Shane Commentary

 

JBS Executives Enter Plea Bargain

May 26, 2017

    

In the unfolding drama in Brazil which extends to the level of President Temer, the Chairman of JBS-SA., Joesley Batista and CEO Wesley Batista have entered plea bargains and provided testimony relating to bribery allegations.

According to the Saturday May 20th edition of the Wall Street Journal a political crisis has now reached an explosive level after simmering over a span of 15 years.  The Batistas admitted to bribing politicians with in excess of $400 million over a number of years to arrange sweetheart financing from the state development bank, BNDES. 

 

Joesley Batista admitted to depositing $30 million in an offshore bank account for Ms. Rousseff the impeached President and paying $2.5 million to Mr. Temer.  Approximately $50 million was paid into an offshore account held by Mr. Lulu DaSilva who preceded Ms. Rouseff as a socialist President. 

O Globo, an influential newspaper noted, “The President has lost the moral, ethical, political and administrative conditions to continue governing and called for his resignation.  Termer is on tape as having urged Batista to pay off a jailed Congressman, former Lower House leader Eduardo Cunha to obtain his silence.  It is noted that Michel Temer held a popularity rating of under 9 percent prior to the latest allegations.

JBS is the world largest protein producer with investments in Australia, Latin America, the E.U. In the U.S. it is the controlling shareholder of Pilgrim’s Pride the second largest broiler producer and also has acquired extensive pork production.

The current crisis has implications for the “financial flexibility and access to credit” for the company which may well be facing a breakup.

In an apology to the Nation of Brazil, Batista provided an unconvincing and self-exculpatory justification, “Up against a Brazilian system that often creates difficulties just to sell solutions, our entrepreneurial spirit and immense desire to get things done lead us to offer payments to public servants.”  He added, “In other countries outside of Brazil we were capable of expanding our business without breaking ethical values.”

The Brazilian financial scandal referred to in the popular press as the “Carwash Corruption” has now assumed massive if not operatic proportions.

   
 

Boston Market Promoting a Spurious “Quality Guarantee”

May 24, 2017

    

Boston Market has announced an extension of their “quality guarantee” which on close reading includes non-existent attributes. These comprise:-

  • The company claim that by 2024 all chicken served in its restaurants will be “U.S.-farm raised.” It is doubtful whether even now and certainly by 2024 Boston Market could purchase at a competitive price any chicken derived from any source other than a domestic supplier
  • Boston Market intends that chicken will be raised without added hormones or steroids. It is a matter of fact that neither steroids nor hormones have been used to produce any chicken in the U.S. since the late 1940’s
  • Boston Market claims that chickens are gluten-free. Since gluten is a protein associated with wheat, the only way in which gluten could be incorporated in a menu item would be from breading. This has nothing to do with the growing and raising of broilers which do not contain gluten.
  • Boston Market claims that their product will be MSG-free. This again is a question of preparation and has nothing to do with the raising or processing of chicken.
  • On the subject of sourcing chicken, the company claims “100 percent antibiotic-free.” Does this mean that all chicken will be raised according to a USDA certified “No Antibiotics Ever” program or simply statutory compliance with FDA Guidance Documents incorporating the VFD which is followed by the entire Industry. Does “antibiotic-free” refer to possible antibiotic residues, since these are in fact non-detectable in U.S. chicken.
 

Boston Market has committed to Global Animal Partnership standards which will raise their cost of raw material without offering any specific benefit other than “bragging rights.” It is noted that Ms. Hunt, the Engagement Specialist at the Humane Society of the United States, stated “we welcome Boston Market’s commitment.” Global Animal partnership is closely affiliated with the Humane Society of the United States through joint directorships and it is even possible that indirectly GAP certification adds to the coffers of the organization.

It is enigmatic that the HSUS which is committed to a vegan agenda would even indirectly endorse any company preparing and serving animal products. It would appear that HSUS through its affiliations is establishing certification programs which continually ratchet up standards and impose requirements which are ever more difficult to meet and most certainly disfavor intensive production. HSUS cannot have it both ways. Either they are opposed to consumption of meat on moral grounds or they are not. If the former why be associated with certifying agencies and endorse standards which are difficult and expensive to meet?

   
 

Depletion of Aquifers

May 17, 2017

    

In recent weeks, speakers at national and regional meetings have discussed the challenge of feeding a World population projected to grow to 9.7 billion by 2050. 

Advances in molecular genetics have improved yields of corn and soybeans but the rate of improvement may not attain the 1.5 percent compounded annual increase required across all food production.

A recent article in Nature sounded a warning on the rate of depletion of aquifers.

  

The study conducted by scientists at the UK Institute for Sustainable Resources in cooperation with the U.S. Goddard Institute for Space Studies – National Aeronautical and Space Administration, applied remote imaging to determine the rate of groundwater depletion in aquifers. The values derived represent the differences between pumping for irrigation and replenishment by rainfall.

Groundwater depletion has escalated 24 percent in ten years from 19.5 cubic kilometers to 25.1 cubic kilometers per year.  (Each cubic kilometer is equivalent to 26.4 billion gallons).  Most of the increase in groundwater depletion has occurred in India, Iran, Pakistan and China.  The crops most responsible for groundwater depletion are wheat (22%), rice (17%), sugar (7%), cotton (7%) and corn (5%).  Groundwater depletion is apparently concentrated in areas that rely on aquifers including the USA, Mexico, the Middle East, North Africa, India and China.

 It is noted that four decades ago Saudi Arabia adopted a policy of self-sufficiency with regard to wheat.  The resulting installation of thousands of center-pivot irrigation systems drained aquifers to a dangerously low level.  The dairy industry in the Central Valley of California is also impacted by periodic shortages of water requiring installation of progressively deeper wells.

It is axiomatic that most regional conflict has less to do with land than water.  It would appear that availability of groundwater will be the major restraint to feeding a burgeoning population.

The report recommended early intervention by improving irrigation, substitution of existing crops for drought-resistant cultivars and restricting abstraction from aquifers.  In many respects recognition of a problem and developing alternative solutions is common to both groundwater depletion and global warming.

   
 

FDA Rule on Caloric Content

May 10, 2017

    

The FDA has issued proposed rules mandating display of calorie levels of menu items in an attempt to reverse the trend in the rate of obesity. Among the multitude of companies required to comply will be pizza stores offering a comprehensive range of toppings all of which alter caloric content. 

 

The irony of the regulation is that in the case of pizzas virtually all orders are either telephoned in or placed on-line so consumers never see a menu board.  Most companies have however indicated calorie content in on-line postings bur whether this influences ordering is speculative. The rule also extends to supermarkets that serve prepared sandwiches.

Bills are under review in the House and Senate ameliorating the impact of the FDA Rule.  It is also possible that the Administration may direct the FDA to delay implementation until legislation is enacted.  The Food Marketing Institute has calculated that compliance with the Calorie Disclosure Rule would cost in excess of $1 billion, ultimately borne by both consumers and restaurants.  The proposed Rule has been in the making for over five years and extends to over 100 pages including the requirement that caloric content for pizza must be declared by slice.

 There is little scientific evidence that posting calorie content influences food choice.  The Rule is yet another example of well-intentioned but onerous intrusion by the Government into business and lifestyle.  It is acknowledged that the U.S. has a problem of obesity in common with most industrialized countries.  Issuing 100 page rules on how caloric content should be displayed on menus and boards is not the solution. 

The time and effort devoted by the FDA to developing a inappropriate solution to a distinct problem stands in contrast to the fact that the Agency inspects less than two percent of imported foods and imposes only cursory control over Asian plants manufacturing pharmaceuticals. It is hoped that the nominee for Commissioner of the FDA when confirmed will introduce a level of rationality apparently lacking in the Agency.

   
 

Agricultural Community Concerned Over NAFTA

May 10, 2017

    

An article in the April 3rd edition of the New York Times by Kirk Semple highlighted the concern expressed by grain farmers over possible changes to NAFTA.

In 2016, the U.S. exported 13.8 million tons of corn to Mexico valued at $2.6 billion representing a unit price of $5.27 per bushel, far in excess of the CME domestic price.

  

Total agricultural exports to Mexico now exceed $18 billion annually including grains, dairy, poultry, beef and hogs. Tom Sleight, president and CEO of the U.S. Grains Consult noted “Soup to nuts:  corn, dairy, meat, specialty products, fruit – they are all pretty much gathered together.”  He added “the U.S. Grains Council and producers are seeking to remind the Administration of the importance of trade and specifically Mexico to Agriculture’s bottom line.” His concern was reinforced by the statement of Barbara Patterson, Government Relations Director for the National Farmers Union who opined “shutting off our borders or losing access to trading partners has farmers concerned.”

The NYT article quoted Todd Hultman a grains analyst at DTN as stating “It’s really hard to track with this President, the campaign rhetoric has really been over the top. But what actions are really going to come from the White House is still a mystery.”

The agricultural community still hopes that Businessman Trump rather than Idealist Trump will emerge as the predominant factor in renegotiating NAFTA. The farming community would endorse an approach to modify the Agreement, to produce a mutually acceptable update.

There is also concern in Mexico relating to sourcing grains. This has resulted in evaluation of alternative suppliers including Brazil and Argentina although this could prove even more expensive than sourcing form the U. S. An alternative approach would be to increase domestic production although this would require a profound change in land tenure an almost impossible objective. Domestic livestock production has been impacted by the cost of U.S. grain which is subject to an import duty benefitting the Government of Mexico to the detriment of consumers.

   
 

Claim to Reduce Wooden Breast Syndrome by Additive

May 3, 2017

    

Reports are circulating on industry websites purporting to offer a nutritional solution for wooden breast syndrome. This emerging condition is frequently encountered in high-yield broilers. 

According to an article in an E.U. publication, a feed additive emanating from a manufacturer in Belgium has been subjected to successful field trials in Brazil. 

It would be justified to report on the claimed positive results of a feed additive experiment if it were based on an article in a peer-reviewed journal conducted with appropriate controls and carried out according to scientific principles.

  

Pathogenesis of wooden breast and the associated ‘white striping’ defect has only recently been described. The specific etiologic factors are unknown but may relate to early development of vascularization of the pectoral muscles in high-yield strains, suggesting an interaction among genetics, nutrition and management.

Previous studies on increasing vitamin E, antioxidants, sulfur-containing amino acids and other nutrients including organic minerals have resulted in amelioration under controlled laboratory studies. In contrast the results of field trials are subject to the limitations of farm-selection, flock bias, confounding and a lack of replication necessary for statistical analysis.

Whenever an industry-wide problem emerges, there is always a ready supply of “quick-fixes”.  Complicated and multifactorial issues do not have simple solutions. It is incumbent on technical writers to question claims and to elucidate the mechanism of action and relate the presumed action of components in a non-defined feed additive to known biological principles.

   
 

Chipotle Claims Elimination of Preservatives

Apr 26, 2017

    

Chipotle Mexican Grill announced on March 28th that it has eliminated colors, flavors and preservatives in all ingredients used to prepare food.  Eliminating FDA-approved preservatives does not actually make food “better”. 

The range of additives in baking and preservatives in protein ingredients serve a useful purpose in maintaining flavor or freedom from pathogens.  There is no specific virtue in pursuing a “freedom-from” claim.

Steve Ells persist with the canard that non-GMO ingredients or poultry and beef produced in accordance with FDA and FSIS regulations are in some way inferior to USDA certified organic products.

  

Steve Ells

Mark Crumpacker, recently reappointed to his position of Chief Marketing and Development Officer for Chipotle stated, “Fast Food Companies should be asking why their food needs added flavors, sweeteners and preservatives in the first place.”  In many cases the answer involves food safety but also preservation of quality and taste.

The statement by Steve Ells published in the Denver Business Wire on March 28th is replete with the usual Chipotle superlatives and claims of preeminence.  By reading between the lines it is possible to discern “exceptions” including beverages and citrus juices.

CHICK-CITE takes issue with the tone of Chipotle announcements and the comments by Ells which denigrate the products served by his competitors without the equivalent menu items from Chipotle possessing superior attributes with respect to either health or quality.  Chipotle in its publicity has invariably included a measure of sophistry and smugness.  Basic defects in conceptual planning, food science and safety led to the consecutive outbreaks of foodborne infection involving at least four pathogens nationwide in 2015 without any assurance that outbreaks could reoccur.

   
 

KFC Commits to Eliminate Common-Use Antibiotics

Apr 19, 2017

    

In an April 7th release, Kentucky Fried chicken announced that by the end of 2018, all chicken purchased by KFC U.S. will be raised without antibiotics important to human medicine (“common- use” antibiotics.)

KFC and its parent Yum! Brands is the last of the major chains to announce a ban which in effect follows FDA policy and mandatory compliance by the broiler industry.

 

Lena Brook, food policy advocate at the Natural Resources Defense Council, stated “The market is responding to consumer demand for better meat. This commitment from the nation’s most iconic fast food chicken chain will have a major impact on the way that birds are raised in the U.S. and in the fight against the growing epidemic of drug-resistant infections.”

For information, the decision will not have any “major impact on how birds are raised” since many broiler producers anticipated the 2017 FDA deadline and followed previously released Guidance documents. Common-use antibiotics are essentially disallowed for other than very specific therapeutic administration under strict veterinary control.

The quantitative impact of antibiotic use in broiler production on the emergence of drug-resistant organisms is questionable notwithstanding emerging knowledge based on advanced molecular analysis and epidemiologic evidence.

The majority of drug resistance in human populations results from inappropriate and over-administration of drugs by the medical profession. However, perception is reality and the industry has in large measure accepted the principle of relinquishing antibiotics for growth promotion and disease prevention on a routine basis in conformity with FDA rules.

Kevin Hochman president and Chief Concept Officer for KFC U.S. stated “Making this change was complex and took a lot of planning. It required close collaboration with more than 2,000 farmers, most of them family-owned and managed in more than a dozen U.S. states where they raise our chickens” This is at best a non-factual statement.  

KFC does not deal with farmers but purchases chicken products from a limited number of integrators who in turn agree to and conform to mutually agreed programs, since they own the flocks placed on contractors’ farms. These flocks receive Company feed and supervision and are harvested and processed to supply KFC and other QSRs.

It is evident that going forward the USDA will play a role in antibiotic-free broiler-raising programs through Process Verified Certification.

   
 

Yum! Brands CEO Forecasts Robotics and Automation in QSRs

Apr 19, 2017

    

Yum! Brands CEO, Greg Creed forecast that by the mid 2020’s, automation and robotics will be commonplace in QSRs.  He noted that affiliated brands, Pizza Hut, KFC and Taco Bell have established automated ordering kiosks in Shanghai, China and are even using robotic greeters.  Creed compared advances in automation in QSRs to the extensive use of robots in manufacturing.

  

His comments to CNBC follow recent initiatives to raise the rates paid to workers to a minimum of $15 per hour for unskilled work.  In view of the thin margins generated by QSRs, substantial increases in labor costs will force both in-store automation in addition to centralized food preparation in commissaries, trends which are already apparent. The alternative, as in Seattle WA. is the closure of stores.

The U.S. fast food industry was founded on manual labor provided by high-schoolers following a right-of-passage, learning responsibility, punctuality, and interaction with customers and supervisors before going on to college or a career.  Over the past three decades, especially in urban areas, QSR workers have represented an unskilled work force virtually tied into minimum wage occupations.

Chick-fil-A® is the outstanding exception with respect to remuneration, training, motivation and benefits. Since the chain is a private company with a unique philosophy and business model decisions were made by the founder, S. Truett Cathy and followed by his son Dan to invest in store associates. This luxury apparently eludes public-quoted companies in intense competition, which are required to demonstrate growth in earnings on a quarterly basis to maintain EPS and to pay dividends often at the expense of employees.

   
 

Reevaluation of Acceptance of GM in China

Apr 12, 2017

    

The China National Chemical Corporation, a parastatal entity, has completed their $43 billion acquisition of Syngenta AG of Switzerland.  Syngenta is a leading biotechnology company developing and distributing GM seeds.  Partly through ignorance but also institutional opposition, Chinese consumers are generally unwilling to embrace GM technology.  The justification for previous Government policy on GM lies in the low productivity of farms. 

  

Currently farmers in China can harvest 95 bushels of corn per acre equivalent to 6 metric tons per Ha.  The U.S. equivalent is 180 bushels per acre. Similar differences exist between the yield of soybeans in China (25 bushels per acre or 1,600 kg per Ha) compared to 52 bushels per acre in the U.S.

Simply put, if the yield of corn and soybeans were to be increased to levels approaching U.S. standards, the price of commodities would fall to the point where millions of small-scale farmers would be displaced resulting in social upheaval.  Accordingly the Government of China which plans all production has maintained a program of excluding GM seeds but cynically allows importation of GM grains for livestock and human consumption.

China National Chemical Corporation will have to integrate the technology of its acquisition into the agriculture of its nation as it will have to compete in the future with powerful competitors such as the combination of DuPont Company and Monsanto.  The national market for seeds in China is estimated at $17 billion according to an article by Brian Spegele in the March 27th edition of the Wall Street Journal.  Pressure to capitalize on their investment will force China to adopt GM grains.  A thaw in attitude was cited in the WSJ article with Zhang Taolin the Vice-Minister for Agriculture stating, “The Government believes GM is safe”.  Syngenta maintains that the Government of China which has funded GM research will adopt the technology for the domestic market in an attempt to upgrade productivity.

It is anticipated that the change in consumer attitude may take some time with Jian Wu, business director at DuPont of China criticizing the Government for “not educating the general public about the real benefits of GMO”.  Of specific interest in China is cultivation of GM soybeans to produce cooking oil which is in demand.

It would appear that China is in a position to learn from the mistakes of the European and U.S. biotechnology companies that identified farmers as their customers for GM seeds. In fact consumers at the end of the production chain represented the arbiters of acceptability.

   
 

Head-Only Stunner Developed in the Netherlands

Apr 12, 2017

    

Dutch Vision Solutions (DVS) has developed a head-only broiler stunner recently promoted in the form of an “infomercial” in an EU poultry periodical.  The purpose of the development program was to engineer a system which would allow recovery of stunned broilers within 30 seconds, apparently a requirement for some certifiers of halal slaughter and important for some export markets. 

The equipment developed by DVS was tested by a Wageningen University research team at a throughput of 13,500 birds per hour.  Stunning efficiency attained 95 percent with approximately 5 percent birds of birds showing a sensate reaction within 30 seconds after stunning.

  

A comparison shows that the capital cost of a head-only installation is approximately eight times the cost of a water-bath unit and according to the figures presented, enigmatically even more that a controlled atmosphere stunning installation.

The head-only stunner does not appear to have advantages over pulsed-DC stunning as installed in some plants in the U.S. or over the more conventional water-bath AC stunners.

Given the growing demand for controlled-atmosphere stunning as a welfare imperative, it is doubtful whether the system will be adopted in the U.S.  In any event, the head-only system still requires manual shackling which is considered a negative by advocates of bird welfare and the customers they advise. It is considered unacceptable that the head-only stunning system as tested, would allow five percent of broilers to pass conscious through the rotary blade or manual slaughterer.

The cost comparison presented in the form of a table in the article published in the EU periodical clearly overstates the cost of controlled atmosphere stunning especially with respect to labor, water usage and electricity. The comparison ignored fixed costs including depreciation and interest.

   
 

INVESTOR PRESSURE ON ANTIBIOTIC USE

Apr 5, 2017

    

A consortium of 71 investment firms is placing pressure on QSRs, restaurant chains and food manufacturers to source poultry free of antibiotics.

An organization termed the FIIR Initiative issued a statement noting “Investors are not immune to antibiotic resistance.  It is hard to put a monetary cost on antibiotics becoming useless but some estimate that it could lose $100 trillion from global economic output, creating an enormous financial and public health crisis”. 

  

This sentiment is in all probability drawn from the Report of a UK committee chaired by Lord O’Neill of Gatley in 2016.  The report projected that by 2050, antibiotic resistance if not checked could reduce world GDP by 2 percent.

Most of antibiotic resistance alluded to in the O’Neill Report relates to drug resistance in human populations associated with misuse of antibiotics leading to emergence of multi-drug resistant tuberculosis, MRSA and other pathogens including Klebsiella and Enterobacter.

Notwithstanding the weight of scientific and epidemiologic evidence concerning nosocomial drug resistance, there is a growing perception that livestock may be responsible for a proportion of the problem. Poultry producers can expect pressure to be directed by the investment community onto customers to eliminate antibiotics from their supply chains. As an alternative to “No Antibiotics Ever” programs some latitude may be extended to allow administration of antibiotics for therapeutic application under veterinary supervision.

It is estimated that 80 percent of companies approached by investors are working with suppliers to monitor and reduce antibiotic use.  Out of ten major chains including Brinker International, Darden Restaurants, Domino’s Pizza Group, McDonald’s Corporation, Restaurant Brands International and the Wendy’s Company among others, Yum! Brands was the only major chain that ignored requests to supply information on their antibiotic policy and intentions. From press reports Yum! Brands appears to be stonewalling the trend to antibiotic-free production.

   
 

Global Animal Partnership

Apr 5, 2017

    

During recent weeks, a number of relatively small QSRs have announced that they will adopt the standards of the Global Animal Partnership (GAP) with respect to sourcing animal products.

Quiznos is the latest entrant announcing their intention of adopting GAP standards by 2024 with respect to purchase of chicken. Since we have at least two recognized animal welfare certifying agencies in the U.S. it is questionable whether we require an additional burden.

  

Evaluation of the Global Animal Partnership website discloses that the organization was established in 2008 by John Mackey, co-CEO of Whole Foods Market.  He created a 5-Step® rating standard for the program which he considered would be appreciated by the demographic patronizing his supermarket chain.

What is informative is the composition of the Board of Directors which speaks for itself:

  • Wayne Pacelle, CEO/President, HSUS
  • Ben Goldsmith, Executive Director, FarmForward
  • Leah Garces, Director, Compassion in World Farming
  • Dan Probert, Former Executive Director, Country Natural Beef
  • Matthew Bershadker, President/CEO, ASPCA
  • AC. Gallo, President, Whole Foods Market
  • Paul Willis, Former Owner, Niman Ranch, now Willis Free-Range Pig Farm

Global Animal Partnership has created a series of welfare levels applying to broilers, hogs, beef cattle, turkeys, sheep, hens and bison. The standards at the two lower levels conform closely to the requirements of the American Humane Association but the stipulations for the higher rungs of the ladder are exceedingly onerous and disfavor intensive production. It is significant that GAP does not have a scientific advisory board providing input on the justification for welfare standards.

The GAP is unnecessary, duplicative and represents an extension of the ego of its founder. It was devised to lend credence to a combination of a whim at best or a cynical exercise in welfare    one-upmanship to benefit the image of Whole Foods Market.

   
 

U.S. REACTION TO INSPECTION IRREGULARITIES IN BRAZIL

Mar 29, 2017

    

Following press reports of alleged irregularities in inspection procedures and certification of raw beef and ready-to eat products emanating from specific plants in Brazil, the U.S. Department of

Agriculture has initiated a program of assaying consignments of raw beef imported from Brazil for the presence of pathogens. 

  

Meat exports from Brazil to China, the EU, and Chile have been restricted although South Korea has resumed imports. Approximately 30 percent of beef imports entering China emanate from Brazil followed by Australia with a 19 percent share and Argentina at 8 percent.

China has not imported beef from the U.S. since a single case of BSE, attributed to sporadic mutation, was diagnosed in 2003.  Alternative suppliers to China include Canada although it is evident that in the short term, prices for beef products will rise sharply in China.  In the intermediate term, Brazil should be able to satisfy importing nations that it has taken steps to resolve issues of improper inspection and possible adulteration, degrading their image in the export market.

   
 

ALL WE NEED NOW IS A TRADE WAR

Mar 22, 2017

    

An editorial in the February 10th edition of The Wall Street Journal lays out the reasons why moderation and diplomacy are required in our future relations with trading partners.

The need to reverse the adverse trade balance with our two NAFTA trading partners and to establish bilateral agreements with China, the UE, Japan and South Korea are self-evident.

  

It is ironic that states carried by President Donald J. Trump have the most too loose from disturbances in trade.  Poultry is ninth on the list in export commodities with respect to proportion of U.S. production at 17 percent with the pork exporting 23 percent of output. 

It is noted that our two NAFTA partners purchased $38 billion in agricultural produce annually.  An aggressive stance against China could invite retaliation and prejudice the $21 billion in U.S. shipments of agricultural products representing almost 15 percent of U.S. exports.

Given the high value of the U.S. Dollar, we are vulnerable to competition from nations with arable land, a suitable climate, relatively low labor costs, mechanization and other advantages.  Exports of broiler parts to Mexico and Canada are critical to maintaining balance in domestic supply and price stability.  The volume of broiler exports over the first eleven months of 2016 amounted to 2.7 million metric tons valued at $2.6 billion.  Mexico was the largest importer of broiler meat during November 2016 of 20 percent of volume and 17 percent of value.

Exports of turkey meat attained 240,000 metric tons valued at $540 million, with the top five importers of broiler parts representing 42 percent of volume.

CHICK-CITE endorses the views of The Wall Street Journal editorial which stated, “President Trump should consider reality before escalating on trade-and betraying the Farm Belt voters who are relying on him to bring growth and opportunity”.

   
 

Georgia University Researcher Develops New Approach to Suppress Ammonia

Mar 15, 2017

    

Using funding provided by USPOULTRY Dr. Woo Kim of the Department of Poultry Science, University of Georgia has developed a new approach to suppress elaboration of ammonia in litter. 

 

Project 687 entitled Effects of Nitrocompounds to Minimize Ammonia Emission in Broiler Litter represents a unique in-feed modality to reduce ammonia liberation from uric acid excreted by flocks.

Dr. Kim demonstrated that a number of nitrocompounds in vitro can inactivate the five enzymes required to convert uric acid to ammonia.  Nitropropanol and nitropropionic acid demonstrated the highest levels of reduction.  Supplementation of broiler diets with either nitroethanol or nitropropanol reduced uric acid degradation and ammonia production in broiler litter without affecting performance. The evaluation included measurement of ammonia volatilization, ammonia nitrogen, total nitrogen, and uric acid nitrogen in litter.

The report did not include any details as to the financial feasibility of the approach. Costs should be compared with the expense of currently available litter amendments to reduce ammonia production by acidification.

The most injurious effect of ammonia on the respiratory tract occurs after placement of chicks exposed to ammonia liberated from used litter beneath the thin covering of fresh wood shavings or other substrate. Obviously including an additive in feed during the pre-starter and starter periods would have little effect on the flock. 

Inclusion of the nitrocompounds in finisher and withdrawal feeds could conceivably reduce ammonia emission which would affect subsequent flocks with a beneficial effect on respiratory function and growth during the first two weeks of the following cycle.  Inclusion of the compounds in feed on a seasonal basis could also be an acceptable strategy especially during cold weather when ventilation rates are reduced to conserve heat.

   
 

Pathogens Influenced by Pollution

Mar 8, 2017

    

A study conducted at the University of Leicester examined the effect of atmospheric pollution on Staphylococcus aureus and Streptococcus pneumoniae both pathogens found in the respiratory tract.  The interdisciplinary team including geneticists, microbiologists and environmental scientists demonstrated that exposure to carbon and other pollutants changed colony characteristics of the bacteria and contributed to enhanced virulence.

  

Dr. Julie Morrissey of the University of Leicester noted, “The study shows that bacteria which cause respiratory infections are affected by air pollution, possibly increasing the risk of infection and the effectiveness of antibiotic treatment for these illnesses.”

Although the study is of significance to human epidemiologists, the results point to the deleterious effects of dust, ammonia and other pollutants in the environment of poultry houses.  We are aware that ammonia and extremely low levels of humidity affect the mucosa of the respiratory tract. 

There is an established association between suboptimal levels of ventilation and respiratory infection.  The studies conducted in the UK provide an understanding of how pollutants not only affect the sensitive tissues of the airways, lungs and airsacs but also that dust, ammonia and other contaminants may influence the pathogenicity of bacteria resulting in a synergistic effect.

   
 

CHICAGO INSTITUTE OF FOOD TECHNOLOGISTS HOSTS DEBATE ON GMOS

Mar 8, 2017

    

In mid-February, the Chicago Section of the Institute of Food Technologists hosted a debate on the merits of GM foods.  More than 170 Chicago-area food industry professionals attended, attesting to the significance of the topic.

According to a report in the IFT Weekly Newsletter, Dr. Benjamin Howard, Laboratory Director at Certified Laboratories noted that a pre-debate survey showed that two-thirds of the attendees were in favor of GM and slightly more believed that GM ingredients are ‘always or mostly safe’.  Approximately half of the respondents expressed the opinion that safety data relating to GM foods is not readily available to the public and private sectors to facilitate informed choice.

  

Dr. Sonny Gilbert Project Scientist with Cofactor Genomics firmly believes, as does much of the scientific community, that GMs are innocuous with respect to safety and are beneficial in terms of sustainability.  It is an undeniable reality that the FDA has approved the consumption of GM foods for two decades and with almost half a billion acres of GM crops planted worldwide in 2014.

Gilbert noted that GMs have become controversial because of lack of relevant information suitable for consumers.  Outstanding and beneficial innovations include bananas and rice modified to express high carotene content to avert blindness and pest-resistant crops which reduce the use of insecticides.

It is apparent that the Chicago section of the Institute of Food Technologists was not able to obtain a reputable scientist to debate from the opposing side.  Joel Warady, Sales and Marketing Officer of Enjoy Life Foods apparently delivered a message relating to consumer needs and the apparent benefits of his Company’s products and by extension, all GM-free foods.  Echoing the sentiments of opponents of GM technology, Warady stated, “I don’t know that GMOs are bad but I will challenge anyone who says they are good because there isn’t enough evidence”.  Despite being a partisan for non-GM, Warady clearly supported the contentions of Dr. Gilbert that consumers are under-informed.

Previously both EGG-CITE and CHICK-CITE have commented on the apparent inability of the major biotechnology companies to mount effective pro-GM campaigns using social media and mainstream print and video.  If companies profiting from GMO technology wish to expand their markets, they will have to become more innovative and consumer-oriented. The customers of biotechnology companies are effectively food manufacturers and consumers not farmers which appears to be the focus of their misdirected perspective. 

To dispel misinformation and engender confidence in GMOs, campaigns should involve a substantial investment in publicity, the use of spokespersons representing sports and entertainment and above all should be directed to millennials and their following generation.

   
 

Wendy’s Announces Move to Lower Live Weight

Mar 1, 2017

    

Wendy’s announced that it would in the future require a 20 percent lower live weight compared to current specifications.

Todd Penegor, president and CEO of Wendy’s stated “We are making this change because we have seen that smaller birds provide a big benefit for our customers who deserve to eat the most tender and juicy chicken.”

  

This statement belies fact.  The larger the bird the more mature the muscle.  Tenderness and juiciness are a function of stunning and post mortem electrostimulation or procedures before portioning.  Bird size has little to do with “tender and juicy” but may have profound impacts on live cost.

Unfortunately, in this market-oriented world, misconceptions and hype frequently conflict with reality, and suppliers are obliged to follow the specifications and apparent needs of their customers.

   
 

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

Feb 22, 2017

Grady Fain

    

Guest Commentary by Grady Fain

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

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

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

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

 

Introduction

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

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

  

Political Scenario

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

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

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

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

Regulations and Welfare

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

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

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

Export Restrictions and Avian Influenza

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

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

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

Commodities

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

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

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

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

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

The poultry market and forecast

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

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

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

   






















 
Copyright 2017 Simon M. Shane