Egg-News

Editorial


FTC Report Implicates Large Grocery Chains in Food Inflation

A March 21st report issued by the Federal Trade Commission (FTC) identified the involvement of major retail grocery chains in food inflation following supply chain disruptions coincident with the COVID years.  The report analyzed the actions of producers, wholesalers and retailers in “skyrocketing prices for groceries” that impacted consumers.

 

The report demonstrated that larger chains benefitted at the expense of smaller competitors.  The focus of the report included Walmart, Amazon, Kroger, C&S Wholesale Grocers, Proctor and Gamble, Tyson Foods, Kraft-Heinz and Associated Wholesale Grocers Inc. The FTC report demonstrated the power of major retailers and their impact on the supply chain based on buying power to the disadvantage of smaller, regional grocery chains.

 

The FTC report documented that large retailers increased their revenue by more than six percent in relation to costs during 2021 through 2023 without commensurate increases in operating expenses.  The report also documented pressure on suppliers relating to prices and delivery.

 

The report was welcomed by the National Grocers Association (NGA), representing independent and small stores. Chris Jones, the Chief Government Relations Officer for the NGA, noted the past failure of the FTC and DOJ to use existing legislation to suppress pricing decisions that disfavor consumers and small suppliers.  The NGA president, Greg Ferrara, stated, “Decades of lax antitrust enforcement enables grocery buyers to coercively squeeze suppliers to comply with their trade demands, unfairly disadvantaging smaller competitors”.

 

The Robinson-Patman Act specifically disallows both discriminatory and predatory pricing.  Buyers who benefit from these practices violate the Act if the buyer pressures producers to agree to lower prices for commodities of similar grade and quality.  This would apply specifically to generic USDA graded eggs that are a commodity in interstate commerce.

 

The FTC report coincides with a lawsuit intended to block the merger of the Kroger Company with Albertsons Corporation.  The Administration recognizes the political benefits of consumer protection in a pre-election year. Notwithstanding the intensified enthusiasm for anti-corporate action, it must be recognized that egg producers have been nickeled and dimed by the major chains over decades. This has reduced margins and deprived producers of sufficient profit to re-invest in maintenance and expansion. An added burden with less than adequate reimbursement is represented by the need to convert housing from conventional cages to alternative systems since 2020 to comply with welfare requirements.

 

The situation in the U.K. parallels the findings of the FTC with regard to pressure on producers. As with the U.S retail grocery in the U.K. is an oligopoly with a few retailers sourcing domestic-produced and some imported shell eggs. After Brexit feed and energy costs soared but retailers failed to adjust prices to allow independent producers of free-range eggs, comprising half of national supply, to reach break-even. The result was a sharp decline in availability as producers ceased operation due to exhausting working capital and credit. Eventually many of the large chains were obliged to make ex gratia payments to individual producers to restock housing and to resume production.

 

The wholesale price of packed generic eggs in the U.S. should be subject to the law of supply and demand. Cyclic periods of oversupply that were a feature of the 1980s through the 2010s have given way to a more rational rate of expansion following consolidation, conversion to non-caged housing and more reliable market intelligence. Unfortunately the prevailing industry benchmark reporting service now appears to function to the detriment of producers. The daily quotations appear to amplify downward movement in price and allows chain buyers the opportunity to depress prices over the short term by temporarily withholding orders. This results in a disproportionately low price, exacerbating price elasticity. A Midwest-large Chicago Mercantile Exchange (CME) quotation would be more equitable given that the costs of corn and soybean meal representing 65 percent of nest run expense is determined by the CME.

 

Examination of pricing policies of large grocery chains by the FTC is long overdue and was in all probability a byproduct of the investigation of the proposed Kroger merger (or acquisition) with Albertsons. This transaction would be detrimental to suppliers, workers and consumers as evidenced by lawsuits filed by the Attorneys General of eight states and the FTC.


 

Egg Industry News


Emergence of HPAI in Dairy Herds- Questions and Implications:

The USDA-APHIS has now confirmed H5N1 avian influenza virus in oropharyngeal swabs and in milk from dairy cows demonstrating clinical depression and reduced milk production. This is the second series of reported cases of H5N1 avian influenza in a ruminant following the goat herd in Minnesota reported last week.

 

Dairy herds have been affected in Texas, New Mexico and Kansas.  The condition emerged approximately three weeks ago but was not diagnosed until March 25th. Based on the presence of dead birds in the vicinity of the Texas farm, it is presumed that shedding by either migratory or resident birds introduced the infection.

State and federal authorities have been quick to note that there was no danger to the public.  This assurance was based on the fact that milk from affected animals did not enter the market and that pasteurization would in any event destroy the virus. Perhaps the calming statements by USDA and state veterinarians are at this time appropriate but obvious concerns exist.

 

The brief report released by USDA-APHIS raises a number of questions: -

  • What species of birds were found dead in the vicinity of implicated farms and has H5N1 virus been isolated from carcasses?
  • Can H5N1 virus be isolated from clinically normal contact cows in the affected herds? Is animal-to-animal transmission taking place? Since as stated, ten percent of cows within the affected herds apparently demonstrated clinical signs, factors contributing to intra-herd transmission should be determined.
  • Studies in progress should demonstrate the duration of viremia, infectivity and the presence of virus in milk.
  • Is milk from clinically unaffected animals in the affected herds being withheld? The report indicated disposal of milk from affected animals.  Obviously, clinical signs and milk production will indicate morbidity in individual animals. In the interest of safety and to preserve the wholesome image of milk, is it intended to withhold products from entire affected herds rather than individual animals and presumably until isolation from udder milk ceases?
  • Will case control studies be conducted on affected and unaffected control herds to establish risk factors for the introduction of infection in a specific location?
  • What changes in the H5N1 virus occurred to allow infection of ruminants? The USDA release noted, “Initial testing by the National Veterinary Service Laboratories has not found changes to the virus that would make it more transmissible to humans.”  The report also stated that viral genome sequencing is in progress.  Accordingly, is the comment regarding risk to human health valid?  Isolates from dead farmed mink in Spain and marine mammals along the coast of Chile demonstrated mutations associated with infection of mammals.
  • Is there evidence of H5N1 influenza virus in evaporative cooling systems, drains, manure handling, feed or other areas of the environment of the affected herd?
  • Are hogs next to be affected by H5N1? This species is susceptible to both avian and mammalian strains of influenza virus and herds could serve as ‘mixing vessels” for recombinant strains of influenza virus with enhanced pathogenicity for livestock or humans.

 

It is hoped that appropriate resources can be applied to obtain a rapid understanding of the epidemiology of H5N1 infection in dairy cattle. This should include extensive surveillance in the three states concerned but also in other areas where outbreaks of H5N1 have been diagnosed in backyard flocks that serve as natural sentinels.

The track record of USDA-APHIS with regard to investigating the field epidemiology of HPAI in commercial egg-production and turkey flocks since the 2015 epornitic has been abysmal. Failure by APHIS to report on the molecular biology of H5N1 virus isolates of 2023 contrasts unfavorably with the prompt investigations and reports from health professionals in South America under the auspices of the Pan American Health Organization.

 

Currently there are too many questions and understandably at present insufficient answers.  We trust that the CCC “slush fund” will be used by Secretary Vilsack to establish a task force to investigate the emergence of H5N1 in dairy herds and poultry flocks in order to provide valid and productive recommendations based on established scientific facts. In the interim there are millions of waterfowl about to begin their northward spring migration with 320 million egg production hens, 70 million pullets, 50 million growing turkeys, all susceptible to H5N1 and with a high proportion located in areas at risk for exposure. Preemptive strategic vaccination would appear prudent to create an immune commercial poultry population. If the 2023 and 2024 H5N1 virus can kill farmed mink and free-living marine mammals and some migratory bird species in their thousands and now to infect ruminants how long will it be before it could become a zoonotic pathogen? This is a concern expressed by the World Health Organization since 2020 designating avian influenza as a potential pandemic infection and should be heeded by all involved in the “OneHealth” principle.


 

COVID Wrongful Death Lawsuit Dismissed

A lawsuit alleging wrongful death was filed with a U.S. District Court for the Eastern District of Texas in April 2021 by the Estate of an employee that died from COVID while working in the Mt. Pleasant, TX plant operated by Pilgrim’s Pride Corp. The Plaintiffs claimed that the company acted “with fraudulent misrepresentations, gross negligence and incorrigible willful and wanton disregard for worker safety.” 

 

During May 2020, COVID was prevalent in all meat and poultry processing plants with workers in close proximity and operating under conditions of low ambient temperature and high humidity that encouraged persistence of the airborne virus.  At this time, little was known of the epidemiology of COVID and the routes of infection.  Based on recommendations by the Centers for Disease Control and Prevention based on influenza, separation of workers using partitions, masking and decontamination were introduced by the industry.  According to evidence submitted, the decedent was not provided with a mask or facial shield until late May 2020 prior to his death in mid-June 2020 from COVID as confirmed by the Titus County Medical Examiner.

 

The court dismissed the case without prejudice, allowing the Plaintiffs 21-days to amend their complaint with specific reference to alleged negligence on the part of the employer.


 

McDonald's Anti-Poaching Policy to be Litigated

ollowing an August ruling by the 7th U.S. Circuit Court of Appeals that revived the 2017 “no- poaching” lawsuit, an appeal to the Supreme Court of the United States was denied certiorari letting stand the lower court ruling that the case could proceed. The decision of the 7th Circuit apparently took into consideration the amicus brief submitted jointly by the U.S. Department of Justice and the Federal Trade Commission.

Since the original 2017 class action lawsuit, McDonald’s Corporation has ceased requiring franchisees to agree to no-poach agreements consistent with federal and some state laws and now adopted as a universal practice by QSRs.  The class alleged that the activities of McDonald’s in 2017 restricted competition for employees and was in violation of the Sherman Antitrust Act and Illinois laws.

The case arises from an employee who worked in a McDonald’s franchise in Florida from 2009 through 2015 and was denied employment by a competing franchisee on the basis of an agreed no-poaching policy.

 

If the lawsuit is successful, damages could exceed $2 billion given that the class comprises workers nationwide.


 

DOE Releases Biomass Report

The U.S. Department of Energy (DOE) has released the 2023 Billion-Ton Report.  This document suggests that approximately one billion tons of biomass comprising both corn and wood products could be used to satisfy 2050 demand for aviation fuel. The DOE report suggests that corn would represent 150 million tons of the biomass contribution annually, supplemented by 40 million tons of wood products that could be combusted to produce power and 40 million tons of gas from landfill.

 

The problem with the projection is that there does not appear to be a financially viable process to convert wood and high-fiber products to fuel.  Fermentation technology is currently used to convert approximately one-third of the corn crop to ethanol to dilute gasoline at an average level of ten percent. Conversion of high lignin biomass to a combustible fuel has yet to become an economic reality despite billions invested in developing the technology that has yet to produce a commercial operational plant. 

With respect to power generation, it is evident that nuclear represents the most promising source of electrical power given available technology including renewables. Expansion of nuclear energy generation will require a major overhaul of permitting and above all safe disposal of nuclear waste.

 

The report essentially bundles together existing corn ethanol and the prospect of using wood material from forests and agricultural residues. Tantalizing, but questionable in execution.


 

Sprouts to Introduce Loyalty Program

Sprouts Farmers Markets will introduce a comprehensive loyalty program according to CEO Jack Sinclair.  He stated, “We need more people signing up to be part of the loyalty program and we are investing in what needs to happen for the future so that we increase the number of people who are providing first-party information”.  Currently the company only has data on ten percent of its customers compared to an industry aspirational value in excess of 75 percent.  The lack of information on the Sprout’s customer base is impeding promotional efforts expressed by Sinclair as “At the moment we are trying to sale grass-fed beef to vegetarians which is not a smart move.”

Sprouts will have to design their loyalty program to appeal to health-conscious consumers and those concerned with organic and specialty foods including protein and produce.  The new loyalty program tailored to the needs of company is currently under review in two markets with additional test planned.


 

Tyson Foods Facing Backlash over Hiring Legal Asylum Seekers

In 2022 Tyson Foods committed to hiring up to 2,500 legal refugees over a three-year period.  Tyson Foods is a participant in the Tent Partnership that will collectively hire up to 180,000 migrants.

 

Following criticism in social media and comments by Senator J.D. Vance (R-OH) Tyson issued a statement to clarify misinformation.  The Company stated, “Tyson Foods is strongly opposed to illegal immigration, and we led the way in participating in the two major government programs to help employers combat unlawful employment, the E-Verify and the Mutual Agreement between Governments and Employers Program”.  The statement added, “Tyson Foods employs 120,000 team members in the U.S., all of whom are required to be legally authorized to work in this country.”

 

Concern over the Tyson intent to employ legal asylum seekers is viewed against the closure of the Perry, IA. pork plant that will displace 1,200 workers.

Senator Vance has gone on record as stating, “Assuming Tyson is operating legally – which we don’t even know if they are, we don’t know the details of their intent but we do know that are firing American workers and hiring illegal aliens to replace them.”  This statement lacks substantiation and to some measure demonstrates a prevailing xenophobia that appeals to a large segment of Senator Vance’s constituency.

 

With respect to making rational decisions on facility utilization that benefits stock owners and stakeholders, Tyson appears to be between a rock and a hard place over staffing and altruism.


 

FTC to Ban Universities Retaining Unused Meal Plan Payments

The White House has instructed the Federal Trade Commission to prevent universities retaining unused meal plan payments.  The initiative is a component of a campaign against “junk fees” and other forms of exploitation of university students (and their parents) including charging for books as a component of tuition fees.  A White House statement noted, “Students incur billions in fees or additional unseen costs for unused meal account funds, using a college-sponsored credit card or banking account, paying for textbooks or taking out a loan.”  The statement also criticized the lack of transparency displayed by Universities in withholding information that would allow students to opt out of certain fees.

 

The intention to limit “junk fees” also extends to restaurants and hotels that in some jurisdictions are required to clearly state service fees and to restrict imposition of charges without a specific explanation and express agreement by the patron.

 


 

Sodexo Promoting Plant-Based University Meals

Sodexo, a multinational food service company specializing in institutional and educational catering, is a force in promoting plant-based protein. The Company has established a goal of serving half of all meals as plant-based by 2025. 

 

 Their latest initiative is to install two separate serving stations in dining halls.  One termed DefaultVeg will serve only plant-based items.  A second station will serve both plant-based and animal-derived meals. The DefaultVeg program was established in cooperation with the Better Food Foundation and the Food for Climate League.

The implications of promoting plant-based meals to university students are self-evident.  Successive generations of students will be attuned to plant-based servings irrespective of cost and quality compared to animal-derived products.  The promotion of plant-based meals will be accompanied by appropriate publicity emphasizing welfare and sustainability benefits that may or may not be valid.


 

AVIX Laser Bird Repellent System Offers Protection from HPAI

It is now an established reality that migratory waterfowl carry and disseminate highly pathogenic avian influenza virus. In addition there is circumstantial evidence that domestic non-migratory bird species may have become involved in the persistence and spread of the infection.  This is based on the incident outbreaks in backyard farms that serve as sentinels. Weekly reports confirm the presence of H5N1 avian influenza virus during early spring in diverse states ranging from Oregon to Massachusetts and from the Dakotas to Texas and before waterfowl have commenced their northward migration.

 

Preliminary epidemiologic studies by APHIS have identified proximity of wild birds as a significant risk factor in cases of avian influenza in commercial egg and turkey farms.  Anecdotal and preliminary field evidence suggest that avian influenza virus can be transmitted over distances of up to a mile if entrained on dust with high winds.  Aerogenous transmission of Newcastle disease virus was confirmed during the 1972 outbreaks in Essex in the U.K. and there is no reason to reject a parallel for avian influenza.  If this is in fact valid, even the strictest biosecurity measures cannot absolutely eliminate the risk of introduction of avian influenza, especially for large egg complexes with houses operated with exhaust ventilation at displacement rates exceeding 1.5 million cfm.

It would seem appropriate therefore to prevent contact between wild birds and enclosed poultry.  Air filters are impractical, cannons have proven to be inconsistently effective, installation of screens over lagoons is expensive and so a more efficient alternative is required to supplement intense structural and operational biosecurity.

 

Bird Control Group in the Netherlands has developed the AVIX Autonomic Laser Bird System that deters a wide range of bird species from congregating and roosting in favored areas providing feed and sanctuary.  Developed originally for protection of fruit and crops, AVIX is now used as a bird deterrent for livestock and poultry facilities in addition to feed mills, barns and lagoons.  The system emits a green laser beam that is perceived by birds as an aerial predator.  The natural reaction of a flock is to take to the air as soon as the first bird recognizes the sweep of the beam.

 

The effectiveness of the system in deterring wild birds was demonstrated in controlled studies conducted by scientists at Wagenigen University in the Netherlands. Currently five units are being evaluated on turkey farms in Minnesota under the state Department of Agriculture under a ‘Livestock Protect’ grant. Some U.S. egg producers at locality risk are installing AVIX laser units on towers on their farms.

 

The system if correctly installed will reduce the gathering of birds within the range of the AVIX laser emitter by 80 to 95 percent.  The system is effective, providing it is continually operational.  The studies conducted in Holland by Dr. Armin Elbers, senior epidemiologist at Wageningen University and Research reported to the International Egg Commission that protection is provided over a range of 600 yards.  Field trials demonstrated the absence of wild birds, principally migratory waterfowl, during the period of operation despite the presence of waterways in the vicinity of farms.  Deactivating the laser invariably resulted in return of waterfowl.

 

From information provided by the U.S. Representative of the Bird Control Group, an installation costs approximately $15,000.  The beam circulates through 180º and can be pre-programmed for optimal coverage depending on topography.

 

Based on the results of U.S. evaluation, a subsequent feasibility study will be prepared taking into account the risks and consequences of exposure to HPAI and the potential financial benefit from installation of the system.

It is emphasized that there is no single protective modality that is absolutely effective against introduction of HPAI into commercial flocks.  The AVIX Autonomic Laser Bird Repellent System addresses a specific and highly significant risk factor.  It is emphasized that both structural and operational biosecurity is required to prevent infection by obvious routes including personnel, vehicles, flock transfer and other fomites.  The AVIX Autonomic System offers producers with a high level of biosecurity an additional means of protecting flocks against aerogenous infection.

 

Ultimately protection from endemic HPAI will require a combination of measures including repelling migratory waterfowl and domestic birds, high levels of structural and operational biosecurity and eventually effective immunization.

 

For further information on AVIX access the Bird Control Group website www.birdcontrolgroup.com or contact Craig Duhr (469) 345-9711 at <c.duhr@birdcontrolgroup.com>.


 

Ongoing Outbreaks of Salmonella Mbandaka in Europe

An ongoing outbreak of Salmonella Mbandaka infection commencing in 2021 has resulted in 300 diagnosed and confirmed cases through March 2024.  Outbreaks have been recorded in the U.K., Finland, France, Germany and the Netherlands.  Extensive, epidemiologic investigations including whole genome sequencing have identified the source as steam-cooked chicken breast  and other products from Ukraine.

 

According to the European Commission, corrective measures have been implemented in the implicated plant with enhanced surveillance and upgrading of food safety.

 

The persistence of one strain for over four years suggests vertical transmission that should be evaluated.  It would be interesting to learn whether producers in Ukraine and specifically the single largest integrator and exporter have implemented preventive vaccination at either or both the breeder and grow-out levels.


 

Sugar Producers Subject to Class-Action Lawsuit Alleging Price Fixing

KPH Healthcare Services a subsidiary of Kinney Drugstores has filed a class-action lawsuit against ASR Group International and other major sugar producers in the U.S. District Court for the Southern District of New York.  Co-defendants include Domino Foods Inc., United Sugar Producers and Refiners Cooperative and Commodity Information, a benchmarking service. The plaintiffs allege, “that defendants and co-conspirators artificially inflated the price of granulated sugar from the distributors.”

 

The case follows unsuccessfully attempts by the Department of Justice to block the acquisition of Imperial Sugar Company by U.S. Sugar Corp. in 2022. Despite courts ruling against the DOJ, it is apparent that current litigation may intensify action against amalgamation especially if it can be proven that consolidation would result in increased prices.  This has implications for any segment of the food industry that is moving towards oligopoly.

The DOJ and the FTC are apparently insensitive to the intrinsic benefits of economies of scale.  It is justifiable for intervention if collusion in determining price can be proven. Opposing mergers intended to restructure segments of production to improve efficiency should be regarded as unacceptable in a free-market economy.


 

Campbell Soup Company Served with a Lawsuit over Alleged Lake Erie Contamination

The Department of Justice (DOJ) has filed a lawsuit against Campbell Soup Company alleging violative release of phosphorus and pathogens apparently arising from their Napoleon, OH. plant into the Maumee River feeding Lake Erie, The release of phosphorus into waterways contributes to eutrophication resulting in undesirable “algae blooms”.

 

The DOJ lawsuit followed separate legal action by nonprofits, Environment America and the Lake Erie Waterkeepers in the U.S. District Court the Northern District of Ohio.

 

To their credit, Campbell Soup recognizes the seriousness of the allegations and has worked with nonprofit environmental activist organizations to rectify deficiencies in wastewater treatment.

 

A spokesperson for the National Environmental Law Center noted, “We commend Campbell for its willingness to work cooperatively with us and the federal government to forthrightly address its longstanding compliance problems rather than spend its time litigating.”  He added, “Filing our lawsuit today will enable us to move forward quickly should negotiations breakdown.”

 

It is evident that the current Administration is active in addressing noncompliance over wastewater treatment and appears to make common cause with nonprofit activists’ organizations.  This has implications for all agricultural operations that generate waste.


 

Livestock and Poultry Producers Could Benefit from the Proposed 2025 Budget

The National Pork Producers Council has applauded provisions in the proposed 2025 Budget that would allocate $29 billion in discretionary funding to the USDA.  The pork industry will benefit directly from approximately $5 billion for a Swine Health Improvement Plan paralleling the National Poultry Improvement Plan.  The National Veterinary Stockpile would benefit from additional vaccines and therapeutics required to respond to a disease outbreak.  The 2025  USDA budget also includes $3.8 billion for research education and extension.

 

To date there have been no similar comments from organizations representing the poultry industry.  Given that highly pathogenic avian influenza, that now appears to be endemic, has resulted in severe economic losses for the turkey and egg production sectors, specific allocations will be required to promote health of U.S. flocks. 

 

It is hoped that the $29 billion in discretionary funding allocated to the USDA will be assigned in an equitable manner and not used mainly to pursue the current programs of restructuring the meat and poultry industries, environmental remediation and to address the needs of “underserved and minority” farmers.


 

Move to Ban U.S. Mink Production

The Minks Superspreaders Act (MINKS) introduced into the 117th Congress in 2021 will once again be promoted with bipartisan support in the House.  Sponsored by Rep. Nancy Mace (R-SC) and Rosa DeLauro (D-MA) and with support from House members from Texas, Pennsylvania, New York and New Jersey, the proposed MINKS are Superspreaders Act would prohibit the possession, transport and sale of captive farm-raised mink for fur production.  In 2023 mink production will decline below one million animals from 50 farms.  According to USDA, in 1966 there were 6,000 mink farms producing 6.2 million pelts annually. Almost all mink pelts produced in the U.S. are sold to China.

 

Concern over mink as a source of zoonotic viruses emerged with evidence that captive mink were susceptible to SARS-CoV-2 with animal-to-animal transmission and the emergence in Scandinavia of strains with mutations pathogenic to humans.  Additional evidence of mink as a potential generator of zoonotic viruses was evidenced by H5N1 avian influenza on a mink farm in Spain in 2023. 

The potential for an emerging epidemic from farmed mink is realistic and the persistence of this anachronistic segment of livestock production imposes a risk that is disproportionate to the potential benefits to the U.S. agricultural economy.

 

Despite the legislative burden faced by the 118th Congress it is hoped that the MINKS Superspreaders Act will be considered as a bipartisan non-contentious bill with expedited passage through both the House and Senate without narrow parochial considerations and lobbying obstructing enactment.


 

USDA to Conduct Trade Mission to South Korea

The U.S. and South Korea celebrated the 10th anniversary of a free trade agreement in 2022.  In 2023, U.S. agricultural exports to South Korea attained $8 billion.

 

The volume of trade between our nations should be increased by the mission comprising 48 agribusiness and farm organizations and five state Departments of Agriculture that took place from March 25th through 28th. The mission reinforced existing arrangements and established new contacts for a wider range of U.S. products.

The American Egg Board was represented by president and CEO Emily Metz and by Greg Hinton, VP of Sales at Rose Acre Farms.

 

In calendar 2021, South Korea was the third largest importer of U.S. table eggs with 37.8 million dozen valued at $46.7 million.  The high volume was attributed to outbreaks of HPAI in South Korea reducing domestic supply.  Concurrently, South Korea imported 5,140 metric tons of egg products from the U.S. valued at $13.3million, up 203 percent in volume and 131 percent in value from the previous year during which 1,701 metric tons were imported from the U.S.  During calendar 2022, South Korea imported 2,171 metric tons of egg products, down 58 percent in volume and 44 percent in value as domestic production responded to restoration of flocks.  In calendar 2023, South Korea was not among the top seven importers of shell eggs but imported 1,141 metric tons of egg products valued at $5.3 million, 45 percent lower in volume and 25 percent in value compared to 2022.

 

Experience and data confirm that South Korea, among other nations, import eggs and egg products only as required. Landed price and availability are the major determinants of the purchase decision. Shell eggs and egg products are essentially commodities with negligible product differentiation.

 

The statement that “The AEB is working to drive demand for egg products and build the industry’s trade capacity to facilitate the export of egg products” is subject to question given the motivation to purchase by importers.

 

While trade missions provide an opportunity to create new markets for existing products, and to establish contacts with the new importers, South Korea is well aware of the availability of table eggs and egg products from the U.S. with price as the major consideration in the purchase decision.  There is obvious recognition of the potential for export of egg products but in this market, the U.S. will compete with India, a low-cost supplier with more favorable transport costs to importers in Asia.  A potential point of product differentiation could be the reality that U.S. egg products are devoid of antibiotic residues in comparison with imports from India.

 

The value of the previous American Egg Board trade mission to South Korea and Japan and the recently concluded program will be confirmed by actual export data.  Aspiration is commendable but results are definitive.


 

Federal Government Funded through October 1st

With the enactment of the second tier of appropriations, amounting to $1.2 trillion, all federal agencies are fully funded through October 1, 2024.

 

The final bipartisan funding bill was effectively six months late and required four continuing resolutions.  The House passed the measure on Friday 22nd with considerable rancour.  The Senate passed the appropriations in a 74 to 24 vote in the early hours of Saturday morning followed by the signature of the President.

It now falls to the Speaker of the House Rep. Mike Johnson (R-LA) to appease his right flank and hopefully consider and pass necessary bills that have remained in abeyance during the conflict surrounding the appropriations bills.

 

The final agreement in the House represented a compromise that would normally be considered appropriate for a democratic government system.

 


 

Welcome to the Vencomatic Group

EGG-NEWS welcomes the Vencomatic Group as a sponsor.  The Company was founded in 1983 by the van de Ven family in their Eersel, location in the Netherlands.  The Group has expanded to include major operating segments comprising Agro Supply, Prinzen, Van Gent and Vencomatic.  Vencosteel is a dedicated supplier of metal components including stainless and specialty steel with an output of 6,500 tons annually.  The Vencomatic Group operates subsidiaries in the U.S. (Adel, IA), in Sao Paulo State (Brazil) and in France, Spain, the U.K., China and Malaysia.

The company posted revenue of $175 million worldwide in 2023 and has 500 employees interacting with 100 suppliers and strategic partners worldwide. The Headquarters Complex in Eersel is uniquely shaped to resemble an egg, recognizing the focus of the company

Vencomatic pullet rearing systems include:-

 

  • The multi-tier Unistart that simplifies vaccination and handling and allows complete visual observation of flocks contributing to uniformity in growth and development.
  •  The Bolegg starter system is designed for compatibility with the Bolegg aviary.  Features of this system include the winchable platforms for water and feed to train flocks. 
  • The Jump-Start system allows chicks to be placed on slats with access to feed and water.  Feeding and drinking levels are raised as pullets grow to encourage development of muscles and balance to allow subsequent use of perches.

Vencomatic aviaries include:-

  • The Bolegg Gallery aviary is a multi-tier system allowing natural behaviors.  The gallery incorporates the Vencomatic laying nest with a tipping floor, Vencobelt egg collection and Vencoslat flooring. 
  • The Bolegg Terrace aviary system permits obstacle-free movement vertically within the system reducing cross transition between rows that uses energy and subjects hens to injury.  The location of perches, drinkers and feeders allows the flock to move along the full length within the system.

Vencomatic developed the ECO heat exchanger to reduce energy requirements and to reduce feed intake under cold conditions.

 

The Meggsius range includes a machine-vision egg sorter that restricts introduction of leakers into the grader. The Meggsius belt control system accurately counts eggs and modulates conveyor speed to ensure optimal operation of graders and reduces rejects occurring during transit from houses to packing plants.


 

Soybean Production Faces Challenges

During calendar 2023, 49.0 million metric tons (1,800 million bushels) of soybeans were exported by the U.S. valued at close to $30 billion.  China was the leading importer receiving 50.6 percent of shipments.  For the 2023-2024 marketing year to date, exports are 18.3 percent lower compared to the previous market year mainly due to lower orders from China.  This is attributed to reduced production of pork, preferential purchases from Brazil and a concerted attempt by the Government of China to reduce inclusion rates of soybean meal in livestock feeds. 

For consecutive calendar years 2017 through 2019 the U.S. supplied 34 percent of soybean requirements for China amounting to 95.5 million metric tons (3,508 million bushels).  There was a sharp decline in exports thereafter during the years of trade instability and reciprocal raising of tariffs. Finalization of the Phase-1 Trade Agreement promised restoration to 95.0 million metric tons for the 2020-2021 market year but shipments only attained 60.3 million metric tons (2,215 million bushels).

 

In a recent CoBank Report authored by Brian Earnest and colleagues, crush margins will be under pressure over the long term based on increased capacity relative to static domestic offtake of soybean meal and concurrent importation of vegetable oils including canola and palm oil.

 

The demand for biodiesel will be the only saving grace for soybean producers and crushers over 2024. Approximately 41 percent of soybeans will be consigned to biodiesel production. Projected demand for soy oil and soybean meal will have to be considered by farmers in their 2024 planting decision.

 

The CoBank Report concluded that a 23 percent overcapacity in the U.S. soybean crushing sector by 2027 will be detrimental to crush margins and indirectly to the price of soybeans.


 

CoBank Macroeconomic and Spring Update

In this second quarter update on the economy, grains and farm supply sectors, CoBank Knowledge Exchange experts Rob Fox, Tanner Ehmke and Jacqui Fatka examine key questions, including: 

 

  • The Fed is promising rate cuts, but are they warranted?
  • Is inflation really under control?
  • Did USDA’s Prospective Plantings Report hold any surprises?
  • Have soybean crush margins bottomed out?
  • What do soil moisture levels look like heading into spring?

 

REGISTER NOW

DATE

April 10, 2024

TIME

10 a.m. PT / 11 a.m. MT / 12 p.m. CT / 1 p.m. ET


 

USDA Weekly Egg Price and Inventory Report, March 27th 2024.

Market Overview

 

  • The average wholesale unit revenue values for Midwest Extra-large and Large sizes were up by 10.7 percent and Medium size was up 13.5 percent this past week. Wholesale prices for Midwest in cartons were approximately equivalent to the 3-year average of $2.25 per dozen during mid-March. This past week shell egg inventory was down by 10.3 percent, following a fall of 3.2 percent the previous week. Although there has been a 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 pre-Easter 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 9.0 percent overall this past week to 1.51 million cases with a concurrent 3.3 percent decrease in breaking stock, following a 6.0 percent fall during the preceding processing week. Demand for egg products presumably increased 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 $1.15 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 current phase of the epornitic appears to be over with migratory birds having moved south following colder weather in January. Sporadic cases in backyard poultry in widely diverse states continue. 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 apparently up by 4.5million hens (1.5 percent) to a new level of 306.6 million for the week ending March 27th This large increase in one week suggests an undercount in previous weeks with apparently low levels of hens entering production. The stated total flock of 312.2 million included about one million molted hens that will resume lay during coming weeks plus 4.5 million pullets scheduled to attain production. Given the latest figures it is estimated that the producing flock is at least 15 to 17 million hens lower than before the onset of HPAI in 2022. It is evident that USDA provided a more realistic figure of flock size in January having adjusted figures to account for depopulation of 13 million hens spread over the last quarter of 2023. There were evident discrepancies between published figures and the theoretical number of hens taking into account known losses and predetermined pullet replacements.
  • The ex-farm price for breaking stock (rounded to one cent) was up 4.3 percent to $1.58 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 25th 2024, the Midwest wholesale price (rounded to one cent) for Extra-large was up 10.6 from last week to $2.41 per dozen. Large was up 10.7 percent to $2.39 cents per dozen. Mediums were up 13.5 percent to $2.28 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 25th edition of the USDA Egg Market News Report confirmed that the USDA Combined Region value (rounded to the nearest cent), was up $0.02 per dozen to $2.25 per dozen delivered to warehouses for the week ending March 18th 2024. This average price lags current benchmark Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $2.16 per dozen. At the high end of the range, the price in the South Central region attained $2.32 per dozen. The USDA Combined Price last week was approximately equivalent to the 3-year average of $2.25 per dozen. This past week Midwest Large was approximately $1.15 per dozen below the corresponding week in 2023 that was rising on demand to $3.40 per dozen as production recovers from HPAI depletion and with declining to stable market demand.

 

Flock Size 

Previously the loss of approximately 13 million hens due to HPAI during the fourth quarter was not reflected in weekly USDA figures until the beginning of February. Increases in flock size during late February and early March amounted to fractions of a percent. The USDA has now published data to reflect previous losses due to HPAI depopulation and molted flocks reentering production to satisfy pre-Easter demand.

 

Given the importance of weekly flock numbers to pricing, accurate values for producing and total flock are required by producers.

 

According to the USDA the number of producing hens reflecting March 27th 2024 (rounded to 0.1 million) was apparently up a questionable 4.5 million million as an adjustment from last week to 306.6 million. The total U.S. flock includes about one million molted hens due to return to production Approximately 5.0 million pullets on average reach maturity each week, based on USDA monthly chick-hatch data for 20-weeks previously. The increase is offset by routine flock depletion and an additional loss of approximately 13 million hens during the last quarter of 2023. To date some flocks have been replaced. Based on inventory level and prices, the population of hens producing table eggs and breaking stock should now be producing at or below pre-Easter demand by consumers. Industrial and food service off-take although increasing, is approaching pre-COVID levels. Prices will continue to fluctuate but commenced a seasonal albeit late rise in price two weeks ago.

 

According to the USDA the total U.S. egg-flock on March 27th 2024 was stated to be up by 5.8 million hens to 312.2 million including second-cycle birds and those in molt. The weekly difference of 5.6 million hens between flocks in production and total hens is an approximate value with the difference of 1.3 million hens from last week denoting that molted hens are resuming production consistent with current demand. Given the season and the trajectory in benchmark wholesale prices, only a few older flocks were molted or depleted during March. At present it is estimated that there are 15 to 17 million fewer hens in the total flock now reflected in weekly USDA figures. The apparent difference is equivalent to about 4.9 percent of the pre-HPAI 2022 national flock of 326 million hens.

 

INVENTORY LEVELS

Cold storage stock of frozen products in selected centers on March 25th 2024 was 2.334 million pounds (1,061 metric tons), down 3.8 percent from 2.426 million lbs. on March 1st 2024. The monthly USDA Cold Storage Report below quantified an increase in the actual total stock level at the end of December.

 

The most recent monthly USDA Cold Storage Report released on March 25th 2024 documented a total stock of 30.6 million pounds (13,928 metric tons) of frozen egg products on February 29th 2024. This quantity was up 20.0 percent from the February 28th 2024 value of 25.5 million pounds. February 29th 2024 frozen egg inventory was up 4.2 percent from the previous month ending January 31st 2024 attributed to presumably slightly lower domestic or export demand or their combination. Compared to February 28th 2023 inventory of whites was up 2.9 percent to 2,993 million lbs. on February 29th 2024. Compared to February 28th 2023 yolk inventory was down 11.5 percent to 697 million lbs. on February 29th 2024.

A total of 88.0 percent (27.0 million lbs.) of combined inventory comprised the categories of “Whole and Mixed” (40.3 percent) and “Unclassified” (47.7 percent). The lack of specificity in classification requires a more diligent approach to enumerating and reporting inventory by the USDA.

 

Shell Inventory

 

The USDA reported that the national stock of generic shell eggs effective March 25th 2024 was down 9.0 percent over the previous week. Inventory over the past week followed a fall of 3.0 percent the previous week confirming low seasonal consumer demand reflected in the orders placed by buyers of the major chains. Combined with breaking stock, the total inventory of shell eggs in industry cold rooms is now at a rounded level of 1.51 million cases (1.66 million last week; 148,900 cases lower this week). The U.S. population of laying hens at this time is influenced by:-

 

  • Losses following outbreaks of HPAI with the depopulation of over 13.0 million hens during the fourth quarter of 2023.
  • The population unaffected by HPAI.
  • Flocks retained after molting with an anticipated decrease in this category as influenced by prevailing wholesale egg prices, and indirectly responding to fourth Quarter 2013 flock depopulation from HPAI.
  • Started pullets from chick placements during early October 2023. Going forward, younger hens will assume a larger proportion of the national flock as more flocks are placed compensating for the flocks depleted due to HPAI.

 

All six USDA Regions reported lower stock levels this past week. The six regions are listed in descending order of stock: -

 

  • The Midwest Region was down a noteworthy 15.4 percent from the previous week to 399,200 cases.
  • The Southeast Region was down 6.6 percent to 258,700 cases
  • The South Central Region was down 11.1 percent to 221,700 cases
  • The Northeast Region was down 0.1 percent to 165,100 cases
  • The Southwest Region was down 7.1 percent to 115,200 cases.
  • The Northwest Region was down 17.1 percent to 57,200 cases

 

The total USDA six-area stock of commodity eggs comprised 1,512,100 cases (1,661,000 cases last week), down 9.0 percent, of which 80.5 percent were shell eggs (81.6 percent last week). The inventory of breaking stock was down 3.3 percent to 295,000 cases. Shell-egg inventory was down 10.3 percent attaining 1,217,100 cases. These changes are a function of regional shell-egg demand coupled with a response to erratic re-stocking as buyers take advantage the industry benchmark price discovery system. A reduction in the incidence rate of HPAI may influence buyers who are now less concerned over short-term availability.

 

A fall in breaking stock was recorded over the past week despite some diversion to the shell egg market. Subsequent weekly stock levels of shell eggs will indicate the extent of industrial and consumer demand. Breaking is stimulated by conversion to egg powder and liquids for export and by higher seasonal pre-Easter demand for liquids by industry and food service. The average price for Midwest checks and breaking stock combined was 61.8 percent of the average value of Midwest Extra-large and Large shell eggs (67.5 percent for previous week) consistent with a 10.7 percent higher price for shell eggs this past week compared to breaking stock and checks combined that were up on average by 2.1 percent. The differential of 61.8 percent can be compared to 80.0 percent in April 2022 reflecting the initial period of high demand for both shell eggs and products. This demonstrates the respective demands for shell eggs and egg products and the interconnectivity of the packing and breaking segments of the egg industry under circumstances of extreme disturbances in either supply (lower due to HPAI in 2022) or demand (higher during early COVID in 2020). The price for breaking stock and for checks is influenced by the relative demand for generic shell eggs and contract obligations with breakers.

 

On March25th 2023 the inventory of other than generic eggs amounting to 416,500 cases (down 2.0 percent from last week at 424,900 cases) among three categories (with the previous week in parentheses) comprised: -

 

  • Specialty category, down a noteworthy 15.2 percent to 32,100 cases on promotion. (was up 14.6% to 37,900 cases)
  • Certified Organic, up 4.3 percent to 90,800 cases. (was up 1.6 % to 87,100 cases)
  • Cage-Free category, down 5.3 percent to 293,600 cases. (was down 1.3% to 309,900 cases)

 

Demand for cage-free product will not increase materially over the intermediate term while generic eggs from caged flocks and some surplus down-classified cage-free eggs are on the shelf at $2.40 to $2.60 per dozen during normal supply and demand conditions. Currently there is a small differential in shelf price between conventional caged eggs compared to cage-free white but a wider difference between higher priced omega-3 enriched, cage-free, free-range and pasture-housed products. That the higher priced egg categories will experience an erosion in demand as generic prices fall is supported by the findings of a comprehensive review relating to the transition from cages to alternative systems.*

 

Existing and proposed individual state legislation mandating sale of only cage-free eggs will support most of the completed and anticipated transition from cages but significant additional re-housing will not be completed by the beginning of 2025, less than 9 months away and clearly never, as projected by most industry observers. The constitutional status of Proposition #12 was confirmed by SCOTUS in a May 11th 2023 decision with specific reference to the dormant Commerce Clause relating to interstate trade. It is unlikely that a legislative initiative (the EATS Act) will be incorporated into the 2023 Farm Bill (that will be delayed beyond April 2024 due to Committee deadlock), to limit the impact of Proposition #12 on sows housed for pork production. Many retail chains are ‘renEGGing’ on or extending their time commitments to achieve an acceptable transition to cage-free eggs despite coercion by animal welfare groups. The State of Utah is extending the deadline by five years. With the current proportion of non-caged flocks and lower prices for generic cage-derived eggs, cage-free eggs are surplus to demand in some areas. Organic eggs are subject to price pressure in many markets especially those served by club stores. Inventory of this category is holding solidly below 100,000 cases with this quantity representing the approximate production of three days of lay. Long-term demand for cage-free eggs will be influenced by the relative shelf prices of the category in comparison with generic white-shelled eggs from caged flocks. Inventory of this category fell below the 300,000-case benchmark this past week, but effectively is working stock given weekly production of 1.7 million cases per week. At the other end of the price range, consumers will purchase less-expensive brown cage-free product over organic eggs when there is a differential in price greater than about $1.20 per dozen under normal conditions of supply and demand. Similarly, consumers will traditionally purchase white-shelled generic eggs in preference to white or brown-shelled cage-free with a differential of over $1.20 per dozen.

 

A comprehensive structured market research project on cage-free eggs has provided an indication of consumer willingness to pay for this attribute. The industry requires a study on other aspects including shell color, GM status and nutritional enrichment using conjoint analysis. Above all, agricultural economists should evaluate the impact of disruption in supply and demand arising from large-scale depopulation following the 2015 and 2022-2023 HPAI epornitics and the current wave of outbreaks extending through partial restoration of hen numbers but with a disproportionate decline in wholesale prices.

 

*Caputo,V. et al The Transition to Cage-Free Eggs. February 2023

 

RELATIVE PRICES OF SHELL-EGG CATEGORIES

USDA-AMS posted the following national shell egg prices as available, for March 22nd 2024 for the preceding week in the Egg Markets Overview report for dozen cartons with comparable prices in parentheses for the previous week: -

 

Retail Prices

Large, in cartons generic white: $1.58 Down 48.7 percent ($3.08)

Large, in cartons cage-free brown: $2.82 Down 15.3 percent ($3.33)

 

Wholesale

Midwest in cartons $2.17 Up 0.9 percent ($2.26)

Large C-F, California in Cartons: $2.91 Unchanged ($2.91)

National loose, (FOB dock): $2.04 Up 4.6 percent ($1.95)

NYC in cartons to retailer: $2.55 Up 8.5 percent ($2.35)

 

Regional in cartons to warehouse reported March 22nd for previous week.

Midwest $2.16 Up 0.9 percent ($2.14)

Northeast $2.21 Up 0.9 percent ($2.19)

Southeast $2.30 Up 0.9 percent ($2.28)

South Central $2.32 Up 0.9 percent ($2.30)

Combined $2.25 Up 0.9 percent ($2.23)

 

WEEKLY ADVERTISED PRICES OF SHELL-EGG CATEGORIES W/E MARCH 28th.

USDA Certified Organic, Brown, Large: $5.02 ($5.03)

Cage-Free Brown, Large: $3.00 ($3.39)

Omega-3 Enriched Specialty, White, Large: $2.72 ($2.78)

Generic White, Large Grade A $2.04 ($1.99)

 

The advertised price for Large white grade A as featured for the week ending March 25th was $2.04 per dozen, (243 stores) up $0.05 or 2.5 percent above $1.99 per dozen last week. Current supply was probably in balance with retail demand the previous week given the fall in inventory held by the industry as reported by the USDA. Independent producers continue to divert shell eggs from breaking to the higher-priced shell market. Large integrated companies and packers continued to deliver to DCs and this week chains increased orders to stock stores in anticipation of pre-Easter demand

 

The USDA benchmark-advertised retail price for certified organic for the week was $5.02 per dozen, (493 stores), down $0.01 per dozen or 0.2 percent from the USDA price of $5.03 per dozen posted last week. A USDA advertised price of $3.00 per dozen was posted for cage-free brown during the past week (66 stores?), down $0.39 per dozen or 11.5 percent from last week at $3.39 per dozen. The price differential between USDA organic and cage-free brown of $2.03 per dozen will favor cage-free brown at the expense of certified organic eggs. Week-to-week single digit fluctuations expressed as a percentage can be expected in the stock of specialty and organic eggs based on the small base of these categories. There was a moderate upward movement in the inventory of certified organic this past week consistent with decreased demand for this category based on price and promotion of cage free eggs.

 

Cage-free brown at $3.00 per dozen was $0.49 per dozen (19.5 percent) higher than cage-free white at $2.51 per dozen (140 stores).

 

Certified organic was promoted this past week at 16.6 percent of the total, consistent with a slightly higher inventory, (last week 28.3 percent of features). Omega-3 enriched comprised 30.1 percent of features with substantially lower inventory (15.5 percent last week). Cage-free was at 11.2 percent with lower stock (52.6 percent last week). This past week Large size comprised 11.2 percent of features as the only generic down from 4.1 percent collectively last week. This confirms that retailers promote any category if available in excess of demand.

 

USDA Cage-Free Data

 

According to the latest monthly USDA Cage-free Hen Report released on March 1st 2024, the number of certified organic hens in Fee was down 0.5 percent from January 2024 at 18.3 million, (rounded to 0.1 million).

 

The USDA reported that the cage-free (non-organic) flock in February 2024 was up 2.1 percent from January 2024 to 106.5 million, (rounded to 0.1 million).

 

According to the USDA the population of hens producing cage-free and certified organic eggs in February 2024 comprised: -

Total U.S. flock held for USDA Certified Organic production = 18.3 million (18.7 million in Q4 2023).

Total U.S. flock held for cage-free production = 106.5 million (106.4 million in Q4 2023).

Total U.S. non-caged flock =124.8 million (125.1 million in Q4 2023).

 

This total value represents 38.3 percent (January, 37.5 percent) of a nominal 326 million total U.S. flock pre-HPAI in 2022 (but 40.7 percent of the national flock after HPAI mortality to a presumed January complement of 307 million in production). Hens certified under the USDA Organic program have decreased in proportion to cage-free flocks since Q1 of 2021.

 

The accuracy of individual monthly values is questioned given a history of either constant numbers or a sharp change in successive months as documented over the past two years. It is currently not possible to reconcile the USDA values for the number of cage free hens with known HPAI depopulation and projected replacement and assumed routine depletion. USDA adjusted the total and producing flocks in late February to account for depopulation due to HPAI. It is anticipated that the April release will reflect a realistic number of producing hens housed cage-free during the first Quarter of 2024. Precise quarterly reports would be more suitable for the industry in planning expansion and allocation of capital than inaccurate monthly values.

 

Processed Eggs

 

For the processing week ending March 23rd 2024 the quantity of eggs processed under FSIS inspection during the week as reported on March 27th 2024 was down 1.7 percent compared to the previous processing week to a level of 1,411,363 cases, (1,435,735 cases last week). The proportion of eggs broken by in-line complexes was 53.8 percent with less diversion to higher-priced shell markets by uncommitted producers, (53.3 percent in-line for the previous week). The differential in price for shell sales and breaking will determine the movement of uncommitted eggs. This past week 71.1 percent of egg production was directed to the shell market, (70.3 percent for the previous week), responding to the differential in prices paid by breakers and packers. Breaking stock inventory was up 3.3 percent this past week to 295,000 cases. Apparent demand from QSRs and casual dining is at stable to slightly lower levels. There is ongoing demand from baking and eat-at-home despite the weekly fluctuation in the inventory of breaking stock. During the corresponding processing week in 2022 in-line breakers processed 50.9 percent of eggs broken.

 

For the most recent monthly report reflecting February 2024, yield from 5,462,517 cases (7,053,712 cases in January) denoted a decrease in demand for liquid and diversion to shell egg sales over the period February 4th 2024 through March 2nd 2024. Edible yield was 38.9 percent, distributed in the following proportions expressed as percentages: liquid whole, 60.1; white, 24.0; yolk, 12.4; dried, 3.3.

 

All eggs broken during 2023 attained 69.78 million cases, 8.4 percent less than 2022. Eggs broken in 2024 to date amounted to 16.75 million cases, 1.7 percent less than the corresponding period in 2023. This is attributed to moderately increased demand for egg liquids from retail, food service and QSRs and casual dining restaurants. Consumers are constrained by economic uncertainty following the ending of COVID support, moderate inflation, high credit card interest rates and a tendency to purchase only essentials.

 

PRODUCTION AND PRICES

 

Breaking Stock

 

The average rounded price for breaking stock was up 4.3 percent this past week to $1.58 per dozen with a range of $1.51 to $1.65 per dozen delivered to Central States plants on March 25th 2024. Checks were unchanged this past week at an average of $1.39 per dozen over the most frequent range of $1.37 to $1.39 per dozen suggesting that the market for breaking stock follows prices for shell eggs following pronounced up or down swings.

 

Shell Eggs

 

The USDA Egg Market News Report dated March 25th 2024 confirmed that Midwest wholesale prices for Extra-large and Large sizes were up 10.7 percent over the previous week. Mediums were up 13.5 percent to $2.28 per dozen. A lower inventory combined with a fractionally higher price, suggests that the market is operating with stable to slightly increased demand. The following table lists the “most frequent” ranges of values as delivered to warehouses*:-

 

Size/Type

Current Week

Previous Week

Extra Large

239-242 cents per dozen

216-219 up 10.6%

Large

237-240 cents per dozen

214-217 up 10.7%

Medium

226-229 cents per dozen

199-202 up 13.5%

Processing:-

   

Breaking stock

151-165 cents per dozen

150-153 up 4.3%

Checks

137-139 cents per dozen

137-139 unchanged 

*Store Delivery approximately 5 cents per dozen more than warehouse price

 

The March 25th 2024 Midwest Regional (IA, WI, MN.) average FOB producer price, for nest-run, grade-quality white shelled Large size eggs, with prices in rounded cents per dozen was up 9.9 percent from last week, (with the previous week in parentheses): -

  1. $2.27 ($2.06), (estimated by proportion): L. $2.23 ($2.03): M. $2.10 ($1.89)

 

The March 25th 2024 California negotiated price per dozen for cage-free, certified Proposition #12 compliant Large size in cartons delivered to a DC, (with the previous week in parentheses) was up 6.5 percent from last week, despite depopulation of a third of the laying hens in the state but offset by introduction from Midwest and Southwest supplying states.

  1. $3.14 ($2.98); L. $3.10 ($2.91); M. $2.92 ($2.82)

 

Shell-Egg Demand Indicator

 

The USDA-AMS Shell Egg Demand Indicator reported on March 27th 2024 was up 13.2 points from the last weekly report to 9.9 with a 9.0 percent decrease in total inventory and a 10.3 percent lower shell inventory from the past week as determined by the USDA-ERS as follows: -

 

Productive flock

306,547,669 million hens

Average hen week production

82.0%(was 82.3%)

Average egg production

251,478,383 per day

Proportion to shell egg market

71.1% (was 71.4%)

Total for in-shell consumption

496,929 cases per day

USDA Table-egg inventory

1,217,100 cases

26-week rolling average inventory

4.34 days

Actual inventory on hand

3.95 days

Shell Egg Demand Indicator

 +9.9 points (was -3.3 on March 20th 2024)

 

The USDA Monthly Report covering January 2024 production including text, tables, data and prices and the 2nd Quarter results for Cal-Maine Foods can be accessed under the STATISTICS tab.

 

Dried Egg Products

 

The USDA extreme range in prices for dried albumen and yolk products in $ per lb. was released on March 22nd 2024. Data for yolk and whole egg powder over the past week was available from the USDA. Values are depicted for the previous week and in parentheses for the week before that. Values for past months illustrate the trend in prices influenced by HPAI depopulation and subsequent repopulation:-

 

 Whole Egg

$5.00 to $6.70

(unchanged)

 

Average Sept. $ 6.51

Oct. $ 5.75

Nov. $ 5.75

Dec. $ 5.63

Jan. $ 5.40

Feb. $ 5.40

March $ 5.80

Yolk

$4.00 to $5.70

(unchanged)

Average Sept. $ 5.03

Oct. $ 4.75

Nov. $ 4.63

Dec. $ 4.55

Jan. $ 4.49

Feb. $ 4.85

March $ 4.85

Spray-dried white

No quotation, past week

Average Dec ‘22. $14.18

Jan. $14.18

March to Feb. ’24 No release

Blends

No quotation, past week

 

 

Frozen Egg Products

 

The USDA posted the range in prices for frozen egg products for the past week. Prices in cents per lb. based on the extreme range on March 22nd 2024 compared to the previous week showed fluctuation in price:-

 

Whole Egg

$1.34 - $1.401

$1.20 - $1.34

White1

$1.10 - $1.20

$1.08 - $1.13

Average for Yolks

$2.04 - $2.071

$2.01 - $2.08

  1. extreme range

 

Whole egg: Up 7.9%: Whites: Up 4.1%: Yolks: Up 0.5%

 

This indicated a relatively small increase in demand for yolks but higher demand for whole egg and whires from the manufacturing and food service sectors and for export. White was in excess of demand

 

February averages (January): Whole. $1.33, ($1.11); Whites, $1.26, ($1.08); Yolks, $1.91, ($1.87).

 

Liquid Egg Products

 

Values for Whites and Yolks covering non-certified truckload quantities have been released at irregular intervals over past weeks. Whole egg values attained on average 113 cents per lb. last week down 5 cents per lb. February averages (cents per lb.) are compared with January values (in parentheses): -

 

Whole, $1.10, ($1.01); Whites, $1.06 ($0.76); Yolks, $1.74, ($1.72).

 

The USDA has not released a report on dried egg inventory since March 13th 2020 due to inability to obtain data from producers, and will not issue reports for the immediate future.

 

COMMENTS

 

During the 4th quarter of 2023 and extending into January 2024, outbreaks of HPAI required depopulation of close to 13 million egg-producing hens. In contrast to 2022, broiler flocks were affected in 2023 with cases in California and Arkansas during fall of 2023 and subsequently in Nebraska. Incident outbreaks of HPAI have abated among turkey growing flocks with the last cases in NC and MO in January and February respectively. There are still incident cases recorded in backyard flocks and presumably free-living predatory birds and in scavenging carnivorous mammals and now dairy cows in three states. Given the risks and consequences of infection it will be necessary to continue to maintain high levels of structural and operational biosecurity with intensification persisting through the remainder of February. HPAI is now diagnosed seasonally in breeding colonies of marine birds in costal areas of Europe and sporadically in commercial flocks. Outbreaks in commercial flocks appear to be correlated with shedding of AI virus by migratory birds that have now moved southward with sharply colder weather in January. The downward trajectory in incident cases suggests a decline in outbreaks consistent with the pattern at the end of 2022.

 

Approximate losses in commercial flocks confirmed with HPAI and updates during the 2022/4 phases of the ongoing epornitic included:-

  • 6,900,000 broilers on 28 farms in 8 states during 2002 - 2023
  • 330,000 broiler breeders on 11 farms in 6 states.
  • 360,000 upland game birds October through December 2023.
  • 14,100,000 turkeys including breeder flocks in 8 states during 2022 and through 2023 year-to-date. During the past nine weeks losses have approximated 2.9 million growing turkeys with 63 incident cases confirmed in seven states (SD; ND; UT; MN; IA; WI, MI.).
  • 52,300,000 egg-production hens in total with 95 percent on 37 large complexes above 0.5 million in addition to 3,500,000 pullets with a total of 54 locations in 12 states. Pullet mortality does not include “at risk” replacements depleted on affected complexes with contiguous pullet rearing. Since October 2023 more than 13.0 million hens have been depopulated in 13 outbreaks.

 

Losses reported by USDA during the past week ending March 20th comprised three WOAH non-poultry flocks (ME.; TX.; OR.).

Depopulation of hens (rounded to 0.1 million) as a result of HPAI in the states most affected during the fourth Quarter of 2023 comprised: OH., (4.5 m.); CA., (3.2 m); IA., (2.7 m); KS., (1.5 m) and MN. (1.0m).

 

Backyard flocks (non-WOAH) allowed outside access will continue to be at risk of infection in the U.S. These small clusters of birds in both suburban and rural areas are of minimal significance to the epidemiology of avian influenza as it affects the commercial industry. Backyard flocks serve as indicators of the presence of virus among free-living birds as evidenced by ongoing outbreaks in commercial poultry flocks across the U.S. The late 2023-early 2024 epornitic evidently has a long tail. Recent outbreaks in backyard flocks especially in northern tier states suggest shedding by resident, non-migratory free-living birds that may have become reservoirs. This has implications for seasonality

 

The USDA-APHIS published a report on the results of epidemiologic studies* on farms in early 2022 and made available on July 25th. Results for 18 egg-production case farms and 22 control farms suggested higher risk of infection associated with the presence of a farm in a control zone, proximity of wild birds, mowing or bush hogging of vegetation adjacent to the farm, and off-site disposal of routine mortality. These factors suggest possible aerogenous introduction of virus shed by wild birds onto farms over short distances. This presumption is based on anacdotal observations and recent published research from Taiwan demonstrating avian influenza virus in air in proximity to migratory birds. The USDA study predictably suggested that protection was enhanced by effective structural and operational biosecurity. The validity of findings was limited by the confounding inherent to the diversity in size of flocks incorporated into the case-control study and deriving data from a 26 page questionnaire by telephone survey, months after outbreaks, introducing recollection bias and responder fatigue.

 

*Green, A. et al Investigation of risk factors for introduction of highly pathogenic avian influenza H5N1 virus onto table egg farms in the United States, 2022: a case-control study. Frontiers in Veterinary Science. Doi: 10.3389/vets.2023.1229008

 

It is hoped that APHIS recognises the need to provide the industry with science-based recommendations to prevent additional incident HPAI outbreaks. This presumes prompt analysis and reporting of whatever field and molecular epidemiology is collected. The Agency is also presumed to have planned epidemiologic field studies and allocated personnel and other resources in anticipation of a spring 2024 resurgence in HPAI. Given that large complexes in six states were infected during November and December, appropriate guidance from USDA-APHIS is anticipated by the Industry in advance of any spring or fall 2024 reoccurence. A release on the investigation of risk factors associated with outbreaks in dairy herds and a comment on wheter mutations have occurred in viruses isolated from infected animals would be instructive.


 

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.


 

Commentary


Senators Pressing USTR and USDA to Increase Agricultural Exports

On March 13th, almost all Republican members of the Senate signed a letter addressed to Katherine Tai, U.S. Trade Representative and Secretary of Agriculture Tom Vilsack expressing discontent with the decline in agricultural exports.  Specifically, the Senators requested information on specific actions the current Administration intends to implement to increase agricultural exports in 2024 and whether new or improved free-trade agreements will be entered into in the current year.

 

The Administration has urged Congress to fund market development programs that have some impact especially in new markets and for new products.  The U.S. exports mostly undifferentiated commodities as cotton, soybeans, corn, and rice.  These products are purchased by importers based on availability and landed price including ocean freight and duties. 

 

The letter from the senators takes issue with the Administration for pursuing an unambitious U.S. trade strategy that is “failing to meaningfully expand market access or reduce tariff and non-tariff barriers to trade.”  The Senators should remember that the previous Administration withdrew from the Trans-Pacific Partnership that was subsequently reconstituted to include eleven nations bordering the Pacific including Canada and Mexico and it eliminated a wide range of taxes and duties to the disadvantage of the U.S. Some bilateral trade agreements have been negotiated such as with Japan that was let down by the precipitous withdrawal by the U.S. in 2017.  The previous Administration imposed punitive duties on the People’s Republic of China that have been retained by the present Administration.

 

For consecutive years 2017 through 2019 the U.S. supplied 34 percent of soybeans requirements for China amounting to 96 million metric tons.  This was followed by decline to 17 percent of the requirements in 2018, followed by a lower proportion in 2019.  Despite negotiation of Phase I of a trade agreement, China did not follow through with imports of soybeans as negotiated. Demand by our major customer declined sharply during the current market year based on a reduction in pork production and Government restrictions on inclusion of soybean meal in diets for livestock.  Total exports of soybeans for the current year are 18.9 percent lower than for the corresponding week in the 2022-2023 market year.  In contrast, China continues to import corn with total exports for the current market year 31.5 percent higher than for the corresponding week during the previous market year.

 

 The Senators representing their agricultural constituencies fail to recognize the formidable expansion in production of soybeans and corn by Brazil and Argentine among other nations.  Russia has become a major exporter of wheat and despite lower harvest; Ukraine is still a major supplier. 

 

As we enter the second quarter of 2024, the demands for new free-trade agreements appear cynical in an expectation that the Administration is somehow required to pull reluctant rabbits out of a very large hat.  Due to no fault of the current Administration and based on the overhang of COVID on the World economy, competition at lower cost and domestic protectionism over at least two Administrations, there is an inevitability over declining exports.  Had the world entered into a depression following the COVID years, the situation would have been far worse?

 

The situation is somewhat reminiscent of Michael Dukakis campaigning for the Democratic candidacy in Iowa who opined that farmers were growing too much corn. He was asked by a farmer what he should grow other than corn at a time when the price was depressed.  The Candidate based on his elitist’s leanings suggests that “Belgian endives” were a suitable replacement, effectively scuttling support in the Midwest. Corn growers have the Renewable Fuel Standard that accounts for a third of the crop being converted to ethanol and with biodiesel absorbing 40 percent of soy oil. Both fuels benefit farmers at the expense of livestock producers and consumers and the respective industries would be non-viable without Federal mandates.

 

The Senators are asking the Administration to push a piece of string on agricultural exports. Importing nations make purchase decisions on commodities based on actual need and landed price in a competitive market. Demands to increase exports engenders favorable constituent approval and generates political points in an election year.

 

 

 


 

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