Editorial

 

WITHDRAWAL FROM THE TPP

Feb 22, 2017

    

It came as no surprise that during the first full working day of the Administration of President Donald J. Trump that an Executive Order was issued, formerly withdrawing from the Trans-Pacific Partnership (TPP).  It was anticipated that the TPP would have provided considerable advantage to agriculture although the potential downsides were highlighted by both Presidential candidates.

  

Formal withdrawal from the TPP has created a vacuum which will inevitably be filled by China which is promoting a competing Regional Comprehensive Economic Partnership.  Trade with Malaysia, Philippines and Thailand will be impaired in the absence of the proposed 12-Nation TPP.  Japan and specifically Prime Minister Abe will be the most embarrassed by failure of the TPP which was a cornerstone of his economic recovery strategy.

The World recently witnessed Xi Jinping extolling the virtues of free-trade at the Davos Gathering of economist and business leaders.  The reality is that China may talk free-trade but the reality is quite different. China effectively imposes barriers against importation, ignores intellectual property rights and promotes national enterprises many of which are government- owned, to the detriment of foreign competitors.

In an incisive editorial in the January 24th Wall Street Journal it was noted that the President might have had a stronger bargaining hand with China had the TPP been ratified, which was the hope of outgoing President Barack Obama.

To maintain exports, especially in the agricultural sector, the U.S. will now have to negotiate a series of bilateral trade agreements with Japan as the priority.

There will be no immediate economic impact from failure of the TPP. Going forward it will be necessary to balance self-interest with the realities of globalization in order to avert a decline in the export of agricultural commodities and poultry to Asian nations who comprise our accessible and qualified markets.

   

Poultry Industry News

 

Weekly Turkey Production and Prices

Feb 22, 2017

    

The February 16th edition of the USDA Turkey Hatchery Report, issued monthly, documented 29.8 million eggs in incubators on February 1st 2017, up 10 percent from February 1st 2016. A total of 25.1 million poults were hatched in January 2017, up 10 percent from January 2016.

A total of 23.2 million poults were placed on farms in the U.S. in December 2016, up 5 percent from January 2016. The relative hatch and placement values suggest disposal of 1.9 million hen poults or 7.5 percent of hatch. Poult placements in 2017 have attained 23.0 million.

 

The February 17th edition of the USDA Turkey Market News Report (Vol 64, No. 07) confirmed the following provisional data for turkeys slaughtered under Federal inspection:-

  • For the processing week ending February 11th 1.437 million young hens were slaughtered at a live weight of 7.91 kg (8.07 kg last week). During the corresponding week in 2016, 1.732 million hens were processed. Ready-to-cook hen weight for the week attained 9,146 metric tons, 17.1 percent less than the corresponding week of 2016. Dressing percentage was 80.5. Year-to-date RTC hen production has attained 59,198 metric tons, 9.5 percent less than YTD 2016.
  • For the processing week ending February 11th 2.522 million toms were slaughtered at 18.40 kg (18.60 kg last week) compared to 2.564 million toms during the previous processing week. For the corresponding week in 2016, 1,732 million toms were processed. Ready-to-cook tom weight for the past week attained 34,700 metric tons, 4.7 percent less than in the corresponding week of 2016.  Dressing percentage was 80.5.Year-to-date RTC tom production has attained 189,833 metric tons, 1.8 percent less than YTD 2016.
  • The National average frozen hen price during the past week was $2.06 per kg, 5 cents/kg below the three-year average.

   
 

Weekly Broiler Production and Prices

Feb 22, 2017

    

The February 15th 2017 edition of the USDA Broiler Hatchery Report confirmed that 172 million day-old chicks were placed among the 19 major broiler-producing states during the week ending February 11th, 1.0 percent more than the corresponding week in 2016 Total chick placements for the U.S. amounted to 179 million. Average hatchability was 83 percent for eggs set three weeks earlier. Cumulative placements for the period January 7th through February 11th amounted to 1.07 billion chicks, one percent more than the corresponding period in 2016.

  

For the processing week ending February 11th 162,204 million broilers were processed at an average live weight of 2.80 kg (2.83 kg. last week) and a yield of 76.0 percent. The number of broilers processed was 2.1 percent more than the corresponding week in 2016. Processed (RTC) broiler production attained 340,127 metric tons 0.2 percent more than the corresponding week in 2016. Processed (RTC) broiler production in 2017 has attained 2,039,981metric tons YTD, almost equivalent to YTD 2016.

Following suspension of the Georgia Dock Index* CHICK-CITE will post the USDA Southern States (SS) benchmark prices in $ per kg. as reflected in successive weekly editions of the Broiler Market News Report.

   
 

Revised USDA-ERS Projected Poultry Production for 2016 and 2017.

Feb 22, 2017

    

The USDA-Economic Research Service released the projected and forecast projections for broilers and turkeys for 2016 and 2017 respectively on February 15th

Metric values are tabulated below:-

  

Parameter

2016 (projected)

2017 (forecast)

Difference (%)

Broilers

 

 

 

Production (m. metric tons)

18.493

18.875

+2.1

Consumption (kg per capita)

40.7

41.1

+0.4

Exports (m. metric tons)

3.021*

3.148

+4.2

Proportion of production (%)

16.3

16.6

         +1.8

 

 

 

 

Turkeys

 

 

 

Production (m. metric tons)

2.720

2.782

+2.3

Consumption (kg per capita)

7.6

7.7

         +1.8

Exports (m. metric tons)

0.259*

0.286

         +10.4

Proportion of production (%)

9.5

10.3

+8.4

*Depressed by import embargos due to HPAI

Source: Livestock, Dairy and Poultry Outlook –February 15th 2017

   
 

SHADY BROOK FARMS® OBTAINS CARU DESIGNATION

Feb 22, 2017

    

The Cargill Shady Brook Farms® brand has earned the Certified Responsible Antibiotic use (CARU) designation from the UDSA.

Cargill has established a supply chain extending from farms to School Food Focus programs with birds raised free of antibiotics in accordance with the certification standards.

  

Dr. Scott Eilert, Food Safety and Quality Regulatory Affairs for Cargill’s turkey brands stated, “It is a true collaboration between School Food Focus, the USDA and Shady Brook Farms.  The results are a win for schools, childhood nutrition and the people who work so hard every day to provide the food we eat”. 

The CARU designation is a combination of efforts which commenced in 2014 to eliminate the use of growth-promoting antibiotics in production. In 2016 Cargill eliminated gentamicin in hatcheries as this was a shared-class antibiotic.  The Honest Turkey™ Brand was introduced in 2017 for a line of turkeys and products.

Kathy Lawrence, co-founder of School Food Focus stated, “We created the Certified Responsible Antibiotic Use standard to reduce the administration of medically important antibiotics and to provide an essential level of transparency, accountability and customer choice lacking in the school food market”.

   
 

Maryland Fillets offered in Austraila

Feb 22, 2017

Presumably U.S. origin leg quarters (described as "Maryland")
in major supermarket chain in suburban Sydney, Australia.
Priced at US$ 2.18/lb.

   
 

CME Prices

Feb 21, 2017

    

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

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

COMMODITY

Corn (cents per bushel)

March ’17   368    (365)

May ’17     376  (   373)  

Soybeans (cents per bushel)

March ’17  1,035  (1,031)

May ’17  1,046  (1,042)  

Soybean meal ($per ton)

March ’17   341     (333)   

May ’17     345   (  336)   

 

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

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

For each 10 cent per bushel change in corn :

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

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

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

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

   
 

WAL-MART STORES SLOWS INTERNATIONAL EXPANSION

Feb 21, 2017

    

Wal-Mart Stores has encountered obstacles in introducing their large-store format and traditional Company policies on purchasing, promotion, and employment in Africa. Strategies which have to date been successful in North America have not worked as effectively in emerging markets.

The February 6th edition of The Wall Street Journal documents problems experienced in the Republic of South Africa which represents the Continent’s largest economy.

  

In 2011, Wal-Mart purchased South African domestic retailer Massmart Holdings with leading brands Game and Makro for $2.4 billion.  The acquisition operated 26 stores outside the Republic of South Africa and in 5 years has only added 13 new locations.  In contrast, competitor ShopRite Holdings has opened 182 smaller stores outside the Republic of South Africa to achieve a total of 375 locations.

The Wal-Mart subsidiary Massmart claims that the conservative rate of expansion is part of a deliberate strategy. There may be justification for the reluctance to open stores in emerging markets since some competitors have open and then closed operations in Nigeria, Mozambique and even in Mauritius.

Problems facing supermarket operators include fluctuation in African currencies, inflation due to mismanagement of national economies, corruption and extreme competition from traditional small stores and the  “informal sector” (street markets) and difficulty in purchasing land and conforming to building codes.

Wal-Mart has closed about 110 outlets in Latin America, reduced the rate of expansion in China and has disposed of its website in that country.

   
 

Chipotle Reports on Q4 and FY 2016

Feb 20, 2017

    

In a press release dated February 2nd 2017, Chipotle Mexican Grill (CMG) announced results for the 4th Quarter and Fiscal 2016 ending December 31st 2016.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as $ x 1,000 except EPS)

   
   
 

Divergence on Supermarket Mechanization

Feb 20, 2017

    

Recently CHICK-CITE reported on the decision by Target to abandon a mechanized “store of the future” which would make extensive use of robotics.  In contradistinction, Amazon is evaluating a two-story automated grocery store in which robots would assemble orders placed by customers.

Amazon contemplates a two-story installation with approximately 5,000 SKUs in stores ranging in size from 10,000 to 40,000 ft2.

  

By eliminating checkout counters and employing robotics, Amazon consider that it will be possible to operate a store with three to five employees.  Amazon has already evaluated a “Go” format of 1,800 square foot in a Seattle location without robotics.  Ultimately, Amazon intends opening up to 2,000 brick-and-mortar stores across a variety of formats.

According to Supermarket News the retail food industry employees 3.4 million workers with a complement of approximately 90 employees per store.

   
 

Ayers Rock, Northern Territories, Australia

Feb 16, 2017

Dr. Simon Shane and Dr. Barbara Shane visit
AyersRock, Northern Territories, Australia

   

Shane Commentary

 

The U.S Poultry Industry -- Perspectives and the Future

Feb 22, 2017

Grady Fain

    

Guest Commentary by Grady Fain

When relevant and informative, CHICK-CITE posts Guest Commentaries of interest to Subscribers and Sponsors.

Grady Fain, Senior Vice President for Nutriad in the U.S. is generally positive with regard to 2017.

He projects steady prices for chicken and stable or slightly reduced feed costs.

For outreach to his friends and clients at the IPPE, Grady prepared a review of his perceptions of the State of the Industry and included forecasts for 2017

 

Introduction

As the U.S. is moving from a turbulent 2016 into a new year with an uncertain political outlook, it is important for the poultry industry to understand the various scenarios that may unfold in the near future and possible changes in global trade agreements, currency exchange rates, regulations and overall cost of production.

Using insights from industry experts within the Nutriad Group and input from consultants, several possible scenarios will shape the year ahead.

  

Political Scenario

The election of President Donald J. Trump, will most certainly bring changes in the overall trade and currency panorama. The outlines of some of those changes can already be seen in his first days in office. The US withdrawal from TPP will leave a vacuum to be filled by China. This nation will assume greater importance in Asia and the Pacific Rim. To compensate, the U.S. must establish bilateral trade deals with the Philippines, Malaysia, Indonesia and Thailand.

According to USDA, close to 18 percent of the total poultry production in U.S. is exported in the form of leg quarters an undifferentiated commodity. This makes the U.S. poultry industry extremely vulnerable to competition, currency fluctuation and escalation in value, trade negotiations and economic growth in importing markets.

The renegotiation of NAFTA will disturb current trade with Mexico and Canada. The threat to overtax Mexican products by 20%, might have a direct effect on bilateral trade. In 2015 Mexican poultry imports from the U.S. excluding eggs-reached over US$ 1 billion.

The devaluation of the Mexican Peso versus the US$ might benefit Mexican imports from countries such as Argentina, Chile and Brazil in comparison to the United States. In January 2017, the value of the peso fell almost 20 percent compared to January 2016.

Regulations and Welfare

The appointment of Scott Pruitt as head of the EPA and possible increased industry focused policies, including an easing of regulations imposed by the previous Administration, might have a positive impact on poultry producers. However, the consumer-driven requirements are still leading the way as retailers and QSRs select their suppliers.

The enigma currently faced by producers is to decide on which aspects of welfare should be followed. Any reduction in density, a move to smaller-scale operations and using non-GM ingredients will demand more land and resources, consequently negatively affecting sustainability.

The new Veterinary Feed Directive (VFD) will also have an impact on operation procedures and costs, as companies adjust to the withdrawal of antibiotics growth promoters and adapt to natural alternatives.

Export Restrictions and Avian Influenza

Avian Influenza outbreaks in many nations in Asia, Africa and the European Union will play an important role in trade of U.S. poultry.  According to USDA, the egg export forecast has increased by 30 million dozen eggs following the H5N6 AI outbreak in South Korea.

The dissemination of recombinant HPAI strains by migratory birds will alter trade patterns affecting the outlook for Asia, Europe and Africa. Even with strains such as H5N8 possibly being eradicated in the EU, and H5N6 being controlled in a few more months in South Korea and Japan, there will be considerable potential for re-introduction of these and other recombinant strains.

The dissemination of AI, and its endemic situation in wild birds, will have a long-term impact on global markets and trade. AI creates business risks for companies which will now be required to adjust their business models, intensifying biosecurity and interacting with Federal, State and local governments.

Commodities

The 2016 corn (maize) harvest is projected to break records in yield and total production, according to the January 2017 World Agricultural Supply and Demand Estimates (WASDE) Number 561.

For the current season the U.S has harvested 175.3 bu/acre or 11.2 m.tons/Ha representing an estimated crop of 15,148 milion bu. or 385 million m. tons, which would be among the largest U.S. corn crops on record.

The soybean crop will attain 4,307 million bu. (117 million m. tons) yielding 34.1 million tons of soybean meal for domestic use and 11.6 million tons for export.

Argentina and Brazil also follow a strong trend in growth and should reach record quantities for corn production due the prospect of favorable weather and heavy planting in anticipation of domestic demand. Brazil is estimating a harvest of 215 million tons of grains, comprising over 108 million tons of soybeans, up 8.7% over 2016. Argentina, even with recent reports of floods, is estimating 36 million tons of corn and 55 million tons of soybeans.

The elevated production numbers, combined with China’s high stock, will pressure the commodities prices in the national and global market. Overall prices should hold close to the current $3.58/bu ($140/m. ton) for corn and $10.32/bu ($378/m. ton) for soybeans.

The poultry market and forecast

U.S. ready-to cook broiler and turkey production for 2017 are forecast at 18.898 million m. tons and 2.782 million m. tons respectively. The forecasts for 2017 prices were increased slightly for broilers and lowered for turkey as projected by the USDA.

As of January 2017, broilers achieved a slight increase in price, reaching 87 cents per pound ($1.91/kg) with a forecast range for the year of 80 to 86 cents per pound for whole birds.

With over 309 million hens in lay and a per capita consumption of 268 eggs in either shell or processed form, profitability will be dampened by over-production. U.S. producers anticipate an annual output of 7,400 million dozen with prices at or above production cost following seasonal fluctuation in price.

   
 

Kuwait Bans U.S. Raw Poultry then Reverses Decision

Feb 22, 2017

    

Inexplicably and without any scientific justification the Government of Kuwait placed a ban on U.S.- origin raw poultry.  The action is believed to be in response to the isolation of avian influenza from a single mallard duck in Montana in January.

According to a USAPEEC February 9th release, Kuwait has not previously placed a restriction on imports as a result of isolating avian influenza virus from migratory or free living birds.

  

Apparently Kuwait on reflection followed the world Organization of Animal Health guidelines relating to isolation of AI virus from wildlife surveillance and accepted regionalization allowing shipments from the Northeast, Southeast and South Central production areas.

   
Visit our Companion Website
www.Egg-Cite.com
Dr. Simon M. Shane
Simon M. Shane
Contact     C. V.

Industry Prices: Thu Feb 23
 Corn3.92 $/bu
 Soybeans10.05 $/bu
 Soybean Meal331.40 $/ton
 Eggs, Producer36  ¢/doz
 Eggs, Warehouse 56-59  ¢/doz 























 
Copyright 2017 Simon M. Shane