Editorial

 

Nominee Scott Pruitt and the Poultry Industry

Feb 24, 2017

    

Oklahoma Attorney General Scott Pruitt has understandably received considerable criticism from opponents of his confirmation as Director of the Environmental Protection Agency, based on his record and post-election statements. It is anticipated that Scott Pruitt will be adversarial but fair in his position given past accomplishments.

A January 18th editorial in the Wall Street Journal documents the mutually successful outcome of lawsuits brought against poultry producers over alleged pollution of the Illinois River Basin. The litigation was initiated by Oklahoma Attorney General Drew Edmondson who preceded Scott Pruitt in that position

  

The lawsuit heard in Oklahoma was decided in favor of the Defendants by Federal Judge Gregory Frizzell who ruled “The State has not yet met its burden of proving that bacteria in the waters are caused by the application of poultry litter rather than by other sources including cattle manure and human septic systems.” 

Judge Frizzell ruled in 2009 that the state of Oklahoma could not seek monetary damages unless the Cherokee Nation joined the suit since their land was involved in the alleged pollution.  This ruling was supported by the 10th Circuit Court of Appeals allowing Mr. Pruitt to abandon the case against poultry producers.

In 2013 Scott Pruitt successfully negotiated a compromise by cooperating with the adjoining state of Arkansas to regulate phosphorus runoff and to initiate a project to obtain data to guide further regulations. The Wall Street Journal editorial noted “A cooperative approach can be more effective and less costly than litigation.”

It is hoped that Scott Pruitt when confirmed will bring common sense and a broader prospective to the Environmental Protection Agency. It will be for him to restore balance between environmental concerns and the agribusiness sector which was lacking in the zealous approach by the Agency during the tenure of President Obama.

A start has been made with an Executive Order freezing hiring and any new expenditure on contracts and a ban on non-cleared press releases. One can hear the shuffling of Birkenstocks in the Federal Triangle as middle-level and senior administrators rush to their Priuses in the parking lot. 

   

Egg Industry News

 

USDA Weekly Egg Price and Inventory Report, February 23rd 2017

Feb 24, 2017

    

According to the USDA Egg Market News Report (Vol.64: No. 8) posted on February 21st Midwest-wholesale prices for Extra Large and Large decreased by 3 percent this past week reverting to the prices pertaining five weeks ago. The progression of prices during 2017 is depicted in the USDA chart reflecting three years of data, updated weekly.

The latest USDA Egg Market News Reports released documented a USDA Combined Region valu of $0.65 per dozen delivered to warehouses. This price lags Midwest Weekly values by one week, and is compared to a peak price of $2.20 per dozen in late November 2015.  The USDA Combined range for Large, in the Midwest was $0.60 per dozen.

  

At the high end of the range, the price in the South Central Region, attained $0.69 per dozen. The current USDA Combined Price was approximately 75 cents per dozen below the three-year average. In early 2016 the average was inflated by the rise in prices attributed to the post-HPAI shortage of all eggs.

Hen numbers continue to rise relative to demand attaining approximately 311.6 million in production. Hens in lay increased from 303 million in early December 2016. For the past week the number of hens increased by 1.5 million. The total egg-flock comprises 316.7 million including hens in molt and small flocks.

Generic shell-egg stock increased by 0.4 percent reflecting the balance between demand and production. Dried-egg inventory of 29.4 million pounds as of December 31st is extremely high, as is the National stock of frozen egg products at 35.8 million pounds.    

   
 

RISE IN PRIVATE LABEL BUISNESS

Feb 24, 2017

    

The recent mid-November Exposition organized by the Private Label Manufacturers Association (PLMA) held in Chicago, showcased innovations in food products and packaging.  Private label business surpassed $118 billion in 2015 with a growth rate approaching two percent

According to Nielsen, store brands in 2015 represented 18 percent of stores’sales value attaining $62.5 billion in U.S. supermarkets.  Growth rates for store brands in drug stores exceeded that of national brands last year. 

  

According to the PLMA, there was considerable growth from deep discount stores including Aldi and Save-A-Lot in addition to Whole Foods Market and Trader Joe’s.  These non-traditional supermarkets achieved $140 billion in sales representing a potential savings of $44 billion annually to shoppers who selected store brands.  According to McMillianDoolittle L.P. of Chicago, the majority of U.S. of food retailers will add to private label offerings in 2017. 

With the advent of Lidl in the U.S., there will be more competition in the private label space with lower prices and fewer s.k.u. counts on shelves.  Consumer surveys show that millennials in particular are more loyal to their favorite stores than their parents with 90 percent of those surveyed shopping in only two stores. 

Brian Scharoff President of the PLMA notes, “Store brands remain the retailer’s most potent weapon in developing strategies for the millennial group”.  He added, “store brands provide flexibility in opportunities to be creative with product assortment and concepts without waiting for national brands”. 

The trend towards store brands is evident with both generic and specialty eggs, to the detriment of national brands, which are experiencing difficulty in maintaining volume in a prolonged low-priced market with large differentials.

   
 

WALMART TESTS COMBINATION CONVENIENCE-PICKUP CONCEPT

Feb 24, 2017

    

Wal-Mart is testing a new concept to boost their eCommerce initiative.  Essentially the prototypes resemble a modern convenience store selling fuel in the forecourt and stocked with groceries, hot sandwiches and coffee in a 4,000 square foot sales area with aisles allowing access to groceries on shelves. 

 

What distinguishes the Wal-Mart operations in Huntsville, AL. and Denver, CO. is that shoppers can pick up groceries previously ordered on-line.  Gina Kretoski, responsible for Walmart eCommerce noted, “The concept was born because at Walmart because we are constantly looking for ways to add convenience.

Customers are changing the way they shop and we want to make sure we’re changing too”.  Online grocery pickup is open from 08H00 to 28H00.  Orders received by 13H00 will be available from 17H00 on the same day.  Orders are filled from local Walmart Supercenters and the service is free.

   
 

FRANCE DIAGNOSES H5N8 ON A DUCK FARM

Feb 24, 2017

    

Following the recent upsurge in reports of H5N8 in the EU, France announced isolation of virus from a duck farm in the southwest region of the Nation.  In early 2016 this area was affected by avian influenza among commercial farms holding geese and ducks to produce foie gras. (See report February 24th).

After a slow start to control and eradication attributed to inaction by regulatory authorities and deficiencies in biosecurity, the late-winter outbreak was eventually contained. Many dozen family-operated farms were affected resulting in bans on importation of poultry products from France and leading to a collapse of the foie gras industry due to embargos imposed by Japan and other importing nations. 

  

December 3rd was to have been the deadline for a declaration of freedom from AI.  It is possible that exports of the high-value foie gras product may continue if importing nations accept the principle of regionalization although it is noted that many of the production farms with up to 10,000 ducks are located in the southwest of France.

   
 

CLARITY EMERGES OVER SHELF-LIFE LABELING

Feb 24, 2017

    

The Food Marketing Institute and the Grocery Manufacturing Association have suggested voluntary labels to indicate shelf life:

  • Best if Used By will indicate the date past which taste or quality may deteriorate
  • Use By indicates the date beyond which safety concerns may affect perishable products

It hoped that the adoption of the voluntary Best if Used By and Used By will be universally adopted in the U.S. by mid-2018, as roll-out has commenced.

 

Jack Jeffers, VP of Quality at Dean Foods noted, “Eliminating confusion among consumers by using common product data wording is a win-win because it means more products will be used instead of thrown away in error”.

It is noted that individual states have obligatory labeling of shelf-life which may conflict with the simple scheme suggested by the FMA and GMA. The current system of imprinting packs with a Julian date is not helpful to consumers and requires a supplementary open date.

   
 

LISTERIA IN CHEESE AFFECTS MANY PRODUCTS

Feb 24, 2017

    

Isolation of Listeria monocytogenes from a sample of cheese manufactured by Deutsch Kase Haus of Middleburg, IN. has resulted in an extensive recall involving 130 brands and products including Sargento, Sara Lee, and store brands sold by Meijer, Albertsons, H-E-B and other supermarket chains.

When contaminated cheese is added to processed food products including pizzas and salads, the extent of recalls increase exponentially in relation to the inclusion of an implicated dairy product.

  

   
 

Eating a Breakfast Meal Lowers Risk of Cardiovascular Disease

Feb 24, 2017

    

According to dietary guidelines prepared by Columbia University Medical Center, consuming a breakfast meal rather than snacking during the day leads to a reduction in the risk of cardiovascular disease. 

The report was endorsed by the American Heart Association. The study demonstrated that 30 percent of U.S. adults skipped breakfast. 

Those that do eat breakfast each day usually have lower serum cholesterol and lower blood pressure compared to subjects deferring the first meal of the day.

Subjects who did not eat a breakfast meal were found to be overweight and prone to diabetes and other metabolic complications associated with over- consumption of calories and poor food choices.

  

The American Egg Board through the Egg Nutrition Center has demonstrated the benefits of consuming an egg at breakfast.  It is now up to the industry to engage with consumers and produce convenience foods that suit the lifestyles of the 30 percent that cannot accommodate a conventional breakfast into their routines and lifestyles.

   
 

National Restaurant Association Releases December Performance Index

Feb 24, 2017

    

The Restaurant Performance Index declined slightly in December to 100.5 from the November value of 100.7.

The Current Situation Index which measures same-store sales, traffic, labor and capital expenditure declined slightly to 99.5 in December mainly as a result of depressed same-store sales and traffic.

  

The Expectations Index was unchanged in December at 101.6.  This parameter was associated with a “cautiously optimistic outlook for the economy.”

Approximately one-third of restaurant operators expect an improvement in the economy within the coming six months which is an improvement from 2016 with eleven straight months of negative expectations.  More than half of the restaurant operators plan to make a capital expenditure in equipment, expansion or remodeling within the next six month.  This may be due to increasing labor rates predicating modern equipment to achieve efficiency in food preparation and serving.

   
 

Midwest Layer Health Management School

Feb 24, 2017

    

The annual Layer Health Management School will be held May 10 – 11th 2017 at Michigan State University in East Lansing, MI.  The program will include both lectures and laboratories and will cover aspects of ventilation management, pest control, recognition of disease and interaction with diagnostic laboratories.

The Layer Health Management School operates under the direction of faculty at Michigan State University, Purdue University, University of Minnesota and the University of Georgia.  The school has the support of a number of poultry organizations including the Minnesota Turkey Growers’ Association.

  

For further information access info@minnesotaturkey.com or (763) 682-2171.

   
 

Target to Shelve Innovation Programs

Feb 24, 2017

    

According to a February 3rd article in the Minnesota Star Tribune Target Corporation will now concentrate its resources on increasing traffic and same store sales. As a result, executive time and resources for innovative programs have been curtailed. 

Victims of the reorganization include “Goldfish” an E-commerce start-up and a highly mechanized “store of the future” incorporating robotics.

  

Dustee Jenkins, Senior Vice President of Communications for Target stated, “We regularly pause to evaluate our business and have to make tough choices about where our company is best served to invest our time and resources.”  The statement continued, “We recently made some changes to the innovation portfolio to refocus our efforts on supporting our core business, both in stores and online, and delivering against our strategic priorities.” 

Target has been impacted by executive turnover, contributing to a stalling of their recovery program initiated by Brian Cornell. Although there is merit in “thinking outside the box and appointing entrepreneurs-in-residence”, what Target needs most at the present time is a retreat to reality.

On a personal note, during a recent visit to a relatively new Target Superstore in an affluent suburban area of North Carolina, poorly stocked shelves were apparent, the clothing area looked like a going-out-of business sale at a K Mart and big-ticket items had been moved around on shelves so that it was impossible to determine prices.  Check-out lines were long, contributing to an unpleasant shopping experience.  At least the toilets were clean but that may be an indication of low traffic rather than a commitment to hygiene.

   
 

2017 IPPE Attendance

Feb 24, 2017

    

Statistics for the 2017 IPPE were made available on February 2nd.  These included 31,000 registrants, 1,275 exhibitors and the Show Floor which covered 533,000 square feet. 

In a joint statement by the organizers of the IPPE, the U.S. Poultry and Egg Association, the American Feed Industry Association and North American Meat Institute, noted “this year’s tremendous exhibition floor and attendee numbers is a complement to IPPE education programs, networking opportunities and diverse exhibits. 

 

The excitement and energy displayed by this year’s attendees and exhibitors will continue to safeguard the success and growth of future IPPEs.

The educational programs comprised 25 major symposia, the International Scientific Poultry Forum and various specialty workshops including the Pet Food Conference and the Beef Workshop.

   
 

Supermarket and Restaurant Industries Support Common Sense Nutrition Disclosure Act

Feb 24, 2017

    

According to a press release from the Food Marketing Institute on February 3rd, the Association will strongly support the Common Sense Nutrition Disclosure Act (H.R. 772/S. 261). 

The legislation would allow the use of a menu or menu board in prepared foods areas, declassifies advertisements and marketing materials as “menus” and allows the use of a website to comply with the FDA nutritional labeling requirements which would be onerous for both restaurants and supermarkets.

  

The Food and Drug Administration was inflexible in establishing a Final Rule on nutritional labeling and the proposed legislation would clarify many aspects neglected and deferred by the Agency to the benefit of both retailers and consumers.

   
 

Panera Bread Reports on Q4 and FY 2016

Feb 24, 2017

    

In a press release dated February 7th Panera Bread Company (PNRA) announced results for the 4th Quarter and Fiscal 2016 ending December 27th 2016.

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)

   
   
 

Biomin Reports on Mycotoxin Content of 2016 Corn Crop

Feb 24, 2017

    

US feed and livestock producers should carefully monitor mycotoxin contamination in ingredients and feed, based on results in the latest BIOMIN Mycotoxin Survey.

For 2016 in the United States, a total of 387 corn samples sourced from over 26 different states and 79 DDGS samples sourced from 14 different states were analyzed in three different laboratories (Romer Labs Inc., USA; Veterinary Diagnostic Laboratory at Iowa State University, USA; Activation Laboratories, Canada) in order to identify the presence and potential risk posed to livestock animal production by six major mycotoxin groups.

  

The survey results provide an insight to the prevalence of aflatoxins (Afla), zearalenone (ZEN), deoxynivalenol (DON), fumonisins (FUM), T-2 toxin (T-2), and ochratoxin A (OTA).In total, 387 corn samples and 79 distiller’s dried grains with solubles (DDGS) samples were sourced from across the US in 2016. Approximately 90% of corn samples and all DDGS samples tested positive for at least one mycotoxin.

Read the Full Sponsored Article at http://egg-cite.com/articles/single.aspx?contentID=8784

   
 

CME Prices

Feb 21, 2017

    

On February 16th close of trading trading on the CME, yielded the following rounded quotations for corn, soybeans and soybean meal.

Values for corresponding months as quoted for the previous week are indicated in parentheses:-

COMMODITY

Corn (cents per bushel)

March ’17   368    (365)

May ’17     376  (   373)  

Soybeans (cents per bushel)

March ’17  1,035  (1,031)

May ’17  1,046  (1,042)  

Soybean meal ($per ton)

March ’17   341     (333)   

May ’17     345   (  336)   

 

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

  • Corn:                     March quotation up by 3 cents                      (+0.8 percent)
  • Soybeans:            March quotation up by 4 cents.                     (+0.4 percent)
  • Soybean Meal:    March quotation up by $8/ton                      (+2.4) percent)

For each 10 cent per bushel change in corn :

  • The cost of egg production would change by 0.45 cent per dozen
  • The cost of broiler production would change by 0.25 cent per pound live weight

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

  • The cost of egg production would change by 0.40 cent per dozen
  • The cost of broiler production would change by 0.25 cent per pound live weight

See posting on the February 9th USDA-WASDE Report #562 for a review of price projections and quantities of commodities produced in the 2016 season.

   

Shane Commentary

 

FDA Negligent in Inspecting Foreign Drug Plants

Feb 24, 2017

    

It would appear that the FDA is ignoring “Drugs” in their Agency title.

A report in the January 30th edition of Chemical & Engineering News cites a Government Accountability Office report which documents that the Agency has failed to inspect 1,300 drug-manufacturing facilities in foreign nations exporting to the U.S.  A total of 243 of  535 pharmaceutical facilities in China have yet to be inspected. 

 

Approximately one-third of 600 pharmaceutical plants in India have not been evaluated by FDA personnel.  The report noted that 90 percent of 171 facilities in South Korea have not been reviewed in on-site visits.

Apparently, the FDA uses a risk-based system to prioritize visits but the agency is chronically under-staffed.

Peter Saxon, president of a consulting group with extensive ties to foreign manufacturers indicated that most of the uninspected plants produce over-the-counter (OTC) products.

If the FDA can expend time and energy in inspecting egg-producing farms following the implementation of the Salmonella Prevention Final Rule and finding virtually no SE even in 2011. The Agency should have the resources to audit manufacturing facilities manufacturing both generic and OTC drugs.

EGG-CITE has frequently noted the deficiencies in establishing priorities and execution of responsibilities for protection of consumers. The FDA as presently staffed and structured cannot do justice to both food and drugs. The U.S. would be better served by separate Food Safety and Drug Agencies with concentration on their specific areas of concern.

   
 

The Egg Industry in China

Feb 24, 2017

    

In a presentation at the 2017 IPPE Dr. Mark Lyons, VP of Alltech shared his observations and experiences based on his residence in China over the past three years.

In preferencing his comments on China Dr. Lyons noted the changes in the structure of society during the past fifteen years. 

One of the most significant has been the shift in population from rural areas to cities involving relocation of 300 million citizens.

There are now180 cities in China with a population exceeding that of Chicago. 

  

Mark Lyons

Industrialization has elevated over 400 million from poverty.  Changes have resulted in profound economic consequences.  Since 2008, labor cost has increased by 62 percent, raw materials have soared by 70 percent and the real estate boom has increased the price of property by 60 percent.  Advancing earning power has changed the economy of China from an export to a consumer market.

The four trends promoted by the Government include self-sufficiency, improvements in quality, increasing scale of production and protection of the environment.  Concurrent with a campaign against corruption, the Government is enforcing food safety, modernization of agriculture and relocation of the population.

Changes in food production have resulted in intensification.  In the two decades preceding the turn of the century, there were approximately 20,000 feed mills in operation.  During the last ten years there has been a marked move to integration with 6,000 feed mills many of which are financially connected to pork or poultry producers.  It is estimated that by 2020 the trend will extend through the food chain with integration and clearly defined market segments.

It is estimated that there are 1.2 million egg-producing hens in China in addition to ducks for egg production.  Approximately 40 percent of flocks are under 2,000 hens in size with 33 percent ranging from 2,000 to 10,000 hens and only 25 percent of the national flock comprises farms with more than 10,000 hens. 

Integration has seen the emergence of a few in-line operations with as any as three million hens.  To place egg production in China in perspective, output expressed in metric tons (19,000 eggs) is approximately five times the size of the U.S.  Average production per hen is estimated at 185 eggs per year.

Challenges facing the Chinese egg industry include high feed cost and relatively stagnant consumption.  Intensification of environmental laws and high labor rates dictate adoption of western technology in housing, equipment, management of flocks and housing of flocks.

As in the U.S., specialty eggs are emerging in response to demand from affluent urban consumers.  Approximately five percent of eggs are branded yielding a 2 to 5-fold premium over generic product.  Nutritional enrichments include DHA, selenium and vitamins.

The challenges facing egg producers will be to raise capital to erect modern in-line facilities, to comply with pollution control and environmental laws, conserve water and to suppress diseases such as evident avian influenza.  Given relatively stable egg production consumption from commercial farms, China is actively seeking export markets.  In all probability egg products will represent the bulk of shipments although there will be extensive competition from India, the U.S. and Eastern Europe.

Agricultural banks and investment groups will play an important role in modernizing the egg industry in China by providing finance and promoting trade involving importation of ingredients and export of product.

Dr. Lyons noted that the business environment in China is unique and challenging given the rapid evolution of the poultry industry, it is necessary to embrace flexibility, commit to the nation and to adapt.

   

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

Industry Prices: Fri Feb 24
 Corn3.91 $/bu
 Soybeans10.07 $/bu
 Soybean Meal331.80 $/ton
 Eggs, Producer32  ¢/doz
 Eggs, Warehouse 56-59  ¢/doz