Editorial

Conflicting Submissions to EPA by RFA and NCC

05/06/2019

Predictably, the Renewable Fuels Association (RFA) has submitted comments to the Environmental Protection Agency (EPA) to support a waiver to allow E-15 to be used throughout the year. Currently, a 1-psi Reid Vapor Pressure waiver applies to E-10 during summer months.

Comments opposing the waiver were submitted to the EPA by the National Chicken Council (NCC). The president of the association representing broiler producers, Mike Brown stated “As corn users, our industry faces potential impact by changes in biofuels policies such as modifying the volatility requirements for E-15 fuel blends during the summer season”. Brown emphasized the potential effect of higher corn usage on availability and price which should be considered in addition to the environmental effects.

The NCC submission quoted Section 211(o)7(a) of the Clean Air Act which requires the Secretaries of Agriculture and Energy in consultation with the Administrator of the EPA to consider petitions by one or more states to grant a waiver. Historically petitions referred to as the “off ramp” were denied in 2008 and 2012.

The NCC has proposed a new standard to be considered in granting waivers relating to availability of corn. It is evident that in a drought year or in the event of unseasonable wet weather producing acreage planted to corn consistent with an El Nino event, stocks-to-use-ratio would be affected. The NCC proposed that waivers should be based on the June stocks-to-use-ratio as published in the World Agricultural Supply and Demand Estimate report. Waivers would be disallowed when the ratio exceeds 10 percent and applying a sliding scale would take effect at the 25 percent level with a 5 to 6 percent stocks-to-use-ratio.

For a number of years, the volumes of ethanol to be produced from corn under the Renewable Fuels Standard have been lower than requirement based on optimistically inaccurate projections of future fuel requirement. This has required the renewable fuels industry to export excess ethanol which at the present time is constrained by market factors and tariffs imposed by China.

The ethanol industry is operating at low or negative profitability as evidenced by the recent quarterly report of the Archer-Daniels-Midland company. Less-efficient ethanol plants have been mothballed and the industry is understandably applying spurious environmental considerations to force government support.

When the biofuels industry was initiated, the U.S. was dependent on foreign oil creating vulnerability. Over the past two decades, the U.S. has achieved energy independence, but the livestock industry and other users of corn are forced to subsidize both growers and refiners.

CHICK-NEWS has consistently maintained that the need for biofuels represents a diversion of food to gasoline and is an indirect tax on all who drive or eat. If the NCC is looking for an “off-ramp” it should in fact be a gradual reduction in the so called renewable fuel standard allowing market factors to determine the availability and price of corn.

In centuries to come, archaeologists will ponder the remnants of excavated metal tanks and piping and wonder what cult worshipped these installations.

 



 

Poultry Industry News

Weekly Turkey Production and Prices

06/07/2019

Poult Production and Placement:

The May 15th edition of the USDA Turkey Hatchery Report, issued monthly, documented 28.2 million eggs in incubators on May 1st 2018 (28.8 million eggs on April 1st 2019) down 2.5 percent (0.7 million eggs) from April 1 st 2018.

A total of 23.9 million poults were hatched during April 2019 (24.0 million in March 2019) and up 1.7 percent from April 2018.

A total of 22.0 million poults were placed on farms in the U.S. in April 2019, (21.7 million in March 2019), 1.1 percent less than in April 2018. This suggests disposal of 1.8 million poults during the month. Assuming all tom poults were placed, 14.9 percent of hen poults or 7.4 percent of all April 2019-hatched poults were not placed.

For the twelve-month period May 2018 through April 2019 inclusive, 289.0 million poults were hatched and 262.3 million were placed. This suggests disposal of 26.7 million poults. Assuming all tom poults were placed 18.2 percent of hen poults or 9.1 percent of all poults hatched during the period were not placed.


 

Weekly Broiler Production and Prices

06/07/2019

Chick Placements.

The Broiler Hatchery Report released on June 5th confirmed that a total of 234.0 million eggs were set during the week ending June 1st, almost the same as in the corresponding week in 2018. A total of 181.4 million day-old chicks were placed among the 19 major broiler-producing states during the week ending June 1st. This was two percent higher than the corresponding week in 2018. Total chick placements for the U.S. amounted to 188.8 million. Claimed average hatchability was 82.9 percent for eggs set three weeks earlier. Broiler chick placements for 2019 through June 1st amounted to 4.08 billion, two percent more than YTD 2018.

Broiler Production

According to the June 7th USDA Broiler Market News Report (Vol. 66: No.23) for the short processing week ending June 1st 2019, 148.8 million broilers were processed at an average live weight of 6.09 lbs. (6.13 lbs. last week) and a nominal yield of 76.0 percent. The number of broilers processed was 0.4 percent less than the corresponding processing week in 2018. Processed (RTC) broiler production for the week was 688.7 million lbs. (344,365 metric tons), 1.1 percent less than the corresponding week in 2018. Production YTD of RTC in 2019 is 16.57 million lbs. (7,532,911 metric tons), 0.8 percent more than in 2018 YTD.


 

U.S. Broiler and Turkey Exports for January-April 2019.

06/07/2019

Export data for the first four months of 2019 indicate a moderate decline in export of broiler parts in comparison to the corresponding period in 2018. The overwhelming impression from this and previous comparisons is the consistent erosion in unit price. This is attributed to the fact that leg quarters comprise over 95 percent of exports. This product represents a low-value commodity lacking in pricing power. Exporters of commodities are subjected to competition from domestic production in importing nations. Leg quarters are vulnerable to trade disputes and embargos based on real or contrived disease restrictions.

Total broiler exports for the period attained 1,027,603 metric tons, 1.1 percent less than the corresponding period in 2018 (1,039,280 metric tons). Total value of exports declined by 11.7 percent to $957 million ($1,069 million).

During January-April 2019 the National Chicken Council (NCC), citing USDA-FAS data, documented exports of 1,104,422 metric tons of chicken parts and other forms (whole and prepared) valued at $1,074 million with a weighted average unit value of $973 per metric ton, 9.9 percent lower in value compared to the first four months of 2018 ($1,080 per metric ton).

The NCC breakdown of chicken exports during January-April by proportion and unit price for each broiler category for 2019 compared with 2018 (with the unit price in parentheses) comprised:-

  • Chicken parts 96.1%; Unit value $899 per metric ton ($1,008)

  • Prepared chicken 2.8%; Unit value $3,516 per metric ton ($3,848)

  • Whole chicken 1.1%; Unit value $1,011 per metric ton ($1,070)


 

Status of 2019 Corn and Soybean Crops

06/10/2019

The USDA Crop Progress Report released June 10th documented progress in the rate of planting both corn and soybeans after a slow start. This will impact yields. High topsoil moisture levels are evident in comparison with the corresponding week in 2018 CHICK-NEWS and EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of harvest in October.

WEEK ENDING

Crop

June 2nd.

June 9th

5-Year Average

Corn Planted %

Corn emerged %

67

46

83

62

99

93

       

Soybeans Planted %

Soybeans emerged %

39

19

60

34

88

73

       

 

 

Crop Condition

V. Poor

Poor

Fair

Good

Excellent

Corn 2019

Corn 2018

2

1

7

3

32

19

52

59

7

18

Soybeans 2019

Soybeans 2017

       

 

 

 

 

Parameter

V. Short

Short

Adequate

Surplus

Topsoil moisture: Past Week

1

8

66

25

Past Year

9

23

60

8

Subsoil moisture: Past Week

1

7

66

26

Past Year

9

22

63

6

 


 

WEEKLY COMMODITY REPORT; PRICES RECEDE ON INCREASED PLANTING AMID YIELD CONCERNS

06/10/2019

The following quotations for July and September 2019, as indicated were posted by the CME at close of trading on Monday June 10th compared with values for Thursday June 6th in parentheses. The commodities market recorded a decline in the futures prices of corn, soybeans and soybean meal over the past two weeks. The mid-May run-up in prices was due to slow progress in planting, the possibility of reduced acreage and the prospect of diminished yields.

The absence of any definitive news regarding finalization of the trade dispute with China and previous conflicting statements by White House spokespersons over the months since the dispute began is disconcerting to the commodities market and has contributed to fluctuation in prices.

COMMODITY

 

Corn (cents per bushel)

July 416 (421)

Sept. 424 (430)

Soybeans (cents per bushel)

July 860 (868)

Sept. 873 (882)

Soybean meal ($ per ton)

July 314 (316)

Sept. 317 (319)

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

COMMODITY CHANGE FROM PAST WEEK  
Corn: July quotation down 5 cents per Bu (+1.1 percent)
Soybeans: July quotation down 8 cents per Bu (+0.9 percent)
Soybean Meal: July quotation down $2 per ton. (+0.6 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

 

COMMENTS

Subscribers are directed to the USDA Crop Progress Report posted in this edition for the rate of planting, crop emergence and condition.

Negotiations with China are apparently at a standstill following shuttles between Beijing and Washington in late April. Some concessions were promised by China on reducing coercive trade practices and clarifying dispute resolution although U.S. negotiators claim that China attempted to backtrack on structural issues. From an agricultural perspective the question of delays by China in approving new GM cultivars has yet to be settled. No date has been set for a summit to sign a trade deal which is as elusive as ever. Prices will be influenced by the trend in stock levels, area actually planted in 2019 and early crop progress in the face of flooding.

According to the May 10th 2018 WASDE Report #588, 85.4 million acres of corn will be harvested in 2019 to produce 15.0 Billion bushels. The soybean crop is projected to attain 4.2 Billion bushels from 87.8 million acres harvested. The levels of production for the two commodities are based on current planting, projections of yield and acreage. The WASDE to be published in mid-June will confirm the acreage actually sown to corn and soybeans respectively.

See the WASDE posting summarizing the May 9th USDA-WASDE Report #588 under the STATISTICS tab documenting price projections and quantities of commodities to be produced, used and exported from the 2019 harvest.

Unless shipments of corn and soybeans to China resume in volume, now a distant hope, the financial future for row-crop farmers appears bleak despite the release of two tranches in 2018 amounting to $8 billion as "short-term" compensation for producers of commodities. A further allocation of $14.5 billion to producers under the Market Facilitation Program was announced on May 23rd for the 2019 crop.


 

USDA-WASDE FORECAST #589 June 11th 2019

06/11/2019

OVERVIEW

The June 11th 2019 USDA WASDE projections for the 2019 corn and soybean harvests are based on historical yield and harvest data. The corn acreage to be harvested was determined from planting completed and stated intentions at 82.4 million acres (81.8 million in 2018) and down 3.5 percent from the May WASDE. In 2019 soybeans will be harvested from 87.8 million acres (88.3 million acres in 2018). There was apparently no material change due to recent Midwest flooding or the forecast for wet conditions from snowmelt delaying planting.

The USDA projected corn yield to attain 166.0 bushels per acre, (178.9 bushels in 2018) and down 5.7 percent from the May WASDE. Soybean yield was projected at 49.5 bushels per acre (52.1 bushels in 2018). These values presume suitable planting and growing conditions, time of sowing and standard rates of germination.

The May USDA projection of ending stock for corn was reduced by 32.6 percent from the May WASDE to 1,675 million bushels. Ending stock for soybeans will be 8.5 percent higher at 970 million bushels. Ending stocks for both corn and soybeans have influenced recent CME price quotations. It is emphasized that projections are based on the presumption of at least a partial settlement of the trade dispute with China followed by restoration of exports to that Nation, a prospect that appears in question given lower demand from China and the latest round of tariffs imposed by both nations.


 

Target Plans Extensive Store Upgrades

06/06/2019

According to the Phoenix Business Journal, Target plans 300 store upgrades in 2019 at a cost of between $4 and $10 million per location.

 

Target has updated more than 500 stores including 53 units in 2019. 

 

Brian Cornell, CEO noted, “Guests continue to respond to these projects by shopping the remodeled stores more often, driving incremental traffic and sales.” 

 

Although in-store shopping represents the bulk of Target sales, the company is installing drive-up services to fulfill orders and home-delivery using Shipt.  Target COO, John Mulligan noted that their three services represented a quarter of total of the 4.8 percent company sales growth. He commented “Importantly our analysis indicates that the new services including Drive-Up and Shipt are driving incremental trips for Target rather than simply replacing other forms of shopping.”


 

FSNS to Present Food Safety Management Course in Greeley, CO

06/04/2019

Food Safety Net Services (FSNS) will present a course on the importance of GFSI in Food Safety Management on June 26th at the FSNS Greeley, CO facility. The course will deal with an understanding and reacting to data generating from sampling, testing and environmental monitoring.

The course will be taught by Alex Brandt, Chief Science Officer and Lori Ernst, Senior Vice President of Ordered Services for FSNS. Both instructors have considerable experience in food operation management, detection methods, foodborne pathogens, sanitation and food safety including auditing. For further information, access training@fsns.com or call 888-525-9788.


 

African Swine Fever Situation Deteriorates in Vietnam

06/04/2019

The Government of Vietnam has conceded that 1.7 million or 5 percent of the national herd has either died or has been culled in an attempt to control African swine fever. The disease is present in 42 of the nation’s 63 provinces according to the Ministry of Agriculture, Livestock Production Department.


 

Possible Merger of BRF S.A. and Marfrig Global Foods S.A. of Brazil

06/05/2019

On May 30th, the two companies filed with authorities in Brazil to complete a merger. If the transaction is completed, the combination will represent a significant force in animal protein since Marfrig is a major producer and exporter of poultry and BRF S.A. has extensive beef and pork capacity.

In December 2018, Marfrig acquired the majority of the Argentine assets of BRF in addition to a unit in Mato Grosso State.

Marfrig is the owner of National Beef Packing Company LLC of Kansas City, MO.


 

Chipotle Defers on Breakfast Servings

06/05/2019

In an address to the Sanford C. Bernstein Strategic Decisions Conference on May 29th, CEO Brian Niccol confirmed that Chipotle would concentrate on beverages and would defer serving breakfasts.

Niccol stated “Part of the reason why we want to get after beverages is I think there is a real opportunity for that afternoon daypart”. He commented on both lunch and dinner as strengths of the company supported by mobile. In discussing breakfast, he stated “I do think breakfast is something in the future that we might do”.

The reality is that previous management failed to recognize the importance of drive-through servings in the location and design of free-standing stores. In common with Subway which also operates a high proportion of store-front operations, breakfasts are difficult to serve in other than urban locations as this mealtime is heavily dependent on drive-through traffic. Developing a comprehensive breakfast menu would require considerable R&D, installation of equipment and training. The current layout of kitchens and serving areas in Chipotle stores is compatible with lunch and dinner, but cannot be adapted to breakfast.


 

Butterball Suspended Operations at Ozark, AR Facility Following Flooding

06/05/2019

Butterball LLC experienced a temporary closure of their plant located in Ozark, AR. caused by flooding, commencing May 24th through the succeeding week. The plant re-opened on Monday June 3rd.

Extensive Midwest rain and flooding in the catchment areas for the Missouri and Arkansas rivers has resulted in extensive downstream damage to low-lying industrial parks and farmland.

 

 


 

Hybrid Turkeys Applying Ovarian Transplantation to Preserve Gene Pool

06/05/2019

A cooperative partnership between Hybrid Turkeys, the University of Guelph in Canada and the USDA-ARS will study ovarian transplantation in turkeys to determine the feasibility of long-term preservation of specific genetic lines. Maintaining avian sperm is not effective since fertility of frozen sperm is extremely low. Raising and maintaining breeding stock is expensive and flocks can be impacted by disease or natural disasters.

The study involves transplanting ovaries to preserve genes. The initial stage involves a seven-day old donor poult and a one day old recipient poult for ovarian grafting. If it can be demonstrated that the recipient does not reject transplanted ovarian tissue, additional transplants will be carried out transferring tissue from white turkey lines to bronze lines. Dr. Ben Wood of Hybrid Turkeys stated “Investment in these research projects are important for future sustainability. We will continue to collaborate with academic and government partners to develop innovative solutions that could offer real value for the future of the industry”.


 

North Korea Reports African Swine Fever

06/06/2019

In a communication to the OIE,North Korea confirmed African swine fever on a farm in Jagan Province near the border with China on May 25th.  Obviously there has been movement of either live hogs or contaminated pork products from China southwards into North Korea.  Hopefully the broad demilitarized zone and limited contact between North Korea and South Korea will prevent the southward movement to affect hogs farms in South Korea.


 

CDC Issues Advisory on Safe Grilling

06/06/2019

Due to the upsurge in incidence rate of foodborne bacterial infection, the Centers for Disease Control and Prevention (CDC) has issued their annual advisory for safe grilling.  Their recommendations include:-

 

  • Separate raw poultry from other foods at the store checkout counter
     
  • Poultry should be chilled and a maintained at 40 F during transport and held under refrigeration before preparation.
     
  • Hands should be thoroughly washed with soap and water before and after handling raw poultry.  Any work surfaces and utensils should be washed before and after cooking.
     
  • Clean the surface of the grill before cooking, exercising care to preventing wire particles which may be dislodged from brushes adhering to the grill surface.
     
  • Do not allow marinades and sauces in contact with raw meat to contaminate cooked food.
     
  • Hamburgers, poultry and precooked meats should be heated to 165 F.
     
  • Cooked food should be held at 140 F until served.
     
  • Leftovers should be promptly refrigerated within one hour of cooking given ambient summer temperatures that promote bacterial growth.

 


 

Contamination Results in Recalls

06/06/2019

Johnsonville Company, in Sheboygan Falls, WI. recalled 42 tons of smoked sausage produced on March 12th.  Green plastic contaminants were found in the 14-ounce packages with a “best by” date of June 9th 2019.  There have been no confirmed reports of injury resulting from the problem.

 

Perdue Foods LLC recalled 16 tons of chicken nuggets, tenders and strips.  This action follows consumer reports of bone fragments in products.  The implicated batches were marketed under the Chef Quik® and Simply Smart® organics brands.  The affected product was manufactured on March 21st.  As of March 31st there were no reports of injury arising from the contamination.

 

The FSIS routinely conducts recall effectiveness audits and posts data on www.fsis.usda.gov/recalls

 

In past months, losses associated with contamination involving both plastic and metal fragments resulted in extensive recalls of meat products.


 

Aviagen Opens Turkey Pedigree Farm

06/06/2019

Aviagen has completed a new three-barn pedigree-rearing farm in Monroe County West Virginia.  The facility will hold three flocks from day-old to 30 weeks of age.

 

Aviagen incorporated extreme biosecurity facilities to prevent exposure of flocks to infection.  The design of houses and selection of structural components and finishes contributing to structural biosecurity are necessary to maintain freedom from Salmonella and other bacterial pathogens which would otherwise compromise the value of breeding stock.


 

Pork Producers Were Concerned Over Proposed Mexico Tariffs and Retaliation

06/09/2019

David Herring, president of the National Pork Producers Council issued a statement on May 31st relating to the proposal by the Administration to place a tariff on imports from Mexico as an imperative to reduce illegal migration. Herring stated “We appeal to President Trump to reconsider plans to open a new trade dispute with Mexico. American pork producers cannot afford retaliatory tariffs from its largest export market, tariffs which Mexico will surely implement. Over the last year trade disputes with Mexico and China have cost hard-working American pork producers and their families approximately $2.5 billion”. The statement continued “We hope those members of Congress while working to restrict the Administration’s trade relief programs, take note”.

The statement continued “Let us move forward with ratification of the United States-Mexico-Canada agreement preserving zero-tariff pork trade in North America for the long term; complete a trade agreement with Japan; and resolve the trade dispute with China, where U.S. pork has a historic opportunity to dramatically expand exports given the country’s struggle with African swine fever”.

Dr. Dermott Hayes, an Ag economist at Iowa State University predicts that U.S. pork producers will lose their entire Mexican market if they face protracted retaliation. In 2018, according to industry data, Mexico represented 20 percent of U.S. pork exports.

In the event the decision not to impose tariffs scheduled for Monday 10th June, following a mutual agreement between the nations has relieved the immediate concern. Should Mexico fail to comply with its obligations tariffs would be imposed and U.S. exporters of agricultural commodities would be back to the end of May. 


Lopez Obrador
President of Mexico

 

Anitox Foundry Program

06/10/2019

Anitox organized an educational program on Tuesday, June 4th dealing with suppression of foodborne pathogens.

Topics included:

  • Chemistry:  the basic mechanisms of destruction of foodborne bacterial pathogens
  • Application methods for incorporating Anitox products in feed to achieve optimal results
  • Analytics measuring pathogen load and the beneficial effect of Anitox products
  • Benefiting from available analytical technology and data to enhance feed safety

 


 

Red Robin Posts First Quarter FY2019 Results

06/10/2019

For the first quarter of 2019 ending April 21st, Red Robin Gourmet Burgers posted net income of $0.6 million on sales of $410 million. Comparable figures for the first quarter of fiscal 2018 were net revenue of $4.4 million on $422 million revenue. EPS for the most recent quarter was $0.19 compared to $0.69 in Q1 of 2018.

Comparable restaurant sales declined by 3.3 percent, and comparable restaurant guest traffic decreased by 5.5 percent.

Guidance for the remainder of fiscal 2019 included net income of $16 million, and comparable restaurant revenue. Red Robin Gourmet Burgers (RRGB) has a market capitalization of $332 million. The 52-week range in share price is $24.57 to $54.95. At 15h00 on June 3rd, share price was $25.62, near the bottom of the range. Twelve month trailing operating margin is 1.3 percent with a negative profit margin of -0.77 percent. The company has yielded a return on assets of 1.0 percent and negative return on equity of -2.7 percent.

Red Robin has featured vegetable-based burgers in menus although recent data suggest that alternatives to beef are expensive and generate slimmer margins

Currently the company is searching for a permanent CEO.


 

Shane Commentary

Farmers Justifiably Concerned Over Threatened Tariff on Mexican Imports

06/10/2019

The announcement by the President that the U.S. would impose an initial and progressive five percent tariff on imports from Mexico effective Monday 10th June created concern on both sides of the border among producers, industrialists and in the legislatures of both nations.

Adoption of USMCA was imperiled by the action since it was evident that Mexico would have imposed retaliatory tariffs that would directly impact the agricultural sector.

At issue is the contention by the White House that Mexico has done too little to stem the migration of refugees from Central America to the U.S. border. In response, Mexico offered to intensify detentions and sent a high-level delegation to Washington on Thursday, June 6th. Congress has expressed little support for the action with solid opposition from Democrats and subdued calls for moderation from Republicans.

David Herring, president of the National Pork Producers Council stated “Producers are extremely concerned about another potential trade retaliation from Mexico”. He added “Mexico is considered one of the most lucrative markets for American agricultural products given easy access and close proximity to the U.S. by rail, ship or truck”.

Veronica Nigh, an economist with the American Farm Bureau Federation commented “When you look at all the different products that the U.S. exports to Mexico, all those folks are getting nervous that retaliatory tariffs could certainly find their way into their products”.

In 2018, the U.S. exported $19 billion in agricultural products representing the second-largest purchaser after Canada. Mexico is the top market for U.S. poultry, eggs, corn and rice in addition to beef, pork, soybeans and wheat.

It is hoped that the announcement of a bilateral agreement by the White House will resolve the immediate crisis. Unfortunately Mexico, in the words of their former Foreign Minister “always says yes but is vague on when”. In the event of non-compliance the Administration has threatened to impose punitive tariffs. In this event, farmers and manufacturers in the U.S. will suffer due to reduced trade and disruption of supply chains. Additional costs will ultimately be borne by consumers. 

 

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