been published by the Environmental Protection Agency in accordance with the Toxic Substances Control Act. The document maintains that formaldehyde “poses an unreasonable risk to human health”. Formaldehyde is used in construction materials representing the reality of low-level continuous home contact.

 

In the poultry industry, formaldehyde is used as a fumigant in hatcheries to suppress bacterial and fungal contamination and as a surface disinfectant.  Formalin-containing feed additives are extremely effective at suppressing Salmonella and other susceptible bacterial pathogens in feed.  Accordingly, the American Feed Industry Association has expressed concern over bans and will oppose anticipated regulation by the EPA.

 

The Agency will accept comments on the Draft Risk Assessment that will be reviewed by the Science Advisory Committee on Chemicals that will also review comments at a virtual public meeting in late May.

 

It is inevitable that restrictions will be placed on the use of formalin but it is hoped that industry concerns will be heeded and that a blanket ban will not be imposed.  Formalin can be used safely both as a fumigant and as a spray application providing appropriate precautions are taken to reduce human contact either through inhalation or direct skin contact.


 

Trader Joe’s Product Recall – Again?

Trader Joe’s is recalling their house brand cashew nuts based on potential contamination with Salmonella.  Routine testing by the FDA showed the presence of the pathogen packed by Wenders LLC. of Dublin, CA.  The cashew nuts were imported from India and Vietnam and contamination was detected on routine import surveillance by the FDA.

 

This is yet another in a series of recalls associated with bacterial or foreign matter contamination.  This suggests that Trader Joe’s is exercising inadequate oversight of quality control among its suppliers. This will ultimately be to the detriment of the image of the company and its goodwill and may even result in tort litigation in the event of injury.


 

China Reports H9N2 Avian Influenza

In a March 19th posting on ProMED, the Center for Health Protection for Hong Kong reported on three cases of H9N2 avian influenza diagnosed on the Mainland.  The patients were all children ranging in age from 3 to 11 years residing in Guangdong and Guangxi Provinces.

 

Most H9N2 cases involve contact with live poultry either on small farms or at wet markets.

 

Cases of H9N2 or other zoonotic strains of avian influenza usually result in temporary closure of wet markets if demonstrated to be the source of infection. Local social and economic pressures result in re-opening within a short duration of time restoring exposure to of infection. It is probable that mild cases of zoonotic avian influenza are not diagnosed especially in rural areas. Authorities in China are reticent to release information on disease and it is considered interesting that the report was released by the Autonomous Region of Hong Kong and not by either the Central or Provincial health agencies.


 

Commentary


The Need for Surveillance of Free-living Birds for HPAI

A recent news item presented the views of Dr. Kyle Van Why, a wildlife biologist with USDA-APHIS Wildlife Services.  Dr. Van Why noted that his Agency is sampling dabbling ducks including mallards, teals and wood ducks that are known to be infected with various strains of avian influenza virus and specifically, the 2022-2024 H5N1 epornitic strain.

 

Dr. Van Why correctly noted that the mild winter encouraged ducks to congregate in mid-migration until the severe storm of mid-January that resulted in southward migration.  He stated, “We just didn’t have a full push until we had that one winter storm in January and then we had a big push of birds down and then they were gone.” 

 

Perhaps by concentrating on dabbling ducks, the USDA-APHIS is missing other non-clinically affected carrier species of HPAI.  If dabbling ducks are in their winter habitat along the Gulf, why did outbreaks occur in backyard flocks in diverse states including Massachusetts, Ohio, Texas and Minnesota during the week ending March 11th in addition to a case affecting commercial turkeys in South Dakota?  Logic would suggest that domestic resident free-living birds have become infected along with carnivorous scavenging mammals that may transmit the virus for, as yet, undetermined periods.  Backyard poultry housed with minimal biosecurity have little involvement with the infection of commercial flocks but serve as sentinels.

 

It would be of value for APHIS to sample a range of wild birds in the vicinity of confirmed outbreaks of HPAI both in backyard and commercial flocks.  It would also be of value to determine the duration and quantum of viral shedding in individual species.  There is considerable literature on the recovery of avian influenza viruses from orders other than Anseriformes and susceptibility of migratory and resident domestic bird species has been demonstrated by both surveys and through widespread mortality.

 

An additional aspect of research is assessing the persistence of avian influenza virus in water and soil although this has been investigated for strains of LPAI1.  Even more important will be to determine the distance over which avian influenza virus can be spread by the aerogenous route under a range of weather conditions.  There is adequate circumstantial and anecdotal evidence to suggest that the virus can be introduced into power- ventilated layer houses. Multitier units holding 200,000 hens may have a maximum exhaust displacement of 1.2 million ft3 per minute and even 400,000 ft3 per minute as a minimum rate during cold conditions.

 

If avian influenza is carried by a wide range of free-living bird species that are resident in the vicinity of poultry farms, the previous model of seasonal dissemination by migratory waterfowl is outdated2.  To concentrate on sampling hunter-killed dabbling ducks based on ease of attainment will provide prevalence rates in the species sampled but it will not advance our knowledge of the epidemiology of avian influenza and specifically H5N1.

 

It is questioned whether the administrators at APHIS are allocating sufficient resources to their field biologists and veterinarians to obtain an understanding of the changing epidemiology of avian influenza?  Are field projects and investigations constrained by past actions or prevailing policies?  Are we going to look back on the ongoing epornitic since 2022 in successive years and ask why we lacked imagination and flexibility in our approach to field evaluation that deprived us of an understand of the role of non-Anseriform avian reservoirs and disseminators of the disease?

 

1. Stallknecht, D. E., et al., Persistence of Avian Influenza Viruses in Water, Avian Diseases, 34:406-411 (1990)

2. Stallknecht, D. E. and Shane, S.M., Host Range of Avian Influenza Virus in Free-Living Birds, Veterinary Research Communications, 12:125-141 (1988)


 

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