Following eleven successive increases in the 10-year benchmark interest rate the FOMC engineered a reduction in U.S. inflation as measured by the Consumer Price Index (CPI) from 8.9 percent in June 2022 to 3.5 percent in March 2024.  The increase in the benchmark interest rate did not result in unemployment and many influential economists predict a “soft landing”. 

Despite the substantial increase in the inflation rate, attaining an elusive FOMC inflation target of approximately 2.0 percent will be difficult to accomplish.  At the beginning of year, the market anticipated as many as six reductions in interest rates.  The five consecutive pauses suggested caution and based on CPI, wage and employment data there will probably be only one or two reductions of 0.25 percent each in 2024 and not before late summer.  Federal Reserve Chairman Powell, supported by Federal Reserve Governors, has stated in Congressional testimony and in public statements that decisions on reducing interest rates would be based on data with demonstrable progress in reducing inflation.

Energy is a major contributor to “sticky” inflation having increased by close to 25 percent since December 2023.  Although turbulence in the Middle East could have been a significant factor in the increase, effectively disciplined restriction in output by OPEC+ has maintained price above $80 per barrel.  As noted in successive weekly Economy, Energy and Commodity Reports in EGG-NEWS, the November reduction in OPEC+ output of 2.2 million barrels a day was extended through June representing two percent of global production.  Non-OPEC output including Brazil, Angola and the U.S. has in large measure moderated the effect of the OPEC+ constraints. OPEC+ has learned that high oil prices reduce demand, and the Cartel has acquired the skill and discipline to fine-tune supply to regulate price and to disfavor alternative sources of energy.

Restoration of the economies of the E.U. and China, concurrent with increased industrial activity, will however create further demand for crude and other forms of non-renewable energy with valid predictions of a rise in price.  Despite the reciprocal mutual attacks by Israel and Iran during the current month, the Brent Crude benchmark is still below $90 per barrel compared to a high of $95 in August 2023 and a recent low of $75 per barrel during November 2023.  Economists predict that if OPEC cuts hold, Brent Crude could reach $100 per barrel by mid-summer attributed to increased demand. 

Unknowns relating to future oil supply and prices will be influenced by possible reaction by Iran.  Obviously increased sanctions against the regime will evoke a response either by the rulers of that nation or their surrogates.  Interdicting transport of crude through the straits of Hormuz or additional action by Houthi rebels in the Bab-el-Mandeb strait could drive oil above $100 per barrel.  This would result in international action including pressure by China, the major purchaser of Iranian oil.  Given recent history, it is anticipated that Brent Crude will fluctuate between $85 and $90 per barrel though summer. Availability of domestic supply in the U.S. will probably constrain WTI crude at between $82 and $87 per barrel but higher prices will favor increased exports.

Since the price of oil is closely correlated with corn and other agricultural commodities, any escalation in price has implications for livestock production. Higher prices for diesel and gasoline will limit consumer spending with a negative effect on the earnings of food producers, distributors and retailers. According to the American Automobile Association

U.S. consumers paid on average, $3.66 per gallon for regular grade during mid-April.

 It is axiomatic that the pump price of gasoline will influence the November election with high prices attributed to the incumbent party, irrespective of justification.

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

On April 17^th 2024 the USDA Economic Research Service (ERS) issued confirmed values for egg production during 2022 with a projection for 2023 and a forecast for 2024. Production, consumption and prices were only slightly revised from the previous March 14^th 2024 report.

Projected egg production for 2023 was unchanged from the March 2024 Report at 7,864 million dozen This will be 0.5 percent higher than in 2022 due to progressive replacement of the 44 million hens depleted due to HPAI over the period extending from early spring through mid-December 2022. The per capita consumption of shell eggs and liquids combined for 2023 was unchanged from the March report at 279.3 eggs but down 1.2 eggs (0.4 percent) from 2022. The projected average 2023 benchmark New York bulk unit price was unchanged from the March report at 192 cents per dozen. This was 31.8 percent lower than in 2022 attributed to a comparison with unseasonal high prices from the end of March through the 2^nd Quarter of 2023.

Subsequent USDA projections will provide greater clarity on the recovery in consumption in an economy that is undergoing deflation. The 2023 Midwest in-carton national wholesale price peaked at $5.17 per dozen on January 3^rd 2023 but fell precipitously to a market bottom of $0.78 per dozen on May 8^th 2023. Price was restored during February 2024 and settled at $2.50 per dozen on April 12^th 2024, higher than for the post-Easter period. This was above the USDA/EIC projection of the combined nest-run March 2024 cost of 75.3 cents per dozen for caged white Large, plus a provision for processing, packaging and transport of 60 cents per dozen amounting to $1.35 cents per dozen delivered to a distribution center.

Restoration in flock size after HPAI flock depletions in 2022 progressed at a rate of approximately 0.5 million per week but placements were limited by the availability of pullet chicks and in some companies the rate of conversion to alternative housing systems. Restoration of the national flock was compromised by a resurgence of HPAI with 13.0 million layers depleted during the 4^th quarter of 2023 representing 4.0 percent of the nominal producing flock of 325 million hens, mainly on complexes averaging over one million hens. The cost of ingredients will influence margins and may result in cessation of production by some small-scale producers that run out of working capital since financial losses were incurred through summer up to mid-fall. Unpredictable factors affecting price will include the extent of losses during the spring of 2024 due to a predicted reemergence of avian influenza. Approximately 8.5 million hens have already been lost to HPAI during April to date involving mainly four large complexes. Exports of eggs and products at approximately two percent of total production will not materially affect the domestic price.

The lagging forecast for 2024 includes production of 7,920 million dozen, up 0.7 percent from 2023. Consumption will attain 280.6 per capita, up a more realistic 1.3 eggs or 0.5 percent above the projection for 2023. USDA project a NY-Large price of $2.03 per dozen up 5.7 percent from the average for 2023.

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

During 2023 shell egg exports attained 89.4 million dozen, up 28.6 percent compared to 2022 when high domestic prices prevailed. Egg products were up 18.2 percent to 20,814 metric tons compared to 2022. For the first two months of 2024 shell egg exports were up 8.9 percent in volume to 12.2 million dozen, down 26.7 percent in value to $24.1 million compared to the corresponding months in 2023. Unit value was down 26.9 percent to $1.98 per dozen.

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

Source: Livestock, Dairy and Poultry Outlook released April 17^th 2024

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

USDA Weekly Egg Price and Inventory Report, April 24^th 2024.

Market Overview

• The average wholesale unit revenue values for Midwest Extra-large, Large and Medium sizes were unchanged this past week. Wholesale price for Midwest in cartons at $2.50 per dozen was approximately $0.90 per dozen above the 3-year average of $1.60 per dozen and up $0.80 from the corresponding week in 2023 at $1.70 per dozen. This past week shell egg inventory was up by 1.5 percent, reversing a fall of 1.4 percent the previous week.
• Although there has been a weekly increase in pullet flocks transferred to laying houses, hen numbers are constrained by the loss of close to 13 million hens due to HPAI on twelve complexes holding from 250,000 to 2.6 million hens during the 4^th Quarter of 2023. Pullets are in short supply with losses of 2.5 million growing birds, mainly in California. Since the beginning of April close to 8.4 million hens collectively have been depopulated in a sequence comprising one complex in Texas and three related facilities under common ownership in Michigan in addition to a breeder complex in New Mexico.
• This past week chains apparently narrowed the spread between delivered cost and shelf price. This could result in a continued reduction in generic stock with a proportional rise in demand but only with constant re-ordering to fill the pipeline into May. 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 up by 1.3 percent overall this past week to 1.64 million cases with a concurrent 0.2 percent increase in breaking stock, following a 1.9 percent increase during the preceding processing week. Demand for egg products continues into May despite less home baking and entertaining. Egg products are required for the food service and manufacturing sectors and for exports that increased in February.
• 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 tapered during the first quarter of 2024, coincident with the end of the Fall migration of waterfowl that was extended in late 2023 by mild weather. The emergence of the infection in a large complex with 2 million birds in western Texas suggested a reoccurrence of the epornitic as northward spring migration has commenced. The three subsequent related cases in Michigan involving a total of 6.4 million hens may have commenced as an indirect extension from an infected dairy herd although an epidemiologic evaluation in progress will be required to confirm the source and routes of intra-Company dissemination. The number and extent of future possible outbreaks during the spring and fall months of 2024 cannot be projected but sporadic cases in backyard poultry and 32 dairy herds in eight widely diverse states is a cause for concern. More surveillance information should be released by USDA-APHIS as it becomes available 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 and release 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 0.9 million hens (0.3 percent) to a new level of 307.0 million for the week ending April 24^th The stated total flock of 312.3 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 17 to 20 million hens lower than before the onset of HPAI in 2022. In January 2024 the USDA 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 over successive weeks taking into account known losses and predetermined pullet replacements. The April loss of 8.4 million hens is not reflected in data released over the past three weeks. It is hoped that the USDA Agency responsible for publication of flock size will get their act together and coordinate with APHIS to record the number of depleted flocks and promptly provide accurate data. Figures released on April 24^th have overestimated flock size
• The ex-farm price for breaking stock (rounded to one cent) was unchanged at $1.58 per dozen.Checks delivered to Midwest plants were up 0.7 percent to $1.43 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 April 22^nd 2024, the Midwest wholesale price (rounded to one cent) for Extra-large was unchanged from last week at $2.43 per dozen. Large was unchanged at $2.41 cents per dozen. Mediums were unchanged at $2.30 per dozen delivered to DCs. Prices should be compared to the USDA benchmark average 4-Region blended nest-run cost of 75.3 cents per dozen as determined by the Egg Industry Center based on USDA data for March 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 April 22^nd edition of the USDA Egg Market News Report confirmed that the USDA Combined Region value (rounded to the nearest cent), was unchanged at $2.50 per dozen delivered to warehouses for the week ending April 19^th 2024. This average price lags current benchmark Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $2.41 per dozen. At the high end of the range, the price in the South Central region attained $2.57 per dozen. The USDA Combined Price last week was approximately $0.90 per dozen above the 3-year average of $1.60 per dozen. This past week Midwest Large was approximately $0.80 per dozen above the corresponding week in 2023 that was falling from a peak price of $3.70 per dozen five weeks previously to $1.70 per dozen as production recovered from HPAI depletion but with declining 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. The loss of 8.4 million hens in April to date is NOT reflected in current data. Increases in flock size during late February and early March amounted to fractions of a percent. The USDA belatedly published data to reflect previous losses due to HPAI depopulation and molted flocks reentering production during the post-Easter period but has yet to update figures for substantial and known flock depletion in April. This is unacceptable given the importance of weekly flock numbers to pricing. Accurate values for producing and total flock are required by farmers and buyers.

According to the USDA the number of producing hens reflecting April 24^th 2024 (rounded to 0.1 million) was apparently up 0.9 million to 307.0 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 but 8.4 million hens have been depleted since the beginning of April. Based on inventory level and prices, the population of hens producing table eggs and breaking stock should now be in balance with post-Easter demand by consumers. Industrial and food service off-take is increasing, approaching pre-COVID levels. Prices will continue to fluctuate but have shown atypical seasonal stability instead of a decline.

According to the USDA the total U.S. egg-flock on April 24^th 2024 was stated to be up by 0.4 million hens to 312.3 million including second-cycle birds and those in molt. The weekly difference of 5.3 million hens between flocks in production and total hens is an approximate value but with the accuracy of USDA figures is questioned. Data for the past week presumes 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 17 to 19 million fewer hens in the total flock despite weekly USDA figures that have not included recent cases of HPAI. The apparent difference is equivalent to about 5.5 percent of the pre-HPAI 2022 national flock of 326 million hens.

INVENTORY LEVELS

Cold storage stock of frozen products in selected centers on April 22^nd 2024 was 2.371 million lbs. (1,078 metric tons), up 0.6 percent from an adjusted 2.357 million lbs. on April 1^st 2024. The monthly USDA Cold Storage Report below quantified an increase in the actual total stock level at the end of March.

The most recent monthly USDA Cold Storage Report released on April 24^th 2024 documented a total stock of 30.3 million pounds (13,780 metric tons) of frozen egg products on March 31^st 2024. This quantity was up 24.4 percent from the March 21^st 2023 value of 24.4 million pounds. March 31^st 2024 frozen egg inventory was down 5.5 percent from the previous month ending February 29^th 2024 attributed to presumably higher domestic demand and exports or their combination. Compared to March 31^st 2023, the inventory of whites was up 29.9 percent to 3.15 million lbs. on March 31^st 2024. Compared to March 31^st 2023 yolk inventory was up 4.5 percent to 765,000 lbs. on March 31^st 2024.

A total of 87.1 percent (26.4 million lbs.) of combined inventory comprised the categories of “Whole and Mixed” (40.9 percent) and “Unclassified” (46.2 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 April 22^nd 2024 was up 1.3 percent over the previous week. Inventory over the past week followed a fall of 1.5 percent the previous week confirming higher than seasonal consumer demand in late April. Combined with breaking stock, the total inventory of shell eggs in industry cold rooms is now at a rounded level of 1.64 million cases rounded (1.62 million last week; 20,400 cases higher 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 and 8.4 million hens during April 2024 to date.
• The population unaffected by HPAI.
• Flocks retained after molting with an anticipated increase in this category as influenced by prevailing wholesale egg prices, and indirectly responding to flock depopulation from HPAI.
• Started pullets from chick placements during early November 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.

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

• The Midwest Region was down 2.3 percent from the previous week to 429,400 cases.
• The Southeast Region was up 1.2 percent to 284,600 cases
• The South Central Region was up a noteworthy 9.1 percent to 250,900 cases
• The Southwest Region was up a substantial 10.5 percent to 149,000 cases
• The Northeast Region was down 5.7 percent to 147,900 cases.
• The Northwest Region was up 0.9 percent to 69,300 cases

The total USDA six-area stock of commodity eggs comprised 1,640,600 cases (1,620,200 cases last week), up 1.3 percent, of which 81.1 percent were shell eggs (80.9 percent last week). The inventory of breaking stock was up 0.2 percent to 309,500 cases. Shell-egg inventory was up 1.5 percent attaining 1,331,000 cases. These changes are a function of regional shell-egg demand coupled with more regular re-stocking despite buyers apparently taking advantage of the industry benchmark price discovery system. Reoccurrence of HPAI will influence buyers who were previously unconcerned over short-term availability.

An inconsequential increase in inventory of breaking stock was recorded over the past week with continued diversion to the shell egg market. Subsequent weekly stock levels of shell eggs will indicate the extent of industrial and consumer demand. Breaking is influenced by conversion to egg powder and liquids for export and by lower seasonal post-Easter demand for liquids by industry and food service. The average price for Midwest checks and breaking stock combined was 62.1 percent of the average value of Midwest Extra-large and Large shell eggs, consistent with unchanged prices for both shell eggs and breaking stock this past week. The differential of 62.1 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 April 22^nd 2023 the inventory of other than generic eggs amounting to 484,400 cases (up 2.6 percent from last week at 472,100 cases) among three categories (with the previous week in parentheses) comprised: -

• Specialty category, up a substantial 20.9 percent to 42,800 cases despite promotion. (was up 9.8% to 35,400 cases)
• Certified Organic, down 3.5 percent to 82,800 cases. (was down 4.4% to 85,800 cases)
• Cage-Free category, up 2.2 percent to 358,800 cases. (was up 4.4% to 350,900 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 in-progress transition from cages but significant additional re-housing will not be completed by the beginning of 2025, less than 8 months away and clearly never, as projected by most industry observers. The constitutional status of Proposition #12 was confirmed by SCOTUS in a May 11^th 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 June 2024 or even early 2025 due to Committee deadlock and the November election), 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 is consistently above the 300,000-case benchmark over past weeks, 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 2022-2024 HPAI epornitics including the current wave of outbreaks.

*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 April 19^th 2024 for the preceding week in the Egg Markets Overview report representing dozen cartons with comparable prices in parentheses for the previous week: -

Retail Prices

Large, in cartons generic white: $1.33 Down 37.6 percent ($2.13)

Large, in cartons cage-free brown: $3.34 Down 4.6 percent ($3.50)

Wholesale

Midwest in cartons $2.42 Unchanged ($2.42)

Large C-F, California in Cartons: $3.02 Down 2.6 percent ($3.10)

National loose, (FOB dock): $1.87 Down 9.7 percent ($2.07)

NYC in cartons to retailer: $2.54 Down 0.4 percent ($2.55)

Regional in cartons to warehouse reported April 19^thfor previous week.

Midwest $2.41 Unchanged ($2.41)

Northeast $2.46 Unchanged ($2.46)

Southeast $2.55 Unchanged ($2.55)

South Central $2.57 Unchanged ($2.57)

Combined $2.50 Unchanged ($2.50)

WEEKLY ADVERTISED PRICES OF SHELL-EGG CATEGORIES W/E April 25^th.

USDA Certified Organic, Brown, Large: $3.92 ($3.91)

Cage-Free Brown, Large: $3.38 ($3.47)

Omega-3 Enriched Specialty, White, Large: $2.67 ($3.16)

Generic White, Large Grade A $1.33 ($2.13)

The advertised price for Large white grade A as featured for the week ending April 25^th at $1.33 per dozen, ( ? stores) down $0.80 or 37.5 percent below $2.13 per dozen last week. Current supply is probably in balance with retail demand given the slightly lower 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. Integrated companies and packers continued to deliver to DCs and this week chains increased orders to rebuild levels in DCs and stores to meet demand with a stable benchmark price. Over the past two weeks wholesale price has remained steady without demonstrating a typical post-Easter decline.

The USDA benchmark-advertised retail price for certified organic for the week was $3.92 per dozen, (752 stores), up $0.01 per dozen or less than 0.1 percent from the USDA price of $3.91 per dozen posted last week. A USDA advertised price of $3.38 per dozen was posted for cage-free brown during the past week (1,557 stores), down $0.09 per dozen or 2.6 percent from last week at $3.47 per dozen. The price differential between USDA organic and cage-free brown amounting to $0.54 per dozen will result in demand for certified organic at the expense of cage-free brown eggs. Week-over-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 cage-free this past week consistent with decreased demand for this category.

Cage-free brown at $3.38 per dozen was $0.27 per dozen (8.7 percent) lower than cage-free white at $3.11 per dozen (316 stores).

Certified organic was promoted this past week at 20.8 percent of the total, despite slightly higher inventory, (last week 30.6 percent of features). Omega-3 enriched comprised 25.7 percent of features with substantially higher inventory (39.0 percent last week). Cage-free was at 50.8 percent with substantially higher stock (22.5 percent last week). This past week Large size comprised 1.7 percent of features down from 5.5 percent. 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 April 1^st 2024, the number of certified organic hens in March was down 1.0 percent from February 2024 at 18.3 million, (rounded to 0.1 million).

The USDA reported that the cage-free (non-organic) flock in March 2024 was down 0.5 percent from February 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 May release will reflect a realistic number of producing hens housed cage-free during April 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 April 20^th 2024 the quantity of eggs processed under FSIS inspection during the week as reported on April 24^th 2024 was up 4.6 percent compared to the previous processing week to a level of 1,486,047 cases, (1,420,174 cases last week). The proportion of eggs broken by in-line complexes was 53.3 percent with slightly more diversion to higher-priced shell markets by uncommitted producers, (54.6 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 70.2 percent of egg production was directed to the shell market, (71.1 percent for the previous week), responding to the differential in prices paid by breakers and packers. Breaking stock inventory was up 0.2 percent this past week to 309,500 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 2023 in-line breakers processed 51.4 percent of eggs broken.

For the most recent monthly report reflecting March 2024, yield from 5,611,714 cases (5,462,517 cases in February) denoted a decrease in demand for liquid and diversion to shell egg sales over the period March 3^rd 2024 through March 30^th 2024. Edible yield was 39.1 percent, distributed in the following proportions expressed as percentages: liquid whole, 61.2; white, 24.0; yolk, 12.3; dried, 2.5.

All eggs broken during 2023 attained 69.78 million cases, 8.4 percent less than 2022. Eggs broken in 2024 to date amounted to 22.47 million cases, 2.2 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 unchanged this past week at $1.58 per dozen with a range of $1.55 to $1.60 per dozen delivered to Central States plants on April 22^nd. The price of checks was up 0.7 percent this past week at an average of $1.43 per dozen over the most frequent range of $1.42 to $1.44 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 April 22^nd 2024 confirmed that Midwest wholesale prices for Extra-large, Large and Medium sizes were unchanged from the previous week. A slightly lower inventory combined with a stable price, suggests that the market is operating with balanced demand. The following table lists the “most frequent” ranges of values as delivered to warehouses*:-

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

The April 22^nd 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 down 0.4 percent from last week, (with the previous week in parentheses): -

1. $2.25 ($2.27), (estimated by proportion): L. $2.22 ($2.23): M. $2.09 ($2.10)

The April 22^nd 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 unchanged 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. $3.04 ($3.04); L. $3.02 ($3.02); M. $2.87 ($2.87)

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator reported on April 24^th 2024 was down 1.9 points from the last weekly report to -1.2 with a 1.3 percent increase in total inventory and a 1.5 percent higher shell inventory from the past week as determined by the USDA-ERS as follows: -

*An unrealistically high figure attributed to an over-count of hens due to failure by USDA to adjust flock size following HPAI depletions in TX and MI

The USDA Monthly Report covering March 2024 production including text, tables, data and prices and the 3^rd 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 April 19^th 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:-

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 April 19^th 2024 compared to the previous week showed fluctuation in price:-

1. extreme range

Whole egg: Unchanged. Whites: Down 0.4% and Yolks: Down 4.0%.

This indicated a relatively stable demand for whites and whole egg but lower demand for yolks from the manufacturing and food service sectors and for export.

March averages (February): Whole. $1.36, ($1.33); Whites, $1.21, ($1.26); Yolks, $2.06, ($1.91).

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 112 cents per lb. last week. March averages (cents per lb.) are compared with February values (in parentheses): -

Whole, $1.11, ($1.10); Whites, $0.85 ($1.06); Yolks, $1.77, ($1.74).

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

COMMENTS

During the 4^th 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, more broiler flocks were affected in 2023 with cases in California and Arkansas during fall of 2023 and subsequently in Nebraska. An incident outbreak of HPAI occurred in MN during April after a quiescent period with the previous 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. The infection has now been recognized as bovine influenza-H5N1 in 37 diagnosed dairy herds in four states. April losses in hens (TX, 2 million and MI, 6.4 million) were confirmed during the first half of April. 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 Spring months. Outbreaks in commercial flocks appear to be correlated with shedding of AI virus by migratory birds that moved southward late and only with sharply colder weather in January. Northward migration has commenced and additional outbreaks can be anticipated

Approximate losses in commercial flocks confirmed with HPAI and updates during the 2022/3 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. During the fourth quarter of 2023 more than 13.0 million hens have been depopulated in 13 outbreaks.

Losses due to HPAI reported by USDA during the week ending April 16^th comprised one WOAH non-poultry flock (KS.). During the past week the third compex holding 2.4 million hens owned by a producer in Michigan was depleted. Three breeder units (type unspecified) in New Mexico holding 128,000 birds were diagnosed with HPAI. Avian Influenza was confirmed in a 70,000 bird turkey flock in Minnesota and the virus was isolated from a live-bird market in Florida.

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 had 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 25^th. 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. A paper on wind-borne dissemination of HPAI during the 2003 epornitic was published in 2012. The preliminary 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 2023 and again in April 2024, appropriate guidance from USDA-APHIS is anticipated by the Industry for the spring 2024 reoccurence in progress. A release on the investigation of risk factors associated with outbreaks in dairy herds and a comment on whether mutations have occurred in viruses isolated from infected animals would be instructive. It would appear that within a day of the belated release of 239 sequences from domestic poultry, wild birds, dairy cows and terrestrial mammals molecular epidemiologists have added to the knowledge of the origin of infection of commercial poultry and dairy herds.

On April 8^th, Crimson Holdings LLC an egg breaking enterprise located in Adrian Wisconsin filed for Chapter 11 protection.

The facility was the production unit of OvaInnovations Inc. and was converted to processing inedible product from a milk drying plant.  From the inception of operation, the plant was associated with resident complaints over odor, investigated by the state environmental agency.  The operation was embroiled in legal action including a dispute with IsoNova Technologies LLC.

David Rettig was the moving force behind OvaInnovations Inc.  Rettig was instrumental in establishing Rembrandt Enterprises in 1999 with financing provided by entrepreneur Glenn Taylor of Minneapolis.  In 2009 Rembrandt acquired Golden Oval eggs.  Rembrandt was impacted by two episodes of highly pathogenic avian influenza.  The production facility in Rembrandt, Iowa is now owned and operated by AGR Partners.

Following successive years of severe losses as a result of exposure to HPAI, France initiated a preventive vaccination program in ducks and geese reared for the foie gras segment of their poultry industry.  To date 26 million waterfowl have received the initial dose of vaccine with 21 million receiving a second booster dose.

During the 2022-2023 epornitic of HPAI, 315 farm outbreaks were recorded with 22 million commercial birds depopulated.  Since the autumn of 2023, ten cases have been diagnosed.

The success of the vaccination program will be confirmed by an analysis of data relating to outbreaks following a complete season with direct comparisons between vaccinated and non-vaccinated susceptible flocks.

In a mid-March statement, the World Organization of Animal Health (WOAH) warned of the threat to wildlife from highly pathogenic avian influenza.  The statement was prompted by a diagnosis of H5N1 HPAI in skuas collected by scientists at the Primavera Antarctic Research Base operated by Argentine.  The WOAH statement included, “Once considered primarily a threat to poultry, HPAI has ushered in a new normal whereby HPAI is moving from wild birds to wild mammals with impacts beyond anything previously seen.”  The statement continued, “At the latest count there have been 485 species from over 25 avian orders affected and 37 new mammal species infected since 2021.  Only the Pacific Islands, Australia and New Zealand remain free of the disease, but the situation is changing rapidly.”

The WOAH Working Group on Wildlife has produced guidelines on vaccination of species under conservation.  California Condors have been vaccinated under special license in the  U.S. following mortality presumably from scavenging dead waterfowl.

The WOAH notes that the magnitude of losses “at the current scale presents an unprecedented risk of wildlife population collapse creating an ecological crisis.”

The WOAH emphasizes the need for interagency coordination and collection of data through the World Animal Health Information System.

EGG-NEWS has reported on outbreaks involving high mortality in numerous wild avian species including cranes in Israel and India, swans in the E.U., Dalmatian pelicans and endangered barnacle geese. (retrievable by entering “avian influenza” in the SEARCH block). The recovery of H5N1 HPAI virus from free-living birds including grackles and blackbirds associated with bovine influenza-H5N1 suggests that the infection is now endemic in the U.S. and is not confined to migratory waterfowl.

In an attempt to appease the Federal Trade Commission (FTC), The Kroger Company and Albertsons Companies announced that 166 additional stores will be added to the list that will be divested to C&S Wholesale Grocers for a total of 579 locations. 

According to a Kroger press release, C&S will operate the Safeway banner in Arizona and Colorado and will license the Albertsons banner in California and Wyoming. Presumably this will be convenient for Kroger and Albertsons should the anticipated transaction be concluded and subsequently C&S goes the way of Haggen after the Safeway transaction in 2016.

The merger elicited a negative response from the FTC.  The Agency stated, “The proposal completely ignores many affected regional and local markets where Kroger and Albertsons compete today.”  The statement added, “In areas where there are divestitures, the proposal fails to include all of the access, resources and capabilities C&S will need to replicate the competitive intensity that exists today between Kroger and Albertsons.  Even if C&S were to survive as an operation, Kroger and Albertsons proposed divestitures still do not solve the multitude of competitive issues created by the proposed acquisition.”

In support of the proposed merger/acquisition, the CEO of The Kroger Company, Rodney McMullen stated, “Our proposed merger with Albertsons will bring lower prices and more choices to more customers and secure the long-term future of unionized grocery jobs.”  McMullen noted that the divestiture plan would ensure that no stores will close, and all frontline associates will remain employed with continuation of existing collective bargaining agreements.  The Kroger Company intends to support C&S operations “through expanded transition services.”

Seventeen states have placed restrictions on introduction of cattle from any of the eight states reporting bovine influenza-H5N1. Effective April 12^th diagnosed cases (27) include Texas, Kansas, New Mexico, Idaho, South Dakota, North Carolina, Michigan, and Ohio. 

Both the U.S. Centers for Disease Control and Prevention and the World Health Organization have issued recommendations based on application of elementary biosecurity to prevent spread and to limit extension to human contacts of cattle. The use of personal protective equipment is advised.

Recommendations by the WHO include enhanced surveillance with reporting of cases especially in unusual hosts through the World Animal Health Information System.  Above all, the World Organization of Animal Health (WOAH) has counseled against implementing “unjustified trade restrictions and import bans” and has advocated adherence to WOAH international standards.”

The American Association of Bovine Practitioners has designated the infection as “Bovine Influenza-A” and has established a working group to cooperate with federal and state agencies and to develop biosecurity protocols.

The Centers for Disease Control and Prevention (CDC) issued a health alert on Friday April 5^th following the single case of human influenza attributed to H5N1 virus, designated strain 3:13 contracted from dairy cows infected with bovine influenza-H5N1.  The health alert was issued to advise physicians and public health workers of the possibility of human influenza-H5N1.

 The CDC also reinforced recommendations to use personal protective equipment for workers at risk.  The alert also encouraged the monitoring of agricultural workers and those exposed to sick or dead wild and domesticated birds that may have been infected with H5N1 virus.

Both mainstream outlets and social media are reporting widely on the emergence of bovine influenza-H5N1 and recent outbreaks of HPAI in egg operations.

• The dairy industry is confirming safety by stating that milk from affected cows does not enter the supply stream and that in any event pasteurization inactivates influenza virus.
•  The situation for eggs is similar. Infection of a flock results in a precipitous drop in egg production and a rapid rise in mortality resulting in rapid diagnosis and withholding of eggs from the market.  Cooking eggs will destroy avian influenza virus that does not in any event appear transmissible to consumers through food.

Dr. Barbara Kowalcyk director of the Center for Food Safety and Nutrition Security at George Washington University correctly stated, “Eggs that are handled properly and cooked thoroughly are safe to eat.”

Provisions to prevent “hostile” nations form acquiring agricultural land in the U.S. are incorporated in the USDA appropriations for fiscal year 2024.  The Secretary of Agriculture will now be a member of the Committee on Foreign Investment in the United States and will participate in implementing the Agricultural Foreign Investment Disclosure Act of 1978. An allotment of $2 million was assigned to the USDA to fulfill this obligation.

The strengthening of oversight of purchases of agricultural land by foreign nations is the result of a U.S. Government Accountability Office review and report conducted in January 2024 that criticized the USDA for collecting data that was not adequately shared with the CFIUS.  Five recommendations made by the GAO were accepted by USDA and will be implemented.

In 2021, EGG-NEWS reported on the intended purchase of a specific tract of land by China ostensibly to erect a corn milling facility that was initially welcomed by the local community.  This intended transaction was ignored by the CFIUS, notwithstanding the fact that the intended purchase was located in close proximity to the Grand Forks Air Force Base.  The U.S. Air Force vigorously opposed the purchase and the resulting publicity resulted in termination of the intended project.

At the end of 2022 close to 43 million acres or 3.4 percent of U.S. agricultural acreage was owned by foreign entities. Canadian companies owned 32 percent of this amount mostly as forests. Agricultural tracts were owned by the Netherlands (6 percent); Italy, Germany and the U.K. (5 percent each) Japan, (1.5 percent) and China, (1 percent) mostly through acquisition of Smithfield Foods. Concern has been expressed over potential purchases by unfriendly nations including the Peoples Republic of China, Iran, the Russian Federation and more unlikely North Korea and Venezuela.

Nestle Purina PetCare has inaugurated a plant to produce pet food in Eden, NC.  The project involved conversion of an existing brewery at a cost $450 million over three years.

Will Steiner manager of the new facility stated, “We have been looking forward to this day for a very long time and are so grateful for the contributions of so many incredible associates who have been working hard to bring this factory to life.”  He continued, “What is most exciting is we can now really get to work and produce many of our brands that pets love and owners trust.”

The inaugural event was celebrated with a $30,000 donation to the Rockingham Community College to support a center for workforce development and $7,000 to the Dan River Basin Association that encourages pets and people to explore nature together. Additional donations were made to the Rockingham County Veteran’s Park and the County animal shelter and the Canine Officer for the Eden police force.

NBC News has publicized the allegations of Joshua Farinella previously employed in the shrimp industry in India concerning injudicious use of antibiotics and coercive labor practices by exporters of shrimp from India.  Farinella has elicited interest in Congress regarding unfair competition by shrimp producers in Asia and specifically India. 

Representative Mary Peltola (D-AK) and Representative Garret Graves (R-LA) have addressed a letter to the White House alleging, “These foreign producers deliberately use government subsidies and shortcuts- like packing the supply with banned antibiotics or using feed obtained through illegal, unreported and unregulated fishing practices to undercut domestic shrimp suppliers and flood the American market with cheap and unsafe shrimp.”  Currently, Congress is reviewing H.R. 4547, the Law Ensuring Safe Shrimp (LESS) Act that will intensify action by the FDA to monitor imported shrimp.  This Agency inspected only one percent of shrimp imports for the presence of antibiotics in 2023.  In comparison, the E.U. Food Safety Agency recognizes the need to inspect half of all imports.

Allegations by Farinella concerning the exploitation of workers were confirmed independently by the Corporate Accountability Lab.  Practices include forced labor, debt bondage and employing child labor.

Representatives of companies importing and selling shrimp from India maintain that their corporate policies prohibit forced labor or unsafe working conditions and they have committed to respond to reports of unsafe product and violations of international labor standards.

On April 3^rd, Tom Vilsack, secretary of agriculture announced that $1.5 billion will be available in fiscal 2024 for conservation and climate-related projects.  Funding available through the Regional Conservation Partnership Program is intended to expand conservation of ranch land and forests with the ultimate intent of modulating climate change. In an address to producers in Minnesota, Secretary Vilsack stated, “We had unprecedented demand for the Regional Conservation Partnership Program last year showing the robust interest in conservation from farmers and ranchers.”  He added, “We are looking forward to seeing what the more streamlined and customer-oriented Regional Conservation Partnership Program can do to get more conservation on the ground in the coming months and years.”

Priorities for 2024 include “climate-smart agriculture”, conservation and environmental justice, all priorities of the current Administration and reflecting an emphasis on disadvantage and minority communities.

$1.5 billion is a large sum to be distributed in small amounts to a large number of recipients.  One is reminded of the comment by the late Hubert Humphrey that “a billion here and a billion there and it soon adds up to real money.”  It is probably incidental that the USDA announcement was made in the home state of the late Senator and Vice President.

Given the nebulous objectives associated with $1.5 billion in grants, taxpayers are entitled to an accounting with quantitative evaluation of returns.  Is this too much to ask?  Is this expenditure supposedly for climate change actually an exercise in altruistic social engineering?

The Securities and Exchange Commission (SEC) will place on hold the imposition of proposed climate disclosure rules.  Opponents claim that the requirements exceed the authority of the Agency with respect to disclosure of Scope One and Scope Two emissions. The SEC originally required disclosure of Scope Three emissions for which reporting would be extremely difficult if not impossible for many companies including food producers.

The Environmental Protection Agency prepares an annual inventory of U.S. greenhouse gas emissions that is submitted to the United Nations under the Framework Convention on Climate Change and the Paris Agreement. 

In 2022, net U.S. greenhouse gas emissions totaled 5,489 million metric tons of carbon dioxide equivalents after taking into account sequestration by the land sector.  In 2022, emissions increased by one percent mainly from combustion of fossil fuel.  This was a result of an increase in economic activity after relaxation of COVID restrictions.  Sources of greenhouse gas emissions in 2022 comprised 80 percent carbon dioxide, 11 percent methane, 6 percent nitrous oxide and the remaining 3 percent from a mixture of compounds. 

In evaluating sources of greenhouse gas emission by economic sector, agriculture represented 10 percent, industry 30 percent, residential and commercial emitters 31 percent and transportation 30 percent.

Based on the low contribution of the agricultural sector, activists condemning livestock production appear to have missed their target.  Perhaps staying up at night while running an air conditioner and writing posts for social media about the evils of meat and poultry production contributed to the residential contribution.

In an April 4^th 2024 release, Conagra Brands (CAG) posted financial results for the third quarter of Fiscal 2024 ending February 23^rd 2024. The Company can be regarded as representative of the manufacturing and packaged food sector with competitors including Post Holdings, Campbell Soup Company and Kraft-Heinz, all currently under pressure to reduce prices to the major food service providers and supermarket chains. In an inflationary environment consumers are turning to less expensive private brands although the trend to eat-at-home may benefit Conagra Brands and competitors.

For the third quarter of FY 2024, net income was $308.6 million on net revenue of $3,033 million with a diluted EPS of $0.64.  Comparable figures for the third quarter of FY 2023 ending February 26^th 2023 were net income of $342.2 million on net revenue of $3,087 million with a diluted EPS of $0.72

The release included results for the four operating segments:-

• Foodservice: Operating profit of $35 million down 48.7 percent from Q3 2023, on revenue of $273 million
• Refrigerated and Frozen: Operating profit of $202 million, down 24 percent, on revenue of $1,200 million
• International: Operating profit of $42 million, up 14 percent on revenue of $272 million
• Groceries and Snacks: Operating profit of $299 million, up 16 percent on revenue of $1,300 million

For the third quarter of FY 2024 (with the values for the corresponding quarter of FY 2023 in parentheses) Conagra achieved a gross margin of 28.3 percent (27.2) and an operating margin of 15.6 percent (15.9). Revenue was down 1.8 percent.

Guidance for FY 2024 included a net sales decline of 1 to 2 percent; an adjusted increase in operating margin of 15.8 percent and an EPS of between $2.60 and $2.65. Capital expenditure was projected at $425 million.

Conagra Brands listed assets of $21,919 million, including a disproportionate  $14,261 million as goodwill and intangibles, against long-term debt and other obligations of $9,221 million. The Company had an intraday market capitalization of $14,230 million on April 16^th. CAG trades with a forward P/E of 10.9 and has ranged over a 52-week period from $25.16 to $38.75 with a 50-day moving average of $28.69. Twelve-month trailing operating and profit margins were 17.7 percent and 7.9 percent respectively. The Company generated a twelve-month trailing return of 5.3 percent on assets and 10.5 percent on equity.

In a self-adulatory release, the Organic Trade Association listed responses to a consumer survey on familiarity with the organic seal. Of those responding, 88 percent were either familiar or somewhat familiar with the term “organic”.  However, 86 percent were also aware of the “natural” designation, and 85 percent with “local” suggesting that the certified organic label is not necessarily unique or preeminent.  It is also noteworthy that “pesticide free”, “vegan”, “raised without antibiotics” and “grass fed” all scored at or above 80 percent in terms of familiarity.

The Organic Trade Association understandably claims that recognition of the Organic seal and the implied connotation justifies the differential in price from corresponding non-organic food items.  After decades of promotion and availability it is evident that twelve percent of consumers are still unfamiliar with the organic seal. This indicates the need for additional promotion of the claimed attributes of organic foods, requiring publicity and a justification of the price differential.

The survey also revealed that “fair trade” was relatively obscure with 58 percent of respondents either somewhat or very familiar with the term.  “Humanely raised” scored 72 percent but was  below the 76 percent for “hormone-free”.  The lowest score of 33 percent for consumer familiarity was accorded “regenerative”.

It is apparent that the “certified organic” designation is clearly the leader among numerous label claims, but it is questioned whether consumers really understand the structure of the National Organic Program and what it offers.  Foods accorded the certified organic seal are produced according to a set of regulations and standards that should eliminate the use of pesticides or additives that may be potentially deleterious.  The requirement that foods be either non-GMO in origin or in the case of livestock products, derived from herds or flocks fed non-GMO feed, has no scientific justification with respect to human metabolism and health. 

It is also noted that certification according to the National Organic Program is based on a review of documentation and is not supported by any structured program of laboratory assay to confirm freedom from GMO content, pesticides or additives. Annual FDA reports indicate low levels of detectable pesticide residues, not materially different from their organic equivalents. Pesticide assays conducted by the FDA yield levels below established non-effect values indicating the acceptability of conventional domestic fruit and produce. The USDA certified Organic Seal does not address food safety with respect to the potential presence of bacterial pathogens.

The Organic Trade Association clearly describes additional costs including production, processing, certification, and other fees to justify the higher cost of certified organic foods.  The question arises as to whether consumers derive a commensurate benefit given the price differential between conventional and certified Organic products.