Shane Commentary

Listeria Outbreak in South Africa Moves From Epidemiology to Politics

05/21/2018

Following 1,011 laboratory-confirmed cases of listeriosis in South Africa, including 193 deaths, incident cases have declined to single digits per week following closure of the plant implicated as the source of infection.

 

There should now be a period of evaluation with a concentration on the epidemiology of the outbreak and applying in-plant preventive measures. Unfortunately investigations have taken second place to a political fight which has implications for exporters of poultry to South Africa. 

The opposition Democratic Alliance criticized the ruling African National Congress Party for delayed action and incompetence.  At issue is the decision to cease testing imported chicken for the presence of Listeria. This is justified given the fact that laboratory assays demonstrated the presence of Listeria monocytogenes ST6 in the implicated plant and in branded processed meat products.  Opposition Member of Parliament Patricia Kopana claims that, “It still remains unclear how these factories were contaminated in the first place.”  Kopana urged continued testing of all imported meats.  She cited for her justification an outbreak of listeriosis in Australia which in fact involved melons as the vehicle of infection. 

 

Kopana also falsely accuses the RSA Government and specifically the Minister for Health, Dr. Aaron Motsoaledi for making the implicated Enterprise plant a scapegoat. Kopana contends that the Government failed to ascertain the source of the infection.  Given this sentiment together with opposition to cessation of routine testing of imported chicken, implies that product from the EU, Brazil or the U.S. may have been involved in the outbreak.  Intensive assays failed to demonstrate the presence of Listeria in imported products.

 

It is indeed unfortunate that the Democratic Alliance which has a reputation for moderation and honesty should raise questions relating to the cause of the Listeria outbreak. Questions raised in the media in South Africa perpetuate the canard that imported chicken was responsible for introduction of what is regarded as a ubiquitous pathogen which can be amplified in plants processing meat products under less than stringent conditions of operation.

 

The fact that the prevalence of listeriosis in the U.S. is extremely low and when limited outbreaks occur they are usually associated with dairy products and produce. U.S. bone-in product has not been implicated in any outbreak of listeriosis in South Africa.


 

Venture Capital Companies Combine to Support Future Meat Technologies

05/11/2018

Future Meat Technologies, an innovator and potential producer of laboratory cultured meat on a commercial scale has raised $2.2 million in a round lead by Tyson Ventures but including the Neto Group of Israel, S2G Ventures of Chicago, BitsXBites of China and Agrinnovation an investment fund representing the technology transfer company of the Hebrew University.

 

The technology to be used by Future Meat is based on the research of Professor Yaakov Nahmias of the Hebrew University of Jerusalem.  Nahmias the chief scientist and founder of the company stated, “We redesigned the manufacturing process until we brought the cost down to $800 per kilogram, with a clear roadmap to $5 to $10 per kg by 2020.”

 

Product which will be cultured by Future Meat Technologies includes both muscle protein and fat which is necessary to provide texture and aroma on cooking.  Nahmias noted, “I want my children to eat meat that is delicious, sustainable and safe, this is our commitment to future generations.”

 

Justin Whitmore, Executive Vice President, Corporate Strategy and Chief Sustainability Officer of Tyson Foods stated, “This is our first investment in an Israel-based company and we’re excited about this opportunity to broaden our exposure to innovative, new ways of producing protein.”  He added, “We continue to invest significantly in our traditional meat business but also believe in exploring additional opportunities for growth that gives consumers more choices.”

Dr. Yaron Daniely, President and CEO of Yissum, the Technology Transfer Company of the Hebrew University stated, “Our institution is the only Faculty of Agriculture, specializing in incubating applied research in fields such as animal-free meat.”

 

Tyson Ventures has also invested in Beyond Meat which produces vegetable-meat alternatives and also in Memphis Meats which is pursuing tissue cultured-derived muscle meat albeit at a high cost which precludes immediate commercialization.

 

The credentials of Future Meat Technologies and Memphis Meat are without question. Both innovators have published on their work and presented data at national scientific meetings. This contrasts with unsubstantiated claims made by Josh Tetrick of Hampton Creek/Just etc. who perpetually claims to be at the threshold of a breakthrough and will soon make traditional livestock production obsolete.

 

At a price of $5 to $10 per kg by 2020, if achievable, synthetic meat will most certainly represent a challenge to traditional livestock production. Even with stringent label requirements cell-cultured meat will be attractive to an affluent demographic intensely concerned over sustainability and environmental issues.


Hebrew University Jerusalem

 

Can We Expect Anything Material From The High-Level Trade Delegation To China?

05/03/2018

Treasury Secretary Steven Mnuchin led a delegation of officials including Presidential Advisors Larry Kudlow and Peter Navarro to China during the first week of May. The objective was to lower the intensity of tension with the Nation with whom we have an asymmetrical trade relationship.

The delegation may not achieve anything material given the intransigence of China. Gao Feng, a spokesperson for the Ministry of Commerce of China noted “The Chinese side resolutely opposes any type of unilateralist or protectionist actions.” He continued “Investment by Chinese enterprises in the United States has made important contributions by increasing employment and promoting American economic development.”

Investment by Chinese companies in the United States is not altogether altruistic. Many of the transactions are by government-supported entities (“parastatals”) and result in extensive disclosure of proprietary technical information. Investment by China in the United States is not matched by an equal opportunity for U.S. companies to undertake reciprocal investment. Regulations and practice have dictated the progressive appropriation of intellectual property by Chinese entities associated with any joint venture between investors from the U.S. or the E.U.

It is hoped that arising from negotiations, China will agree to conform to the principles discussed during the 2017 meeting between the President and Chairman Xi Jinping. Topics included beef exports from the U.S., importation of cooked poultry from China, purchases of natural gas from the U.S. and regulation of financial services.

Automobiles and parts are a major source of conflict. China imposes a 25 percent tariff on vehicles and components imported from the U.S., but should China wish to export to the U.S., only a 2.5 percent tariff would be applied.

China has embarked on an aggressive policy of dominating the high tech, transportation and pharmaceutical industries. To progress from commodities and relatively undifferentiated products such as steel fabrication, China will require technical assistance from the U.S.

Our negotiators should not expect any rapid resolution of contentious items. China has a history of playing the long game and temporizing. In the short term, China would like to avert an all-out trade war and may well concede on a few issues. Most economists contend that punitive tariffs on Chinese steel and a range of other consumer items will not necessarily create more jobs in the U.S., but may in fact be detrimental to the economy. What appears superficially to be politically advantageous will have profound impact on long-term growth of our economy and ultimately job creation. This is especially apparent in states with historically strong agricultural exports.


 

Farm Bill to Address Raise in SNAP Payments

04/18/2018

The 2018 Agriculture and Nutrition Act of 2018 (the Farm Bill)  which passed out of the House Agriculture committee on a party-line vote on April 18th will address the problem of escalation in number of beneficiaries of the Supplemental Nutrition Assistance Program (SNAP). Participants in this program increased from approximately 3.5 million in 2000 to a peak of 48 million in 2013.  The rise from 2007 through 2011 corresponded to the unemployment rate which doubled from 4.5 percent prior to the great recession to a peak of 9.5 percent in 2009.  Since this time unemployment has decreased to 4 percent but the number of recipients has not fallen in proportion and stands at approximately 42 million, costing over $70 billion in 2017.

 

The GOP Farm Bill will require recipients to either work, seek work or undergo work training.  Exemptions will be extended to single mothers and those caring for the elderly, the disabled and seniors.  The Farm Bill has been written in anticipation that at least one-third of current recipients can be removed from what has become a permanent entitlement, saving at least $20 billion annually.

 

The Federal program allows some states to extend waivers and extensions. Experience in Kansas has shown that in 2017 over 6,000 families moved from reliance on welfare to commence working. Eligibility for SNAP will be based on need with elimination of “broad-based categorical eligibility”.

 

It would be a shame if the 2018 Farm Bill were to be delayed by partisan bickering over eligibility for SNAP.  What began as a supplemental program has unfortunately become an entitlement.  Given a 4 percent unemployment rate, the number of SNAP participants should be in the region of 15 to 20 million not the current 40 million, suggesting an undue dependence on Uncle Sam.


 

High Cost of Foodborne Infection

03/26/2018

An aspirant Broadway performer and talented actress who contracted life-threatening complications following infection with E.coli O157:H7 has settled with Costco for an undisclosed sum.

The vehicle of infection was a chicken salad consumed in October 2015. She developed hemolytic uremic syndrome and received a donor kidney from her husband. After numerous surgeries and rehabilitative procedures, her medical bills have to date exceeded $2 million.

Attorneys for Costco denied liability under the Plaintiff’s claim and asserted that it complied with all applicable statutory and regulatory provisions and standards. The case was settled following mediation.

In a recent court decision, a family was awarded a settlement arising from Salmonella infection of a child who contracted encephalitis and will require lifelong support. Although the integrator producing, processing and marketing the chicken product documented conformity to the USDA maximum permissible level of Salmonella contamination on carcasses and parts, the Court ruled that this did not absolve the Defendant from liability. The case law developed from this claim creates a higher level of risk for integrators. The award of close to $2 million took into account contributory negligence on the part of members of the family who prepared food for the child, with a presumption of either undercooking or cross-contamination in the kitchen.


 

Survey on Willingness to Consume Cultured Meat

03/06/2018

A survey company Surveygoo owned by Asia Opinions Ltd. Conducted a survey sponsored by Ingredient Communications based in the U.K. According to a press release by Surveygoo, 1,000 consumers in the U.K. and the U.S. were questioned as to their willingness to consume cultured meat. The survey revealed that 29 percent of respondents said that they would consume the product, 38 percent avowed that they would not and 33 percent said they didn’t know. This indicates a lack of knowledge on the part of those surveyed and a degree of resistance.

 It is noted that the results based on participants consuming “all types of food” included 28 percent willing to try cultured meat, 37 percent unwilling and 35 percent unsure. In the category described as vegan, 60 percent said they would and 26 percent said they would not. How vegans who do not eat meat, fish, eggs or dairy products can accept cultured meat which is based on animal cells and is produced using bovine serum is inexplicable. Again it points to a lack of knowledge on the part of the participants in that category and also the simple structure of the survey.

This “quick and dirty” approach to evaluating consumer responses borders on malpractice. There is no indication of whether price was a consideration nor were other major characteristics of the respondents documented.

Protect us from garbage surveys incorporating extreme simplicity and bias.


 

2018 Farm Bill to Include Dairy and Cotton Support Provisions

02/28/2018

The proposed 2018 Farm Bill under review by the Senate will contain $1 billion for “struggling dairy farmers”.  The Margin Protection Program established in the current Farm Bill was not beneficial to farmers and enrollment has dropped 75 percent. The safety net for family dairy farmers will hopefully “fix problems with the old MPP” according to Senator Charles Schumer (D-NY).

 

Cotton farmers will also receive benefits in terms of the STAX provision incorporated in the 2014 Farm Bill.  The crop will be subsidized applying the boondoggle that cotton is a vegetable oil crop based on cottonseed as a by-product.  According to Chuck Abbott writing in Successful Farming on February 8, “The American Enterprise Institute estimates that he dairy and cotton subsidies would cost from between $700 million to $1.5 billion annually.

 

It is apparent that selected commodities receive bountiful Federal support.  Apart from indirect benefits accruing from the interstate highways system and support of river transport, the broiler and turkey industries receive no direct benefits or subsidies.  In fact, obligations inherent in EPA, OSHA, DHS, USDA and other agencies add to cost.  Most of the incremental expenses imposed by the Federal government cannot be passed on to customers and consumers in a competitive environment.


 

Concern in the U.K. over Post-Brexit Agricultural Trade

02/28/2018

Domestic livestock producers in the U.K. are expressing concern over the strong likelihood of importation of U.S.-origin beef and poultry if a trade agreement is signed between our nation and the U.K. after Brexit.  It appears that fault lines are emerging and that in the interest of protectionism. Opponents of U.S. imports are invoking antibiotics in the case of cattle and chlorine immersion to block chicken.  The U.K. may have a valid issue over antibiotics but it is evident that the poultry industry has demonstrated a greater degree of compliance with the VFD on substitution of alternatives to antibiotics in production.  The turkey industry still has to make progress based on the disparity in the use of antibiotics as expressed in quantity administered per unit weight of production compared to broilers.

 

Chlorine immersion is effectively a spurious barrier to protect domestic U.K. production.  If required, chlorine could be replaced by other bactericidal compounds.

 

At the end of the day, the U.S. will have to reappraise the needs of the U.K. and supply supermarket chains with sophisticated added-value products.  The purchase of Moy Park by Pilgrim’s Pride will obviously provide this company with considerable market intelligence and synergy resulting from U.S. efficiency and E.U. technology.  Certainly, the U.K. will not represent a typical high-volume commodity export market in which product differentiation will be represented by either left or right leg quarters.  Given the range of products available in the U.K. in supermarkets extending from high-end Marks and Spencer’s down to lower-priced Aldi and Lidl, Thailand through Cargill-owned companies will be in a position to provide specific products requiring both volume of scale as well as sophisticated presentation.

 

It is hoped that Ted McKinney the U.S. Under-Secretary of Agriculture for Trade and Foreign Agriculture Affairs will tread lightly and be sensitive to the political and marketing environment in the U.K. in his negotiations.

 

If NAFTA negotiations break down and we concurrently antagonize Cuba, we risk losing exports of chicken amounting to 805,291 metric tons valued at $677 million. In the event that the export market to the top two nations is destroyed by injudicious policy and diplomacy, U.S. integrators will have to find alternative export markets. Diverting up to five percent of current production in the form of dark meat into the domestic market will seriously depress prices and hence profitability.


 

Sanderson Farms Antibiotic Resolution Voted Down

02/27/2018

At the 2018 annual meeting of Sanderson Farms, a proposal to phase out medically important antibiotics for disease prevention in the supply chain received 43 percent of the vote and was therefore rejected. Management campaigned actively for shareholders to reject the proposal The proposal also required management to commit to timetables and metrics to implement a policy of phasing out medically important antibiotics. In 2017 a similar resolution gained the support of 30 percent of shareholders’ votes. Sanderson Farms is the only major chicken producer which has not committed to reducing the use of antibiotics of human health significance or introducing “Antibiotic Free” brands. 

 

Irrespective of shareholder resolutions or the inclinations of management, Sanderson Farms and its Veterinarians are obliged to conform to regulations as codified in FDA Guidance Document 152.  Virtually all antibiotics with the exception of bacitracin are regarded as important or critical in human medicine as listed in FDA Guidance Document 209.  Antibiotics of human health significance can only be prescribed by a licensed veterinarian in accordance with a VFD, applying “Prudent Use Principles”. Conformity is accepted to be the practice within the company.

 

 

It is generally accepted that over-prescription by the medical profession in developed nations, deficiencies in decontamination of medical facilities and improper regulation of drugs in developing nations has contributed to bacterial resistance as a world problem. Notwithstanding the fact that the medical profession persists in issuing prescriptions under circumstances disallowed for U.S. Veterinarians, there is a lower level of restriction on physicians.

 

In the face of increasing evidence from molecular assays and whole genome sequencing, it is apparent that there is a connection between antibiotic use in livestock production and the subsequent emergence of drug resistant pathogens. Epidemiologic evidence points to specific problems in livestock and poultry production. The emergence of the mcr-1 plasmid-associated gene which is spreading in the E.U. and has emerged in a few cases in the U.S. in E.coli and Klebsiella spp. is attributed indirectly to misuse of colistin in Asia, Eastern Europe and the Middle East. In the absence of specific traceback studies the Sanderson Farms contention that, “There is not any credible science that leads us to believe we are causing antibiotic resistance in humans” is valid if emphasis is placed on the “we” and with an assumption of the here and now. From a broader and longer-term perspective any integrator using antibiotics on an extensive scale could precipitate the emergence of antibiotic resistance. The risk is very small but the consequences to a brand could be immense.

 

 

Whether or not the administration of antibiotics to flocks is or is not contributing to drug resistance in human pathogens in the U.S. is really not the issue. The real problem is the deep-seated perception among, consumers, customers, regulators and legislators that antibiotic use in livestock is contributing to emerging drug resistance. Period.

 

The evident risk to Sanderson Farms with regard to their antibiotic policy and pronouncements lies less in the danger of actually evolving and disseminating drug resistance than in a degrading of company image and ultimately sales and profits. Competitors of Sanderson Farms have initiated antibiotic-free production and many of these companies are operating in accordance with USDA-verified “No Antibiotics Ever” programs.  Most of the members of the industry associations representing food retailers, restaurants and QSRs have announced their intention of sourcing poultry meat from flocks that do not receive antibiotics.  Although Sanderson maintains that there is an oversupply of antibiotic-free poultry and that none of their customers are demanding antibiotic-free product, the trend towards “drug-free’, “antibiotic-free” and “No Antibiotics Ever” is evident in the marketplace and will grow in volume and scope.

 

Competitors have effectively implemented antibiotic and drug-free programs without obvious deterioration in performance in most flocks harvested. The small proportion of flocks which may require antibiotic therapy under a VFD are diverted to the conventional market stream without “antibiotic-free” label claims. If an integrator finds it necessary to treat successive flocks in a complex or a significant proportion of flocks for septicemia or enteritis, appropriate preventive modalities should be evaluated and implemented.

 

Routine administration of growth-promoting levels of antibiotics was disallowed, effective January 1st in the U.S. Many companies preemptively eliminated inclusion of sub-therapeutic levels of antibiotics from 2014 onwards. Perdue Farms initiated an extensive field trial from 1988 to 2001involving 7 million broilers in168 paired-house comparisons in North Carolina and Delmarva. The trial* failed to demonstrate financial benefits from using growth-stimulating antibiotics although live weight was depressed by 15g per bird and livability was reduced by 0.17 percent from flocks receiving growth-promoting antibiotics.

 

 It appears inexplicable why Sanderson Farms is so committed to defending antibiotic use since it represents an anachronistic approach to both production and customer perceptions.  Opponents of antibiotics in general and those who are antagonistic to intensive livestock production maintain that even therapeutic use under Veterinary supervision is a mask to compensate for deficiencies in housing, immunization and management.  Given the production performance of Sanderson Farms, these assertions are not substantiated but the perception that Sanderson Farms relies on antibiotics should be an obvious concern to management.

 

Shareholders will have the final say.  Financial performance even over the short term will be a factor influencing institutional investors who own approximately 85 percent of SAFM.  If in the future, the value of sales or gross margins fall as a result of decreased unit price compared to competitors, and if the declines are attributable to rejection of the brand by major customers or by consumers, a change in policy will have to be effected.  It would be unfortunate if these changes are made only after the company experiences an erosion in brand loyalty and consumer goodwill.

 

*Engester, H.M. et al The effect of withdrawing growth promoting antibiotics from broiler chickens: A long-term commercial industry study. J. Applied Poultry Science. 11:431-436 (2002)


 

KFC in the U.K. Experiences Delivery Problems. DHL Apologized!

02/25/2018

Following a move from Bidvest, their existing logistics company, Kentucky Fried Chicken was impacted by a failure of DHL to supply over 900 stores in the U.K.  Outlets suffered shortages of product resulting in store closures, reduced operating hours restricted menus and customer disaffection. Within days 600 stores were operating and open but customers were suffering from “burrito withdrawal” and dry non-greasy fingers.

 

A statement issued by KFC alluded to “teething problems”.  This is totally irrelevant as chickens do not have teeth.

 

In response to the debacle, a representative of DHL noted “Due to operational issues a number of deliveries in recent days have been incomplete or delayed.  We are working with our partners KFC and QSL (the supplier of their inventory and delivery software) to rectify the situation as a priority and apologize for any inconvenience.” 

 

The key word in the DHL statement is “apologize” This appears to be the universal response to any failure of service causing inconvenience or loss of goodwill. An “apology” is intended to absolve a company from blame as a result of incomplete planning, incompetence or lack of resources.  Lost luggage generates an “apology”. Failure of internet or cable connection elicits an apology. Flight delays due to “equipment failure” or inability to proactively respond to “weather” also generate an effusion of apologies. Inordinate delays in medical facilities generally do not require apologies since patients are regarded as having been habituated.

 

Meaningless apologies are actually in lieu of compensation as they do not cost anything and constitute a license to continue operating with the same disregard for consumer service and well- being.  By the way our Government never apologizes.

 


 

New CEO Appointed to Chipotle Mexican Grill

02/22/2018

Chipotle Mexican Grill has appointed Brian Niccol as CEO to succeed beleaguered founder Steve Ells. Niccol transitions to Chipotle from Taco Bell where he served as CEO of the Yum! Brands Mexican-themed subsidiary. During his three-year tenure, Niccol repositioned the image of Taco Bell with emphasis on the 20 to 30-year age demographic. He introduced breakfasts, digital ordering and revamped the menu.

In his new position, he will have to apply all his skills and experience to revitalize a chain which has suffered from mismanagement extending downwards from a dormant Board to incompetent store managers and disaffected employees.

Chipotle Mexican Grill has posted a 52-week range in share price of $247.50 to $499.06. The company has a market capitalization of $8.4 billion. Prior to the Tuesday 13th announcement of the appointment of Brian Niccol, CMG closed at $251.29 not far from the 52-week low. The announcement was reflected in an upward move with a close on February 14 at $289.86.

The twelve month trailing operating margin for the chain is 6.4 percent with a profit margin of 3.0 percent.

Niccol faces the following challenges on his first day on the job:-

  • A survey showing that 2,500 customers believe that quality and trustworthiness has fallen since 2015.

  • Failure to improve menus. The cheese queso was not well received by either new or loyal customers.

  • Failure of marketing initiatives including giveaways, a loyalty program and minor tweaks and additions to the menu.

  • A perception that stores are dated. Recently statements by Chipotle executives have indicated that operational imperatives such as “keeping restaurants clean” was neglected “while they focused on food safety”. Keeping restaurants clean is an essential part of food safety and denotes the lack of knowledge and perception of the coterie of yes-men surrounding Steve Ells.

  • The biggest challenge facing Niccol will be his level of authority. He will be held accountable for improvements in profitability but it is questioned whether he will be able implement changes which reflect adversely on the previous decisions by Ells and sanctioned by the Board. Given a free hand he may justify the confidence demonstrated by investors. If restrained or impeded in his actions, at best there will be minimal improvement in financial performance and at worst Chipotle will be looking for a new CEO within a year. The fact that Ells has stated, “I fully intend to have the new CEO be in charge” is reassuring but given past performance and inability to appoint qualified and creative subordinates Ells, in the background may be the biggest obstacle to a turnaround.

  • Niccol will have to redefine the image of Chipotle as he did at Taco Bell. The question arises as to whether the chain is a QSR or a casual dining destination. Given ordering at a counter and walking through a line places Chipotle in the category of a very expensive QSR. The chain has offered patrons meals of questionable nutritional value with image based on a firm foundation of hype and sentiment developed by a trained cook applying unrealistic restraints in terms of ingredients as reflected in the menu.

Institutional and independent investors who have called for changes at Chipotle have to date been unrewarded. If Niccol turns the chain around he will be regarded as Superman by Wall Street. The concern is that the culture of the company, the overhang of foodborne infections and mismanagement at all levels are the collective equivalent of kryptonite.

 

 

 

 

 


 

Misleading Headlines Distort Perception

02/19/2018

The editor of a European poultry periodical recently published an article with the heading “Fake Meat Could Soon Take Over the World.”  This is grossly misleading and a disservice to readers.

 

It is a consistent and avowed intention of organizations opposed to intensive livestock production to limit the supply of milk, eggs and meat.  A number of organizations promoting environmental considerations and welfare would therefore promote alternatives including vegetable protein and cultured meat to displace animals in food production.  The article under the grandiose heading makes claims for a vegetable-substitute burger patty requiring “95 percent less land, 74 percent less water and 87 percent lower greenhouse gas emissions” compared to a comparable beef patty. 

 

While the claims for environmental benefits may or may not be valid depending on assumptions and parameters, the reality is that there is no complete substitute for animal-derived meat or chicken-derived eggs comparable in cost, nutritional value and organoleptic properties.

 

Synthetic meats using tissue culture technology are currently unrealistically expensive and limited to laboratory evaluation and demonstration to induce venture capitalists to fund the “next great thing”.

 

To infer that fake meat would “Soon Take Over the World” is at best naïve and at worst deliberate and mischievous hyperbole. We expect better from poultry journalists who monitor and interpret trends.


 

Whole Foods Market Putting Pressure on Suppliers

02/18/2018

Amazon is predictably attempting to raise margins and profitability at their Whole Foods Market (WFM) acquisition.  The company has instituted centralized purchasing decisions, is operating an order-to-shelf program and has appointed a national contractor to restock and conduct in-store demonstrations.

 

Whole Foods Market has sent suppliers letters noting that they will be required to pay for product placement.  The fees will amount to three percent of cost for grocery suppliers and five percent for beauty products.

 

Amazon elected to reduce prices at WFM to attract new customers and to regain loyalty from consumers who had defected to major supermarket chains offering natural and organic products at a considerably cheaper prices.  Concurrently clones including Sprouts eroded sales by offering similar products at a more reasonable cost.

 The Amazon motivated initiative at WRM will reduce margins generated by vendors by as much as 25 percent.  Small family-operated farms delivering organic produce and larger companies with a heavy commitment to the chain will also suffer.

 

Competitors of WFM are waiting in the wings to pick up suppliers. The Kroger Company has emerged as the most active in seeking out specialty brand products for which shelf fees are not charged.  Some vendors have defected to Walmart Stores as the company has actively recruited new suppliers of organic, natural and specialty products and locally grown produce at trade fairs.


 

Beyond Meat to Initiate R & D Center

02/15/2018

Following recent infusion of capital, Beyond Meat which produces vegetable-based meat substitutes will build a 26,000 square foot research and development center in El Segundo, CA.  Ethan Brown CEO and founder of Beyond Meats stated, “The expansion of the Manhattan Beach Project here in Los Angeles reflects our belief that building meat from plants is an opportunity of global importance, one that is deserving of investment levels consistent with what you would find in the alternative energy or health science sectors.”  He added, “We are seeing a record number of consumers expressing interest in a broader set of protein choices.”

 

The facility will employee 100 scientist and technicians with a mission to improve human health and apply food technology to synthesize meat from plant material.

 

The openness of Beyond Meats and the obvious commitment of resources and personnel to research and development have resulted in a broad range of products.  The progress made by the company and its track record of investment by both venture capital companies and protein producers including Tyson Foods contrasts with the unsubstantiated promises and hype emanating from Hampton Creek. Josh Tetrick, the founder and CEO of the Company, with presumed HSUS, connections recently indicated that it was on the verge of producing cell-cultured meat. His social media initiative follows mainstream publicity accorded to Memphis Meats, an acknowledged leader in the field. The claims by Hampton Creek that it will soon be able to market a product and displace conventional livestock production do not disclose the location of their research facilities or the personnel involved in the claimed development program.


 

Smithfield Foods Develops Transport Accident Response Plan

02/13/2018

Jennifer Woods a livestock-handling expert located in Alberta, Canada is assisting Smithfield Foods to develop a livestock emergency response program and to train employees in reducing losses following vehicle accidents during transport. The program involves training first responders on how to extract hogs from damaged trucks and trailers.

 

 The situation is less complicated with chickens compared to hogs but obviously the weight of harvested turkeys creates difficulties. The number of hens, broiler or turkeys transported on a single trailer requires a large complement of “harvesters” equipped with nets to capture birds released from modules or coops. It is critical to transfer injured birds away from the view of bystanders and the media. It is also necessary to have a container with a supply of carbon dioxide for humane euthanasia.

 

Vehicle recovery teams should also be instructed on how to upright loaded trailers to minimize losses and to expedite transfer of birds from the site of the accident to the plant for processing.  This is especially important during extremes of hot and cold temperature.

 

Since accidents involving transport of poultry are inevitable especially in mountainous regions and in winter months an appropriate contingency planning and training program is advisable following the initiative of Smithfield Foods.

 


 

Food Service Companies Allege Collusion and Price Rigging

02/12/2018

Sysco Corp. and US Foods have instituted separate lawsuits against Tyson Foods Inc., Pilgrim’s Pride Corp. and Sanderson Farms Inc., alleging “price rigging” by the three major producers and possibly others.  Collectively the two Plaintiffs represent 25 percent of the food service market.  The allegations relate to indirect collusion among integrators to limit production with consequential increases in prices for chicken products over an extended period.

 

The Plaintiffs allege that access to the AgriStats® industry benchmark allowed integrators to monitor volumes and costs of production representing “indirect collusion”.

 

In the second complaint, the plaintiffs allege that the Georgia Dock Index was manipulated through the weekly submissions of prices which formed the basis of the now defunct index.  From 2016 onwards, the Georgia Dock Index diverged from other indices including the USDA weekly price reports and commercial price-discovery services.  The Plaintiffs’ allegation that possible manipulation of the Georgia Dock Index was responsible for overpayment is a spurious contention since alternative indices were freely available and apparently used by the Plaintiffs. In any event even if manipulation of the GDI is proven there could have been no adverse effect on the Plaintiffs prior to the time that the indices diverged.

 

The lawsuits have limited prospects for success but the legal costs involved in defense will be substantial.  The disruption and diversion of management time coupled with disclosures will in all probability result in settlements by the Defendants confirming a prevailing view that this is yet another “shake down action” by avaricious lawyers.

 

(SMS 269-18 February 12th 2018)


 

President Trump Addressed the American Farm Bureau Convention – Speech Well-Received But Concern Remains Over Impact of Potential Loss in Trade

01/12/2018

President Donald J. Trump received a warm reception when he addressed the 99th Annual Convention of the American Farm Bureau on Monday, January 8th. Following an enthusiastic introduction by Secretary of Agriculture, Dr. Sonny Perdue, the President outlined administrative measures benefitting the agricultural community which provided critical support for his 2016 election. Relaxation of onerous EPA restrictions and regulations have benefitted farmers. Withdrawal of the Waters of the United States (WOTUS) Rule proposed jointly by the EPA and the US Army Corps of Engineers has removed the threat of Federal intrusion onto farms, fines for non-compliance and the requirement for capital investment and expense with no prospect of return. It is clearly evident that the advice of the Secretary of Agriculture and Republican Legislators, including Senator Pat Roberts (R-KS) has made the President and the Administration more aware of the needs of agriculture.

The Administration claims to be reviving rural prosperity through expanding high-speed internet, health services and job training in accordance with an Executive Order signed in April. There is doubt as to how these initiatives are progressing although functionaries are talking-up achievements of questionable value.

Trade negotiations and specifically NAFTA represented the very large elephant in the Opryland, Nashville venue of the speech. Although the President claims that his team headed by Robert Lighthizer is intent on “leveling the playing field” and “getting a better deal” threats to unilaterally withdraw from the 25-year old trade pact are of concern to the farming community. Apart from hints of simply “walking away”, the alternative of advancing onerous conditions such as the five-year sunset clause, are obvious deal-breakers, completely unacceptable to our partners. Either way, dissolution of NAFTA will eliminate advantages which currently benefit the agricultural community.

Ambassador Robert B. Zoellick, previously U.S. Trade Representative, a Deputy Secretary of State and a former World Bank President, published a commentary in The Wall Street Journal on Tuesday, 9th January advocating retention of trade pacts and decrying the unilateral withdrawal from the Trans-Pacific Partnership which he helped negotiate. The proposed pact which was concluded in principle, included six nations with whom the U.S. has bilateral agreements and the TPP would have added five more. Unilateral withdrawal has allowed China and other nations to assume dominance in the Pacific area which offers export potential for competitors. Zoellick cautioned against establishing a policy which would dictate market outcomes in bilateral negotiations including the U.S.-Korea Free Trade Agreement. Zoellick deprecated withdrawal from trade pacts to develop a “Fortress America” policy. He stated “The U.S. is abandoning the challenge of setting new trade standards whether for data, E-commerce or transnational services. America once attracted the World’s talent but hostility is driving people away. If the Administration pulls the U.S. out of NAFTA, financial markets might recognize that economic isolation imposes a risk to growth.”

Trade issues dominated the thoughts of attendees as expressed by Dale Moore, Executive Director for Public Policy at the Farm Bureau in his quoted comment “trade has become an increasingly important and substantial part of the agricultural economy. So anything that causes a ripple in that can have not just little effects but significant effects.”

Withdrawal from the Trans-Pacific Partnership placed beef exporters at a disadvantage with regard to the market in Japan which has now been captured by Australia. Michael Dykes, President of the International Dairy Foods Association, is concerned over withdrawal from NAFTA since Mexico could raise tariffs of up to 75 percent on dairy products. The broiler industry could face high tariffs on chicken.

The tax bill has benefitted farmers by allowing instant reductions on capital expenditure and decreased the number of farm families affected by the Estate Tax. Farmers can deduct 20 percent of the gross value of products that are delivered to cooperatives theoretically erasing annual tax liability. By selling to a private or corporate elevator, only 20 percent of net profit can be deducted. As with any hastily framed legislation, unintended consequences have emerged creating inequities which will have to be rectified. Stanley H. Ryan, CEO of Darigold, noted that despite “helpful and supportive provisions in the tax bill, for businesses to get full benefits, it is necessary to have market access.”

On balance, there appears to be a softening of pre-election rhetoric. This may be due to the advice of Agriculture Secretary, Dr. Sonny Perdue and Senate Agricultural Committee Chair, Senator Pat Roberts supported by pro-NAFTA advocates within the White House. Major issues such as trade negotiations have yet to be resolved. It will be critical for progress to be made during the sixth round of NAFTA negotiations in Montreal in late January. Positive progress if it is evident on the bilateral agreement with Korea will also indicate whether there has been a change in policy in the White House favoring agriculture.

To quote the President “We shall see.”                 

(SMS 082-18 January 12th 2018)


 

Disposal of Broiler Litter Problematic in High Density Areas

01/07/2018

A recent posting on Arkansas Online by Emily Walkenhorst highlighted the problem of disposal of broiler litter in areas with an expanding population of birds as a result of new complexes or extending existing units to increase production.

The Eastern Shore has faced the problem of disparity between production of broiler litter and available crop area for disposal. The situation which emerged in the 1980s led to the development of science-based nutrient management plans. Perdue Farms the largest integrator on the Eastern Shore has invested heavily in facilities to reclaim energy and nutrients from broiler litter. Land Grant universities in Maryland, Delaware and Virginia have evaluated programs and monitored the effect of application of litter to crops.  Fortunately soil conditions on the Eastern Shore allow application of broiler litter to crops. Unfortunately proximity to the Chesapeake Bay and agitation by environmental activists in concert with the legislature of Maryland has led to restraints which impose higher costs than would be encountered in Arkansas, Missouri, Georgia, Mississippi and other states where geographic density of production is in balance with the availability of cropland.

Tyson Foods and Simmons Foods have introduced nutrient management plans for their growers in northwest Arkansas and it has become necessary to move broiler litter from areas where crop application is limited by soil type and cultivation practices.  Obviously local and state authorities are monitoring expansion among broiler operations.  The Arkansas Online article noted that in Randolph County, the broiler population has increased six-fold in twelve years and has risen14 percent in Independence County over the same period. Competition for resources including water and available labor is now matched by the capacity to dispose of broiler litter as a restraint to both expansion and establishing new complexes.

It is hoped that the 2018 Farm Bill will include provisions for applied research to establish new technology to process broiler litter and to derive benefit from the waste product without imposing additional capital and operational costs.

(SMS 045-18 January 7th 2018)


 

Dairy Industry Presses for Free Trade

01/01/2018

In advanced of the Sixth Round of NAFTA negotiations and noting further progress for the Trans-Pacific trade pact from which the U.S. withdrew unilaterally, the U.S. Dairy Industry has expressed concern over exclusion from free-trade agreements.

Writing in The Wall Street Journal, Andrei Mikhalevsky president and CEO of California Dairies and Stan Ryan president and CEO of Darigold urged duty-free access to Mexico for U.S. agriculture products and “meaningful access” to the dairy market in Canada.

The U.S. Dairy industry produces 25 million gallons of milk annually with direct and indirect employment of close to 1 million and a claimed “economic footprint” of more $206 billion.

Mexico is the largest export dairy market for the U.S. with $1.2 billion in sales in 2016. The U.S. supplies 75 percent of dairy products consumed in Mexico, supporting 30,000 U.S. workers.

The Dairy Industry is justifiably concerned over exclusionary policies imposed by Canada which operates with a controlled marketing systems resulting in higher prices for consumers in that country.  Dairy imports were expressly excluded from the original NAFTA agreement.  The Dairy Industry is also concerned over progress made by the EU in establishing economic partnerships placing U.S. dairy producers at a disadvantage. 

The Japan-EU economic partnership and the bilateral free-trade agreements with Canada and Vietnam and proposed associations with Malaysia, the Philippines and Thailand will soon be concluded. Australia and New Zealand are active in expanding exports to the Pacific region through the Pacific Alliance incorporating Chile, Colombia, Mexico and Peru.

Mikhalevsky and Ryan stated in the WSJ article, “How can America stand alone and watch the rest of the world systematically reduce its competitive trade access?”  The authors noted, “We urge the Trump Administration to pursue trade agreements aggressively in Asia and beyond or restore a level playing field for U.S. dairy and agriculture.”

(SMS 009-18 January 1st 2018)


 

Senate Agriculture Committee Considers Biodefense

12/29/2017

In a recent hearing before the Senate Agriculture Committee, retired Senator Joe Lieberman expanded on the report prepared by his Commission on biodefense at the national level.  The Commission was established to review implementation of the Homeland Security Presidential Directive No.9 requiring surveillance for catastrophic diseases of crops and livestock.

Academics and regulators including Dr. Raymond Hammerschmidt of Michigan State University, Dr. Richard Myers, President of Kansas State University and Dr. R.D. Meckes, State Veterinarian for North Carolina expressed concern over the possibility of introduction of foot and mouth disease and the need for a vaccine stockpile.  Following the 2000 outbreak of foot and mouth disease in the U.K. the expense and public resistance to slaughter-out suggest the need for vaccination to suppress infection and to contribute to more rapid control. 

Although considerable emphasis was placed on foot and mouth disease, experience with highly pathogenic avian influenza in 2015 indicates that the nation could suffer serious losses due to introduction of virus by migratory waterfowl independent of any malevolent action by agro- bioterrorists.  African swine fever also has the potential to cause serious losses.  The virus has been present in Cuba and could be introduced to Florida and the Mid-Atlantic region where it could in likelihood become endemic in feral swine.  With the advent of highly pathogenic avian influenza as a worldwide problem, there is far less concern over Newcastle disease which is effectively suppressed by vaccination suggesting an approach to orthomyxovirus infections including avian influenza in succeeding decades.

Senator Pat Roberts (R-KS), chairman of the Senate Agriculture Committee cautioned against hysteria stating, “This is a difficult issue because if you really come out and say what was on your mind it would scare the dickens out of people.”

Agro-defense will have to compete with other demands for available funding. The $250 million cost for the foot and mouth disease vaccine bank will represent an obstacle, given competing demands to be incorporated in the 2018 Farm Bill.

(SMS 2,113-17 December 29th 2017)


 

CEO Attributes Low Wing Sales to Anthem Protests by NFL Players

12/20/2017

In a conference call following the release of the 4th Quarter and Fiscal 2017 financial results, the CEO, of a NASDAQ-traded company indicated that lower sales of chicken wings might be attributed to decreased patronage of sports bars serving wings as a result of pre-game protests by some NFL players. He observed “There’s not as much traffic going through some of the wing places we service.” The   CFO of the Company, echoed the sentiments of the CEO stating “These places are telling us that wing sales are lighter than normal.” He added “Wing prices usually go up during football season, but that has not been the case this year.”

A review of the December 2017 USDA Cold Storage Report shows that on November 30th 2016, wing inventory amounted to 86.4 million pounds. On October 31st 2017 the level in storage had declined by 18.5 percent to 70.4 million pounds followed by a 8.2 percent month-over-previous month rise to 76.1 million pounds on November 30th 2017, but still 11.8 percent below the November 30th 2016 level.

Although the NFL protests may have played a role in patronage of sports bars, there are a number of other reasons why this Company and possibly other integrators have seen a drop in sales through  food service companies such as Sysco, distributing to casual dining restaurants:

  • There has been considerable substitution of expensive “bone-in wings” by “flat-wings” which would lower demand for conventional product.
  • With the advent of inexpensive wide-screen TVs, families and sports fans are gathering in homes to watch games and are purchasing their wings in bulk at wholesale club stores and supermarkets.
  • The trend towards at-home consumption results from the extended recession. Frugality in dining out and alternative purchase of food at supermarkets with home preparation, established over four years, continues to the present time, despite a recovery in the economy and in employment opportunities.
  • Companies supplying major supermarket chains and club stores would probably not have seen the same decline in sales to their retail outlets compared to food service companies delivering to restaurants. Integrators are able to deliver five- and ten-pound IQF packs of coated and breaded wings with a range of flavors equivalent to the servings offered by sports bars at a considerably higher price. This has encouraged supermarket and club store purchases as an alternative to dining out.

More detailed market research would be necessary to substantiate the impression advanced by the CEO of the company that socio-political factors are effectively depressing demand for bone-in wings. Given that there are two wings on every bird and that the numbers of broilers processed has not increased by more than two percent over the past year, suggests that a steady demand for wings continues as denoted by the decline in stock levels.

It is possible that the Company concerned is in a non-competitive situation supplying jumbo wings from seven-pound plus broilers. Sports bars buy by weight and sell by unit. A few years ago, Buffalo Wild Wings differentiated the cost on their menus between medium and large wings. This created a problem of inventory control and in some cases customer disaffection. Perhaps some chains are discriminating against very large bone-in wings.

There is a discrepancy between same-store sales among wing-chains. Buffalo Wild Wings has posted sequential reduction in same-store sales with a decline in Q3 for Company stores and franchised operations of 2.3 percent and 3.2 percent respectively. In contrast, Wing Stop, which is predominantly a take-out chain and now with home-delivery and on-line ordering, posted increased traffic and “low single digit” increases in Q3 same-sales. This suggests that both in-home preparation and take-out are eroding patronage of sports bars.

(SMS 2,085-17 December 20th 2017)


 

Antibiotic Use in Livestock 2016-FDA Review

12/20/2017

The FDA recently published a review of antibiotic use in U.S. livestock covering 2016. This will serve as a benchmark to determine the effect of the VFD and Guidance Document #213 implemented in calendar 2017.

The review document produced in accordance with a Congressional mandate covers calendar 2016 and lists specific drugs, both medically important and insignificant with respect to human therapy as administered to cattle, swine, chicken, turkeys and minor species. Comparing 2015 to 2016, antimicrobials approved for use in food-producing animals decreased by 10 percent suggesting voluntary restraint in anticipation of the VFD and in response to customer specifications.

The following statistics were highlighted:-

  • The FDA determined that 43 percent of antibiotics comprising domestic sales and distribution of medically important compounds was intended for use in cattle, 37 percent for swine, 9 percent for turkeys and 6 percent for broilers.

  • Domestic sales and distribution of medically important antimicrobials accounted for 60 percent of domestic sales of all antimicrobials approved for use in food-producing animals.

  • The leading classes of antibiotics included tetracyclines (70 percent of sales), penicillins (10 percent), macrolides (7 percent), sulfas (4 percent) and aminoglycosides (4 percent). Cephalosporin’s and fluoroquinolones amounted to less than 1 percent each.

  • Among the antibiotic classes, 63 percent of domestic sales and distribution of penicillins were intended for turkeys.

  • Domestic sales and distribution of medically important antimicrobials decreased by 14 percent from 2015 to 2016 with tetracycline the leading class showing a reduction of 15 percent.

  • During 2016, 96 percent of medically important antimicrobials approved for use in food-producing animals were sold as “over-the-counter”. Ionophores are included in the list of antibiotics, but it is appropriate to subtract this class from the total to determine the actual use of the various antibiotic classes administered to chickens and turkeys respectively, as shown in the table below. Of the 9,400 tons of antibiotics, (less ionophores) used in the U.S. during 2016, 3.8 percent was used in chickens and 8 percent in turkeys.

From an epidemiologic perspective, the quantity of antibiotic sold by species category is less important than the dose, based on biomass. Applying standard production parameters and volumes of production, it was calculated that the actual weighted average dose of antibiotics administered to broilers (excluding ionophores) amounted to 0.015mg/kg body weight. In contrast, the weighted average utilization of antibiotics based on live mass of turkeys amounted to 0.31mg/kg. Although the total usage table shows that approximately twice as much antibiotic was used by turkeys as compared to broilers, the actual differential in useage is 20-fold.

In the debate on antibiotic use, a major integrator maintains that antibiotics do not represent a problem for the broiler industry based on the fact that there are no detectable residues in the edible portions of a broiler. This is a disingenuous position since the problem relating to antibiotics relates to the perception and reality of the emergence of transmissible drug resistance. CHICK-NEWS and its predecessor, CHICK-CITE, previously documented the emergence of mcr-1 originating in China where colistin is used extensively and injudiciously in both the swine and poultry industries. This plasmid mediated gene has emerged in many nations in Asia and the E.U. and has been recovered from E.coli in the U.S. representing a danger to human health.

Previously it was considered unlikely that the use of antibiotics in livestock would influence drug resistance in human pathogens. Obviously there are disease-causing organisms such as tuberculosis and the pathogen responsible for gonorrhea acquiring resistance, obviously having no relationship to livestock. In point of fact, most drug-resistant organisms responsible for human infections are acquired in medical facilities.

More advanced techniques including whole genome sequencing applied to investigate the molecular biology and epidemiology of drug resistance have demonstrated the potential of livestock therapy to be associated with future emergence of drug resistance. This is the justification for Congressional action and the antibiotic-free specifications imposed by customers.

Irrespective of the scientific principles involved, the public perception is that injudicious use of antibiotics in livestock is responsible for adverse human health outcomes. No amount of bluster, misinformation or deceptive TV commercials can alter the impression among consumers and legislators that antibiotic use in intensive animal production plays a role in drug resistance.

The livestock industries should await with interest the publication of the summary report produced by the FDA in December 2018 reflecting antibiotic use in 2017.

Quantity used (kg.) by Species

Antibiotic Class Chickens Turkeys

Aminoglycosides 24,111 22,198

Lincosamides 8,874 -

Macrolides 20,718 1,176

Penicillins - 529,083

Sulfas 21,115 41,127

Tetracyclines 285,513 156,617

TOTAL 360,331 (3.8%)* 750,201 (8.0%)

*Total antibiotic use for livestock in 2016 (less ionophores) 9,380,045 kg.

ADMINISTRATION OF ANTIBIOTICS TO U.S. CHICKENS AND TURKEYS IN 2016

 

(SMS 2,089-17 December 20th 2017)


 

Retailers Being Held to Leases

12/17/2017

Recent court decisions have enforced lease provisions entered into between retailers and landlords. In the most recent ruling, Starbucks, which planned to close 77 Teavana stores, were ordered to continue operations despite losses. The lease between Starbucks and the Simon Property Group included a provision which required Starbucks to be “open and operating during normal business hours”.

A State Court in Washington ruled that the lease between Whole Foods Market and the Bellevue Square Mall required the food retailer to “carry on business without interruption for the first 10 years of the contract.” Whole Foods elected to close their 365 concept store without prior notice to the landlord in mid-October.

Retailers are currently reevaluating concepts and shedding banners which are unprofitable. Lease provisions have also resulted in conflicts with management decisions. After Amazon acquired Whole Foods Markets, it was determined that using existing stores in some locations as pick-up centers for items ordered on-line would conflict with leases. These restrictions will have to be resolved either by negotiation, or as a last resort, litigation.

 

 

 

(SMS 2,060-17 December 17th 2017)


 

Cattle and the Environment

12/11/2017

In an attempt to evaluate the environmental impact of beef production in the U.S., an evaluation was performed to determine the optimal national herd which could be maintained only on plant waste, including cornstalks and DDGS. Katie Langin writing in Science online on December 4th cited an article in Nature Ecology and Evolution which calculated that the U.S. herd would have to be reduced from 31 million to 14 million beef cattle and that beef consumption would decline to about 27 pounds per capita unless the difference was compensated for by imports.

Alternatives to conventional beef are under active evaluation. Vegetable substitutes require additional development to approximate taste and texture, although they are reputedly more nature-friendly and relatively inexpensive compared to beef.

The alternative of cell-cultured meat is limited by technical and financial issues and there is no intermediate- term prospect for substitution. In addition, cultured meat would not be regarded as “vegetarian” given the use of animal cells and bovine serum for production.

Chicken still represents a balance between quality of protein and cost of production as measured in resources, carbon emission and energy utilization, given the inherent high-feed conversion efficiency albeit with diets formulated for a monogastric species.

(SMS 2,012-17 December 11th 2017)


 

NAFTA – Canadian Prospective

11/30/2017

Paul Tasker of the Canadian Broadcasting Corporation posted a November 21st article incorporating comments by the Foreign Affairs Minister of Canada, Chrystia Freeland on the lack of progress in renegotiating the NAFTA agreement.  Following what must be regarded as an unsuccessful fifth round, Freeland noted intransigence in “Significant sticking points including the U.S. push to change the rules of origin and demand for a five-year sunset clause.”  She added, “There are some areas where some extreme proposals have been put forward and these we simply cannot agree to.” 

Pessimism expressed by Freeland was echoed by U.S. Trade Representative Robert Lighthizer who noted, “Thus far we have seen no evidence that either Canada or Mexico are willing to seriously engaged on provisions that will lead to a rebalanced agreement.”  A major point  of contention is the U.S. demand for a five-year sunset provision.  Freeland noted that this would be redundant since any party to NAFTA can issue a six-month written notice to leave the pact.  Freeland observed “I’ve been married for 19 years, when my husband asked me to marry him he didn’t say every five years we’re going to check whether we want to get divorce or not.  We don’t think that’s a good foundation for a lasting relationship.”  In any event, imposing a five-year sunset clause would act as an impediment to future planning for businesses wishing to establish plants in either of the participating nations or to make capital investments in anticipation of exports to other NAFTA countries.


 

Raw Milk Implicated in Brucella Infections

11/29/2017

The Centers for Disease Control issued a release on November 21st noting that Brucella abortus strain RB51 had been detected in raw milk and that cases of human infection had been identified.  The Udder Milk Creamery Company, a private cooperative distributing milk in Connecticut, New Jersey, New York and Rhode Island has been implicated in transmission of infection.  A previous case was identified by authorities in Texas in July involving the K-Bar Company but is unrelated to the New Jersey incident.

The Udder Milk Creamery Company has been unresponsive to request by the Centers for Disease Control concerning the origin of raw milk to facilitate traceback. The website of Udder Milk is purposefully unhelpful requiring a specific login as a member to access any data relating to the scope and products supplied.

The CDC has issued a blanket advisory that any person consuming raw milk or milk products from the cooperative should be tested for brucellosis and if positive should undergo antibiotic therapy.

Brucella abortus strain RB51 is an attenuated live vaccine strain which can be present in milk and initiate infection.  The specific strain is however resistant to a number of antibiotics and it is necessary to identify the nature of infection in order to select an effective treatment.

Brucellosis is an extremely rare condition in the U.S. following eradication of the infection in the dairy and cattle industry.  There were approximately 3,000 cases annually during the 1950’s only approximately 100 per year during the last decade.  Most of these cases are associated with foreign travel and consumption of contaminated milk or direct contact with an infected animal. Infection due to other than B. abortus may be associated with wild hogs or dogs.

Raw milk dairies are frequently implicated in outbreaks of STEC E. coli infections, campylobacterosis and salmonellosis.  As previously noted, there are no nutritional advantages associated with raw milk compared to pasteurized milk or derived products.

There are parallels between raw milk dairies and small-scale egg and poultry meat production.  Flocks under 3,000 hens are exempt from the requirements of the FDA Salmonella Prevention Rule of 2010. All egg-borne cases of Salmonella Enteritidis since this time have been traced back to farms flying under the FDA radar.  By the same token local and farm slaughter of chickens represents a potential hazard to consumers based on the absence of USDA-FSIS inspection and appropriate standards of safety and quality control as applied in the U.S. commercial industry.  Chick-News has recently commented on the threat by the USDA to revoke authority delegated to the Maine Department of Agriculture over small plants. This action  followed passage of a series of clearly illegal local slaughter ordinances and an unconstitutional state law attempting to preempt Federal legislation.

(SMS 1,953-17 November 29th 2017)


 

Petition to Include Poultry in Humane Methods of Slaughter Act Unnecessary

11/20/2017

An animal rights activist organization Mercy for Animals has petitioned the USDA for poultry to be included in the Humane Methods of Slaughter Act implemented in 1958. Even if this were to be achieved it would make no difference to the situation which has prevailed for decades. Broilers, spent hens and turkeys slaughtered in plants under USDA inspection are rendered unconscious by electrical stunning before slaughter. In some turkey plants modified atmosphere stunning is now used and a number of broiler plants have either converted to or are contemplating a transition to the alternative system.

Perdue Farms, the nation's fourth-largest poultry producer, has introduced a modified atmosphere system to replace traditional electric stunning. Quoted in the Washington Post, Dr. Bruce Stewart-Brown, Perdue Farms’ Vice-president for Food Safety, Quality and Live Production Operations, said the company has used the gas system for turkeys and started using it in a chicken plant a few weeks ago. He said the system contributes to a much improved atmosphere in which the animals are gently put down. He added "in general we don't think you have to regulate us into acting correctly or doing the right thing," he said. "I guess the other part of that is if consumers care enough about it, they'll vote with their pocketbooks toward people who are doing it a certain way."

It is in the interests of processors to handle broilers and turkeys humanely and to achieve loss of consciousness before slaughter to attain optimal quality and tenderness of meat. Allegations of widespread “malicious cruelty” raised by Mercy for Animals are unfounded in modern plants based on training and supervision of personnel, mechanization and third-party video surveillance.

(SMS 1,897-17 November 20th 2017) 


 

Caponization is a Trend We Do Not Need

11/20/2017

The November 21st Edition of The Wall Street Journal ran an article on capons as a gourmet dish. Caponization is a cruel and entirely unnecessary procedure with the beneficiaries comprising high-end restaurants and their rich patrons. 

The location of avian male gonads requires entry to the body cavity and the procedure is carried out crudely and without an anesthetic. The procedure involving birds is entirely distinct from castration of immature mammalian livestock. The advantages relating to caponization are apparently related to flavor and texture achieved at great expense for a privileged few.  In many respects, caponization is analogous to consuming foie gras which is banned in California and has evinced considerable resistance from animal rights activists as well as mainstream consumers.

The WSJ article quotes Holland Smith a food commentator as saying, “He was conflicted when he learned the true nature of the main course, recoiling at the extra torture that the castrated bird endured to make it more plump and juicy.  He decided to never eat capon again.”  A second commentator Joshua Marston noted that, “He shuddered at the idea of eating a castrated animal.   questioning why it is necessary.”

Capons have experienced a resurgence in popularity following the presentation of “Game of Thrones” which presents a lifestyle representing medieval cruelty and characterized by Jim Cramer as crypto pornography. 

Ray Avila a producer of capons in Osage, IA claims to produce 50,000 altered birds annually and can perform gonadectomy at a rate of 100 per hour or 36 seconds per bird-- which may be an exaggeration.  Perhaps authorities in Iowa may wish to review laws relating to cruelty and illegal practice of veterinary medicine. 

Caponization is a trend which we do not need. It will invariably create negative publicity for our commercial broiler and turkey industries.

(SMS 1,920-17 November 20th 2017)


 

Yum China Surges on Technology

11/10/2017

According to a Tuesday November 7th article by Wayne Ma in the Wall Street Journal, Yum China Holdings has shown an unprecedented seven percent growth in same-store sales for the KFC segment.  Net income over the first eight months of the current year rose nearly 20 percent compared to the corresponding period in 2016 with a 10 percent increase in the most recent quarter.  Shares of Yum China are up more than 65 percent since the 2016 NYSE IPO.

Ma attributes introduction of technology to improved performance over the previous ownership by Yum! Brands based in the U.S.  Patrons of western-style QSRs in China are young, mobile and technologically savvy.  In the prototype store in Hangzhou, young China is evaluating various electronic and menu options.  Orders are placed at electronic kiosks and payment is effected by “Smile to Pay” face recognition using Ali Pay apps. Orders can be placed by smartphone using a QR code imprinted on tables. 

Menus have been modified to cater to local taste and now emphasize a healthful image. For convenience Yum China Holdings have purchased a controlling stake in an online food delivery company and the Company has established a national loyalty program with 127 million members.

Negative publicity arising from alleged food safety incidents was one of the deciding factors leading to Yum! Brands divesting ownership of their chain in China.  At the time of the announcement of the intended sale, it was noted by CHICK-CITE predecessor to CHICK-NEWS that xenophobia and contrived publicity by state news agency Xinhua together with administrative obstruction directed against establishing new stores limited potential for growth.  Predictably after acquisition by a domestic consortium of investors in China, opposition disappeared allowing the company to expand to almost 8,000 KFC and Pizza Hut stores.

(SMS 1,843-17 November 10th 2017)


 

Major Producer in China Recognizes the Need for Integration

11/05/2017

As reported in an October 30th posting on Reuters Guangdong Wen’s Foodstuff Group (GWFG) reported a 63 percent fall in profits for the first three quarters of fiscal 2017. The Company is involved in a wide range of farming enterprises with a concentration on broilers and hogs. Additional products include eggs, duck meat, dairy and seafood.

Applying a conversion factor of 6.6CNY to $1, market capitalization is currently $19.2 Billion and 2017 sales are estimated at $8.42 Billion. Net earnings for fiscal 2016 attained $1,786 Billion CNY, but the 2017 estimate will drop by 46 percent to $964 million.

The Company attributes the drop in earnings to reduced sales of live poultry as a result of negative publicity arising from widespread outbreaks of H7N9 avian influenza which resulted in 300 fatalities year to date among consumers mainly purchasing from live bird markets.

GWFG recognizes the need to integrate and to market processed broilers to supermarkets through a cold-chain. A previous posting in CHICK-NEWS demonstrated the obvious difference in recovery of avian influenza virus from carcasses processed in wet markets compared to supermarkets.

To effect the change, GWFG will have to phase out traditional brown feathered (“yellow bird”) breeding stock to be replaced with conventional white-feathered broilers. The company will have to “move into slaughtering and adapting its sales modeled to more customized orders and expanding its chilled poultry meat business”

During a visit to China over ten years ago, this commentator was met with disbelief when the demise of the traditional “yellow bird” was predicted. This was based on the prolonged growing period extending up to 14 weeks, the unfavorable feed conversion and distribution limited to wet markets. This segment of the broiler industry in China was evidently non-competitive compared to integrated production of white-feathered commercial broilers. The carcass composition and the live weight achieved by conventional broilers at seven weeks of grow-out are obviously compatible with the growing QSR market favored by young Chinese who have abandoned traditional cuisine in favor of a more modern lifestyle.

(SMS 1,806-17 November 5th 2017)


 

Questions Concerning the Popularity of On-Line Shopping

11/05/2017

CHICK-NEWS has resisted the lemming-like trend in industry periodicals predicting the demise of traditional supermarkets. A wave of enthusiasm for on-line shopping was stimulated by the announcement of the purchase of Whole Foods Market by Amazon. This considerable investment increased the share of the food market held by the parent company from 0.2 percent to 1.4 percent. This compares to nearly 15 percent for Wal-Mart Stores and 7 percent for second-ranked Kroger as determined by Global Data Retail.

The Food Marketing Institute considers that on-line grocery sales will grow from $20 billion in 2016 to $100 billion by 2025. This presumes a 4 percent compound growth rate, which may be optimistic given that the demographic committed to online shopping may be smaller than projected.

A Reuters/Ipsos poll reported in the November 1st edition of the Institute of Food Technologists web periodical clearly demonstrated the difference between committed online grocery shoppers and those preferring traditional supermarkets. More than half of the 8,600 respondents surveyed during late August preferred their local food stores on the basis of price, quality and convenience.

The poll determined that 75 percent of consumers “rarely or never” buy groceries online. Even among shoppers that use the Internet for other than groceries at least weekly, 60 percent do not purchase food online. Admittedly Amazon has considerable experience in IT and logistics which could benefit Whole Foods Market which was prior to acquisition showing anemic growth in same-store sales. This is attributed to addressing a fairly static but affluent demographic in specific cities. Over the past few years Whole Foods was confronted with competition from national, regional and local supermarket chains featuring organic and natural products at low prices. Whole Foods also had to contend with numerous clones offering similar ambience and products at equivalent or lower cost.

A recent news item noted that Whole Foods Market under Amazon ownership will be hiring an additional 6,000 workers. This will take $240 million off the bottom line, not that we will ever see Whole Foods’ financials again. If in fact Amazon intends boosting sales by Whole Foods Market using on-line shopping why expand the brick-and mortar workforce? A completely new strategy will have to be developed which attracts more than the committed on-line shoppers located in high-density urban areas to show a return on the purchase price exceeding $13 billion.

(SMS 1,909-17 November 5th 2017)


 

China to Promote Flock Welfare

10/30/2017

According to press reports, the Vice Minister of Agriculture for China, Yu Kangzhen announced that his Nation will promote welfare for livestock.  In an address to a conference organized by the United Nations Food and Agriculture Organization attended by 400 representatives from academia, industry and the Administration Yu noted, “promoting animal welfare has become not only an important choice for the green development of agriculture but even more so as an important embodiment of human caring in modern society.”  He was also quoted as stating, “Chinese traditional culture has always advocated the concept of raising and using animals with an attitude of love and appreciation. As one of the World’ major developing countries China will align with the objective requirements for economic and social development and will vigorously promote work on animal welfare.” 

Yu apparently expresses a novel sentiment since my visits to China have not demonstrated any marked appreciation for flock welfare, with profitability the principal consideration. As far as culture in China is concerned the Nation regards dogs as food animals and traditional Chinese food and medicine embody cruel practices to the detriment of both domestic animals and wildlife. 

A second component of this new-found concern for welfare might relate to future trade restrictions.  China has just about played out the avian influenza card imposing bans on importation of breeding stock. The unjustified restrictions based on avian influenza have achieved the objective of forcing primary breeders to supply great-grandparent level breeding stock and at the same time protected domestic producers of commercial poultry.  Will China now impose restrictions based on artificial and unrealistic welfare standards?  Cynicism and China both begin with a “C”

 

(SMS 1,752-17 October 30th 2017)


 

Substitutes for Burgers

10/29/2017

In past weeks there has been considerable hype in the social media as well as the mainstream press on replacing beef in burgers. The two alternative routes, vegetable formulations and cell-cultured meat both claim environmental benefits but with vastly different costs.

The first approach which is both practical and economical involves vegetable substitutes for beef. Although there are clear distinctions between real and ersatz burgers, demand for an alternative to beef moderates consumer expectations with a sense of contributing to the environment, offsetting differences in taste and texture.

Impossible Burger™ is a leader in substituting vegetable formulations for beef. Environmentally conscious food service companies including the Compass Group and Sodexo are promoting alternatives to beef since they supply university dining halls, museum and corporate restaurants. The University of Chicago will feature the Impossible Burger™ supplied by Bon Appetit Management Company which delivers to a claimed 1,000 university cafeterias in 33 states. Claims for the Impossible Burger™ include lower greenhouse gas emissions and smaller land and water requirements compared to production of conventional burgers.

Impossible Foods produces burger patties at a plant in Oakland using wheat, coconut oil, potatoes and a plant-derived heme pigment.

Laboratory culture of muscle tissue is an alternative route to substitution of beef. The technology has received inordinate publicity, despite being at an experimental stage. Tissue culture is inordinately expensive despite claims to achieve cost-parity with conventional meat. The hype associated with cell-culture has attracted investment capital with a low probability of ever generating a return, even over the long term. Tissue culture-derived meat still requires animal inputs including serum for the substrate and the original bovine cells are of animal origin. Effectively the product can never claim to be “vegetarian” and will not compete with vegetable-based patties and other products suitable for QSRs and casual dining restaurants.

 Ground beef is the emphasis for vegetable-based development of alternatives. To date there have been few attempts to substitute vegetable formulations for chicken. The relative environmental impact of poultry production compared to beef production disfavors substitution of chicken meat which has the attributes of low cholesterol content and reduced greenhouse gas emissions based on efficient feed conversion.

At the present time it would appear that the beef industry has more to fear from vegetable substitution than the chicken industry. Neither industry should have any concern over tissue cultured synthetic meat given the complexities and cost of production.

(SMS 1,745-17 October 29th 2017)


 

NAFTA – The Rhetoric Versus the Statistics

10/22/2017

The Monday, October 16th edition of The Wall Street Journal cited figures derived by ImpactEcon LLC based in Colorado on dissolving NAFTA. Their study shows that abandoning the trade agreement would result in a net loss of 256,000 jobs in the U.S. over a five-year period. More important, Mexico would lose 950,000 jobs, which would seriously impact the economy of our neighbor leading to political uncertainty. Replacing the present regime with an anti-American government could result in another Venezuela on our doorstep.

The effect of abandoning NAFTA on the agricultural segment of our economy would be severe. Exports of commodities to Canada and Mexico have now attained $40 billion annually. Reverting to pre-NAFTA rules could result in a 75 percent duty on chicken and 45 percent on turkey. The net result would be a gain for our competitors in Brazil and Argentina in addition to stimulating domestic production.

If the objective of renegotiating NAFTA was to “level the playing field” then meaningful negotiations and concessions must be considered. Insisting on a sunset clause requiring a tripartite agreement to continue or to renegotiate the agreement at five-year intervals is unacceptable to our partners. This requirement would dampen investment since it would serve a disincentive to long-term planning. Attempting to increase the NAFTA-made content of automobiles to 85 percent from the current 62 percent and insisting that 50 percent be derived from the U.S. is a cynically contrived deal breaker.

If the intent of the White House, through the U.S. Trade Representative, Robert Lighthizer, is to demand the entire cheese but to settle for a slice, the negotiating tactic may rebound. Opposition to NAFTA expressed in pre-election rhetoric in 2016 was based on restoring jobs for American workers in Midwest Rust Belt enterprises. Abandoning NAFTA will have the opposite effect and in addition will severely impact the agriculture and economies of the very states from which the President derived his narrow margin of support.

(SMS 1,691-17 October 22nd 2017)


 

Concern Over NAFTA Negotiations

10/17/2017

Following statements from the White House commenting on the bilateral discussions between President Donald J. Trump and Prime Minister Justin Trudeau, a sense of pessimism and doom has emerged relating to NAFTA.

In a press conference following the discussions, the President noted “If we can’t make a deal, it will terminated and that will be fine.” This may be interpreted as either a negotiating tactic or may indicate a predetermined decision to exit the Agreement which has served the three North American countries since 1994.

A possible deal breaker is the proposed “sunset clause” which would require renegotiation of the NAFTA agreement at five-year intervals. It is generally conceded that this provision will inhibit investment in plants and facilities although intended as a disincentive to outsource and locate plants outside the U.S.

Thomas Donohue, President of the U.S. Chamber of Commerce, has strongly advocated for NAFTA and his views were recently highlighted on this website. On Tuesday, 10th October, he stated “We have reached a critical moment and the Chamber has no choice but to ring the alarm bells.”

Lobbyists are obviously ramping up their campaigns directed to Legislators to support an amended NAFTA agreement and to absolutely oppose outright withdrawal.

Although U.S. trade representative, Robert Lighthizer has projected a positive spin describing the series of tripartite negotiations as “having made good progress so far” there is concern that pre-election promises by the President will dictate the demise of the Agreement.

Prime Minister Trudeau will discuss U.S. proposals with the president of Mexico, Enrique Pena Nieto.

Abandoning NAFTA would have immense consequences to the agricultural industry in the U.S. and may alienate supporters of the Administration in Midwest states who effectively swung the election of the President.

 (SMS 1,671-17 October 17th 2017)


 

Prospects for African Poultry Production?

10/10/2017

A posting on October 5th reported on presentations made at the Poultry Africa Expo 2017 held in Kigali, Rwanda. Nan-Dirk Mulder, senior analyst on animal protein at Rabobank an acknowledged expert on international poultry production commented, “Africa is ready to take its place on the world stage, if poultry farmers become vigilant and focus on increasing production and reducing imports.”

This optimistic sentiment belies reality.  Only Egypt, neighboring North African nations and South Africa have large poultry industries relative to population.  Their viability is in question given disease, lack of technology and a supermarket distribution system and in relation to Brazil and the U.S. noncompetitive costs of production associated with high feed and labor costs.  The South African industry has been supported by imposing restrictions on imports.  Given free trade, the South African broiler industry cannot compete with the U.S. and Brazil and ultimately eastern European nations.

Kevin Lovell, former chief executive of South African Poultry Association who attended the Expo stated, “African poultry and egg industries stand a chance in playing a significant role in global exports of fresh and frozen chicken meat and eggs if they prioritize quality coupled with quantity.”  This is wishful thinking.  Cross-border trade may take place but none of the current nations are capable of competing with the World’s major producers who enjoy low feed costs, a developed infrastructure, markets, financing and economies of scale.

(SMS 1,636-17 October 10th 2017)


 

Status of Franchisors’ Employee Remuneration Subject of a Dept. Labor Agreement

10/05/2017

In September 2016, CHICK-CITE, predecessor of CHICK-NEWS, reported on a questionable action by the National Labor Review Board establishing a Joint Employment Precedent. This decision attempted to establish responsibility by franchisors for the remuneration and working conditions of employees of their franchisees. In June 2017, the White House nominated Marvin Kaplan, Senior Counsel at OSHA, to the NLRB followed by William Emmanuel, a lawyer specialized in employment law, establishing a Republican majority. It is expected that the NLRB will reverse the previous ruling regarding joint employment.

According to a posting by Tiffany Dowell Esq. in the Texas Agricultural Law Blog on September 25th, Sonic Industries Services, franchisor of the Sonic drive-through restaurant chain, entered into a voluntary agreement with the U.S. Department of Labor (DOL), Wage and Hour Division. The Company has approximately 3,500 drive-in locations of which 94 percent are locally owned and operated under franchise agreements.

Following allegations that franchisees did not conform to the Fair Labor Standards Act, Sonic entered into a voluntary agreement with the Department confirming that it is a joint employer with workers at franchisee locations. The Wage and Hour Division recognizes that the existence of a franchise relationship in and of itself does not create a situation of joint employment. The agreement with Sonic is similar to the 2016 acceptance by the Subway chain. The Wage and Hour Division is encouraging franchisors to ensure that franchisees comply with the law to avoid paying back wages, damages and penalties.

The Fair Labor Standards Act requires that employees receive at least the Federal Minimum Wage of $7.25 per hour in addition time and one half the regular rate for every hour they work beyond 40 hours per week. Employers are required to maintain accurate records of hours worked, wages and other conditions of employment.

(SMS 1,598-17 October 5th 2017)


 

Manufacturers Reevaluating "Clean Label" Direction

10/04/2017

Following a headlong trend to eliminate preservatives, coloring agents and additives with functional properties, a number of manufacturers are now experiencing pushback from consumers.

The much heralded Chipotle queso which was hyped as “made with a combination of simple ingredients you are likely to recognized” has been characterized as “gritty”, “bland”, and a “crime against cheese” according to an article by Monica Watrous in Food Business News.

David Portalatin Vice President and Food Industry Analyst at the NPD Group quoted in the article stated, “It is clear consumers have changed their preferences for many of the foods we eat and the concept of clean eating is definitely a driving factor.”  He added, “On the flip side of that equation in many cases what we prefer is something very different.  The American consumer today has a very personal definition of what healthy eating is and the goal is more about a total sense of wellness.”

It appears that consumers are not willing to sacrifice taste, texture and familiarity from iconic brands.  ConAgra has discontinued David Simply Seeds™ comprising sunflower with no artificial flavors or preservatives.  The company failed to gain support for the bland product which failed. 

General Mills is re-launching Trix Classic™ a cereal with synthetic colors after consumer demands for restoration. This followed the launch of Trix™ without additives in pursuit of a clean label image.  Mike Siemienas the spokesman for General Mills noted, “We will continue to offer our customers the current formula of Trix with no artificial flavors and no colors from an artificial source which has its own fan base along with classic Trix.”  He added, “Both products will be available for consumers.”

In coming months, additional cases of consumer rejection of “clean label” food items will emerge denoting that formulation to achieve certain label specifications does not necessarily engender broad customer appeal.

(1,583-17 October 4th 2017)


 

Unilever Focus on Sustainability and Welfare

10/03/2017

An analysis of Unilever by columnist Schumpeter was published in The Economist on September 2, 2017.  The commentary reviewed the policies of the Company under the leadership of Paul Polman the CEO for the past 18 years.  Polman believes that Unilever should be run sustainably “by investing, paying staff fairly, and making healthy products with as little damage as possible to the environment.”  This appears to be contrary to the conventional business doctrine of managing the company in the interest of shareholders over the long term.

Recently Unilever rejected a bid from Kraft Heinz. Despite the failure to acquire the Company by a consortium comprising 3G and Berkshire Hathaway, Unilever will have to adopt a more shareholder-friendly approach even if this means an erosion of core values.

The Economist notes that during the tenure of Paul Polman which commenced in 2009, emissions of greenhouse gases have declined by 43 percent and waste by 96 percent expressed as units of production.  The company has plowed earnings back into research and development and enhancing brands which should provide a long-term benefit.  Global market share among Unilever products has increased from 16 to 18 percent over ten years allowing the company to outperform local companies in diverse markets.

Unilever has been at the forefront among multinationals in promoting flock and animal welfare as exemplified by their subsidiary Ben and Jerry’s and other manufacturers of prestige ice cream which was an early adopter of cage-free eggs. The brush with Kraft Heinz will have an impact on Unilever in the short term and especially after the anticipated retirement of Polman within two years.  Pressure to enhance profitability may come at the expense of altruistic and societal values but given the entrenched values expressed by the company, major changes are unlikely and Unilever will continue as a major force in sustainability and welfare.

(SMS 1,566-17 October 3rd 2017)


 

Opposition to New Broiler Complexes

09/21/2017

When integrators announce their intent to establish a new complex, irrespective of the location, considerable opposition emerges from the local community. The most common objections as expressed by individuals and citizens’ groups include contamination of ground water and pollution; odor; increased traffic and a decline in property values. The 600-pound gorilla in the corner of the room is xenophobia. Processing plants employ a large number of relatively low-wage workers. Given the disinclination of many citizens to undertake line positions, even if the unemployment rate is high and many are on welfare, the least-attractive jobs are filled by immigrant workers. This evokes resentment frequently expressed as “the character of our community will change.”

 The KansasCity Star recently commented on the announcement that Tyson Foods intended to establish a broiler complex near Tonganoxie, KS. The project would have involved a $320 million investment in a processing plant, hatchery and feed mill and would have offered employment to 1,600. In past months, the Kansas Secretary of Agriculture and Leavenworth County officials were in discussions with Tyson Foods, but because the development was to have been undertaken by a public-quoted company, preliminary discussions were confidential, since consideration was extended to possible release of non-publicly disclosed information.

Leavenworth County has a 1.2 million available workforce within a 30-minute drive of the intended center of development. There are in excess of 35,000 citizens in the area seeking jobs paying between $10 and $15 per hour. A spokesperson for Tyson Foods, Worth Sparkman, noted that Tyson would “hope to hire from as many local communities as possible with some team members commuting.”

Tyson Foods as with any company is obligated to conform to Federal and state requirements with regard to both the Clean Air Act and the Clean Water Act. Any previous environmental issues for which the Company was sanctioned were quickly resolved by application of appropriate investment in technology and enhanced training and management involvement.

A concern, which arose with the proposal, involved possible environmental contamination arising from the approximately 200 contract growers to be located in a 50-mile radius from the proposed plant. Tyson Foods had mandated that contract farms would have no more than six barns on a property consistent with considerations of management, disease risk and logistics. This restriction would have limited the possibility of contamination from manure runoff. Tyson also established required setback distances from residences and committed to take into account local zoning if applicable and other considerations relating to an agricultural area.

One of the objections frequently raised against establishing a new complex is that the local school system will not be able to accommodate the children of plant workers and that in all probability Spanish-speaking teachers would be required. Since agribusiness companies such as Tyson Foods only employ documented aliens and citizens most of whom are already in the area or within commuting distance of a proposed plant, this appears to be a contrived and invalid argument. The Kansas Secretary of Agriculture Jackie McClaskey noted that the question of education was irrelevant because research conducted by her Department and the Kansas Department of Labor showed that the workers required by Tyson Foods already live within a 30-mile radius of Tonganoxie.

Tyson Foods would have increased the local tax base and the workers would also have contributed to the community both in terms of their tax deductions and spending power. The attitude of opponents is expressed by a citizen who commented “Those who think the opposition is due to a fear of immigrants are off the mark. It’s not about race, it’s not about ethnicity, it’s a little bit about culture because there is going to be a culture shock for all people involved.”

Tyson Foods has a difficult task ahead to diffuse opposition to the next site selected. It is noted that Sanderson Farms ran into problems attempting to establish a plant in Nash County, NC, but was welcomed by residents of St. Pauls. The original intended site of the Costco plant in Nebraska was changed following concerted opposition.

We live in a changing world and residents of rural areas cannot expect to produce corn and soybeans but not have their customers nearby. Tyson Foods as a public company has a record of community and environmental responsibility. The project had the support of the State and would have functioned in accordance with environmental regulations. The 5,000 residents of Tonganoxie will in the long run be poorer as a result of their actions and some other community will benefit.

(1,511-17 September 21st 2017)


 

Seafood Traceability Rule Has Implications for the Poultry Industry

09/16/2017

The Seafood Traceability Rule scheduled to take effect in January 2018 requires importers of seafood to provide documentation extending from catch through processing to point of importation. U.S. District Judge Amit P. Mehta has ruled that the provisions relating to tracking are valid and sustainable. The traceability rule was opposed by the National Fisheries Institute and eight seafood companies collectively responsible for 90 percent of fish consumed in the U.S. worth over $10 billion annually.

Judge Mehta wrote in his opinion, “the vast majority of seafood consumed each year in the United States either originates from the waters far from home or is caught locally but passes through a foreign processing and distribution chain.” Mehta, noted, “It is well documented that, at each stage, opportunists seek to game the system, largely by circumventing laws or norms that regulate the manner in which the world seafood market operates.” Although the rule was developed during the previous administration, Secretary of Commerce, Wilbur Ross has ratified the regulation which is validated by the Magnuson-Stevens Fishery Conservation and Management Act designating jurisdiction over seafood regulation to the Department of Commerce.

In light of potential importation of chicken form China and conceivably from other nations, a similar rule mandating traceability and transparency should be introduced. Although costly as in the case of the seafood industry, application of innovative technology including blockchain traceability would be beneficial and would protect consumers and the image of the industry. Producers in the U.S. have already commenced voluntary labeling indicating variations of “hatched, raised and processed in the U.S.”

(SMS 1,486-17 September 16th 2017)


 

Seafood Traceability Rule Has Implications for the Poultry Industry

09/12/2017

The Seafood Traceability Rule, scheduled to take effect on January 1st 2018, requires importers to provide documentation extending from catch through processing to point of importation. U.S. District Judge Amit P. Mehta has ruled that the provision relating to tracking are valid and sustainable. The Traceability Rule was opposed by the National Fisheries Institute and eight seafood companies, collectively responsible for 90 percent of fish consumed in the U.S. worth over $10 billion annually.

Judge Mehta wrote in his opinion “The vast majority of seafood consumed each year in the United States either originates from the waters far from home or is caught locally and passes through a foreign processing and distribution chain.” Mehta concluded “It is well documented that at each stage, there is an opportunity for participants to seek to game the system largely by circumventing laws or norms that regulate the manner in which the world seafood market operates.” Although the Rule was developed during the previous Administration, Secretary of Commerce Wilbur Ross has ratified the regulation which is validated by the Magnuson-Stevens Fishery Conservation and Management Act designating jurisdiction of seafood to the Department of Commerce.

In the light of potential importation of chicken from China and conceivably other nations, a similar rule mandating traceability and transparency should be implemented. Although costly as in the case of the seafood industry, application of innovative technology including blockchain traceability would be beneficial and would protect consumers and the image of the industry concerned.

(SMS 1,461-17 September 12th 2017)


 

Controversy over Increasing Line Speeds

09/08/2017

A proposal to increase line speed to 175 birds per minute has created opposition from the Government Employees Union (AFGE) and groups representing workers. These include activist groups including the United Food and Commercial Workers and the Knoxville-Oakridge, Central Labor Council, the Interfaith Workers Justice, the National Employment Law Project, the Southern Poverty Law Center, the NAACP, the National Council of LaRaza, the National Council on Occupational Safety and Health, the Presbyterian Church, and the Western North Carolina Workers Center.

At issue is the inevitability of higher levels of mechanization which will reduce labor requirements as determined by volume of throughput. Faster line speeds will be supported by higher levels of mechanization, machine vision and installations which are now common in E.U. plants which operate at 200 birds per minute.

The opponents of increased line speed claim a potential deterioration in product safety. This is a spurious contention since even at one bird per minute an inspector cannot detect bacterial contamination. With increasing line speed, companies have introduced HACCP systems and preemptive approaches to enhancing quality and safety. Increased line speeds which will justify automation will mean fewer jobs for workers and inspectors. Changing to proactive HACCP, FSIS inspectors need to be re-trained from operating according to an obsolete 1907 model of visual examination for fecal contamination and septicemic lesions requiring a more advanced level of operation and additional training for workers.

Statistics collected by the Occupational Health and Safety Administration show that the incidence rate of on-line injuries has progressively decreased and is far lower than the red meat industry and on a par with workers in other food-related fields. Claims that increased line speed will result in more injuries including repetitive motion disorder will be invalidated by mechanization.

It is apparent that the labor unions and the organizations advocating rights for workers recognize the inevitable loss of jobs as a result of introducing more mechanization and advanced equipment. Simply put opponents of increased line speed are motivated by cynical narrow self-interests rather than considerations of worker welfare and consumer safety.

(SMS 1,450-17 September 8th 2017)


 

Bill Lovette Addresses North Carolina Poultry Federation Annual Banquet

08/16/2017

The keynote speech at the 2017 Banquet organized by the North Carolina Poultry Federation was an opportunity for Bill Lovette to review industry issues and trends emphasizing that the broiler industry is no longer recognizable by one’s grandfather!  

Lovette noted that annual retail sales of poultry worldwide now amounts to $400 billion.  It is projected that by 2020 poultry will surpass pork as the preferred meat globally.  Of the 45 percent expansion from 2010 to 2030, as forecast by Rabobank, three-quarters will come from emerging markets.

“Big Ag” including the intensive livestock industry is demonized by environmentalists.  Opponents of poultry, swine and beef production ignore the fact that since 1960 there has been a 37 percent reduction in pesticide use in the U.S. and that one farmer now feeds 155 people versus 26 sixty years ago.

  

Lovette attributes improvements to technology developed through basic and applied research and field evaluation.  With Federal and state cutbacks on support for research, 76 percent of funding is now obtained from private businesses, foundations and farm organizations.

Lovette emphasized that we are in an era of consumerism.  It is however difficult to know what consumers want and more importantly, what they are willing to pay. Current issues facing the industry include organic versus conventional, antibiotic-free production and in the case of broilers an emerging concern over growth rate which is an offshoot of welfare.

One out of five new food products introduced into the U.S. includes a specialty label claim with 44 percent for USDA organic, 28 percent for “no-antibiotics-ever”, 29 percent for “hormone free”, 15 and percent “natural”.  Despite the proliferation of label claims, only 33 percent of consumers are informed as to the significance and reliability of seals and text.

An example of the extent to which consumers are misinformed includes the fact that 70 percent believe that organic foods are “better” for the planet and 60 percent believe they are “safe”. About three quarters of consumers believe that antibiotic residues are present in chicken meat. In reality all U.S. meat products are free of residues and are regularly tested to ensure compliance.

 Due to the inherent non-sustainability of organic foods, if all U.S. crops in 2014 were raised according to organic guidelines, the U.S. food supply would require an additional 109 million acres, equivalent to the area of California. Conventional foods represent no advantage in food safety compared to products grown or processed in accordance with USDA Organic certification. In some cases due to deficiencies in hygiene or lack of Federal inspection associated with small operations, organic products may represent a higher risk to public health than conventional foods processed by large-scale producers who process and pack in plants incorporating HACCP. The current structure and regulation of organic production in the U.S. suggests that the system will not be able to satisfy the future demand for food.

 For the past 25 years, one trillion meals have been consumed without any documented case of a deleterious effect from consuming GMO products or livestock.  By 2050 the World will need 60 percent more protein derived from animals. This can only be attained through the application of technology including genetic engineering and now the emerging field of CRISPR gene deletion.

Sustainability is the key to all production systems with an even greater imperative to adjust to the challenges of climate change, the emergence of new diseases and the requirement for scale of operation to reduce cost and enhance productivity.  From a business perspective, Pilgrim’s Pride recognizes the consumer demand for organic product. The Company has initiated production under the USDA certified Organic program directly and also through their GNP acquisition. Going forward Pilgrim’s Pride considers that water, energy, flock welfare, employee health and safety and product integrity as priorities.

In providing guidance to the members of the NC Poultry Federation, Lovette suggested the following:-

  • Don’t just tell you story, tell it with transparency and heart
  • See it through their eyes
  • It’s not about being right it’s about respect of choice
  • Fearlessly take on the issue but let values lead the conversation
  • Respond with speed and balance
  • Empower people to advocate and innovate

 

Impact of Collapse of NAFTA Highlighted by Study

Economic research consultancy, Impact ECON has indicated that collapse of NAFTA would result in a net loss of 250,000 jobs in the U.S. with 50,000 in the food and agriculture sector. The company estimated that GDP would fall by $13 billion attributed to losses in the farm sector.

It is estimated that disruption in trade would impact exports of U.S. poultry to Mexico, which imported 396,000 metric tons of broiler parts valued at $346 during the first eight months of 2017 million. Mexico is the leading importer of U.S. poultry and represented almost 20 percent of U.S. broiler shipments during the period.

Concern over the lack of progress in renegotiating NAFTA is heightened by comments by U.S. Trade Representative, Robert Lighthizer who stated “If we end up not having an agreement, my guess is that all three countries will do just fine” He added “there’s a lot of trade and there’s a lot of reasons to trade.” Secretary of Commerce, Wilbur Ross, noted “As far as I can tell, there is not a world over-supply of agricultural products” He characterized the potential danger of a NAFTA withdrawal by the U.S. as an “empty threat”. Bill Lovette, CEO of Pilgrim’s Pride Corp. which has complexes in Mexico is optimistic that exports will continue in the absence of NAFTA. Quoted by Bloomberg News Lovette opined “Mexico and the U.S. are so inextricably linked that I don’t believe there’s going to be a significant impact especially for chicken” He added “ Mexico is very aware of food inflation and does not want citizens to see runaway costs” Somehow this commentator is not reassured. Andres Luis Obrador a left-leaning politician and Presidential front-runner may have different views!

Pre-election rhetoric followed by recent statements by the Administration have created a high level of anxiety among farm organizations resulting in submission of a letter to Secretary of Commerce, Wilbur Ross, expressing concern if the U.S. is forced to contend with high tariff rates which will inhibit trade. A total of 86 farm organizations and companies involved in agri-business were co-signatories of the letter to the Administration.

 

(SMS 1,842-17 November 10th 2017)


 

 
Copyright 2018 Simon M. Shane