The Pew Charitable Trust recently issued a report on U.S. consumer attitudes towards GMOs.  Their survey released in mid-November suggests that the proportion of those surveyed considering GMOs “bad for their health” has risen from 39 percent in 2016 to 49 percent in 2018.  The Pew report also identified “meat produced with hormones” and “foods grown with pesticides” and “food containing artificial ingredients” as a substantial risk to human health.  The survey apparently disclosed that 78 percent of those who cared a great deal about GMO foods also considered food additives posing a serious health risk.

It is considered significant that the survey revealed that the higher the level of scientific knowledge and education among respondents, the less the concern over GMOs.

Social scientists consider that the results obtained by Pew were “over-stated”.  The results obtained were essentially attributed to how the questions were asked.  Studies conducted by the University of Idaho not including the phrase “genetic engineering” in questions found only a small percentage of respondents concerned over GMOs.  A study conducted by Rutgers University revealed a seven percent response favoring mandatory labeling of GM foods when asked specifically what information consumers required.  When the question was rephrased to determine whether GM content should be included on labels, 59 percent of the same survey group considered identification of GM ingredients important.

Based on previous Pew studies involving welfare and food with specific reference to GM technology, it would appear that Pew is constructing surveys to confirm predetermined prejudices and can no longer be regarded as an independent authority devoid of bias.

The following quotations for the months as indicated were posted by the CME at 15H00 on December 7th together with values for the reference months in parentheses confirming an upward move slightly exceeding two percent in both soybean and corn prices for December compared to the previous week but with no change in the price of soybean meal. The rise is attributed to speculation that China might resume imports of U.S. commodities free of punitive tariffs.

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

COMMODITY CHANGE FROM PAST WEEK

Corn:              Dec. quotation up 8 cents per Bu.      (+2.2percent)

Soybeans:       Jan. '19 quotation up 23 cent per Bu. (+2.6percent)

Soybean Meal: Dec. quotation unchanged                 ( -- )

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

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

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

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

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

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

There is now some optimism concerning the outcome of the dinner meeting at the G-20 Summit between the delegations from the U.S. and China led by their respective Presidents. The U.S. has agreed to a three-month delay in raising tariffs from ten percent to twenty-five percent on over $200 billion in annual imports from China. In return China has agreed to purchase an unspecified quantity of agricultural commodities, energy and heavy equipment from the U.S. to offset the negative balance of payments. Negotiations will resume to resolve the major structural issues impacting trade and the concerns raised by the U.S. concerning coercive practices, cyber-espionage and theft of intellectual property.

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

See the WASDE posting summarizing the November 8th USDA-WASDE Report #583 under the STATISTICS tab documenting price projections and quantities of commodities to be produced, used and exported from the 2018 harvest

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

Unless shipments of corn and soybeans to China resume the financial future for row-crop farmers appears bleak despite the promise of $12 billion as "short-term" compensation. Recent comments from the USDA suggest that this value may be trimmed. Farmers will not be placated by the promise of a year-round E-15 blend since the logistic problems of delivery to consumers and legal challenges will delay any positive price benefit. Oversupply of ethanol with the current 10 percent dilution mandate is evident from the spot price of $1.22 per gallon ($1.26 last week) compared with a 2018 peak in late March of $1.60. Exports have been constrained by the retaliatory tariffs imposed by China on U.S. ethanol. Some refiners are reducing production and mothballing fermentation plants.

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

Now that the rhetoric following the dinner between the Presidents of China and the U.S. and their respective entourages has been parsed and debated, there is a question as to what was actually agreed to given the absence of a communique.  The take-home message is that the U.S. has made a concession by delaying for a three-month period, the announced escalation of the current 10 percent tariff on approximately $200 billion in exports from China to U.S.  China has in turn agreed to import “substantial” (but unspecified) quantities of agricultural and industrial products to reverse the negative balance of trade.

The major issues of misappropriation of intellectual property, coercive pressure on U.S. businesses entering the market in China and state support for steel and other industries were not addressed.  It was accepted that these structural and fundamental issues will be the subject of negotiation over the subsequent three months.  There was even a question as to the starting time.  Does the clock start ticking on December 1st 2018, January 1st 2019 or after clearing away the dinner plates?

Prior to the meeting, Larry Kudlow the Director of the National Economic Council expressed pessimism over the bilateral talks although he was receptive to some deal to “turn a new page, a breakthrough”.  Kudlow is joined in moderation by the Secretary of the Treasury, Steven Mnuchin, who has independently initiated discussions with counterparts in Beijing.

The task ahead will be to normalize trade relations between the two largest world economies. This will be fraught with overlays of history, recalcitrance by China and an aggressive approach by the U.S., conflicting with the Asian concepts of slow and deliberate progress and the need to maintain “face”. 

It is evident that both sides have motivation to defuse the trade conflict. China must maintain a high growth rate and generate jobs. To remain in power after 2020 the U.S. Administration must increase prosperity through the next two years despite predictions of a recession. Inherent caution on the part of our opponent in negotiations and a take-no-prisoners attitude by designated Chief Negotiator, Robert Lighthizer suggest that talks will be contentious. Threats to impose tariffs appear to be the best hand that the U.S. can play. 

In the event that tariffs are prolonged and if agricultural and industrial trade is not restored, the negative effects of the U.S. bargaining strategy will become apparent in the form of inflation and decreased spending necessary to maintain economic growth.  At the end of the day any competent economist will confirm that tariffs are effectively taxes, limiting spending power. Economists also warn against conflating a trade deficit with a “loss”, a misconception accepted by the Administration.

Based on the importance of cage-free production, the USDA-AMS issues a monthly report on volumes and prices for the information of Industry stakeholders. There is some doubt as to the accuracy of the monthly flock numbers and the question is raised whether it would be more desirable to post accurate quarterly data in place of erratic monthly figures.

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

The USDA Cage Free Report for the month of November 2018 released on December 3rd 2018 documented constant flock sizes in hens producing under the Certified Organic seal and for cage-free flocks as compared to September 2018. Organic and cage-free egg production were higher by 0.3 percent from October The respective numbers of hens in organic and cage-free flocks should reflect the realities of supply and demand in the market over successive quarters. Average flock production rose to 75.5 percent for both categories of non-caged hens (accepting USDA data):-

• Hen Numbers in Production increased 0.3 million to 324.4 million.
• Shell Inventory Up by 4.4 Percent from Previous Week.
• USDA Midwest Benchmark Generic Prices for Extra Large, Large and Medium down 1.3, 0.8, and 5.9 Percent Respectively Compared to Past Week.

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on December 3 rd the Midwest wholesale prices for Extra Large, Large and Medium sizes were lower by 1.3, 0.8 and 5.9 percent respectively compared to the past week. The progression of prices during 2018 is depicted in the USDA chart reflecting three years of data, updated weekly.

The December 3rd USDA Egg Market News Report (Vol. 65: No. 49) documented a USDA Combined Region value rounded to the nearest cent, of $1.28 per dozen delivered to warehouses week ending November 30th. This price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.20 per dozen. At the high end of the range, price in the South Central Region attained $1.35 per dozen. The USDA Combined Price last week was 38 cents per dozen below the three-year average and 60 cents per dozen below the corresponding week in 2017. Weekly Combined Regional price is not increasing with the same velocity during 4th Quarter of 2018 compared to the corresponding weeks in 2017.

 

Central Valley Eggs has an open position for a Production Manager at their Wasco, CA., in-line aviary complex comprising 2-million hens with replacement pullets. The position reports to the General Manager. The incumbent will be responsible for optimizing flock performance from facilities and staff applying leadership and procedures consistent with federal, state and industry regulations and standards, contributing to food safety and sustainability.

The Company offers a competitive salary and fringe benefits and is an equal opportunity employer.

Applicants are encouraged to submit a CV outlining education, training, relevant experience and employment history to Jeff Peterson, General Manager <jpeterson@cveggs.com>

The first of the series of Green Wise supermarkets opened in 2007 specializing in organic and natural foods will be closed on December 29th.

In a statement, Publix stated, “A number of variables and evaluations were utilized in making the decision to close this store but in general the store was under performing.”  Publix also noted that there were no plans to open another banner at the location.  Additional Green Wise markets are located in Mt. Pleasant SC, Lakeland, Boca Raton FL, Marietta GA and Fort Lauderdale FL.

Stung by public opposition to hog-waste lagoons and adverse court judgments, Smithfield Foods is establishing a joint venture enterprise with Dominion Energy to convert waste into methane gas.  Designated projects will require $125 million for each of the two partners over ten years to convert from lagoons located on contract farms in North Carolina, Virginia and Utah.

Ken Sullivan, CEO of Smithfield noted, “The environmental footprint of agriculture has to do with the crops fed to livestock but also the waste part of animal agriculture.”  He added, “This effort is focused on the waste aspects and our endeavor to divert an inevitable part of the waste stream in to something usable that has economic benefit and in the process reduces our carbon footprint.” 

The conversion project will cover 90 percent of hog finishing in North Carolina and Utah.  The company is concentrating on the finishing phase of the production cycle since most waste is produced during the 20 weeks during which hogs grow from 50 pounds to market weight.

Kroger announced on Tuesday, November 20th that Monroe, OH will be the site selected for the first robotic fulfillment center using the technology developed by Ocado of the U.K.

The project will encompass 335,000 square feet and will cost $55 million.

Chairman Rodney McMullen stated “Kroger is joining with the best partners in the world to co-innovate and leverage technology to redefine the customer experience.”

The Administration issued a statement on Monday December 3rd confirming the lack of specifics arising from the dinner meeting between the Presidents of China and the U.S. and their respective advisors on the preceding Saturday night. According to tweets and statements from the President it was his understanding that his gesture in holding tariffs on $200 billion of imports to the U.S. from China at 10 percent and not raising the rate to 25 percent on January 1st 2019 was matched by concessions from our trading partner characterized as a “great deal”.

It was stated that China would import an unspecified but “very substantial” quantity of energy, agricultural products and industrial equipment, limit distribution of fentanyl and would reduce the 40 percent tax on U.S. automobiles. The comments from the President noted that outstanding issues including theft of intellectual property, coercive joint-venture agreements and state subsidized dumping would have to be resolved in bilateral negotiations within 90 days.

In a report from China posted on Reuters on Wednesday December 5th it is apparent that China has the intention of placing any increase in tariffs in abeyance during negotiations but offered no specifics on imports or reducing the tariff on autos. The article cited an official at the Chinese Academy of Social Sciences as stating “China should prepare but not rush to make concessions” Yu Yongding added “This is a competition of endurance to see who breaks first”.

It appears that a decision to clamp down on manufacture and trading in fentanyl has been made. A second consideration, relating to the theft of intellectual property was the subject of a November 21st directive from the Development and Reform Commission of China specifying retribution for errant companies.

A more definitive statement of intentions including the actual start date of the 90-day period for negotiations has yet to be officially announced. The success of the dinner meeting in Argentina will only be apparent from the timing and quantity of orders for soybeans and machinery in addition to meaningful progress in resolving structural issues. Given past history, this may take a lot longer than anticipated by the White House as of Sunday morning.

In September, Secretary of Agriculture Dr. Sonny Perdue announced that the Economic Research Service and the National Institute of Food and Agriculture would be moved out of Washington to a yet to be decided location. The justification for the move was to save money and to place the agencies nearer the farming communities they serve. In addition, Dr. Perdue believes that the move from Washington DC would reduce the turnover rate among personnel.

In a letter of protest to Congress, prominent academics, economists affiliated to industry and previous heads of the ERS urged intervention to rescind the decision. Dr. Gale Buchanan, former USDA Chief Scientist stated “The proposed restructuring is a major disruption in the USDA Research arm that provides invaluable support for American food and agriculture.”

Moving the two agencies from Washington would lead to loss of direct engagement with the scientific research community including the National Science Foundation, the USDA-Agricultural Research Service and the National Institutes of Health. The proposal to move the agencies is also opposed by the American Statistical Association.

Having settled in Washington, key personnel may resign if the ERS is relocated from DC to take positions with either other government agencies, universities, consultancies, think-tanks, industry associations or commercial enterprises. This would lead to disruption of activities.

A similar situation occurred when the Services group responsible for approval of biologics within the USDA was moved to Ames, IA. during the 1980s. Although this change was justified based on the need for the group to interact with scientific colleagues at Iowa State University and the National Veterinary Services Laboratory, disruption of activities and resignations impeded approval of biologicals during the two years following the move.

The AEB has announced that during October, 14.9 million impressions and 32,000 website visits were achieved by the Incredible Egg website.

Per capita consumption for 2018 will attain 280 eggs, a 1.4 percent increase over 2017. According to the USDA, the projected consumption in 2019 will increase by 0.6 percent to 281.7.

According to Nielsen data circulated by the American Egg Board, for the first ten months of 2018, sales volume of cage-free shell eggs increased by 17.2 percent to attain a 10 percent market share based on volume. With respect to dollar value, cage-free eggs advanced by 11 percent to achieve a 17 percent share compared to the corresponding months of 2017.

On November 23rd, Emily Weinstein posted an article featuring five weeknight dishes including, kale sauce pasta, shortcut chilaquiles, oven-steamed salmon, all of which either contained an egg or egg products.

The State of Wyoming has suffered a reverse following rejection by the 10th Circuit, of a 2015 law enacted in Wyoming to limit access to open land for the purposes of collecting resource data without permission from the landowner. The 10th Circuit ruled in September 2017 that finding the “collection of resource data constitutes a protected creation of speech”. U.S. District Judge Scott Skavdhal granted summary judgement in favor of plaintiffs including the National Press Photographers Association, the National Resource Defense Council and the Western Watersheds Project.

In his ruling, Judge Skavdhal stated “There is simply no plausible reason for this specific curtailment of speech and this statute is a clear attempt to punish individuals who are engaging in protected speech that at best some find unpleasant.”

The U.S. Soybean Export Council has announced that Romania has received the first shipment of new crop (2018 harvest) soybeans from the U.S.

The Export Council has been active in developing new markets for soybeans following the cancellation of orders from China as a result of the ongoing trade dispute. A companion posting noted that for the market year 2018, soybean exports to nations other than China increased 50 percent to 750 million bushels in market year 2018.                      

For the past two decades, the Export Council has invested in education and technical assistance to prospective and ongoing importing nations to demonstrate the superiority of U.S.-origin soybeans with respect to nutrient content. Evaluation of ingredient quality and establishing technology for assays has resulted in differentiation of what might be regarded as a commodity into a product with superior attributes associated with U.S. origin.

It is estimated that per capita poultry meat consumption in Romania will increase to 61 pounds in 2018, displacing pork. Constanta at the mouth of the Danube River is well suited for distribution of bulk product shipped to the Nations major port for onward transport to the hinterland of Romania, and to Bulgaria and other Eastern European nations served by the river system and by railways.

The latest shipment of soybeans will be processed by a plant in Romania operated by Bunge to produce soybean meal and soy oil which is valued in both Romania and Bulgaria.

The Ministry of Health of Israel has concluded that Salmonella prevention programs are inadequate to protect consumers of table eggs. Accordingly, the Minister of Agriculture has granted permission to import eggs presumably from the E.U. on a duty-free basis to maintain reasonable retail prices for consumers.

Following a report by Dr. Sagit Nagar, Head of Poultry Diseases in the Veterinary Division of the Ministry of Agriculture, a high-level of Salmonella (serotype not specified but presumed to be SE) has infected many of the farms that supply the market.

Recently the Government of Israel offered substantial support to producers to eradicate Salmonella infection, but the association representing the farmers did not agree to the terms and conditions of the grant.

It is noted that egg production in Israel is derived from numerous small-scale family operated units with relatively primitive facilities. The unacceptable prevalence of Salmonella infection is enigmatic given the high standard of poultry veterinary resources in the nation and it is possible that the problem of salmonellosis is more socio-political than epidemiologic.

In a press release dated November 6th The Kroger Company (KR) announced results for the 3rd Quarter of Fiscal 2018 ending November 10th 2018.

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)

52-Week Range in Share Price: $22.85 to $32.72

Market noon Nov. 6th post-release $28.48

Forward P/E: 12.6 Beta 0.7

Same Store Sales growth excluding fuel +1.6 percent. Growth in digital sales +60%.

In commenting on results Chairman and CEO Rodney McMullen stated, "Kroger is transforming our business model. We're moving from a traditional grocer to a growth company with both a strong customer ecosystem that offers anything, anytime, anywhere, and asset-light, high-margin alternative partnerships and services. Restock Kroger is the blueprint for this transformation.

"We are strengthening the Kroger ecosystem by reducing costs and investing the savings in our associates, technology, and price to grow units, traffic and share. Leveraging our store, logistics and data assets in turn creates incremental new profit streams, which then further redefines the customer experience. In this way, our new growth model will be a virtuous cycle.

"We are doing all of this and remain committed to delivering on our 2020 Restock Kroger financial targets."

The Company recorded a $12 million LIFO adjustment in Q3 2018 compared to $3 million inQ3 FY 2017.

YTD the Company has expended $589 million in the OCADA automated warehouse system.

Kroger confirmed EPS guidance of $2.00 to $2.15 for FY 2018.

The U.S. Food and Drug Administration issued a statement on November 26th concerning the multistate outbreak of E. Coli O157:H7 attributed to romaine lettuce. As of this date, 43 confirmed cases have been documented in 12 states with most recent being October 31st.  To date 22 cases have been diagnosed in Canada.

On November 20th CDC advised consumers not to consume romaine lettuce based on the fact that the probable source had not been identified. As a precaution the green produce industry complied with a FDA request to withdrawn romaine lettuce and QSRs and supermarkets disposed of product on their shelves.

Traceback investigations suggest that the implicated lettuce was cultivated along the Central Coast and the Northern growing regions of California, with product harvested during late summer.

The FDA is attempting to narrow the location which is responsible for the infection.  As of mid-November, harvesting of romaine lettuce from the Central Coast region has ended.  Cultivation has now shifted to the Imperial Valley and the Yuma Valley of California.  During winter romaine lettuce is also imported from Mexico and some cultivation occurs in Florida.  It is evident that hydroponic romaine lettuce and greenhouse product is not involved.

The FDA considers that the recommendation to destroy available stocks of romaine lettuce issued during mid-November has removed potentially contaminated product from the market.  The FDA recommended that major producers agree to participate in a labeling program to identify the harvest region and date of pack.  This is confirmed in an official FDA update stating - based on discussions with major producers and distributors, Romaine lettuce entering the market will now be labeled with the harvest location and the harvest date.  Romaine lettuce entering the market can also be labeled as being hydroponically or greenhouse-grown.  Product without this information should not be consumed.

The FDA statement concluded with comments by Commissioner Dr. Scott Gottleib, “We hope that growers, processors, distributors and retailers will join us in our effort to protect consumers by applying labeling recommendations to their products.  We remain committed to identifying ways to decrease the incidence and impact of food borne illness outbreaks, and will continue to provide updates on our investigation and changes to our advice on romaine lettuce as more information becomes available.”

Labeling will be useful in traceback investigations but will do nothing to prevent foodborne Salmonella or E.coli infection if produce is contaminated in fields or through cross-infection in packing plants. The only sure method of ensuring that green produce is free of bacterial pathogens is to introduce electron beam treatment as no other effective method of inactivating bacteria is available.