Editorial

Nothing Achieved in Bilateral Trade Negotiations with China. Hope for Washington Talks.

05/17/2018

According to a detailed review by Kenneth Bradsher in the New York Times on May 4th, the meeting between a high-level delegation from the U.S. and counterparts in China was essentially fruitless.  No agreement was reached and there is no date for subsequent talks.

 

The U.S. delegation presented a series of demands which should have been regarded as unacceptable in advance.  These included:-

 

  • Cut the negative U.S. trade surplus by $100 billion annually for each of two successive years
     
  • Cease subsidizing manufacturing industries participating in the Made in China 2025 program covering ten significant industrial sectors.
     
  • Allow the U.S. to impose tariffs or restrict imports of products derived from the Made in China 2025 program.
     
  • Halt cyber-espionage.
     
  • Strengthen intellectual property protection.
     
  • Recognize the right of the United States to restrict Chinese investments in sensitive technologies.
     
  • Reduce tariffs on U.S. goods entering China.
     
  • Allow free access to services and the agricultural sector of China by U.S. companies.
     
    Bradsher quoted Professor Eswar Prasad of Cornell University as stating, “The list reads like the terms for a surrender rather than a basis for negotiation.”
     
    The list of demands cuts squarely across development programs and planning by China.  Prior to the meeting Beijing indicated that some concessions were possible especially with respect to automobiles and parts and the provision of services.
     
    The chief negotiator for China was Liu He, a member of the Politburo who serves a as Vice Premier for Finance, Trade and Technology.
     
    A communique issued after the meeting published in Xinhua, the official news agency stated, “The two sides agreed that a sound and stable China-U.S. trade relationship is crucial for both, and they are committed to resolving relevant economic and trade issues through dialogue and consultation.” 
     
    With regard to resolution of trade conflicts it would suit China to refer disputes to the WTO since this would provide time to exploit the asymmetrical relationship.
     
    The ball is clearly in China’s court. Accordingly China has reciprocated with a delegation to the U.S. possibly willing to grant concessions. Their commitment can be judged by the rank of the leading negotiator, Vice President Liu He accompanied by officials responsible for policy on agriculture, telecommunications and the Central Bank Governor Yi Gang. The discussions will be played out against a backdrop of apparent dissention between uberhawk Peter Navarro and the more pragmatic Cabinet members Steven Mnuchin of the Treasury and Wilbur Ross of Commerce. It is understood that Navarro will be excluded from the highest-level negotiations.
     
    Parallel talks are taking place in Washington between Vice-Premier Wang Qishan and the U.S. Chamber of Commerce. Topics reviewed included liberalizing rules on foreign ownership, approval of U.S. pharmaceuticals and opening the high-tech sector to U.S. partcipation.
     
    The President has expressed pessimism over the negotiations stating at a news conference on Thursday May 17th “I doubt whether negotiations will succeed”  
 

Poultry Industry News

STOP PRESS

05/22/2018

The following items will receive continued and detailed coverage in forthcoming editions of EGG-NEWS and CHICK-NEWS:-

 

  • Newcastle Disease Case, Los Angeles County: USDA-APHIS and SENASICA officials are negotiating a modus vivendi to allow U.S.-origin breeding stock and fertile eggs and raw processed poultry to be shipped from all but the implicated County in California to Mexico. Effectively our southern neighbor would apply regionalization despite the blanket national embargo in cases of exotic Newcastle disease and highly pathogenic avian influenza. A resolution of the current embargo is expected within days.
  • The 2018 Farm Bill: The House should intensify efforts to achieve a compromise on provisions of the 2018 Farm Bill either by softening some work-for-SNAP requirements and expediting an immigration Bill. But then there is the Senate---
  • Dr. Pearse Lyons Honored: Dr. Pearse Lyons, founder and president of Alltech who died recently from complications following thoracic surgery was posthumously honored at the 2018 ONE18 Conference as the recipient of both the Alltech Medal of Excellence for his scientific achievements and the Alltech Humanitarian Award for philanthropy.
  • Questions to FDA Over Salmonella Braenderup cases: Representative Rosa L. DeLauro addressed a letter to FDA Commissioner Dr. Scott Gottlieb on May 21st concerning the apparent outbreak of salmonellosis affecting 35 patients. From the questions it would appear that FDA might be motivated to extend investigations to the detriment of the Company concerned and ultimately for the U.S. egg-production industry

 

Report of a Limited END Case in California

05/19/2018

In a press release dated May 18th APHIS confirmed isolation of virulent Newcastle disease (END) from a “small flock of exhibition chickens” located in Los Angeles County, CA.

 

This is the first reoccurrence of END since the outbreak of 2003 in California which initially occurred in urban game fowl and eventually extended to two in-line egg-production complexes with over two million hens then operated by Moark LLC.

 

Appropriate surveillance within a zone surrounding the affected location and on contact flocks was implemented by the California Department of Food and Agriculture, obviously in consultation with APHIS, according to Dr. Anette Jones, CADFA State Veterinarian.  Initial results indicate that the infection was confined to the index flock which according to reports has been quarantined hopefully pending depletion.. Fortunately lessons learned during the 2003 event can be applied to detection and control in what is hoped will be a limited event. Both UC Davis and the California Animal Health and Food Safety Laboratory have outreach programs to owners of backyard, game fowl and heritage flocks.

 

Obviously the source of infection will have to be identified in order to impose effective preventive measures. Possibilities include illegal introduction of avian species, contact with infected wild birds or by personnel introducing the virus from outside our borders in the absence of appropriate biosecurity.

 

 The report indicated that the backyard farm comprised “show birds”. If the flock concerned comprised exotic breeds not recently moved among fairs or events, there is only a small likelihood that END virus has been disseminated to other flocks. If however these chickens were in fact game fowl a replay of the early stages of the 2003 outbreak might be a possibility.

 

Since most owners of fighting cocks in the U.S. and especially along Southern border states vaccinate against Newcastle disease, the prevalence of antibodies will be widespread and generally at a high level. This will both impede detection by ELISA serology and will also mask introduction of infection. Experience has shown a low mortality rate in immunized flocks following initial exposure to END virus. Fortunately PCR can be applied to confirm the presence of END in fecal and tracheal samples from infected flocks with mild clinical signs and low-grade mortality.

 

The current recognition of END in Los Angeles County is a justification for maintaining effective biosecurity in commercial farms at all times since both END and HPAI are endemic in many states within our Southern neighbor and free-living birds crossing borders may serve as reservoirs of infection.

 

The situation regarding exports is complicated by the requirement that Mexico source raw poultry, chicks and eggs from a nation “free of velogenic Newcastle Disease (END=vvND)” The FSIS export library has been amended accordingly awaiting any statement concerning a concession relating to regionalization. The entire country of Mexico is not regarded as being free of END.


 

Updated USDA-ERS Poultry Meat Projection for 2018 and 2019.

05/15/2018

The USDA-Economic Research Service released production and consumption data for broilers and turkeys for 2017 (actual), 2018 (projected) and 2019 (forecast) respectively on May 15th 2018.

 

Broiler meat production in 2019 will increase by 1.6 percent compared to 2018 to 19.681 m metric tons (43,298 million lbs.) RTC. Per capita consumption will increase by 1.2 percent) to 41.8 kg. (92.0 lbs.) Exports will represent 16.4 percent of RTC production attaining 3.227 m metric tons (7,099 million lbs.)

 

Turkey production will decrease by 0.9 percent in 2019 to 2.714 m metric tons (5,971 million lbs.) RTC. Per capita consumption will remain constant in 2019 at 7.3 kg. (16.1 lb.) Export volume will decline by 0.9 percent to 0.298 m metric tons (656,000 lbs).  Forecast values for production and consumption of turkey in 2019 are considered to be optimistic given 2018 prices, production and inventory. The projection does not take into account possible collapse of NAFTA and loss of market penetration into Mexico.


 

WEEKLY COMMODITY REPORT

05/18/2018

According to the May 10th 2018 WASDE #577 release, 80.7 million acres of corn will be harvested in 2018 to yield 14.60 Billion bushels. The soybean crop is projected to attain 4.84 Billion bushels from 88.2 million acres harvested. These values are updated from the April WASDE report.

 

Quarterly corn and soybean stocks were estimated by USDA in early April to total 8.9 Billion bushels (60.9 percent of 2017 harvest) and 2.1 Billion bushels (47.8 percent of 2017 harvest) respectively.

 

The following July and September quotations were posted by the CME at close of trading on May 18th together with values for July as quoted on May 11th in parentheses.

COMMODITY

 

Corn (cents per bushel)

July ’18    401  (390)         

Sept.  ‘18     410   ( - )            

Soybeans (cents per bushel)

July ’18    998  (1,002)    

Sept.  ’18  1,004   ( - )      

Soybean meal ($ per ton)

July ‘18    375  (386)

Sept.  ’18      372   ( - ) 

 

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

 

COMMODITY                      CHANGE FROM PAST WEEK

Corn:                     July quotation up 11 cents per Bu.                 (+2.8 percent)

Soybeans:              July quotation down 4 cents per Bu.              (-0.4 percent)

Soybean Meal:       July quotation down $11/ton.                         (-2.8 percent) 

 

  • For each 10 cent per bushel change in corn:-

 

The cost of egg production would change by 0.45 cent per dozen

 

The cost of broiler production would change by 0.25 cent per pound live weight

 

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

 

The cost of egg production would change by 0.40 cent per dozen

 

The cost of broiler production would change by 0.25 cent per pound live weight

 

See WASDE posting summarizing the May 10th USDA-WASDE Report #577, under the STATISTICS tab reviewing price projections and quantities of commodities to be produced, used and exported during the 2018 season.


 

Weekly Broiler Production and Prices

05/19/2018

Chick Placements

The May 16th 2018 edition of the USDA Broiler Hatchery Report confirmed that 177.3 million day-old chicks were placed among the 19 major broiler-producing states during the week ending May 12 th. This was two percent more than the corresponding week in 2017. Total chick placements for the U.S. amounted to 185.3 million, approximately two percent above the corresponding week in 2017. Average hatchability was 80.4 percent for eggs set three weeks earlier. Broiler chick placements for 2018 through May 12th amounted to 3.48 billion.

Broiler Production

For the processing week ending May 12th 162.3 million broilers were processed at an average live weight of 6.18 lbs. (6.30 lbs. last week) and a nominal yield of 76.0 percent. The number of broilers processed was 1.2 percent less than the corresponding processing week in 2017. Processed (RTC) broiler production for the week attained 762.4 million lbs. (346,553 metric tons), 0.8 percent less than in the corresponding week in 2017. Production of RTC for 2018 to date attained 14.19 million lbs. (6.451 million metric tons), almost the same as for the corresponding period in 2017.

The USDA Southern States (SS) benchmark prices in cents per lb. (rounded to nearest cent) as documented in the Broiler Market News Report (Vol. 65 No. 20) May 18th 2018 edition are tabulated with a comparison with the previous week:-


 

Weekly Turkey Production and Prices

05/19/2018

Poult Production and Placement:

The May 15th edition of the USDA Turkey Hatchery Report, issued monthly, documented 28.7 million eggs in incubators on May 1st 2018 (28.2 million eggs on April 1 st 2018) down 0.7 percent from May 1st 2017. A total of 23.4 million poults were hatched during April 2018 (24.1 million in March 2018), down 0.5 percent from April 2017.

A total of 22.6 million poults were placed on farms in the U.S. in April 2018, (22.8 million in March 2018), down 3.5 percent from April 2017. This suggests disposal of 0.8 million hen poults or 6.8 percent of hen poults hatched during April 2018 or 53.4 percent of the total hatch.

For the twelve-month period May 2017 through April 2018, 286.9 million poults were hatched and 269.2 million were placed. This suggests disposal of 17.6 million hen poults over the period representing 12.3 percent of hen poults hatched or 6.1 percent of all poults hatched.

Turkey Production:

The May 18th edition of the USDA Turkey Market News Report (Vol. 65: No. 20) confirmed the following provisional data for turkeys slaughtered under Federal inspection:-

  • For the processing week ending May 12th 2018, 1.930 million young hens were slaughtered at a live weight of 16.5 lbs. (16.6 lbs. last week). During the corresponding week in 2017, 1.843 million hens were processed. Ready-to-cook (RTC) hen weight for the week attained 25,682 million lbs. (11,674 m. tons), 0.1 percent less than the corresponding processing week of 2017. Dressing percentage was a nominal 80.5. For YTD 2018, RTC hen production attained 407.5 million lbs., (185,226 metric tons), 4.6 percent less than during the corresponding period in 2017.

  • For the processing week ending May 12th 2018, 2.653 million toms were slaughtered at 42.7 lbs. (42.7 lbs. last week) compared to 2.449 million toms processed during the previous week. For the corresponding week in 2017, 2.583 million toms were processed. Ready-to-cook tom weight for the week attained 89.7 million lbs. (40,791 m. tons), 1.1 percent less than in the corresponding processing week in 2017. Dressing percentage was a nominal 80.5. For YTD 2018 RTC tom product has attained 1.573 million lbs. (714,964 metric tons), 0.2 percent more than during the corresponding period in 2017

  • The National average frozen hen price during the past week was 81 cents per lb., 2.0 cent per lb. higher than the previous week and 28 cents per lb. below the three-year average. The following prices rounded to nearest cent were documented for domestic and export trading on May 18th 2018 :-

 

Product

cents per lb.

Change from previous Week (%)

Frozen hens

81

+2.5

Frozen toms

81

+2.5

Fresh hens

104

Unchanged

Fresh toms

103

Unchanged

Breasts 4.0-6.5 lb.

95

+2.1

Breasts (B/S) tom

175

+34.6

Drums (toms for export)

62

+6.9

Wings (V-cut tom)

67

+8.1

Wings (V-cut hens)

180

No new quotation

Thigh Meat (frozen for export)

130

+2.3

Mechanically Separated (export)

34

-10.5

Inventories:

On May 14th 2018 cold storage holdings at selected centers amounted to 179,776 lbs. up 0.9 percent from an inventory of 178,152 lbs. on April 1st 2018.

The April 23rd 2018 edition of the USDA Cold Storage Report issued monthly, documented a total turkey stock of 462.9 million lbs. on March 31st 2018, approximately equivalent to four weeks production and up 8.0 percent compared to March 31 st 2017 inventory. The March 31st 2018 value was 8.2 percent above February 28th 2018 due to the disparity between supply and demand during the month. The Whole Turkey category representing 47.3 percent of total storage of 462.9 million lbs., was up 20.7 percent from March 31st 2017. Tom carcasses in storage increased by 33.7 percent from March 31st 2017 to 106.6 million lbs. on March 31 st 2018. Hen carcasses in storage increased by 10.5 percent from March 31st 2017 to 112.1 million lbs. on March 31st 2018.

The “Other” and “Unclassified” categories collectively amounted to 126.1 million lbs. or 27.2 percent of inventory on March 31st 2018, 2.2 percent above March 31st 2017. The magnitude of these two non-specified categories suggests that the USDA should attempt to classify product more accurately as to specific product.

 

Exports:

Please review comments on prospects for exports as outlined in the weekly Broiler Report and the January-March 2018 export data in this edition. Exports should not be impacted by previous isolated sporadic cases of LPAI in Missouri and Texas given the acceptance of the OIE principle of regionalization by the major importing nations.

Prospects for an expedited conclusion of NAFTA negotiations have faded according to trade negotiator Robert Lighthizer. The U.S. turkey industry shipped 46,555 metric tons or 67 percent of turkey exports to Mexico valued at $101 million during the first quarter of 2018


 

Status of 2018 Corn and Soybean Crops

05/21/2018

The USDA Crop Progress Report released May 21st documented an increased rate of corn planting after a slow start now equivalent to the 5-year average. Corn is emerging at a rate consistent with time of planting. Soybean planting surged in the past week exceeding the 5-year average. A quarter of the soybean crop has emerged. EGG-NEWS and CHICK-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of harvest in October.

 

WEEK ENDING

Crop

May 13th

May 20th

5-Year Average

Corn Planted %

Corn emerged %

62

28

81

50

81

47

       

Soybeans Planted %

Soybeans emerged %

35

10

56

26

44

13

       

 

N/A ( too early )

V. Poor

Poor

Fair

Good

Excellent

Corn Condition 2018

Corn Condition 2017

         

Soybean Condition 2018

Soybean Condition 2017

         

 

Parameter

V. Short

Short

Adequate

Surplus

Topsoil moisture: Past Week

8

17

64

11

Past Year

2

10

68

20

Subsoil moisture: Past Week

7

21

64

8

Past Year

2

10

72

16


 

Topics Reviewed at IPC Meeting

05/02/2018

Topics of concern to the world’s broiler industries were reviewed at the 2018 meeting of the International Poultry Council (IPC) in Amsterdam.

 

Items of reviewed included:

 

  • Demand for slow-growing broilers
  • Sustainability
  • Antibiotic residues and drug resistance
  • Avian influenza
  • Halal requirements in relation to stunning
  • Food safety

 

 

Officers elected at the meeting included:
 

 

  • Jim Sumner of USAPEEC, re-elected President
  • Ricardo Santin of Brazil, Vice President
  • Robin Horel of Canada, Secretary-Treasurer

 


 

Chipotle Partners With DoorDash For Delivery

05/06/2018

Chipotle Mexican Grill announced a national delivery partnership with DoorDash covering 1,500 of the 2,400 restaurants in the U.S. This initiative was widely expected, given efforts by newly appointed CEO, Brian Niccol to enhance sales through customer convenience.

During recent months, a number of QSRs have announced agreements with food delivery services including McDonalds Corporation with UberEats and the YUM! Brands banners with GrubHub in which it has an investment.

According to Reuters citing Pentallect Inc., food delivery sales will grow from $13 billion in 2017 to $25 billion by 2022.

 


 

Covance Food Solutions Acquired by Eurofins

05/10/2018

Eurofins has announced the acquisition of Covance Food Solutions from LabCorp. This transaction narrows the range of reputable laboratories conducting assays on feed and food products. According to the announcement, Eurofins and Covance Food Solutions will continue to operate separately until closing during the 3rd quarter of 2018. Eurofins maintains that their preeminent position and international reach will benefit customers of Covance Food Solutions through broadening the range of assays, expediting results and confining cost through economy of scale and efficiency.

 


 

Second International Conference on Necrotic Enteritis

05/10/2018

This program will be held concurrently with the AVMA-AAAP meeting in Denver, CO July 11 – 12.  Featured presenters will include:

 

  • Dr. Rob Moore, Royal Melbourne Institute of Technology, Australia, will speak on Genomics overview on Clostridium perfringens
     
  • Dr. Filip Van Immerseel, Ghent University, Belgium will speak on Controlling the necrotic enteritis threat without antibiotics, a European experience
     
    Other topics will include:
     
  • Biology of Clostridium perfringens
     
  • Pathogenesis and epidemiology of necrotic enteritis
     
  • Diagnosis and future control measures

 

Amazon Eyes U.K. Morrisons Chain

05/15/2018

According to the U.K. Independent, Amazon may be eyeing acquisition of the Morrison’s Supermarket chain. This follows the announcement that Sainsbury’s will purchase Asda currently owned by Walmart. Amazon provides food deliveries to U.K. customers using Pantry and Prime services.

Morrison’s achieved a 3.6 percent increase in same-store sales for the quarter ending May 6th compared to the corresponding period in 2017. Morrison’s purchases directly from farmers and producers of dairy and poultry products as well as food processors. In addition to stocking shelves in their own supermarkets, Morrison’s functions as a wholesaler supplying convenience stores.

Brian Roberts, Global Insight Director at marketing company TCC Global quoted in the Independent article by Ben Chapman stated “investors will be nervous about the growing threat from consolidation in the grocery market following the recent slew of mega-mergers.” He added “Looking ahead, a takeover bid from Amazon is not beyond the realms of possibility as the E-commerce behemoth looks to grow its footprint in U.K. retail.” According to Chapman, in 2017 Amazon was interested in the purchase of the Waitrose chain a competitor of Morrison’s.


 

Wendy’s Posts First Quarter 2018 Results

05/16/2018

In a press release dated May 8th, Wendy’s Company (WEN) reported results for the first quarter of fiscal 2018 ending April 1st. The company generated a net income of $20.16 million on total revenue of $380.56 million. The 33 percent increase in sales and a 10 percent increase in net were not reflected in an increase in share price. WEN closed at $16.52 on Friday 11th and has traded over a range of $13.57 to $17.75 over the past 52 weeks. EPS declined from $0.09 for the first quarter of FY2017 to $0.08 for the most recent quarter. EPS was adversely influenced by non-recurring expenditures associated with restructuring.

 Wendy’s has a trailing 12-month operating margin of 20.7 percent and a profit margin of 14.6 percent. The company has achieved a 4.2 percent return on assets and a 38.8 percent return on equity. Net profit was influenced positively by a tax adjustment.

The company posted a 1.6 percent same-store sales increase in North American stores. Wendy’s has 6,600 restaurants worldwide. Management projected an EPS of $0.55 to $0.57 for fiscal 2018, approximately 40 percent more than fiscal 2017.


 

BRF Posts Loss in First Quarter Of 2018

05/16/2018

According to a company release, BRF, a major protein producer in Brazil, posted a substantial loss in the First Quarter of Fiscal 2018 ending March 31st. For the quarter, net operating revenues amounted to $2.28 billion. The company generated a gross margin of 18.7 percent. These values compare to net operating revenue of $2.17 billion for the first quarter of fiscal 2017 with a gross margin of 17.6 percent. Operating income was $74.7 million with a margin of 3.3 percent. This compares to operating income of $44.2 in Q1 of 2017 with an operating margin of 2.0 percent. The company generated a loss of $32 million with a negative EPS of $0.04. The comparative figure for Q1 of 2017 was a loss of $79 million with a negative EPS of $0.10.

Total assets attained $5.28 billion on March 31st 2018, considerably higher than the market capitalization of $1.53 billion. BRF carries $4.40 billion in non-current liabilities of which loans represent 81 percent with the remainder comprising pension plans, deferred taxes and provisions.

Approximately 65 percent of revenue is generated in Brazil with the remainder from international sales. Five percent of sales value is to the European Union, with the Company impacted by embargoes resulting from allegations of defective inspection and concerns over export certification.

In commenting on the results, newly appointed Global CEO, Lorival Nogueira Luz Jr. noted “While seeking a solution to embargoes and loss of goodwill BRF has already made some adjustments by commencing initiatives to balance the supply of products, including collective vacations in five of its plants.” He added “Issues such as compliance, in addition to health, food safety and security and environment also deserves special attention. These policies are part of our identity and are non-negotiable.”

According to the statement in the BRF Shareholder Letter, the new Chairman of the Board of Directors, Pedro Parente supported by other Board members have already shown their commitment to the restructuring of the company.


 

Suitors for Keystone Foods

05/16/2018

Mergers and Acquisition News on May 11th confirmed that Cargill of the U.S. and Fosun International of China have expressed an interest in potentially acquiring Keystone Foods. Tyson Foods has also considered the company, but acquisition of a major competitor such as Keystone might result in anti-competitive action.

Parent company Marfrig of Brazil intends using the approximately $3 billion purchase consideration to pay down debt and to finance the acquisition of the National Beef Packing Company. This transaction is in doubt given Congressional scrutiny.


 

StarKist Develops First Chicken Product

05/17/2018

StarKist which based promotion on the theme “Chicken of the Sea” will now market an actual chicken product.  Termed Chicken Creations and packed in pouches, the range will be available in four flavors.

 

Andy Mecs, Vice President of Marketing and Innovation for StarKist stated, “After 100 years in the tuna business, we proudly announce that StarKist is now a diversified food company.”  He added, “It is our goal to provide convenient, healthy options that satisfy the palates and nutritional needs for all Americans.” 

 

StarKist has developed expertise in preparing tuna and salmon in pouches which is directly applicable to chicken.


 

Peco Foods to Invest $40 Million in Distribution Center

05/17/2018

Peco Foods will open a new warehouse and distribution center in West Point, MS.  The project which is estimated to cost $40 million will create 300 new jobs.  Peco has acquired a 185,000 square foot warehouse located on 37 acres and will install freezing equipment and refrigerated storage to serve customers.

 

The Mississippi Development Authority is providing assistance with respect to wastewater and infrastructure and the City of West Point is providing a reduced rate for water and sewer services.


 

Optimistic Prediction by Grain-Traders

05/17/2018

Despite the threatened trade war between China and the U.S., the chief executives of major grain trading companies have express optimism in recent weeks.  The quarterly reports of Bunge and ADM have been reviewed in past editions of CHICK-NEWS and can be accessed using the SEARCH feature.

 

Soren Schroder, CEO of Bunge noted, “Agribusiness is back, strong as ever” as quoted in the May 2nd edition of the Wall Street Journal.  Bunge projected a profit of $1 billion for fiscal 2018 mainly based on oilseed crushing.

 

Juan Luciano, noted in a conference call to analysts last week that ADM is no longer committing to long-term supply agreements.

 

Factors which have influenced a more optimistic approach grain trading including the drought in Argentina, lower taxes on exports of Argentine soybeans and the delay in spring planting in the Midwest.  Uncertainty over soybeans exports which are critical to the viability of Midwest farms predicates planting wheat in northern-tier states.

 

Despite optimistic predictions by the major commodities traders (“ABC”) the rumored merger between ADM and Bunge appears on hold, and Glencore has not renewed interest in acquiring Bunge.


 

Cattle Growers Oppose Marfrig Intention to Purchase the National Beef Packing Company

05/19/2018

CALF USA, an advocacy association representing cattlemen has addressed a letter of protest to the Attorney General and to the Secretary of the Treasury opposing the purchase of National Beef Packing Company by Marfrig Global Foods of Brazil.  The group contends that both JBS and Marfrig are “state-controlled enterprises”. This is factually incorrect although both companies have benefited from low-interest loans from the state development bank BNDES.  The companies are not “in whole or in part controlled by the Brazilian government” as claimed in the letter.

 

CALF is corrected in stating that both companies have been involved in unethical practices relating to inspection and export certification and in the case of JBS, criminal indictments have been handed down against the senior executives who have been removed by Court order from the company.  The entire Board of Marfrig was replaced earlier this year following losses in successive quarters.

 

The letter addressed to the Administration included the statement “We respectfully urge the Committee on Foreign Investment in the United States and the U.S. Department of Justice to take decisive action to prevent Marfrig from acquiring National Beef on the grounds that Marfrig demonstrates an unrepentant propensity for exploiting cattle producers and consumers through the production and the sale of unsafe beef”.

 

Marfrig intends to sell their U.S. broiler integrator, Keystone Foods to finance the purchase of the National Beef Packing Company.

 


 

Aurora Furloughs Plant

05/20/2018

Cooperativa Aurora Alimentos in Santa Catarina State, Brazil will furlough one of its eight plants in June reducing output by 12 percent of company capacity.

The reduction is a response to the ongoing decline in exports following embargos imposed by the E.U. and other nations. The action by importing countries resulted from revelations of alleged improper inspection and irregularities in export documentation.


 

Phibro Animal Health Posts Q3 Results

05/21/2018

Image result for Phibro Animal HealthPhibro Animal Health announced results for the third quarter of fiscal 2018 on May 7th. For the period ending March 31st, sales attained $208.9 million, 24.7 percent above the corresponding quarter in fiscal 2017. The company generated a net profit of $19.8 million, 16.1 percent below the third quarter of fiscal 2017. EPS was $0.49 compared with $0.59 in 2017. Operating profit declined from $30.0 million to $26.5 million mainly due to a $4 million rise in the Sales, General and Administration category.

Phibro Animal Health has a market capitalization of $1.76 billion and on a trailing 12-month basis generated a return on assets of 9.7 percent and a return on equity of 35.8 percent. Operating profit was 12.3 percent and the net profit margin attained 7.2 percent.

For the most recent quarter, gross margin increased from 31.9 percent to 33.0 percent with operating profit declining from 15.8 percent to 12.7 percent.

Animal Health represented 64 percent of net sales for the quarter with Vaccines at 9 percent and Nutrition at 15 percent. Mineral Nutrition represented 29 percent of revenue.

Phbro Animal Health has now entered the companion animal segment. There was no indication of expenditure on research and development in the quarterly release According to the statement accompanying the results, the Company is actively seeking acquisitions and technology.


 

Zoetis To Acquire Abaxis

05/21/2018

On May 16th, Zoetis Inc. announced that it made an offer for Abaxis Inc. offering $83 per share valuing the transaction at $2 billion. Abaxis, located in Union City, CA. manufactures diagnostic instruments and test kits including VetScan® Benchtop and handheld diagnostic instruments for veterinary application.

Juan Ramon Alaix, CEO of Zoetis stated “This acquisition brings Zoetis a company that has a proven competitive diagnostic platform for growth we can help to accelerate in the U.S. and worldwide with our global scale and direct customer relationships.”

Clint Severson, Chairman and CEO of Abaxis noted “We see a prime opportunity to grow our businesses as part of Zoetis.” He added “Zoetis has the global presence and direct veterinary customer relationships to deliver greater value to more customers around the world and accelerate the growth of our international operations.”

The equipment manufactured by Abaxis has direct application in companion animal medicine and places Zoetis in direct competition with IDEXX in this segment. Ultimately there may be some applications for poultry complementing the range of ELISA assay systems offered by a Zoetis subsidiary.  


 

U.K. Hog Industry Reduces Antibiotic Use by 50 Percent over Two Years

05/21/2018

The Agriculture and Horticulture Development Board, a statutory entity funded by farmers, growers and contributors to the supply chain has announced that antibiotic use in U.K. hog production declined by 34 percent between 2015 and 2016 and by the end of 2017 less than 50 percent of the base quantity had been used.

 

Antibiotic administration is subject to strict control and records are maintained in an electronic database developed by the Veterinary Medicine Directorate and covers all UK producers including Northern Ireland, Scotland and Wales.

 

Professor Peter Borriello, CEO of the Veterinary Medicine’s Directorate stated, “Congratulations to the pig sector on these impressive reductions in antibiotic use which builds on those already seen in 2016.”  He added, “These achievements are the result of high level collaboration across the industry to deliver on a challenging and rigorous on-going plan to reduce and refine antibiotic use, while maintaining the health and welfare of pigs.” 

 

Dr. Christine Middlemiss the Chief Veterinary Officer for the United Kingdom stated, “A reduction in antibiotic use achieved by the U.K. pig industry over the last two years is excellent.  This has been achieved by the sector working together and following a clear agreed plan of action which is focused on responsible reductions alongside the prevention and management of disease.  This approach is essential for the sustainability of British agriculture and will help to maintain the effectiveness of antibiotics in the future”.

 

 

The achievement by the hog industry in the UK is based on the realization that public sentiment as well as regulatory pressure is against the use of antibiotics in production.  To maintain viable export markets, antibiotic-free or strictly controlled administration is necessary. The major U.K. retailers have imposed standards of antibiotic-free production on their suppliers.  It is evident that the participants in the U.K. hog industry including the National Pig Association, the British Pig Association, the Pig Veterinary Society, Quality Meats Scotland, Northern Island Pork and Bacon Forum and the equivalent meat promotion entity in Wales and the Responsible Use of Medicine in Agriculture Alliance have cooperated, sharing technology to achieve the reduction.

 

There are obvious lessons in the approach by our transatlantic colleagues.


 

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.

 

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05/22/2018

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