Shane Commentary

Wadiak to Produce Sustainable Chicken

09/08/2019

A recent meat industry periodical devoted inordinate significance to an interview with Matthew Wadiak and his venture to produce ‘sustainable’ chicken.  In 2012 Wadiak was a co-founder of Blue Apron.  This company has lost money every since its inception and was the subject of a recent report on quarterly performance that denoted an insecure future with either acquisition or liquidation as possible outcomes.  Wadiak is now building a new company committed to “regenerative agriculture”.  His approach is to enhance soil quality using “carefully bred and raised heirloom chickens” complying with Global Animal Partnerships Step-4 Certification.

 

Apparently Wadiak has acquired  $12 million in financing from Amera Capital Management to enable his company, Cooks Venture to establish broiler enterprise based on slow-growing birds.    The company has purchased a disused processing plant formerly operated by Simmons Foods in Jay, OK.  The plant is to be converted to air-chilling which is not a unique concept even in the U.S.  The intent is to attain a capacity of 700,000 birds per week, all grown on pasture.  Breeding facilities were acquired from Crystal Lake Farms previously the production facilities used to produce Peterson strain male broilers. 

 

Wadiak makes claims for his naked-neck birds which are probably neither valid nor commercially viable.  Target price for his product is $15 for a four-pound chicken suggesting that the market will be confined to affluent, environmentally conscious consumers.  Wadiak apparently does not consider competition from existing producers of premium and organic chickens including Bell and Evans, GNP and Fieldale Farms. Production parameters accepted for the naked-neck chicken reared on pasture suggest that unless a very high wholesale price can be obtained, with acceptable volume to offset fixed costs, enterprises based on philosophy and claims sustainability and in this case regenerative agriculture are doomed to either failure or are relegated to a small niche of the market. Wadiak’s venture may follow Blue Apron as an interesting concept but financially nonviable over the intermediate term.


 

China Retaliates Against the U.S. With Tariffs on U.S. Exports

08/27/2019

China announced on Friday, August 22nd that it will impose tariffs on $75 billion worth of U.S. exports. Predictably, the Administration announced that counter-retaliation would include raising tariffs on the $250 billion worth of Chinese goods from an existing 25 percent at present to 30 percent on October 1st. In addition, the proposed 10 percent rate due to go into effect on September 1st but deferred to mid-December would be raised to 15 percent. Observers have indicated that the constant escalation in the tariff war is counterproductive and will not achieve the aim of structural changes in China despite statements to the contrary by spokespersons for the Administration.

The tariffs on imports from China are borne by consumers. The Federal Reserve Bank of New York calculates that tariffs at the present rate will increase expenditure by the average American household by more than $800 annually. This figure will increase proportionately depending on any subsequent escalation in tariffs.

Tariffs imposed on agricultural products even before the August 4th blanket ban by China are now seriously impacting this sector. The compensatory payments to farmers effectively increase the national debt and repayment will have to be made by succeeding generations. The situation from the perspective of September 1st 2019 is far cry from the claim that “trade wars are easy to win and are of short duration”. This statement may be based on experience but obviously depends on the strength and determination of the adversary.


 

UN-FAO Issuing Unrealistic Recommendations on ASF

08/16/2019

A recent release by the United Nations Food and Agricultural Organization estimates that “almost five million pigs in Asia” have died or have been depleted due to African Swine Fever (ASF). This assessment is a gross underestimate of the damage and suggests that the FAO is out of touch with reality or is institutionally gullible, accepting distorted reports from member nations. Rabobank has estimated that 30 percent of the herd in China has either died or been culled representing a loss of 100 million hogs, a figure subsequently confirmed by a representative of an agency monitoring use of soybean meal.  Vietnam has reported the loss of over 20 million hogs and it must be assumed that proportional losses reflect the ASF situation in North Korea, Laos, Myanmar and possibly other nations in Asia.

The FAO has urged “implementing effective biosecurity”. Given that the organization knows that in China there are at least 20 million small-scale hog producers and with their knowledge of production practices gained from their response teams, the Agency must appreciate that this is a meaningless and unproductive recommendation.

The FAO recommendation not to move hogs or pork products is based on a sound foundation but unfortunately is observed more in the breach than in reality. If a small-scale hog farmer suspects that a herd of 20 hogs is infected, animals are either moved to slaughter or are sold, contributing to dissemination of the virus. Given the extent of ASF involving all provinces in China, and the incidence rate, any attempt at quarantine has been a failure.

ASF will persist in Asian nations until there is full integration allowing effective structural and operational biosecurity including location of production units and processing plants. Effective control will only be achieved when an effective and durable vaccine is available given that ASF is now endemic in most Southeast Asian nations.


 

Sanderson Farms Wins “Natural” Lawsuit against Advocacy Groups

08/08/2019

After prolonged litigation, Sanderson Farms Inc. has prevailed against Friends of the Earth and the Center for Food Safety regarding an allegation of deceptive advertising.  The U.S. District Court for the Northern District of California dismissed the lawsuit on the grounds that the plaintiff’s lacked “organizational standing” to pursue the suit because they were unable to demonstrate that the allegations of deceptive advertising made them divert resources from their respective missions. 

 

At issue was the claim that Sanderson Farms chicken was “100 percent natural”. The plaintiffs maintained that failure to allow flocks outside access and administration of antibiotics constituted misrepresentation.

 

The lawsuit was filed in June 2017 and at the time Sanderson Farms vowed to defend the action.  Court documents indicated a number of assays demonstrating antibiotic residues.  At the time, plaintiffs maintained that residues of ketamine were present in chicken.  There is no valid reason why ketamine, which is an exceptionally expensive and highly controlled drug should have been administered to poultry and the finding is regarded as spurious since valid testing methods have not been developed for detection of residues of this drug in poultry meat.  Some of the assays that apparently detected specific antibiotics and pesticides were also invalid to assay poultry meat.  At the time the lawsuit was filed Sanderson noted that the company did not administer any of the antibiotics, chemicals or pesticides listed in the complaint. Sanderson Farms did however acknowledge that company veterinarians prescribe penicillin in accordance with FDA regulations and prudent use principles as therapy for specific flocks as required by clinical and laboratory indications.  The company claimed that appropriate withdrawal times exceeding FDA guidelines were followed.

 

The findings of the Northern District Court of California should serve as a warning to advocacy groups to more circumspect when initiating of litigation.  By their vigorous defense, Sanderson Farms has benefited the entire industry and placed potential plaintiffs on notice with respect to discrediting current production practices and advertising claims.


 

Hamlet Protein Evaluates AviStart®

07/28/2019

AviStart® is a proprietary enzyme-treated soy protein produced by Hamlet Protein A/S both in the EU and the U.S. The manufacturing process reduces trypsin inhibitor, oligosaccharides and antigens including beta-conglycinin compared to conventional solvent-extracted soybean meal. Assays for anti-nutritional factors in 180 samples of U.S. soybean meal showed a range of 1.4 to 5.5 mg/g dry matter for trypsin inhibitor, 4.3 to 8.3 percent stachyose and 0.6 to 1.9 percent raffinose with up to 8 percent oligosaccharides.

 

At the 2019 Poultry Science Association Meeting Hamlet Protein presented results of applied research demonstrating the value of including AviStart® in broiler diets*.  Assays showed that conventional soybean meal used in the study contained 2.2 mg/g of trypsin inhibitor and 9.3 percent oligosaccharides compared to AviStart® at 1.5 mg/g. Inclusion of 5 percent AviStart® in the basal diet reduced trypsin inhibitor by 7 percent and both beta-conglycin and oligosaccharides by 16 percent.

 

In the replicate pen trial, conducted by Southern Poultry Feed and Research, AviStart® was included in the starter diet for 14 days at a level of 5 percent.  The possible interaction of AviStart® with superimposition of Clostridium perfringens infection was evaluated together with including BMD in diets at 55 ppm throughout the growing period. The trial was designed to determine the effect of BMD alone and in combination with AviStart®.  The replicate pen trial comprised eight treatments each with eight pens of 25 male broilers vaccinated at day-old against coccidiosis.  For treatments challenged with C. perfringens, the pathogen was mixed in feed to attain a dose level of 1.0 x 108.5 CFU per chicken and fed during days 19 through 21.

 

At the termination of the 42-day trial, control broilers weighed 2.306 kg with a feed conversion of 1.790. Challenge with C. perfringens resulting in clinical necrotic enteritis (4.8 percent mortality) reduced body weight by 9.4 percent to 2.089 kg., significantly different from the control. Feed conversion was significantly elevated by 3.8 percent to 1.858 kg.  Inclusion of AviStart® at 5 percent in starter diets restored body weight numerically to 2.295 kg, with a feed conversion of 1.803, but these parameters were not statistically significantly different from respective controls.

 

Inclusion of BMD at 55 ppm did not significantly increase body weight over controls or the treatment receiving both BMD and AviStart® although feed conversion ratio was significantly lower compared to controls.  As expected, BMD was effective in reducing the impact of necrotic enteritis on weight gain and feed conversion.  With respect to the uninfected treatments, weight gain through 42 days was unaffected by inclusion of AviStart® or BMD or their combination.  In contrast AviStart® and BMD significantly decreased feed conversion ratio and their combination was significantly superior to treatments receiving either of the additives individually in diets. 

 

With respect to the treatment infected with Clostridium perfringens, AviStart® restored body weight to that of the uninfected controls as did BMD and the combination of BMD and AviStart®.  The major impact of including of AviStart® in diets through 14 days was to restore feed conversion ratio to that of the controls in the treatments challenged with Clostridium perfringens.

 

The trial demonstrated that AviStart® was equivalent to BMD both in addition cost and in improving weight gain and reducing the feed conversion ratio in broiler chicks through 42 days of growth.  AviStart® was equivalent to BMD in improving both commercial parameters of growth and feed conversion.

 

Based on the results of the trial, AviStart® would be expected to provide an approximately 7 to 1 benefit to cost ratio from flocks impacted by clinical necrotic enteritis, depending on cost of feed, severity of challenge and prevailing unit revenue. It is reasonable to anticipate a benefit to cost return ranging from 3 to 5 depending on financial and biological variables from inclusion of Avistart® in broiler feed for a post-placement of 14 days. Production benefits are attributed to removal of anti-nutritional factors inherent to enzymatic treatment during processing of soybean meal.

 

In commenting on the results of the sponsored trial Erik Visser CEO stated “Hamlet Protein has a long track record in manufacturing soy-based specialty proteins. Avistart® represents a new product for the poultry industry and is generating positive reports from field application”. Visser added “The introduction of Avistar® in Latin America, the E.U. and Asia is based on independent scientific research and is supported by specialized Hamlet Protein technical teams”

 

*Rasmussen, S. H. et al. Effect of an enzyme-treated soy protein on the performance of broiler chickens infected or uninfected with Clostridium perfringens. Proc. 2019 Poultry Science Association Meeting.


 

World Resources Institute Promotes GM to Feed a Burgeoning Population

07/19/2019

In a comprehensive report on a sustainable food future, the World Resources Institute emphasized the contribution of genetic modification (GM) for major crops to alleviate hunger in expanding populations.  The report also comments on the need to restore forests and wetlands, reduce greenhouse gas emissions from agriculture, and limit meat consumption.

 

There is a growing concern that benefits of the Green Revolution resulting from the technical contributions of Nobel recipient, Dr. Norman Borlaug cannot be replicated using conventional breeding before demand outstrips production capacity, especially in developing nations.

 

Dr. Sara Evanega, director of the Cornell Alliance for Science supported the major findings of the report noting “genetic engineering is not going to be the only tool but it’s a good one.  To not use it is like asking a plant breeder to use an abacus instead of a calculator.”

 

The application of genetic modification is criticized by individuals and organizations including the Center for Food Safety.  This organization is apparently content to cherry pick science, distort findings and generally oppose GM technology while its operatives function with full stomachs.


 

Prospects for Bilateral China-U.S. Talks to Resume

07/16/2019

In a CNBC interview on Friday July 12th White House advisor and avowed Sinophobe, Dr. Peter Navarro announced that face-to-face talks with China would soon resume.  Navarro indicated that Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer would travel to Beijing to resume trade talks that terminated in May.

 

According to a Presidential tweet following the summit at the G-20 meeting in Osaka, Japan, China agreed to “import substantial quantities of agricultural products”.  Subsequently China denied that this was their commitment arising from the meeting. The conflict in perceptions clearly indicates the need for professional diplomats and aides to attend summit meetings and prepare minutes reflecting decisions. The President most recently commented, “China is letting us down in that they are not buying the agriculture products from our great farmers that they said they would.  Hopefully they will start soon!”  White House Economic Advisory, Larry Kudlow commented on Thursday July 11th that the U.S. expects China to start purchasing soybeans and other agriculture products in the near future.

 

Conflicting messages from the White House have roiled markets for many months and until substantial orders are placed by China, resolution of the trade conflict remains speculative.

 

The dearth of agricultural exports to China is most certainly affecting the balance of trade.  In June, the negative differential between U.S. exports to China and imports from that country attained $29.9 billion, eleven percent higher than the $26.9 billion posted in May.  The impact of the higher tariff on $200 billion of Chinese goods is reflected in the decline in exports to the U.S. from China amounting to 7.8 percent in June compared to a 4.2 percent decline in May.

 

The decision to place a 25 percent tariff on an additional $300 billion in Chinese exports to the U.S. is currently on hold pending the outcome of negotiations.


 

FAO Reviews Impact of African Swine Fever in Asia

07/16/2019

The UN Food and Agricultural Organization recently issued a report on the financial and social impact of African swine fever (ASF) on food security and livelihoods of households relying on hog production. The FAO quantified a rapid rise in the price of pork during the second quarter of 2019. Currently ASF occurs in China (32 out of 34 provinces), Vietnam, Cambodia, Mongolia, Democratic People’s Republic of Korea and Laos.

The report noted the geographic extent of ASF in eastern and southeastern Asia resulting in death and culling of a significant proportion of the hog population. It is evident that small-scale family units are disproportionately affected based on lack of biosecurity, reliance on food swill and the need for middlemen to transport hogs to processing. CHICK-NEWS has opined that ASF will not be controlled within years and certainly not eradicated given the presumption of an endemic status on the subcontinent. To maintain pork production, the structure of the industry will of necessity require vertical integration eliminating the income of family farms.


The purchase of Smithfield Foods by Shuanghui Group now the WH Group in 2013 for close to $5 billion predated the ASF outbreak but was in part motivated by the desire of the parent company to gain inside knowledge of how hog production can be vertically integrated and to assess the efficiencies of scale achieved in the U.S.


 

Impact of Agriculture and Chicken Production on Mississippi River and Gulf Pollution with Nitrates

07/09/2019

The Wednesday, July 3rd edition of The Wall Street Journal devoted the entire page A6 to the impact of agricultural operations and chicken farms and plants in Arkansas and Mississippi on nitrate pollution. Along the 2,300 miles extending from the headwaters in Minnesota to the Gulf of Mexico the Mississippi River receives nitrates from tributaries resulting in concentrations of up to 7 mg/liter as the river passes through Louisiana. Major contributors include runoff from agricultural land in Minnesota, Iowa and Missouri. Production of hogs and chickens in Missouri, Arkansas and Mississippi add to nitrate pollution through the Missouri, White and Arkansas Rivers.

Areas of low oxygen in the “dead zone” with more than two milligrams per liter of nitrates comprise a wide band in the Gulf extending from the mouth of the Mississippi to the border between Texas and Louisiana. A number of municipalities along the lower reaches of the Mississippi River have difficulty in not exceeding the Federal standard of 10 mg nitrate per liter in drinking water and have experienced sharp increases in nitrate content since 2009.

The magnitude of the problem is now evident and it will not be long before appropriate legislation imposes restrictions on both crop farmers and livestock production including poultry.


 

Antibiotic Use in the Netherlands

07/03/2019

Researchers at the State Institute for Public Health and the Environment (RIVM) recently published a report on antibiotic use in livestock in the Netherlands covering 2018*. The 248 page document entitled NethMap 2019 combined with MARAN 2019 quantifies antibiotic use and also the incidence of emerging antibiotic resistance.

The report noted the importance of drug resistant Klebsiella pneumoniae. This organism was responsible for a number of outbreaks of nosocomial infections including fatalities at an NIH referral hospital in Bethesda, MD in 2013.                           .

The report noted that antibiotics prescribed for livestock remained constant in 2018 compared to the previous year. There was a 63 percent reduction in the total quantity of antibiotics used compared to the reference year of 2009. Following the pattern of U.S. restrictions, antibiotics of human health significance are only sparingly used in livestock. In contrast, antibiotic use in hospitals in the Netherlands is increasing.

The Dutch has been active in establishing “regional care networks” which among other functions encourage cooperation between veterinarians and physicians to minimize the potential risk of transmission of drug-resistant organisms from farms to medical facilities.

We await with anticipation a similar comprehensive report within a year of the reporting period, quantifying antibiotic use in livestock, companion animals and the human population in relation to data on drug resistance following introduction on restrictions on antibiotic administration to poultry, swine and ruminants.

deGreef, et al NethMap 2019: Consumption of antimicrobial agents and antimicrobial resistance among medically important bacteria in the Netherlands/MARAN 2019: Monitoring of antimicrobial resistance and antibiotic usage in animals in the Netherlands in 2018 (2019) Rijksinstituut voor Volksgezondheid en Milieu.  


 

USDA to Assume Responsibility for NBAF

06/25/2019

The Nation Bio and Agro-Defense Facility (NBAF) has transitioned from the Department of Homeland Security Science and Technology Directorate to the U.S. Department of Agriculture.

The NBAF will incorporate biosafety Level-4 facilities to study diseases with catastrophic potential that threaten livestock and human health.  The facility involves an investment of $1.3 billion and will be commissioned in May 2021.

 

Secretary of Agriculture, Dr. Sonny Perdue stated, “It is a real honor for USDA to have the operational stewardship of NBAF.  We look forward to working with Congress, our private sector partners and our academic partners in this area as we take over operations.”

 

The NBAF was initially planned in 2006 as a replacement for the Plum Island facility in New York State.  Originally placed under the jurisdiction of the Department of Homeland Security, this agency worked closely with USDA which has the technology and capability to plan and implement what may be regarded as a high technology program.  The NBAF will be located in Manhattan, KS.  Although regarded as “strategically placed near the largest concentration of animal health companies in the world” the facility is also in reality, located amid a high concentration of livestock.  Any release of a pathogen with the potential to cause a severe disease would be difficult to contain.  Despite the use of BSL-4 laboratories, accidents do happen as noted previously with Pirbright Laboratory in the UK, Sverdlovsk in Communist Russia and the CDC in Atlanta.  Plum Island was situated in a favorable location since prevailing winds would have conveyed any accidental release of pathogens into the Atlantic.  While the need for a modern research facility is not questioned, the actual location of the NBAF may have been more influenced more by political and logistic considerations than the need for maximum security.


 

Risk of Introduction of ASF on Smuggled Meat Products

06/17/2019

Following outbreaks of African swine fever (ASF) in Eastern Europe, South Korea instituted a surveillance program for ASF virus on smuggled meat in 2015. Authorities in South Korea confiscate approximately 6,000 products per month from travelers at airports. Following the emergence of ASF in China, surveillance was intensified. During August 2018, 4,000 pork products mainly comprising sausages were seized indicating the extent of smuggling. A total of 52 samples were selected for real-time PCR assay for ASFv. Specimens were seized at Incheon and Jeju International Airports from passengers flying for Shenyang China.

Of these confiscated products sampled, two blood sausages, one dumpling and one commercial sausage yielded ASF. Conventional PCR assay was used to characterize the isolates that were identical to isolates from the Ukraine, Lithuania, Poland and Russia.

It was not possible to propagate virus from the specimens that yielded DNA of ASFv on PCR assay. The report of surveillance conducted by authorities in Korea confirms the danger of illegal introduction of processed pork products by travelers.

Returning to the U.S. from Japan through Minneapolis International Airport in late May it was a disappointment to note that USDA had not deployed beagles as at Kennedy and Atlanta Airports. It is understood that in view of the risk of introduction of ASF the Beagle Brigade has been reinforced. We hope to see a more extensive presence of these valuable and sensitive detectors of contraband meat at airports and other points of entry in the future

*Kim, H-J et al African Swine Fever Virus in Pork Brought into South Korea by Travelers from China, August 2018 Emerging Infectious Diseases. 25: 1231-1233 (2019)


 

Farmers Justifiably Concerned Over Threatened Tariff on Mexican Imports

06/10/2019

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

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

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

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

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

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

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


 

Effects of the China Trade Conflict

05/29/2019

Despite the intention of the President to meet with his counterpart Xi Jinping, President of China at the G20 Summit in Japan in June, prospects for a settlement of the trade dispute are dimming.  Imposition of a 25 percent duty on approximately $200 million in imports from China and the virtual banning of Huawei as a supplier of equipment to the U.S. or purchase of components suggests a significant confrontation.

 

It is estimated that in 2018, U.S. exports to China amounted to $120 billion.  This figure was reduced by a sharp reduction in imports of soybeans and other agricultural commodities.  During 2018, exports from China to the U.S. attained $540 billion despite tariffs.  Contrary to assertions that tariffs are borne by exporters in China, the reality is that consumers are bearing the brunt of tariffs that are regarded by most economists as an indirect tax.  It is estimated that price hikes from 5 to 10 percent on most goods from China has resulted from the tariffs extending through the supply chain. 

 

Naturally, suppliers of substitutes of products previously imported from China have raised their prices in an opportunistic response, contributing to inflation that will become more apparent within months.  Despite White House statements, a survey conducted by Fox News, generally favorable to the Administration, revealed that 45 percent of those responding considered that tariffs will hurt U.S. consumers and the economy.  Analysts project that a prolonged trade war will reduce GDP by a range of 0.5 to 1 percent.  Jason Furman, former chairman of the Council of Economic Advisors under the Obama Administration considers that the advantages from any future trade agreement with China has justified the current strategy although he is optimistic that there will be no dramatic deterioration in the macroeconomic situation in the U.S.  If all exports from China were taxed at 25 percent, GDP in China could be reduced by 1.0 to 1.5 percent. It is accepted that China has sufficient reserves to implement stimulus programs to offset the decline in exports.

 

The Administration may have miscalculated the vulnerability of China both from an economic and political perspective in applying threats and brinkmanship. A senior official in China stated, “We do not want to fight but are not afraid of one to safeguard national dignity and our core interests.”

 

Point-man Robert Lighthizer, U.S. Trade Representative considers that the effect of intellectual property theft, subsidies to quasi-state enterprises and coercive trade practices collectively have a negative effect on the U.S. economy now and also in the future.  Attempts by China to dominate trade in Asia and potentially Europe as part of the China 2025 initiative must be resisted.

 

The Administration would serve our interest to a higher degree by communicating in greater detail with industry and consumers and laying out a clear plan to resolve the trade issue to the satisfaction of both Nations.  It is evident that concessions will have to be made on both sides.  The impasse continues with the May 19th edition of the Financial Times characterizing the current situation as “who will blink first?”


 

Cargill Invest in Cultured Meat Company

05/21/2019

According to a company press release, Cargill has invested in Aleph Farms, a company based in Israel working on cell-cultured meat.  The recipient of funding is a leader in cell-cultured meat technology and anticipates releasing a commercial product within 3 to 5 years.  Cargill has also invested in Memphis Meats of the U.S. and has purchased equity in a number of plant-based protein companies.

 

Sonya Roberts, Managing Director of Growth Ventures and Strategic Pricing for Cargill Protein North America stated, “Cargill is committed to innovation and we are delighted to be a part of Aleph’s accelerated growth.”  She added, “This partnership connects new frontiers in cell-based technology with insights into the global food system and supply chains to meet future customer and consumer needs”.

 

As noted previously in commentaries, CHICK-NEWS is of the opinion that cell-cultured meat substitutes will have to undergo profound advances in technology before they are remotely competitive with either conventional meat derived from cattle of plant-based substitutes.  Apart from the expense involved in production, the regulatory hurdles have yet to be addressed with the USDA and the FDA respectively sharing jurisdiction over aspects of production, safety and labeling.

 

The investment by Cargill should not be regarded as an endorsement of the technology but rather as an expensive learning experience to determine the obstacles in production, viability and long-term commercial prospects for cell-cultured meat.


 

Tyson Foods to Pursue Plant-Based Meat Alternatives Independently

05/12/2019

Following the sale of their approximately seven percent equity stake in Beyond Meat, Tyson has announced that it will introduce a range of plant-based meat substitutes as an independent initiative. It is evident that Tyson obtained considerable knowledge of both production technology and the market for products through their association with Beyond Meat. Tyson probably also determined reasons for the suboptimal financial performance of the company and consider that they may capitalize on the market without the disadvantages of functioning as a start-up with growing competition.

The intention of Tyson Foods to move into the market as an independent was revealed by CEO Noel White at a quarterly analyst conference on Monday 6th May. It is intended that the Tyson product will launch towards the end of summer with a more extensive distribution during the 4th quarter.

Analysts project the meat substitute market in the U.S. to be worth $1.5 billion with a target of $2.5 billion by 2024. Beyond Meat will have a strong competitor in Impossible Foods. In a recent personal sampling of the product at a restaurant chain serving the product at Seatac airport, the Impossible Burger with an added haeme pigment derived from plants to provide juiciness was clearly inferior to a conventional beef burger. The menu item was served at a premium of $1 over a conventional menu item, possibly reflecting cost to the restaurant or a “feel-good” tax.


 

Recalls Mounting in Volume and Cost.

05/08/2019

The Russellville AR. complex of Conagra Brands is recalling 1,000 tons of frozen entrees due to failure to include milk on the label contents. Since milk is an allergen, it is necessary for appropriate indications to appear on the label if dairy products are included.

Tyson Foods has voluntarily recalled 6,000 tons of frozen ready-to-eat chicken strips potentially contaminated with extraneous material. The product recall is an expansion of a March 21st response involving  30 tons of product from Plant 7221 shipped to retailers and Department of Defense locations. Six complaints were documented with three alleging injury.

Recalls associated with misbranding and foreign body contamination have been increasing over the past year and probably exceed recalls for pathogens, especially in the case of large processing facilities. The cost of recalling misbranded or damaged product is disproportionately high in addition to degradation of brand image and customer disaffection. Obviously plants must apply greater diligence to labeling, preventive maintenance and inspection.


 

China Punishing Canada Over Detention of Huawei Executive

05/01/2019

Meng Wanzhou, Deputy Chairwoman and CFO of multinational Huawei and daughter of the founder of the Company, was arrested by Canadian authorities on December 1st 2018 at the request of the U.S. In March, Canada announced that extradition proceedings to the U.S. would be initiated and Ms. Meng is currently under loose house arrest in Vancouver.

The fallout for Canadian agriculture has been heavy. Exports of canola seed amounting to $2.0 billion to China in 2018 have ceased. China alleged that consignments were contaminated by “a pest” apparently ants, although no evidence of any defect was noted by Canadian authorities inspecting product prior to shipment. In addition, inspections of soybeans imported from Canada have been subject to extended delays for inspection at port of entry.

These actions by agencies administered by the central government sent a message to trading companies many of which are quasi-government entities not to purchase Canadian soybeans. Exporting companies, Richardson International and Viterra have been forced to divert shipments of soybeans, canola seed and peas to India and Bangladesh at a deep discount. Despite the fact that prices of pork in China are rising sharply, obstacles including compliance with documentation have been raised as issues to impede imports from Canada.

It is evident that China fails to recognize that due process is inherent to the legal system of Canada and judicial proceedings are independent of dictates of the executive branch. In contrast in China an edict from President Xi or his principal subordinates would resolve any legal or administrative problem. China regards the detention and probably extradition of Ms. Meng to the U.S. as an affront to the sovereignty of China and is responding accordingly with all pressure that can be brought to bear.

It would not be a surprise if the U.S. Justice Department rescinded the extradition request to Canada concurrently with announcement of a bilateral trade agreement with China. Previously the White House hinted of involvement in the case that was prosecuted based on alleged contravention by Huawei of anti-Iran sanctions. If a low-level scapegoat in Huawei could be identified and indicted Ms. Meng would be off the hook, we would be closer to trade harmony with China and Canadian farmers and exporters would be relieved of uncertainty and financial distress.


 

E.U. Considering Restrictions on Labeling of Vegetable-Based Meat Substitutes

05/01/2019

Following a 2017 decision by the European Parliament concerning labeling of substitute milk and dairy products derived from other than cows, the E.U. Agriculture Committee proposed restrictions on labeling of vegetable-based protein. It is intended that any term which relates to meat derived from animals including “steak, sausage, burger et al” will be disallowed for plant-based substitutes. The ultimate decision will be the responsibility of the European Parliament and if passed as expected, a lengthy process of approval by each member state will be required before the policy decision is implemented.

According to the Mintel Group, barriers to adoption of plant-based meat substitutes include positioning in a store, concern by consumers over preparation and serving and unfamiliarity with a new product. In the U.S., lack of availability in many supermarkets and high price relative to meat substitutes disfavor market growth of this segment. Proponents of plant-based protein claim a high recent annual growth in sales value with an increase of 6 percent in 2017 to 24 percent in 2018. This should be compared to two percent for animal-derived meat in the most recent year. Obviously one must consider the base for the calculations of relative growth rates. “Real” meat sales in 2018 attained $90 billion compared to plant-based protein alternatives at $1 billion.

An editorial on the proposed IPO of Beyond Meat in EGG-NEWS (accessible under the SEARCH tab), highlighted the cost of production of meat substitutes and the need to sell at a discount to encourage trial purchases by consumers. Plant- based meat substitutes will not achieve significant market penetration in competition with “real” meat products simply on the basis of claimed sustainability and welfare considerations. The affluent demographic sensitive to these attributes is obviously limited and probably avoids meat in any event.


 

ADM Downsizing

04/23/2019

ADM has announced layoffs including offers of early retirement.  According to a company spokesperson the action is necessary “to strengthen the core of ADM’s business and establish the company as a global leader in nutrition.”  The spokesperson noted, “One of these actions will be the opening of a voluntary early retirement window for certain eligible U.S. and Canadian colleagues. Other options include capturing synergies from our recent acquisitions and realigning our organization worldwide as we further streamline and standardize processes and eliminate overlapping roles and responsibilities.” This is a great example of corporate gobbledygook and business-speak justifying termination of mature managers and traders over an admittedly disappointing quarter.

 

For the fourth quarter ending December 31, 2018, ADM earned $315 million on revenues of $15.95 billion.  This compares to a net earnings of $788 million on revenue of $16.07 billion for the corresponding fourth quarter of fiscal 2017.

 

Justification for the current round of intended layoffs is the impact of “extreme winter weather” on first quarter North American operations. The company predicts that disruptions attributed to weather will have a negative pre-tax operating impact of $55 million for the current quarter.

 

A decade ago ADM attempted to restructure the company from a focus on grain trading characterized by The Economist as “shoveling pennies” and oilseed crushing to ethanol production from corn. This initiative was based on government mandates and a presumed secure future in so-called renewable fuel.  Although contribution from animal nutrition has benefited earnings, ethanol production has been less profitable than anticipated.  Oilseed crushing and refining constitute the mainstay of the company.

 

A severe weather incident would appear to be an inadequate reason to layoff valuable employees with experience and skills required by the company as it adjust to a more competitive trading environment. ADM will have to navigate uncertainty regarding international commodity trading in a declining world economy.


 

Epidemiology of Campylobacter Infection in Broilers Revisited

04/23/2019

As an early investigator of the epidemiology of Campylobacter infection in broilers, a recent article describing a limited study in Spain illustrates how scientists manage to rediscover what is already known and documented without necessarily making a contribution to resolving a problem. The study in question1 evaluated three growing farms supplying a processing plant in Spain. Consistent with the all-or-none prevalence of Campylobacter infection in flocks, two of the three farms studied were Campylobacter positive only when sampled at 35 and 42 days respectively, consistent with experience. The third farm was negative until removal from the house, again a frequent observation.

This pattern stands in contrast to Salmonella infection in which the prevalence rate within a flock rises sharply from a low level at placement to a peak at 14 days followed by rapid reduction as a mature biome develops in the intestinal tract. Generally at the time of depletion, flocks that are infected with Salmonella show less than 10 percent prevalence as determined by cloacal swabs.

There is no surprise in the finding that carcasses from all three farms in addition to transport crates, scald water, defeathering equipment and the environment of the processing plant yielded Campylobacter. The limited study simply confirms what was known about Campylobacter infection in the early 90's A review of the then current literature covering 220 citations analyzed routes of transmission but also possible modalities to reduce the level of infection in both whole carcasses and portions2.

1. Perez-Arnedo, I. and Gonzalez-Fandous, E. Prevalence of Campylobacter spp. in Poultry in Three Spanish Farms, a Slaughterhouse and a Further Processing Plant. Foods, doi: 10.3390/foods803111 (2019)

2. Shane, S. The significance of Campylobacter jejuni Infection in Poultry: A review. Avian Pathology 21, 189-213 (1992)


 

Convenience Stores Rely Heavily on Gasoline Sales

04/12/2019

The National Association of Convenience Stores recently posted a report documenting the 16th consecutive year of record in-store sales for 2018. Although total sales increased by 8.9 percent to $654 billion, in-store sales advanced by 2.2 percent to $242 billion with 70 percent of sales represented by fuel which showed a 13.7 percent increase, partly due to escalation in unit price.

A significant problem faced by convenience stores, is that with improved fuel consumption, fewer stops are made to fill up, which impacts in-store sales. Food service sales represented 22 percent of in-store sales and included prepared foods and beverages that generate high margins. Increases in in-store sales and remodeling are reflected in an average convenience store area of 3,200 square feet. Some units located on interstates and in urban areas extend over an area of 5,000 square feet. It is estimated that the capital costs for a new store is now approaching $7 million.

The convenience store segment of retail is experiencing an escalation in direct operating expenses including wages, health-care insurance and credit card fees. Convenience stores are vulnerable to possible restrictive legislation on the sale of tobacco. Cigarettes and related products represent 37 percent of in-store sales.

Convenience stores represent an important potential outlet for egg-based snacks including one- and two-pack hard-cooked peeled eggs. Innovation in egg-based ‘finger food” and snacks could contribute to increased demand. The American Egg Board has achieved success in moving product through QSRs and the food service industry. It would appear that the convenience store sector represents a new opportunity.


 

Opacity in ASF Reports from China

04/02/2019

CHICK-NEWS and EGG-NEWS have forcefully questioned reports on the extent and severity of the ongoing outbreak of African swine fever (ASF) in China. Official reports suggest the loss of one million hogs out of a population of 300 million, which should be inconsequential in terms of output and market price. The reality is that prices of live hogs and pork have shown a steady increase since the first diagnoses during the 3rd quarter of 2018. High prices for pork are also reflected in increased demand for poultry meat as documented in a recent USDA-FAS GAIN Report. Conflicting data have been released by central and provincial authorities, although it is evident that at least 114 disclosed outbreaks have been confirmed in 28 provinces. This in itself is a red flag (irony intended), since multiple outbreaks of a highly contagious disease in diverse geographic areas over a short time period suggests a high incidence rate inconsistent with official reports.

The Ministry of Agriculture of China stated that the national pig herd in February fell by 16 percent year-on-year, representing 50 million hogs. More important, the sow herd has apparently fallen by 20 percent implying that forward production will be affected even in the unlikely event that the infection in grow-out farms can be controlled in the intermediate future. Authorities in Shandong Province, producing close to 50 million hogs in 2017, stated that the breeding sow herd had declined by 41 percent. The province produces seven percent of the national supply of close to 600 million hogs annually.

During the early months of the outbreak, official reports confirmed diagnoses, but most were described in small family-owned units with less than 200 hogs. To have attained the magnitude of losses as are now becoming apparent, the number of outbreaks and their extent over at least fifteen major provinces producing hogs must be far higher than has been admitted.

Since pork is a major protein source in diets in China, disruption of supply will have profound social and economic impacts, some of which are becoming apparent including the increased demand for broiler meat. Clearly China will have to import pork, presuming a relaxation of import duties on agricultural products imposed as retaliation for U.S. tariffs on manufactured goods. It is ironic that the WH Group, most vulnerable to the ASF outbreak is the owner of Smithfield Foods of the U.S. that indirectly will benefit from the outbreak.

The primary concern of veterinary authorities in the U.S. should be to prevent introduction of ASF. The most likely route would be illegal importation of pork from Asia in which the virus can remain viable for extended periods. CHICK-NEWS previously documented seizure of numerous containers of partly cured pork at the Port of Elizabeth in New Jersey. Taiwan and South Korea have also interdicted illegally imported pork contaminated with ASF Virus. The obvious questions are how much contraband material has been imported into the U.S. and Canada and whether existing illegal supply channels will continue to function undetected, risking our pork industry.


 

Midwest Row-crop Farmers Suffering Stress from Debt

03/31/2019

It is apparent that Midwest farmers are showing mental stress from current prevailing low ingredient prices and income.  Bloomberg reports that the ratio of debt to farm income has risen sharply since 2014 from a ratio of 3.0 to 6.5 in 2019.  This figure is the highest since 1985 during which a value of 7.2 was posted.

 

The plight of farmers was highlighted by the action of Senators Joni Ernst (R-IA) and Tammy Baldwin (D-WI) who included $50 million over five years in the 2018 Farm Bill to cover emotional and mental counseling in rural areas.  Wisconsin has lost 1,200 dairy farms in the past three years with small family-operated units impacted the most.  Calls to Farm Aid are evenly distributed among livestock, grain, dairy and vegetable producers with 1,034 calls in 2018, double the number in 2017.

 

A temporary beneficial effect resulted from the $8 billion distributed to farmers by USDA as a result of lost exports and consequential lowered domestic prices following the initiation of the trade war with China.  Prospects for a second round of ex gratia payments are remote.

Commenting on the current debt situation, Scott Marlow, senior policy specialist at the Rural Advancement Foundation International stated, “Farmers have a fierce independence and deep connection with the land that can become an economic disadvantage.”  He added, “Farmers can be driven far further than most of us would be before they would call it quits, to the point of getting off-farm jobs to be able to continue farming and subsidizing the farming operation with off-farm income.”

 

The plight of small-scale row-crop farmers contrasts with the security enjoyed by independent contractors to broiler integrators. These farmers receive a check after every 8 to 9 week cycle. They have no working capital invested in the flocks placed and the risks of disease and market fluctuations are borne by the integrator owning the birds. The contract system has worked for over seven decades and functions to the mutual benefit of both Farmer and integrator. Given the prevailing situation in corn, soybean and wheat cultivation broiler and turkey farmers are in a more favorable place. A very good justification not to attempt to fix a situation that is not broken as proposed by the previous Administration


 

Conflict Over EPA Small-Refinery Exemptions to RFS

03/25/2019

Despite pre-election rhetoric that the Renewable Fuel Standard (RFS) would be supported to the benefit of Midwest corn growers, the EPA under the current Administration has continued to grant small-refinery exemptions to the RFS. Under previous administrator Scott Pruitt, the EPA granted 48 Small Refinery Exemptions (SREs) in 2016 and 2017 totaling 2.3 billion gallons of biofuels not blended. Subsequently five additional waivers were granted in 2017 and the FDA rejected one request. It is estimated that the 53 waivers represented the equivalent of 930 million bushels of corn that would produce 2.6 billion gallons of ethanol.

The exemptions by the EPA have aroused the ire of advocates of corn-based ethanol. Geoff Cooper, president and CEO of the Renewable Fuels Association stated “It is extremely disappointing and outrageous to see EPA once again allowing oil refiners to undermine the RFS and hurt family farms, ethanol producers and our environment by exploiting and abusing our statutory provision that exempts them from their obligation to blend renewable fuels.”

Brian Jennings, CEO of the American Coalition for Ethanol stated “The EPA has further depressed demand for ethanol by rubber-stamping five more refinery exemptions for 2017 and done so without reallocating the blending obligations to other refiners.” He added “Any benefit of selling E-15 year-round will be wiped out until and unless EPA gets back to the rule of law when it comes to these refinery waivers under the RFS.”

Scott Segal, an attorney representing refiners stated “Attempts to set artificial barriers against granting SREs has been rejected both in court three times and by the direction of Congress in EPA appropriation bills.”

The EPA maintains that it is following law in granting SREs.


 

S. A. Poultry Association Campaigning Against Imports

03/11/2019

The South African Poultry Association (SAPA) is campaigning strenuously against imports from Brazil, the U.S. and other nations that collectively contributed to a volume of 570,000 tons in 2018, representing 25 percent of total consumption (assuming 50 million population and an average 41 kg. per capita).

SAPA bases its current request for import bans on job preservation, quality and safety. According to Izaak Breitenbach, General Manager of the broiler branch of SAPA, all three major broiler producers in the RSA laid off workers in 2017 when faced with high production costs due to the drought which impacted the availability and cost of ingredients.

Breitenbach as quoted in the RSA Sunday Tribune on March 3rd distorted reality in his promotion of a proposed ban on importation of chicken. The action he suggests would be illegal in terms of WTO rules and would contravene the African Growth Opportunities Act (AGOA) under which the RSA is granted favorable trading rights with the U.S. Breitenbach incorrectly claims that the chicken industry in the U.S. is “subsidized by the government” stating further “they receive subsidies for corn and soy feed”. SAPA is also agitating against Brazil by questioning the quality and safety of imports amounting to 348,000 tons in 2018.

Marthinus Stander, Chairperson of Country Bird a major producer noted “We’re not scared of whole chicken carcasses coming to the country but we cannot compete with the prices that leg quarters are being dumped in South Africa.” There is however no evidence that producers in the U.S. are “dumping” leg quarters. The issue has been resolved by independent evaluation to conform compliance with WTO rules.

Paul Apostolides, a relatively small family-owned producer operating on the East Coast of Kwa Zulu-Natal Province quotes a local producer-cost of $0.72 per pound which is realistic given feed, labor and energy costs in South Africa. In contrast he grossly understates the CIF price of frozen imported product at $0.20 per pound. At an average price of $900 per metric ton as per USDA FAS Export data for 2018, the 97,000 metric tons of U.S. leg quarters were shipped at $0.41 per pound FOB to which must be added freight, insurance, duties and related costs.

In his concluding remarks, Breitenbach noted “Government needs to step in and protect the local industry and the thousands of jobs at stake.” With an imminent national election, it is in the interest of the ruling African National Congress party to ensure that there is “a chicken in every pot” or at least a U.S. leg quarter as favored in the Nation. The Government of the RSA can accept an imperceptible increase in the unemployment rate given the documented 30 percent unemployment figure and possibly 50 percent underemployment.

The reality is that production of broilers in the Republic of South Africa has become non-competitive relative to Brazil, Argentina and the U.S. This is due to high labor costs and inefficiency, an exorbitant feed price, climatic extremes, deficiencies in power supply and a deteriorating infrastructure. Obviously companies with a product range comprising chilled whole birds and tray portions are in a relatively favorable position as they do not compete directly with frozen imports and market to a higher income demographic.

It is evident from the Sunday Tribune article, that the journalist Mervyn Naidoo failed to check facts and figures with special regard to the costs of domestic production and imports and simply quoted his obviously biased sources.

If imports were banned, the price of chicken would soar in consistency with the laws of supply and demand. As an example the price of domestic U.S. steel and aluminum rose following the injudicious imposition of a 25 percent tariff on imports in 2017. It is in the interest of the ruling African National Congress party to make available a relatively inexpensive source of protein for lower-income consumers who will effectively be supporters in the coming election. The ANC appears cynically willing to sell the RSA chicken industry down the river as a matter of political expediency.


 

Putting a Muzzle on Social Media Activists.

02/23/2019

During the past week Pinterest and Facebook clamped down on non-scientific and biased postings to extend their control over dissemination of misinformation. At issue is the misdirected opposition to childhood vaccination. Any person is entitled to their opinions but not their facts. The growing number of posts unjustifiably promoting the ideas of cranks and individuals with hidden agendas has caused an upsurge in cases of measles and whooping cough that can no longer be tolerated.

 

The outlandish views based on junk science and deliberate falsification of results cost Dr. Andrew Wakefield his medical license but he is supported by a host of like-minded charlatans including microbiologists, homeopaths, and fringe scientists. They are opposed by organized medical associations, the CDC and similar agencies together with primary care physicians who deal with the consequences of deliberate neglect of vaccination.

 

Social media has provided any crank with a large megaphone to spread fear and blatant prevarication. The effort involved in disproving any link between early vaccination and the autism spectrum diverted medical researchers and epidemiologists from other activities over years in the U.S. and Scandinavia. Their efforts were necessary given the gravity of rejection of vaccines in North America, the EU and Japan. Herein lies the problem of countering false claims in the social media. The time, creativity and professional reputation expended in rebuttal is disproportionate to unsubstantiated claims by quacks intent on scaring intellectually impressionable and vulnerable parents.

 

The vaccine issue as amplified by social media has highlighted the problem of asymmetrical opposition to science. For three decades, opponents of GMO technology have generated social and political restraints to adoption of cultivars offering increased yields and reduced pesticide and herbicide use. There is no evidence that GM crops have any adverse health effect despite unsupported claims to the contrary.

 

Animal rights groups and pro-vegan organizations such as HSUS and its clones have been able to harvest multiple millions in income by manipulating social media to the detriment of the intensive livestock sector of agriculture.

 

Perhaps the vaccination issue and false political postings have awakened providers, legislators and users of social media to the dangers of misinformation. Although censorship is undesirable we must advance somewhat from not shouting fire in a theatre as the standard for free speech. The social media collectively represents a two-edged sword. Making available knowledge, advancing fellowship and positive causes is beneficial. The darker side involves falsehoods, coercion and an appeal to baser instincts and fears that tear at the fabric of our society. Technology created this force now we have to learn to manage it for more positive outcomes.


 

India Moves the Goal Posts on E-commerce

02/06/2019

When confronted with any form of foreign investment or innovation India can be relied on to revert to protectionism that is the inherent default mode for the highly socialist regulated economy. In recent years, Amazon has entered the market in India through local partners closely followed by the 2017 investment of $16 billion by Walmart in domestic company Flipkart. It is estimated that during 2017 the sales of these companies amounted to $3.2 billion and $3.8 billion respectively.

 

Noting that the projected E-commerce market in India will rise rapidly from the 2018 sales value of $33 billion in 2018 the Government of India has imposed restrictions on foreign investors. This is in an attempt to protect the millions of mom-and-pop retail stores in the Nation.  

 

The regulations effectively prevent E-retailers such as Amazon and Walmart/Flipkart from selling products through subsidiaries.  This was a tactic forced on the foreign E-commerce companies following a previous restriction.  Companies can now only sell their own brands on their websites, severely restricting sales.

 

It is no coincidence that restrictions were imposed in advance of national elections.  Prime Minister Narendra Modi is vying for a second term and is pushing a “national champion” program which appeals to the middle class in addition to domestic backers of his Administration with their own E-commerce aspirations.

 

India has always been and will continue to be an unreliable investment opportunity given the socialistic inclination of the bureaucracy and the Byzantine administration overlapping state and national jurisdictions. The inefficient and possibly corrupt legal system is no help to foreign investors.  The market in India is potentially huge but artificial barriers and erratic policy decisions disfavor sinking capital into projects and apparent opportunities.


 

ASF Will Restructure Pork Production in China

02/05/2019

It is estimated that 40 percent of output amounting to around 700 million hogs annually are derived from small farms with less than 400 animals. With primitive facilities and deficient biosecurity, small-scale farmers are disproportionately impacted by African Swine Fever (ASF) compared to large integrations. Quarantine of variable intensity has prevented farmers from shipping hogs to distant abattoirs for slaughter. The cost of holding hogs for extended periods has wiped out profit even in farms unaffected by the disease.

African Swine Fever is especially hard on farmers who rely on the seasonal demand over the lunar new-year holiday that began on January 5th and is characterized by high domestic consumption. It is ironic that the current lunar year is termed “the year of the pig” given the advent of the infection.

It is obvious that as small growers exit production, the small but rising number of integrated producers will be able to expand to satisfy demand.

Perhaps in anticipation of ASF and also declining foreign trade, the centrally planned government of China in 2018 initiated a campaign to reduce excessive consumption of protein and especially pork, both on economic and health grounds.

Given the structure of the hog industry in China, and the history of control and eradication of ASF in the EU, producers can anticipate an endemic status for the disease in the foreseeable future even if an effective vaccine is introduced. Integration is inevitable resulting in a decline in the support structure for small-scale farmers concentrated in areas of high density of hogs. This includes many feed mills and will extend further back through the production chain to companies crushing imported soybeans from the U.S. and Brazil.


 

Angola Market in Question

02/04/2019

The Government of Angola has issued a document outlining economic and development strategy over the proximal four years to replace oil as the principal driver of the economy.  The Plano Nacional de Desenvolvimento considers promotion of domestic agricultural products including poultry, beef, pork, rice, cornmeal and flour.  Import restrictions will be imposed on wholesalers and domestic producers authorized to import goods.

 

It is anticipated that restrictions will be placed on imported chicken by 2022.  Angola was the second largest importer of U.S. broiler parts with a volume of 188,006 metric tons shipped from January through October 2018 with a value of $167.4 million at an average unit price of $890 per metric ton.

If the intended situation in Angola follows the pattern in Mozambique, the import permit system will become a cash-cow for officials in the Government who impose restrictions and then illegally profit directly or indirectly from issuing permits.  Domestic production of poultry will require foreign capital and it is questioned whether EU, North American or even Asian nations have the intestinal fortitude to deal with an acknowledged corrupt regime, temperature extremes and endemic diseases in addition to defects in the transport infrastructure and the absence of a cold chain for distribution. Angola was ranked by Transparency International in 2016 as the 164th most corrupt nation out of 176 countries bordering on the status of a “failed state”  Mozambique was ranked 161 out of 183 nations in 2018 by the same international agency.

 

The prospects of Angola becoming self-sustaining in broiler and egg production are considered doubtful given the record of implementation and performance of projects in other sub-Saharan nations.


 

China Approves GMO Cultivars

01/28/2019

According to a commentary in the Wall Street Journal, James C. Collins, Jr., CEO of Corteva Agriscience, a division of Dow DuPont, China has approved the importation of five genetically modified crops including soybeans, corn and canola. China will benefit from a continuing supply of ingredients that can be grown in the U.S. and other nations.

China has been slow to approve GM ingredients and the change in policy, although based on scientific evaluation, is an indication of their need to import ingredients at competitive world prices to support both livestock feed and for human food. The major beneficiaries of the decision by China will naturally be the developers and distributors of GM seeds of which DowDuPont represents a major supplier.


 

USDA to Recall 10,000 Employees

01/19/2019

USDA Secretary Dr. Sonny Perdue has ordered 10,000 furloughed employees to return to work without pay to staff FHA and related service agencies.

The partial Federal shutdown now entering the second month without an indication of resolution of the impasse over border security has generated resentment among farmers planning for the 2019 crop.

 

The recalled USDA employees together with about 800,000 others in the TSA, the U.S. Coast Guard and other affected agencies will eventually be paid for their time. It is however both coercive and exploitative to expect any employee to work without pay. Many of the lower-paid personnel live from paycheck to paycheck and after missing two pay periods have accumulated debt.

 

The Government needs to reopen and the fiscal and policy issues concerned should be resolved by good-faith negotiation.


 

E.U. to Face Food Shortage With Current “All Natural” Policy

01/07/2019

Remi Dumery, a farmer in France, has castigated current E.U. policies on GMO and pesticides. Dumery maintains that the 28-nation union is “sleepwalking into a food crisis and politicians are doing nothing to stop it.” Dumery claims that elected representatives are pandering to scientific illiteracy in an attempt to establish their environmental credentials.

At issue is the herbicide glyphosate, which has become a political football. Dumery maintains that President Emmanuel Macron has sufficient technical evidence to exonerate the compound from allegations that it is potentially carcinogenic. Unless a suitable and equally efficient herbicide is developed within the next three years, crop yields will deteriorate and environmentally deleterious alternatives will replace glyphosate.

The E.U. has adopted a decidedly anti-GMO stance despite three decades of experience that has demonstrated that GMO crops are innocuous with respect to health of humans and livestock. Anti-science and unfounded opposition to innovation will seriously restrict advances in agriculture which will be necessary to feed the world’s population by mid-century.

Dumery refers to the “Nespresso effect” in which a highly urbanized population takes for granted the availability of prepackaged food without any consideration how it is grown or processed. Unscrupulous politicians have applied fear and uncertainty and in many cases, sophistry to oppose GMO technology and environmentally acceptable herbicides and pesticides.

In a recent decision, the European Court of Justice determined that gene editing involving deletion and suppression of genes was to be covered by the same rules as insertion of genes. This is an example of unfounded restriction which obstruct technical and commercial progress in developing new cultivars offering resistance to pathogens and drought and offering increased yields.


 

Senator Debbie Stabenow Promotes Benefits of the 2018 Farm Bill

12/27/2018

In a press conference relating to the passage of the 2018 Farm Bill, Senator Debbie Stabenow   (D-MI), the ranking member of the Senate Agricultural Committee outlined benefits from the Farm Bill to the U.S. farming community but specifically to her Michigan constituency.

It is evident that dairy farmers will benefit both from the support extended in the Bill but also indirectly from the USMCA Trade Agreement, yet to be ratified. An aspect of the Farm Bill that was a specific area of concentration for Stabenow included establishing an Office of Urban Agriculture. During the Obama Administration, the USDA actively supported farmers’ markets and sustained programs to establish cultivation of vegetables in urban areas on vacant land. Various reports have indicated the non-viability of these projects, many of which rely on volunteer labor. The U.S. has never been able to establish the model of allotments popular in the U.K. and E.U.  The allotment system contributes to supply of vegetables by families and is also a recreational endeavor. The system is dependent on an enthusiastic group of participants and a public transport system, both of which appear to be lacking in our inner cities.

Senator Stabenow also pointed to the exclusion of restrictions for recipients of the Supplemental Nutritional Assurance Program (SNAP). Despite specific success stories such as Oakland Avenue Urban Farm in Detroit, the sustainability and financial viability of urban farming is highly questionable.


 

Bayer CEO under Pressure

12/07/2018

Werner Baumann the CEO of Bayer AG advanced to CEO in 2016 on a platform of acquisition with Monsanto as the principal prize representing a $63 billion commitment. The transaction was supposed to turn Bayer into the World’s major producer of seeds and agricultural chemicals critical to feeding and expanding a population expected to reach over 9 billion by mid-century. 

 

Marijn Dekkers, predecessor of Baumann had concerns over the acquisition. Apart from increasing debt load, he possibly foresaw the public relations problems associated with a company in the crosshairs of environmentalists and Green parties in the E.U. and worldwide.  The doubts expressed by Dekkers have now become a reality with Bayer facing up to 10,000 lawsuits over the potential cost of defending lawsuits alleging the carcinogenicity of glyphosate, the active ingredient of Roundup®™.

 

Faced with the current situation, Bayer will cut ten percent of its workforce representing 12,000 positions, spin-off the Animal Health business and sell prime brands, Coppertone and Dr. Scholl’s, acquired from the Merck consumer portfolio.

 

Investors, especially banks and institutions abhor uncertainty. Since the August 10th adverse jury verdict against Monsanto, Bayer shares have fallen by 35 percent possibly making the holding company vulnerable to hostile takeover and subsequent dismemberment.

 

In retrospect, the injudicious purchase of Monsanto was in part stimulated by the failure of Monsanto to acquire Syngenta AG in August 2017.  Subsequently, Syngenta AG. was acquired by ChemChina, a government-controlled enterprise.  This made Monsanto receptive to an acquisition which appealed to Baumann who courted Monsanto from May 2017 through to the announcement of the deal in September 2018.  The Monsanto honeymoon with Bayer lasted only three months until the San Francisco jury verdict.

 

The weight of scientific evidence suggests that glyphosate is not carcinogenic irrespective of the WHO-IRAC Report, which designated glyphosate as a potential carcinogen in March 2015.  This declaration was subsequently retracted based on opposition by independent scientists affiliated to academia and regulatory agencies.  It was also disclosed that a co-author of the Report had a conflict of interest that he was serving as an expert for litigants suing Monsanto.

 

The bottom line for farmers is that their major supplier of genetically modified seeds and herbicides is under financial pressure and will obviously attempt to increase prices.  The livestock industry will lose Bayer Animal Health as an independent supplier of anti-parasiticals since after the subsidiary is acquired the market will be less competitive.


 

Demise of Cellulosic Ethanol?

12/03/2018

The 2007 Energy Independence and Security Act introduced a mandate for cellulosic ethanol. It was projected that 100 million gallons of non-corn ethanol would be produced in 2010 rising sharply to 5.5 billion gallons in 2017. As a result of heavy subsidies and a market mandated by the Renewable Fuels Standard, four capital-intensive plants were erected to convert plant waste into ethanol.

In 2014, 725,000 gallons of cellulosic ethanol were produced with the bulk derived from processing landfill waste. Production of cellulosic ethanol expanded in 2016 to 3.8 million gallons and then to 10 million gallons in 2017. Production was however approximately one-eighth of the 90 million stated capacity of the four plants.

Fast forward to November 2018. DuPont, an early entrant into the field, has sold the Nevada, IA plant erected at a cost of $200 million to Verbio of Germany. The purchaser will spend $35 million to convert the plant to produce methane as a fuel for vehicles or for the natural gas grid by 2020. This plant has the capacity to process 300,000 metric tons of corn stover annually, and was originally intended to produce 30 million gallons of ethanol.

The Abengoa plant in Hugoton, KS is now mothballed following a filing for bankruptcy. The Beta renewables plant has also been shuttered. Only the joint venture Poet-DSM plant is in operation in Emmetsburg, IA., although the financial viability of this facility is in question given the demise of the three other facilities.


 

African Swine Fever Situation Deteriorates in China

11/30/2018

Two reports during the week ending Friday November 16th and subsequent items indicated  deterioration in the African swine fever (ASF) situation in China.  To date 60 outbreaks have been documented in 18 provinces since the index case in early August.

 

Until this past week, Sichuan Province was unaffected.  African swine fever was diagnosed on a smallholding with 40 hogs in Yibin City in the Southeast of the Province.  Sichuan produces 66 million hogs out of the total output in China of 700 million in 2017.The Province has an 80 lb. per capita consumption of pork.

 

Despite bans on importation of live hogs and hogs products, ASF obviously crossed over into Sichuan from adjoining Juizhou Province where cases were recently diagnosed. On November 16th, Thomson Reuters reported isolation of ASF virus from a dead wild boar in Bastian City in Jilting Province in Northeastern China.  Emergence of ASF among feral swine represents a serious change in the epidemiology of infection and will complicate control and almost certainly prevent eradication in the intermediate term.  Endemic infection in a mild clinical form among wild hogs will constitute regional reservoirs.  The U.N. Food and Agriculture Organization estimates that there are more than 40 million wild hogs in China.

 

Authorities in China have imposed quarantines over affected small farms. Feeding swill containing potentially infective material has been banned.  Unfortunately authorities do not have the resources to effectively implement control measures on other than large production units.

 

The fact that the price of pork is rising in Provinces characterized by high consumption suggests that the public is not concerned over acquiring the infection.  This is not the case with avian influenza affecting broiler flocks since sharp drops in consumption follow announcements of infection.  The rise in prices for live hogs and pork will only complicate control since there will be a greater incentive to smuggle products and to defy quarantines and restrictions on movement.

 

Based on persistence of African swine fever following introduction into the Iberian Peninsula in the early 1960’s and the most recent outbreaks in Russia and Eastern Europe it is inevitable that ASF will become endemic in China and possibly spread to other Asian nations.  The only effective control measure will be the development and introduction of an effective vaccine.  Given homogeneity of ASF virus isolated from early cases in China with ASF virus from outbreaks in Eastern Europe, a vaccine which is effective against sero-group A should provide protection. In the interim since the virus appears to be transmitted in feed, as with the coronavirus causing porcine epidemic diarrhea, inclusion of dietary organic acid supplements to inactive ASF virus would be a worthwhile precaution.

 

 

It is inevitable that introduction of ASF into China will profoundly impact the structure of the industry, disfavoring small family farms in favor of large self-contained units capable of implementing effective biosecurity, vaccination and the efficiencies associated with economies of scale.


 

Seizure of Potentially Contaminated Products by FDA

11/20/2018

On November 7th inspectors from the Food and Drug Administration assisted by the Marshal’s Service raided J and L Grocery LLC in Alma, AR. The company receives salvaged products including over-the-counter drugs, cosmetics and human and animal food products for re-distribution.

The action taken by the FDA is justified and is intended to protect consumers. What is of concern is that the enterprise was previously inspected in September and October 2018 revealing insanitary conditions. According to the November 9th 2018 FDA release, conditions included multiple live nesting and dead rodents, live raccoons and cats, animal feces and urine-stained products scattered among seven warehouses and sheds. Accordingly, Administrative Detention Orders were issued dated October 9th and 19th.

Why was there a delay between the first visit in September and the November action? It is possible that products were not released after the October 19th Detention Order, but in view of the unsanitary conditions observed, all products should have been seized and the company ordered to cease operation. If the FDA does not have the legal authority to act promptly when confronted with an obvious deviation from accepted practices, then it should seek legal authority to truly function as an agency protecting the public.


 

Produce Demonstrated as Reservoir of Pathogens with Transferable Antibiotic Resistance Gene

11/20/2018

Scientist at the Julius Kuhn-Institut, Federal Research Centre for Cultivated Plants, Braunschweig, Germany recently conducted an analysis of potentially pathogenic E. coli isolated on produce offered for sale at supermarkets.  Advanced microbiological techniques were used to detect resistance genes, Class 1 integrons and plasmids.

 

The study showed a wide array of transmissible multiple resistant plasmids in bacteria isolated from produce. Since salads are consumed raw, it is highly probable that bacteria carrying multiple resistance genes could be transferred to the microbiome of consumers.

 

The source of potentially pathogenic and drug resistant bacteria was not identified.  Given the Yuma Valley outbreak of STEC associated with romaine lettuce, it’s more than probable that animal waste enters water courses and is used for irrigation for produce.

 

Fecal contamination of water with subsequent deposition on leafy vegetables represent a link between an animal system and consumers.  With respect to drug-resistant bacteria on meat, the risk of transferring genes to the human biome is limited since these products are cooked before consumption.  Salads represent a logical link between livestock and consumers with respect to transmissible antibiotic resistance.

 

*Blau, K. et al. 2018, doi. Org/10. 1128/nbIO.01300-18. The Transferable Resistome of Produce


 

Sanderson Farms Bryan, TX. Complex a Subject of Protest

10/16/2018

It is evident that activist groups promoting unions and labor rights have targeted Sanderson Farms as the Nation’s 3rd-largest broiler integrator. On Monday October 8th a protest was staged by a coalition including members of Interfaith Worker Justice, Brazos Interfaith Immigration Network and the Council for Minority Student Affairs.  Allegations which have been strongly denied by Sanderson Farms include restrictions on bathroom breaks, discrimination and sexual harassment by supervisors.

 

Sanderson Farms CFO Mike Cockrell emphatically stated, “The same labor group has made these allegations before in Mississippi.”  He added, “We denied they were accurate then and we deny they're accurate now.”  Cockrell opined “The idea that anyone would treat another human being like that is difficult to imagine and if that happened in our plant those supervisors will be terminated immediately.”  Sanderson Farms has a zero tolerance policy on any kind of discrimination or harassment.

 

The representative of the protestors Plankey Videla of the Centro de Derechos Laborales stated, “We have witnesses and people who have told us that they have begged to go to the bathroom while working on the production line.”  She also alleged, “Quite a few women have also come and told us about harassment on the part of supervisors.”

 

Given that the organizations promoting union representation and improved working conditions have gone on record with their protest, covered by mainstream and social media and that Sanderson Farms has denied allegations at the corporate level, it will be appropriate to investigate the situation at the Bryan, TX. A disinterested review team could establish whether there is any substance to the allegations.

 

Surely responsibility is vested in OSHA and other agencies within the Department of Labor to determine whether abuse of workers has or has not occurred.  If in fact there is any substance to the complaint, appropriate authorities including the Department of Justice should intervene. If the allegations are proven to be without substance, Sanderson Farms would be vindicated and the duplicity of the accusers exposed. 

 

Both for the image of the industry and also the management and shareholders of Sanderson Farms the accusations should be promptly investigated and if deficiencies exist either at the local or company-wide level, appropriate remedial action is indicated. Given that accusations have been proven to be without substance with respect to other producers and in areas of the U.S. the matter should be laid to rest as quickly as possible before it becomes a consumer or social media issue.


 

NCBA Oppose Motor Carrier Safety Administration Hours of Service Rule

10/09/2018

The Federal Motor Carrier Safety Administration has issued regulations requiring a driver of a heavy vehicle to rest 10 hours after 11 hours of continuous driving. The National Cattleman’s Beef Association are requesting blanket exemptions from the regulation.

NCBA president Kevin Kessner stated “The current Hours of Service framework is incompatible with the realities of livestock hauling.” He added “Drivers of our livestock need to be alert and safe while also cognizant of the welfare of the animals they are hauling. We want them to rest as needed instead of racing against the clock.”

The regulation as framed has a sound basis in both statistics relating to accidents involving heavy vehicles and on the effects of fatigue on driver performance. It is recognized that after an 11-hour stretch, a driver cannot leave a vehicle loaded with hogs or cattle for 10 hours during a rest period.

Surely the solution would be on those occasions when it is contemplated that a driver will undertake a journey longer than 11 hours to provide two drivers who can relieve each other at five-hour intervals. Admittedly this will increase cost but should contribute to a lower accident rate. Serious accidents involving livestock trailers generate opposition to intensive animal production and place a burden on first-responders who are ill-equipped by training and inclination to euthanize large numbers of animals under stressful weather conditions and frequently at night.

The NCBA should not ask for blanket exemptions or as they term their request “flexibility”. Appropriate planning and expenditure on manpower would contribute to a higher level of safety and remain within the intent of the Hours of Service Rule.

Fortunately, the broiler and turkey industries do not require drivers to be in service for extended periods. Delivery of started pullets and day-old chicks may involve extended distances, but again appropriate planning with either two drivers or staging substitute drivers along a route could be arranged.

There are good reasons for the Federal Motor Carrier Safety Administration to introduce limits on duration of service. Flight crews are rigorously supervised and more recently, length of continuous service periods for hospital interns and residents have been reduced to avoid fatigue and errors. These are valuable precedents which should be adopted by all users of our highways.


 

American Humane Promotion of Farm Program

10/05/2018

Marty Frankhouser, newly appointed National Director of the AHA Farm Program, recently circulated a letter to producers notifying them of an upcoming advertisement to appear in Supermarket News. Basically the full-page spread portrays the logos of participating egg and poultry meat producers.

The value of a welfare certification program is based on consumer acceptance and confidence in the validity of the program. A secondary consideration is the perception by retailers, QSR operators and food service companies that a given welfare certification program is valued by consumers.

It is difficult to discern the potential value of displaying 50 or more logos in an advertisement in a trade magazine other to attempt to bolster the image of the AHA Farm Program among retail buyers or for the gratification of AHA management. The assurance that AHA is “constantly working through national television campaigns, print advertising and social media to promote the American Humane Seal is intended to reassure producers who pay a royalty for the endorsement.

A more persuasive approach would be to present market research data demonstrating a statistically significant motivation to purchase products by consumers based on the AHA Seal. It would be further beneficial to retailers for AHA to quantify the willingness-to-pay a premium for products bearing the Seal. This would allow producers to calculate the benefit to cost of participation in the program and for retailers to ascertain whether there is a potential to improve margins on products carrying the AHA Seal.


 

American Farm Bureau Federation Urges Negotiations in Place of Tariffs

09/30/2018

With the advent of the ten percent tariff imposed on $200 billion of goods imported into the U.S. from China effective September 24th, the American Farm Bureau is counseling prudence and negotiation. In a statement before the Senate Agriculture Committee the Farm Bureau urged “our trade officials to engage in discussions with our trade partners to resolve trade concerns before resorting to tariffs”. Actions targeting our largest agricultural export markets have resulted in retaliation against U.S. farmers, ranchers and agricultural and food businesses across the country.

To be cynical, there is an end in sight. Unfortunately, this will involve further tariffs on the remaining $267 billion of Chinese imports. Retaliating, China has virtually run out of U.S. imports on which tariffs can be placed. Up to ten percent has been placed on $60 billion of over 5,000 U.S. categories coinciding with the U.S. tariffs of September 24th. As of this date, China has placed tariffs on a total of $113 billion U.S. goods including virtually all agricultural products.

U.S. cable channels with international connections covering the trade war between the U.S. and China evidenced strong support for the retaliation by the government of China by its citizens. They regard the U.S. action as bullying and coercive. Obviously the average citizen of China is unaware of past business and trade practices and have benefitted from misappropriation of intellectual property, coercive tactics in acquisitions and state subsidies for quasi-independent companies.

The Government of China cannot simply accede to U.S. demands, irrespective of their justification. This would be losing face. Although past U.S. Administrations have not made much progress in resolving outstanding trade and commercial activities with China, the present approach appears to be equally unproductive but with the potential of raising prices to consumers and weakening the position of U.S. as a major leader in World trade and international relations.


 

Canadian Dairy Policy Pivotal to NAFTA Renegotiation

09/16/2018

Dow Jones reports that U.S. Agriculture Secretary Dr. Sonny Perdue has emphasized that any renegotiation of the NAFTA agreement will be dependent on radical changes to the Canadian controlled marketing program for their dairy industry. At the present time, there is overproduction in Canada with export of milk and dairy products to the U.S. Concurrently U.S. farmers are afforded only a limited TRQ quantity with a 300 percent duty over the assigned quantity. Last year, Canada established Class 7, a new category covering protein concentrates, skim milk and whole milk powder effectively representing a subsidy to allow exports of these products in competition with the U.S.

According to White House Economic Advisor, Larry Kudlow, the milk issue is the remaining major point of contention delaying finalization of a NAFTA deal. The U.S. position is that Class 7 must be repealed.

Foreign minister Chrystia Freeland stated that NAFTA negotiations were making “very good progress” but also added “it’s going to take flexibility on all sides”. Given the support of Wisconsin for the current Administration and considering the imminence of midterms, it is doubtful that a compromise will be reached over the dairy issue although there are indications that Canada may “throw the dairy farmers under the bus” in the face of threatened tariffs on automobiles and components. If in fact the U.S. can effect changes in the controlled dairy production involving 10,000 farmers, the 1,000 Canadian egg farmers will be vulnerable to similar revocation of their monopoly.

In late September he U.S achieved understanding in principle over outstanding issues with Mexico and has threatened to proceed without Canada effectively invalidating NAFTA with potential repercussions for both parties.


 

African Swine Fever outbreak in China Has Implications for the U.S.

09/11/2018

Based on previous experience with African swine fever in the Iberian Peninsula and more recently in Russia and Eastern Europe, China will have great difficulty in containing the emerging epidemic of African swine fever.

 

Authorities in China have now admitted to eight distinct outbreaks in areas geographically separated by over 500 miles.  There is a presumption that transport of live hogs is involved in transmission.  The relatively primitive systems of hog production involving many thousands of relatively small-scale farms will contribute to outbreaks since there is no potential for effective biosecurity.

 

China imposed tariffs on U.S. pork in retaliation to U.S. tariffs on manufactured goods.  Given the demand for pork and obvious disruption of domestic production the Government of China may have to reevaluate their position on pork imports as domestic prices soar and public disaffection emerges.  Although the Administration of President Xi has promoted lower pork production in the interest of sustainability, health and conservation of foreign exchange, changes in dietary habits among the emerging middle class China predicates greater consumption of pork and chicken and beef for the affluent. 

 

If U.S. pork exports to China resume on a tariff-free basis, pressure will taken off the broiler and turkey industries. These segments of the domestic poultry industry would naturally benefit from removal of extra protein from the U.S. market.

 

It is ironic that a considerable portion of the pork produced in the U.S. and especially for export is derived from Smithfield Foods and affiliates which are subsidiaries of the WH Group of China.  Embargos, tariffs and now African swine fever have weighed heavily on the share price of the company since mid-year.


 

Traceback Complicated by Diverse Origin of Protein Products

08/28/2018

A recent case of salmonellosis in Holland was investigated by public health authorities*. All clusters with two or more cases are reported to the Netherlands Food and Consumer Product Safety Authority which is responsible for laboratory and epidemiologic investigations. In this specific outbreak involving a rare serotype of Salmonella Typhimurium, not previously detected in Holland. A total of 24 out of 29 respondents linked their infection to consumption of “fillet Americain” a raw minced beef spread with herbs identified as the presumptive vehicle of infection.

Investigation showed that the supermarket implicated in supplying the raw minced beef sourced the product from a deboning plant in Holland which processed 58 tons of meat per day. Traceback obviously stopped at the processor since they derived beef from six abattoirs in four different E.U. nations. The deboning plant in turn delivered their product to 55 meat processing plants, 32 of which were in eight other E.U. member states.

It is questionable whether advanced product identification systems such as blockchain would be capable of maintaining a record of source from farm of origin through slaughter, and subsequent stages of deboning and processing.

This case illustrates the danger of consuming uncooked and undercooked meat products in menu items such as “fillet Americain” and “steak tartare”.

*Freidl, G., et. al., Tracing Back the Source of an Outbreak of Salmonella Typhimurium: National Outbreak Linked to the Consumption of Raw and Undercooked Beef Products, The Netherlands, October – December 2015, PLOS Current Outbreaks, August 16th 2018, Edition 1.doi:101371/current outbreaks.

Epidemiological curve showing 34 cases with Salmonella Typhimurium infection by date of onset of illness in the Netherlands during October 2015.


 

Did the IHop to IHob Flip-Flop Work?

08/17/2018

CHICK-NEWS has commented on the marketing ploy by IHop to introduce and promote burgers.  According to the company, the temporary name change generated a number of news items and social media impressions.  The company claims to have increased sales of burgers although from a previously small base. 

IHop comparable same-store sales increased by an anemic 0.7 percent for the most recent quarter.  It is questioned whether the promotion of burgers was achieved at the expense of cannibalizing existing offerings on the existing broad casual and family dining menu.

 

It would appear that IHop management are putting a brave face on what could be regarded as a marketing faux pas. Steve Joyce, CEO of Dine Brands the parent of IHOP stated, “I was asking people has anyone seen anything bigger than this?”  IHop president Darren Rebelez stated, “Literally everybody in the world now knows IHop is now selling burgers, that was goal number one: goal number two is to actually sell them.”

 


 

Reducing Greenhouse Gas in China Depends on Lower Meat Consumption

08/07/2018

A recent article in The Atlantic documented that in the mid-1980s when the population of China was approximately 1 billion, meat consumption, principally from pork was 30 pounds per capita. With a current population of 1.4 billion, meat consumption has soared to 140 pounds per capita consistent with increased earnings. As a nation, China consumes nearly one third of the World’s meat.

To reduce imports of grains and oilseeds, and to lower greenhouse gas emission, long-term planning under President Xi Jinping is calling for moderation in consumption of animal protein. This will ultimately have obvious impacts on the production of soybeans and corn in the U.S., Brazil and the Argentine and will also reduce both domestic production and imports of pork and beef from the Americas. Changing consumption patterns in China with a partial reversion to dependence on vegetable protein will over the long term affect every farm in the U.S., Brazil and neighboring nations.


 

Growth in Plant Based Meat and Dairy Substitutes

08/05/2018

Nielsen has released statistics confirming that sales of plant-based dairy, meat and other products attained $3.3 billion in 2017. This represented a growth of 20 percent over 2017.  Plant-based milk substitutes represented $1.6 billion with this category comprising 15 percent of all milk sales, impacting dairy milk. 

 

Plant-based creamer sales rose by 131 percent to $109 million. Plant-based meat substitutes such as the Impossible Burger brand and others increased by 24 percent to $670 million.

 

Michelle Simon, executive director of the Plant-Based Foods Association commented, “The plant-based food industry has progressed from being a relatively niche market to full mainstream.”  She added, “The new data confirms what we are hearing and seeing everyday for our members: sales are up, investment is increasing and new jobs are being created in the plant-based foods industry.”

 

There is considerable opposition from associations representing the dairy and livestock industries to confine the terms “milk” and “meat” to products derived from animals. FDA is in the process of soliciting input on labelling and nomenclature of “alternative” food products.

 

The lobbying and legal challenges against substitutes are the motivation for the statement from the Plant-Based Foods Association that “regulators and legislators must treat our industry fairly and the playing field for plant-based is level and fair but the state and national levels.”  What’s source for the goose is source for the gander, milk is milk, meat is meat and soybean-derived proteins and eggs from mung beans are clearly something else.

 


 

WeWork Bans Animal Products

07/23/2018

WeWork, a provider of office space in 250 locations scattered throughout 70 cities worldwide has banned serving red meat or poultry at company events and will not allow employees to expense meals containing meat. The justification is to “reduce environmental stress and to save the lives of animals”.

WeWork is the largest private-sector occupier of offices in central London and is the second largest renter in Manhattan. The company was valued recently at $20 billion after a substantial investment by the SoftBank Vision Fund of Japan.

The popularity of WeWork is based on the fact that employers can reduce the cost of housing a worker currently estimated at $20,000 for rent, security and technology to less than $8,000 per head. This is based on the fact that WeWork provides 50 square foot per worker compared to 185 square feet for a traditional corporate office.

WeWork lost $884 million last year and is indebted to landlords for $1.9 billion in leases extending up to 15 years in duration. The downturn in the world economy or retraction focused in high-density markets could sink the company. The Economist in a July 14th review of the company documented the demise of Regus which was previously a leader in the service-office market but collapsed following the bust of the dot.com boom in 2008.

It would be more appropriate for the founder of WeWork, Adam Neumann and his Chief Creative Officer Miguel McKelvey to look to the welfare of their investors and stakeholders rather than to exert an inordinate concern for hogs and chickens.


 

Pressure on China May Yield Concessions and Benefits

07/18/2018

Secretary of the Treasury, Steven Mnuchin commented that China may be receptive to resume negotiations after a week of retaliatory threats. Mnuchin commented “To the extent that China wants to make structural changes, I and the Administration are available.” He added “We are not advocating tariffs, we are advocating fair trade.”

On Thursday, July 12th the Administration advanced plans to impose an additional 10 percent tariff on imports from China valued at $200 billion to take effect in August. U.S. Trade Representative Robert Lighthizer commented “For over a year, the Administration has patiently urged China to stop its unfair practices, open its market and engage in true competition.” He added “We have been very clear and detailed regarding the specific changes that China should undertake.”

Although the Administration has hinted that it may provide relief to farmers impacted by embargoes and tariffs on agricultural products, compensatory payments would not be generally favored in Congress based on increasing the national debt. Farmers’ groups look to a diplomatic resolution of the current “dispute” as characterized by Mnuchin, but effectively is a trade war.


 

Lidl Reappraises U.S. Entry

07/18/2018

In 2017, Lidl opened 48 stores in the mid-Atlantic region.  Their announced intention was to open 100 stores by the end of 2018.  After an initial flurry of openings, corporate management in Germany revaluated their strategic plan, displaced the executive responsible for U.S. entry and drew in their horns. Only five new stores have been opened to date in 2018 and the company has negotiated out of options in a number of regions including Texas and the eastern Seaboard. 

 

It is apparent that the original plan which called for freestanding stores approximately twice the size of those in the E.U. were too large and too expensive for the intended market.   Although restricting SKUs and offering rock-bottom prices can attract a price-conscious demographic, this approach does not necessary contribute to acceptable margins and hence profitability, especially with a high capital investment in facilities. Approximately six months ago, Lidl announced that it would use existing storefront and relinquished locations to establish new stores.

 

Lidl entered the deep-discount segment of food retailing competing with an established Aldi and Trader Joe’s.  The company failed to appreciate that shopping in a supermarket by suburban middle-class residents is a destination event requiring a broad range of produce, deli offerings and center-of-the-store items sufficient for a family over a week.  This model differs markedly from custom in the western E.U. which dictates small stores patronized by apartment dwellers who make frequent trips integrated with their daily commutes by public transport, purchasing daily necessities and limited to what they can carry.

 

Lidl has yet to create a house brand comparable to Aldi.  This will take years to convince customers that quality is equal to or superior to national brands although offering extreme value.  Many of the initial Lidl customers were motivated more by curiosity than a desire to find a cheaper consistent supplier of produce and groceries to whom they could become loyal.

 

And then there was Amazon---


 

Secretary of Agriculture Promotes Work Requirements for SNAP Recipients

07/11/2018

Speaking at an Eastern Washington Agriculture Leaders’ Conference on July 2, Dr. Sonny Perdue, Secretary of Agriculture expressed his view that able-bodied adults should work or participate in training programs to receive SNAP benefits.  This places him on record as endorsing a major provision of the House version of the Farm Bill.  The Senate version which was passed on a bipartisan vote has no restrictions on SNAP recipients.

 

Perdue stated, “If people enjoy the benefit of having food for their family…they should expect that someone that’s taking advantage of that, or utilizing that during down times, are trying to better themselves to a more independent lifestyle.”  Rep. Cathy McMorris Rodgers (R-WA) was active in promoting the House version which passed narrowly on a 213-211 vote.  She commented, “The House felt very strongly – frankly, as I do – there should be some work requirement associated with the generosity and compassion of the American taxpayer.”  She added, “The Farm Bill and the work requirement is a historic effort to empower more people to build a foundation for a better life.” 

 

Reconciliation of the House and Senate versions of the 2018 Farm Bill will be contentious but hopefully resolution will be achieved before expiration of the 2014 Act in September.


 

Wooden Breasts And White Striping Not Alleviated By Glutamine And Arginine Dietary Supplementation

07/02/2018

Dr. K. A. Livingstone and colleagues at the Prestage Department of Poultry Science, North Carolina State University recently completed a study on the effect of dietary supplementation with glutamine and arginine on the prevalence and severity of “white striping” and “wooden breast”, both degenerative myopathies occurring in high-yield broilers grown to heavy weight. The project “Effect of Dietary Glutamine on Metabolism Related to Muscle Myopathy in Broiler Chickens” was funded as project number 696 by the USPOULTRY and Egg Association Foundation.

Supplementation of diets with glutamine and arginine did not reduce the incidence of either “wooden breast” or “white striping”. The research actually disclosed that addition of glutamine (a non-essential amino acid) increased the occurrence of “white striping”.

“White striping” was associated with a significant increase in total carbon dioxide and bicarbonate in blood and a reduction in saturated oxygen and partial pressure of oxygen. Similar trends were noted with “wooden breast”. It was concluded that both conditions are extremes of a common pathogenesis with the two myodystrophic changes exacerbated by relative hypoxia.

Approximately five decades ago, selection for rapid growth in broilers resulted in a disparity in muscle mass relative to cardiovascular and pulmonary capacity. This was manifest as sudden right heart failure (“flip over”) and under cold conditions or at high altitude, ascites syndrome. The predisposition to these conditions representing a genetic environmental interaction was progressively eliminated by selective breeding and in the short term changes in nutrition, management and environmental control.

Researchers attempting to identify a “quick fix” and companies touting simple solutions including additives must recognize that as with the problems of fast-growing broilers in the 1970s and 1980s physiological restraints have become rate limiting with respect to pectoral mass. The problem of deep pectoral myopathy in turkeys was resolved by selective breeding as will “wooden breast” and “white striping” which are variations of the same basic defect arising from inadequate early vascularization of pectoral muscle coupled with hypoxia.

The studies recently completed by Dr. Livingstone’s group add to an understanding of the complexity of “white striping” and “wooden breast” in that there is obviously a systemic component adding to the effect of deficient vascularization of pectoral muscles of high-yield strains in early to mid-growth.

We have seen this movie before----


 

HSUS Attacks McDonald’s on Welfare

06/27/2018

In a change in policy, the HSUS will launch an aggressive TV advertising campaign directed against McDonald’s Corporation. The issue relates to the refusal at this time of McDonalds to commit to “slow growing” strains of broilers.

McDonalds has introduced a comprehensive welfare policy requiring perches, modified atmosphere stun-to-kill and enhanced third-party audits. Recognizing the non-sustainability and additional costs associated with slow growing broilers which offer no specific welfare advantage, McDonald’s justifiably did not include this aspect in their welfare program.

McDonald’s will conform to the Global Chicken Sustainability Advisory Council recommendations according to Marion Gross, Senior Vice President and Chief Supply Chain Officer.

The welfare credentials of McDonald’s Corporation cannot be questioned given their 2012 decision to cease sourcing from suppliers using gestation stalls for sows and a commitment to sourcing cage-free eggs in the future.

The airing of commercials which attack McDonalds characterizing children’s menu items as “unhappy meals” is regarded as a measure by the HSUS to strengthen their “welfare credentials” rather than to pressure McDonald’s. The HSUS has experienced a decline in donations following revelations of harassment and the firing of ex-president Wayne Pacelle and the forced resignation of Board members.


 

Aspirant Entrant to Feed Additive Market

06/17/2018

Plaman Global has received $20 million in funding from Goldman Sachs to develop a feed additive comprising diatomaceous earth. The Company name represents a combination of founders Peter Plakidis and Geordie Manolas. Plaman intends mining black diatomaceous earth from a location in New Zealand. Generally diatomaceous earth which is derived from diatoms is white in color but the product will be marketed under the brand Black Pearl® due to adherent organic matter mixed with the diatomaceous component.

 

On face value it is questionable to claim that a diatomaceous earth feed additive could replace antibiotics, botanicals or oligosaccharide prebiotics which have established modes of action and in most cases documented benefit to cost ratios. The company claims “outstanding efficiency in a 42-day study on broiler chickens and similar results from a trial on hogs.”  Absent data and any details of the diets fed and housing of stock, it is not possible to evaluate any claims by Plaman Global.  There is no published data in the peer-reviewed literature to support a claim that diatomaceous earth can serve as a growth promoter or enhance feed conversion efficiency in monogastric animals.

 

The commercial component of the company will be headed by personnel previously employed by Elanco Animal Health. Recruitment of these marketing managers and representatives is understandable given that Eli Lilly the parent of Elanco Animal Health has announced that the subsidiary will be either sold, spun off or dismembered and has commenced downsizing.

 

Since diatomaceous earth is GRAS, there should not be any problems relating to registration.  The difficulty will be persuading doctoral-level nutritionists and veterinarians affiliated to major poultry and hog integrators that the additive provides superior cost-efficiency compared to current antibiotic-displacers under commercial conditions.  A further problem may well relate to the composition of the compound.  Quality control will have to specifically focus on potential contamination with heavy metals or PCB given that the product will be mined from a geological deposit. Levels of contamination even at ppb levels will represent a deal breaker. 

 

It is hoped that Goldman Sachs have extending financing to the company based on trials which demonstrated efficacy and safety as conducted by a reputable research university or organization.  Investment should have been based on rigorous data using appropriate experimental procedures with controls and statistical analysis of results. If the enterprise is based on assumptions, extrapolations and spreadsheets Goldman may not see a return on their investment. We are now functioning in a post-Theranos period and a conservative approach to investment in startups with unsubstantiated claims is injudicious. 

 

Of obvious concern is that diatomaceous earth has been extensively evaluated as a feed additive and has received no commercial adoption despite being readily available and at low cost.  Diatomaceous earth is beloved by organic adherents and is used an organic-approved endo- and ectoparasitic agent but with minimal efficacy. Why diatomaceous earth taken from the ground in Otago, New Zealand should have growth promoting properties has yet to be explained. Plaman Global should not only demonstrate efficacy and safety of Black Pearl® but also the biological basis on which benefits if demonstrated are obtained. Enhanced performance if associated with the product might accrue from enhancing absorption of nutrients, binding anti-nutrient factors or modifying the biome. Diatomaceous earth would have no direct nutrient value. To cite the advertising theme of a tabloid “Enquiring minds want to know”!


 

North Carolina Legislature In Overdrive Over Adverse Smithfield Verdicts

06/14/2018

The North Carolina Senate has approved legislation to obstruct lawsuits aimed at agricultural operations creating a nuisance. The reaction follows the first lawsuit which ruled against Smithfield Foods with the prospect of many additional cases including the second now being tried in a Federal court in Raleigh. In any event, the present and future lawsuits will be heard in Federal courts which are not influenced by state legislation

Republican members of the Senate have opined that the proposed legislation will deprive property owners of rights and that characterizing the issue as “farmers versus eaters” is incorrect. Former state Supreme Court Justice, Robert Orr and Paul Stam, previously a leader of the State House, are warning that proposed band-aid legislation will be overturned and that intensive livestock operations cannot persist in creating a nuisance.

It must be remembered that although a moratorium was placed on new farms using lagoons for waste disposal, all existing operations were grandfathered in under the agreement. Alternative technology to dispose of waste including digesters is available but the capital investment would ultimately have to be borne by integrators, raising the cost of production.

If the hog industry in North Carolina is to survive, lagoons will have to be phased out in favor of modern technology, as in the case of egg production which abandoned lagoons in the 1980s.

Legislators with a high concentration of hog production in their states should not try to involve turkey and broiler production which do not generate a nuisance. Lagoons are specifically a hog problem and must be solved by integrators and their contractors.


 

Hope for Recovery in Brazil

06/03/2018

Following the announcement that diesel fuel would be subsidized by 12 percent and deployment of the military to clear road barriers, there is hope that the paralysis caused by the truckers’ strike will soon be alleviated.  The damage to agribusiness is profound.  Sugar cane mills ceased operation and suppliers have invoked force majeure on contracts.  The export ports of Santos and Paranagua stopped operation and vessels stacked up since there were no cargos to load.

 Obviously China will delay any action on imposing tariffs on U.S.-origin soybeans based on the interruption of supply from Brazil.  Virtually all cattle, hog and poultry slaughter ceased with obvious impact on the earnings of JBS SA, Marfrig, Aurora and other producers.  Beef exports amounting to 40,000 metric tons were deferred with a potential loss of $170 million. It is estimated that approximately 4,000 metric tons of beef is deteriorating in trailers.

 

The strike and its consequences have accentuated opposition to the Administration of President Michele Temer.  Although 55 percent of Brazilians disapproved of the strike, 95 percent criticized the response of the Administration to the crisis.

 

The strike and aftermath have impacted recovery from a recession and have cast doubt on the claims by the Termer government that long-standing economic problems have been solved despite the fall in interest rates and inflation.

 

As truckers follow their union recommendation to return to work, gridlock on national roads will have to be cleared, fuel supply to plants and businesses will need to be restored and the highly complex production chain resume operation.  Ultimately taxpayers will bear the burden of the subsidies and increased loans to support the economy.


 

Distribution of Funding by USPOULTRY Foundation

05/27/2018

The 2017 Annual Report issued by the USPOULTRY Foundation provides details on the allocation of funding by topic since the first grant in 1963.  USPOULTRY has funded research projects within three categories which allow for flexibility and response to emerging challenges.  The Board Research Initiative created in 2013 operated concurrently with Traditional Research funding comprises the Comprehensive Research Program.  The third component is Emergency Research Funding characterized by the response to disease outbreaks including the 2015-2016 HPAI epornitic.

 

In reviewing research grants by topic, disease dominates with 37.8 percent of grants. Poultry Production was next at 17.4 percent, Food Safety at 14.6 percent, Environmental Issues at 13.4 percent, Nutrition at 3.6 percent, Primary Processing at 3.5 percent and Further Processing at 3.4 percent.  The remainder, comprising 6.3 percent of funding included worker health and specific aspects of egg processing.

 

Over past decades, half of the research funding has come from revenue generated by the International Poultry Expo with the remainder from the Foundation.

 

Jerry Moye, Chairman of the Board of Directors of the Foundation expressed his gratitude to production and allied companies and individuals helping to collectively raise $11 million which made the Emergency Research program impossible.

 

The USPOULTRY research program is under the able direction of Dr. John Glisson, Vice president of Research.

 

Research funding in 2017 amounting to $1 million, reflects the conditions regarded as important at the present time.  These include welfare auditing, foodborne bacterial pathogens, wastewater remediation and myodystrophy (“woody breast”).

 

Seed funding awarded to researchers at Land Grant universities and institutional laboratories enables evaluation of hypothesis leading to publication of preliminary results. This in turn increases the competitiveness of scientists and their laboratories to receive larger competitive grants to continue studies.


 

What Went Wrong at Campbell Soup?

05/24/2018

In a word – Plenty.  The Company announced abysmal losses for the second quarter of 2018, lowered guidance and underwent a 12 percent drop in share price on Friday May 18 adding to the 38 percent of loss over the past year.  Campbell Soup net sales have declined year-on-year from between 1 percent to 2 percent for seven successive quarters.  Among problems facing the company, in common with the packaged and branded segment of the food industry are increasing costs of raw materials, escalation in transport and distribution expenses and above all competition from private label brands.

 

The abysmal quarterly announcement coincided with the end of the seven-year tenure of Denise Morrison who retired with immediate effect, and was replaced by Board member Keith McLoughlin as an interim CEO.  In an investor’s call McLoughlin indicated that the company will “take a fresh look with urgency” He noted that soup sales under the Campbell brand were down 1.9 percent over the past 12 months compared to an increase of 3.8 percent for competing brands and that private label soups were up 11 percent.

 

 

Ms. Morrison correctly read the trend towards healthy foods and invested in the purchase of Bolthouse Farms a producer of juice and fresh –cut produce and carrots.  Due a combination of poor execution, problems acquiring ingredients and ineffective marketing, the Fresh and Healthy segment which was created to appeal to a wellness demographic was the subject of a $619 million write-down.

 

A swing back to more traditional snacks in 2017 led to the acquisition of Snyders-Lance but with this transaction completed during the most recent quarter, there was no material impact on either sales or earnings.

 

Early in 2018, Campbell Soup entered into a pricing confrontation with Walmart representing about twenty percent of sales, ultimately depriving the company of a valued customer. Private label brands have been steadily eroding sales as evidenced by the difference in shelf price between a can of soup under the Campbell brand compared to house brands of equivalent size, presentation and quality on the shelves of Aldi and now Lidl. Target and Kroger which have developed their own private labels have generated consumer loyalty.

 

Morrison is not solely responsible for the misfortunes of the company. It is no coincidence that 42 percent of the equity is held by insiders including the Campbell Trust and Mary Alice Dorrance Malone.  The Board obviously supported the radical departure from traditional Campbell products and overpriced acquisitions by Morrison to an extent which was unjustified by results.  Warning signs were evident but no action was taken even in the face of fierce competition from the Kraft-Heinz combination in 2015. 

 

Consolidation in the packaged food industry is considered critical to obtain efficiency of scale and to exert pricing power.  This presumes that either Campbell Soup will have to slim down, become more efficient and concentrate in market niches were it has expertise or alternatively be acquired or merged. 

 

It is enigmatic that under a previous CEO, Harold Schaub in the late 1970s, Campbell Soup was a significant producer of broilers and turkeys.  The company could have used its expertise to become a major force as an integrator. Product was used in-house for Swanson’s TV dinners and a wide range of soups.  Both Campbell and ConAgra later withdrew from primary production concentrating on higher-margin packaged foods, ultimately to their respective detriment.


 

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 2019 Simon M. Shane