Updated USDA-ERS Poultry Meat Projection for May 2024.

On May 16th 2024 the USDA-Economic Research Service released updated production and consumption data with respect to broilers and turkeys, covering 2023 a projection for 2024 and a forecast for 2025.

The 2024 projection for broiler production is 46,805 million lbs. (21.275 million metric tons) up 0.9 percent from 2023 and a 0.6 percent upward adjustment from the April 2024 report. USDA projected per capita consumption of 101.3 lbs. (46.1 kg.) for 2024, up 1.5 percent from 2023. Exports will attain 6,889 million lbs. (3.134 million metric tons), 5.2 percent below the previous year.

The 2025 USDA forecast for broiler production will be 47,550 million lbs. (21.614 million metric tons) up 1.6 percent from 2024 with per capita consumption up 0.8 lb. to 101.8 lbs. (46.3 kg). Exports will be 2.8 percent lower compared to 2024 at 6,889 million lbs. (3.131 million metric tons), equivalent to 14.8 percent of production.

Production values for the broiler and turkey segments of the U.S. poultry meat industry are tabulated below:-

Source: Livestock, Dairy and Poultry Outlook released May 16th 2024

The May USDA report updated projection for the turkey industry for 2024 including annual production of 5,214 million lbs. (2.330 million metric tons), down 4.4 percent from 2022. Consumption in 2024 is projected to be 14.2 lbs. (6.5 kg.) per capita, down 3.8 percent from the previous year. Export volume will increase by 8.8 percent in 2024 to 510 million lbs. (231,818 metric tons). Values for production and consumption of RTC turkey in 2024 are considered to be realistic, given year to date data, the prevailing economy, variable weekly poult placements, production levels, freedom from HPAI and inventories.

The 2025 forecast for turkey production is 5,320 million lbs. (2.418 million metric tons) up 2.0 percent from 2024 with per capita consumption up 0.7 percent to 14.3 lbs. (6.5 kg). Exports will be 1`.0 percent higher than in 2024 to 515 million lbs. (234,000 metric tons) equivalent to 9.7 percent of production.

Export projections do not allow for a breakdown in trade relations with existing major partners including Mexico, Canada and China nor the impact of catastrophic diseases including HPAI and vvND in either the U.S. or importing nations

The USDA export projection takes into account declining broiler product exports to China. For 2022, China imported 622,099 tons of broiler products valued at $1,087 million including feet at an average unit price of $1,263 per ton. Feet represented 77.8 percent of volume during 2022 (483,538 metric tons) at a unit price of $1,926 per ton. Compared to 2022, exports to China during 2023 were 34 percent lower in volume to 405,343 metric tons and 34 percent lower in value to $711 million.

Subscribers are referred to the monthly export report in this edition and update of production data and cold storage inventories of broilers and turkeys respectively posted in each end-of- month edition of CHICK-NEWS with the previous monthly data under the STATISTICS tab.

U.S. Broiler and Turkey Exports, January-March 2024.                   

OVERVIEW

Total exports of bone-in broiler parts and feet during January-March 2024 attained 846,031 metric tons, 9.6 percent lower than in January-March 2023 (935,942 metric tons). Total value of broiler exports decreased by 3.0 percent to $1,113.9 million ($1,148.5 million).

Total export volume of turkey products during January-March 2024 attained 49,831 metric tons, 29.9 percent more than in January-March 2023 (38,373 metric tons). Total value of turkey exports increased by 7.7 percent to $140.7 million ($130.7 million).

Unit price for the broiler industry is constrained by the fact that leg quarters comprise over 97 percent of broiler meat exports by volume (excluding feet). From the first quarter of 2021 through 2022, unit value of leg quarters increased consistent with international demand followed by a decline in 2023. Leg quarters represent a relatively low-value undifferentiated commodity lacking in pricing power. Exporters of commodities are subjected to competition from domestic production in importing nations. Generic products such as leg quarters are vulnerable to trade disputes and embargos based on real or contrived disease restrictions.

HPAI has emerged as a panornitic affecting the poultry meat industries of four continents with seasonal outbreaks. The incidence rate and location of cases in the U.S. limits eligibility for export depending on restrictions imposed by importing nations

Ongoing outbreaks of African swine fever in China and Southeast Asia from early 2019 and Europe from 2010 onwards reduced the availability of pork. In addition, disruptions in chicken production and logistics due to COVID restrictions decreased availability of protein with international repercussions on trade in chicken and pork. The demand for pork imports to China has diminished with restoration of domestic hog production to the extent of overproduction. Mild oversupply is evident in the white-feathered broiler sector with implications for exports other than feet extending into 2024.

EXPORT VOLUMES AND PRICES FOR BROILER MEAT

During January-March 2024 the National Chicken Council (NCC), citing USDA-FAS data, documented exports of 835,492 metric tons of chicken parts and other forms (whole and prepared), down 9.1 percent from January-March 2023. Exports were valued at $855.5 million with a weighted average unit value of $1,388 per metric ton.

The NCC breakdown of chicken exports for January-March 2024 by proportion and unit price for each category compared with the corresponding months in 2023 (with the unit price in parentheses) comprised:-

In an anticipated ruling, 2,400 broiler contractors have been granted certification as a class in their lawsuit against Pilgrim’s Pride Corporation.  The specific case is part of a series alleging collusion by integrators to reduce grower remuneration.  The Plaintiffs allege that integrators functioned in accordance with no-poach agreements and shared information informally and also indirectly through a benchmark cost reporting system in wide use. 

During January 2023 Sanderson Farms reached an agreement with eight defendants. Tyson Foods, Perdue Farms and Koch Foods have settled with defendants for a total of $50 million to date.

On April 17th, USPOULTRY arranged a workshop developed by the Food Safety Advisory Committee to consider aspects of the Public Health Information System.  Attendees representing the poultry meat industry were provided with instruction on accessing and navigating the system including downloading of data and aspects of addressing non-compliance records.

USPOULTRY will continue to provide additional information through workshops, seminars and reports posted on the Association website.

During February 2023, Micro-Tracers, Inc. in collaboration with University of Arkansas, was awarded a USDA National Institute of Food and Agriculture (NIFA), Small Business Innovation Research (SBIR) grant as part of the Meat and Poultry Processing Research and Innovation (MPPRI) program. This program aims to improve the supply chain resilience of small and mid-size meat and poultry processors through emerging technologies, sustainability and food safety.

The collaborative project focuses on a chlorine-free method that safely and cost- effectively inactivates pathogens in poultry wastewater. Generating these disinfectants on-site, in wastewater reduces hazards associated with handling of chemicals and contributes to worker safety. This application also reconditions wastewater without toxic residues, making it environmentally friendly and ideal for water reuse applications while providing real-time process monitoring to ensure the safety of poultry products. 

In 2023, pilot-scale equipment was designed and built and utility was validated. Both E.coli and Salmonella were inactivated in treated wastewater through the in-situ generation of oxidants. These included hydrogen peroxide, hydroxyl radicals and singlet oxygen. Quantitative analyses of bacterial survival showed decreases in colony forming units by two to four orders of magnitude.

The principle of the application is the generation of reactive oxygen species (ROS) that induce oxidative stress leading to bacterial death.When molecular oxygen undergoes electrochemical reduction, the resulting molecules and metallic ions further reduce pro-oxidants to form highly-reactive hydroxyl radicals through the Fenton reaction. Simultaneous photodynamic reactions generate another ROS, singlet oxygen contributing to bacteriolysis.

Continuation of Phase III research in 2024 will focus on commercialization and integration of pilot equipment into existing poultry processing, sanitation and cleaning systems. Remote trials are in progress at the Agricultural Research and Extension Pilot Processing Plant of the University of Arkansas, Poultry Science Department in addition to the Natural State Processing Facility in Clinton, AR. 

Micro-Tracers, Inc. established in 1961 has acquired extensive experience collaborating with senior technical staff at poultry integrations in the U.S. and abroad. By adopting improved water reuse applications, small to mid-sized poultry producers can improve sustainability, supply chain resiliency and generate enhanced profitability.

According to USDA-FAS GAIN Report SF2024-009 released on May 3rd, the Government of the Republic of South Africa has extended anti-dumping duties on U.S. origin, bone-in frozen chicken.  Currently U.S. poultry is imported into South Africa under a tariff rate quota that rebates anti-dumping duties provided that volume is lower than the TRQ limit of 71,632 metric tons specified for 2022-2023. 

U.S. chicken is still non-competitive with poultry from other nations eligible for a tariff rebate.  The South African International Trade Commission ruled that anti-dumping duty rebates and poultry tariff rebates are not “mutually exclusive”.

The Foreign Agricultural Service is making appropriate representations to the International Trade Commission and the South African Revenue Service to reconsider what must be regarded as a discriminatory ruling. Despite the TRQ only half the U.S. quota was imported in 2022-2023 due to competition from other exporters and domestic supply.

For the record exports to the RSA have declined successively since 2020:-

Year    Importer rank  Metric Tons

2020             11th         88,798

2021             14th         79,450

2022             14th         55,449

2023             18th         44,324

Aviagen has announced Ms. Yingxin Zhao as the 2023 recipient of the Poultry Science Scholarship.  Ms. Zhao is a graduate of the University of Alberta and will undertake doctoral studies relating to meat quality, working with a major producer in the Province.

Ms. Zhao commented, “This scholarship not only supports my academic pursuits, but also affirms the value of my research in the broiler meat industry.”  She added, “Thank you Aviagen and the Canadian Poultry Research Council for the scholarship award”.

Matt Klassen, Account Manager in Canada for Aviagen stated, “Ms. Zhao embodies the future of the Canadian poultry industry and Aviagen is proud to support her journey.” Aviagen is a longstanding supporter of the Canadian Poultry Research Council and will continue to invest in initiatives that promote a sustainable future for the poultry sector.

With the initiation of operations by Nest One a combination of HeadStart Hatching and Next Nest Hatching, Jennie-O Turkey Store will close hatcheries in Barron, WI in June and subsequently their facilities in Henning and Foley, MN.

Head Start Hatching and Next Nest Hatching were formed under Life-Sciences Innovations.  The joint-operation will be managed by Jonathan Huisinga, a fourth-generation participant of the turkey industry.  The Nest One Hatchery will be equipped with HatchTech incubation installations including a patented hatcher that allows poults to feed and drink after they hatch and dry, contributing to increased viability and livability.  The Nest One facility was planned over an extensive period with construction commencing in the fall of 2022 and completion in January 2024.  With incremental production, the facility has now attained projected capacity allowing Jennie-O to terminate existing activities and consolidate hatching in one modern unit.

In the most recent quarterly investors’ call Hormel CEO Jim Snee noted, “The modernization and investments have set up our plant, people and brand for growth by enabling us to more efficiently achieve our mission of meeting the needs of our customers and consumers with innovative products and services.”

The Barron, WI complex will cease operations during the current quarter and the plant will be repurposed for value-add further processing.

Mosa Meat of Holland has raised $43 million in a funding round led by LowerCarbon Ventures among others.

Maarten Bosch, CEO of Mosa Meats, stated, “The overall macroeconomic landscape has been rough in the last two years, that has culled the herd of companies and forced us to be even more strategic and focused on achieving our mission.”

Previously, the Company raised $55 million to expand pilot production.  The current expenditure will be to scale up to commercial production.  This step appears to be a major restraint to marketing cell-cultured meat since no company appears to have broken the barrier of consistently achieving commercial scale production in bioreactors.

At this stage, cell-cultured meat appears to be a giant black hole for venture capital funding with some estimates placing investment north of $2 billion since inception of the concept with little to show for the expenditure. Apart from the problem of production at a competitive cost, parliaments in France and Italy and state legislatures in the U.S. have imposed either outright bans as in Florida and Alabama or are to require onerous labeling requirements that are essentially discriminatory and to protect conventional livestock production. 

As with plant-based meat substitutes, affluent consumers may be willing to sample the product but long-term growth through universal acceptance will only be achieved at a comparable cost to conventional meat and with similar organoleptic properties and flexibility in preparation of a range of meat dishes.  Non-quantifiable attributes including environmental benefits will not be sufficient to justify a price differential or contribute to preferential purchase if texture or taste is inferior to protein from animals and poultry.

There appears to be more support for cell-cultured meat in the E.U. compared to the U.S. but production and economic restraints will determine the future of cell-cultured meat. Production at this time has not progressed beyond limited pilot scale.  The image of the embryonic industry has not been helped by unsubstantiated hype and in some cases, deliberate deception by unethical companies desperately seeking venture capital funding to survive until the next round.

Following revelations of illegal employment of minors to clean packing and processing plants, USPOULTRY in association with the National Chicken Council and the National Turkey Federation has established a task force to share industry best practices relating to prevention of child labor. The group will include company representatives with expertise in HR, communications and employment law.

This action is paralleled by the Meat Institute whose members have come under criticism for employing, directly or indirectly, children as young as 14 on nightshifts to clean equipment and facilities in contravention of both state and federal laws.  The most recent case involves a chain of plants in California used minors in deboning and further processing operations.  The owners and company were collectively fined and will have to repay $4.8 million in back wages and damages to close to 500 workers in addition to penalties. 

Fayette, Inc., based in Tennessee, was subject to a $650,000 fine as a result of employing 24 children in plants owned by Seaboard Triumph Foods, LLC in Sioux City, IA. and Perdue Farms in Accomac, VA.  The case involving Packers Sanitation Services, Inc. that provided labor for meat plants in the Midwest through 2023 was the most publicized case of egregious and widespread employment of minors.

Underage workers are usually recruited from the local community to join cleaning teams.  In the course of investigations, the Department of Labor referred possible trafficking allegations to the Department of Justice for additional action.  A large number of unaccompanied minors have entered the U.S. across the southern border, and are exploited by recruiters who in turn provide services to established U.S. companies processing livestock and poultry. 

The Meat Institute has developed a Best Practices document to enable plant management to verify age and employment eligibility.  Both fines and negative publicity should deter packers and processors from simply handing off responsibility to labor contractors given the consequences of unfavorable media attention and inevitable lawsuits.

The action by USPOULTRY and two of the associations representing major segments of the poultry industry is commendable.   Children have no place in processing and packing plants where they are exposed to corrosive chemicals and hazardous equipment as evidenced by injuries and deaths reported during the past two years.

The Pan-American Health Organization and the World Health Organization have become involved in an investigation of an extensive outbreak of Guillain-Barre Syndrome (GBS) in Guatemala.  A total of 87 cases have been documented with five fatalities localized in two regions in the nation.  The first cases were detected in November 2023 ceasing in early March.

GBS is an infrequent sequel of campylobacteriosis affecting approximately one in 1,000 cases.  The condition is characterized by muscular weakness extending to paralysis and is attributed to an autoimmune response against nerve tissue stimulated by antigens produced by a specific strain of Campylobacter jejuni.  GBS usually occurs within weeks of an acute gastroenteritis characterized by bloody diarrhea.  An initial investigation of the Guatemala cases disclosed deficiencies in food preparation and in personal hygiene leading to campylobacteriosis.

Health officials in Guatemala are continuing their epidemiologic investigations and motivating acceptable practices in food preparation.

There is low prevalence of GBS among those recovering from campylobacteriosis estimated at 1 in 1,000 cases. Unfortunately the consequences of the condition justify suppression of Campylobacter jejuni through the entire production chain of poultry meat considered to be a major vehicle of infection. At this time there is no effective pre-harvest method to prevent intestinal colonization of flocks.  Fortunately, post-harvest measures including chlorination and other approved additives to spin chiller water and carcass washes lowering levels of Salmonella will also reduce the extent of surface contamination with Campylobacter.  Thorough cooking destroys foodborne non-spore forming bacterial pathogens. 

In a press release dated May 8th Beyond Meat Inc. (BYND) announced results for the 1st Quarter ending March 30th 2023. The Company beat a consensus revenue projection of $75.2 million but loss exceeded the anticipated $(43.1) million. BYND fell 13.5 percent in after-hours trading following the release attributed to the wider loss and a weak forecast.    

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS)

* ‘+’ denotes improvement (or ‘less bad’)

NOTES:

R&D expenditure declined 67 percent from Q1 2023 to $9.9 million or 13 percent of revenue

S&G expenditure declined 9.7 percent from Q1 2023 to $47.3 million or 65 percent of revenue  

For Q1 FY 2024:-

52-Week Range in Share Price:  $19.25  to  $5.58    50-day Moving average  $7.54

Forward P/E: Neg.                  Beta 2.4

Insiders hold 9.2 percent of equity, Institutions 37.3 percent.

Comments:-

For Q1 2024:

     U.S. sales represented 65.3 percent and International 34.7 percent

          Of U.S sales 75.1 percent were through retail channels, unchanged from Q1 2023

            Of International sales 48.0 percent were through retail channels, up from 42.8 percent in Q1 2023

Average unit revenue in Q1 2024 for all sales attained $4.56/lb. compared to $4.67/lb.

          during the corresponding quarter of 2023.

Guidance for FY 2023 included:

      Net revenue of between $315 and $345 million.

      Gross margin of mid- to high ‘teens.

      Operating expenses $170 to $190 million

      Capital expenditure $15 to $20 million

      Continued negative cash flow

In commenting on results Ethan Brown president and CEO stated:-  “In Q1, we made solid progress against our 2024 priorities, including: hitting our first quarter revenue objective; reducing operating expenses and cash consumption year-over-year; bringing production in-house to reduce costs and improve quality; and commencing shipments of Beyond IV, the fourth generation of Beyond Burger and Beyond Beef, to our customers, to the praise of nutritionists and consumers alike.”

Brown concluded “Together with measures we are exploring to bolster our balance sheet, we continue to work to position 2024 as a pivotal year as we strive to achieve sustainable and profitable operations.”

Despite this optimistic commentary the reality includes:-

• An accumulated deficit of $1,135,614 million.
• Trailing 12-month negative operating cash flow of $97.5 million
• Inventory of $122,538 represents 1.6 times Q1 FY 2024 sales
• Effective October 30th 45.1 percent of float was short
• Share price of $7.15 on May 8th off 62.8 percent over past 12-month high of $19.25
• Institutional holdings declined from 63 percent to 37 percent over past year.

In a press release dated May 1st Pilgrim’s Pride Corp. (PPC) announced results for the 1st Quarter FY 202 ending March 31st 2023. The quarterly figures showed positive earnings for all three segments with higher revenue and operating profit across all three geographic areas. Earnings were appreciably above Q1 2023 and exceeded consensus estimates on both revenue and earnings for Q1 2024.

The following table summarizes the results for Q1 2024 derived from the SEC 10-Q form and the Company release. Values are compared with the corresponding Q3 FY 2022 (Values expressed as US$ x 103 except EPS)

1. March 31st 2014/ December 31st 2023.

• Q1 2024, $10.3 million interest income (Q1 2023, $36 million)
• Q1 2024  $3.3 million miscellaneous income (Q1 2023, $22.7 million)
• Q1 2024  $4.3 million gain in foreign currency transactions (Q1 2023 $22.7 million loss)

Operating income and sales posted by the three business segments during Q1 2024 were:-

      U.S.      71.7 percent of company operating income on 59.1 percent of sales

      Europe  12.4 percent of company operating income on 29.1 percent of sales

      Mexico  15.9 percent of company operating income on 11.8 percent of sales

52-Week Range in Share Price of PPC:  $19.96 to $36.99.  50-day Moving average,  $34.05

Market Close: May 1st pre-release    $35.54.

             Close: May 2nd post-release $35.95.

Current Forward P/E 14.6    Beta 0.8  

Equity held by insiders and holding Company: 82.6 percent, Institutions, 17.0 percent

In commenting on Q4 results Fabio Sandri, CEO stated “Although we experienced depressed market conditions and persistent consumer inflation throughout 2023, we saw this as opportunity to enhance our competitive advantage. To that end, we focused on consistent execution of our strategies, controlling what we can control, and maintaining investment in our operations. These efforts further strengthened our business, accelerating our profitable growth as market conditions evolved,”

Sandri continued “During the first quarter, the U.S. continued to improve as Big Bird realized significant benefits from enhanced operational efficiencies and market fundamentals. Case Ready and Small Bird continued to grow from increased distribution to Key Customers, promotional activity, and the value of chicken to consumers. Prepared Foods also drove significant growth in both retail and food service through branded offerings, further diversifying the portfolio.

Addressing Europe, Sandri noted “Consumer inflation and labor costs continue to be challenging. Nonetheless, the team secured additional business with retail Key Customers, drove branded growth above category averages, and identified further

In relation to Mexico, Sandri observed, ”We improved through a combination of enhanced supply and demand fundamentals in the commodity market, increased Key Customer partnerships, and further momentum of branded offerings”.

Sandri concluded, “Our strategies continue to demonstrate their effectiveness as we’ve grown ahead of the markets with our Key Customers. Similarly, our branded portfolio continues to gain acceptance throughout the market, further diversifying our portfolio. When these efforts are combined with our operational excellence initiatives to expand capacity, we can further drive our profitable growth,”

In a press release dated May 6th Tyson Foods Inc. (TSN) announced results for the 2nd quarter of FY 2024 ending March 30th 2024. TSN posted lower revenue than the $13,100 anticipated but was higher on adjusted earnings ($0.62 vs. $0.39).

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS)

* Goodwill and intangibles 42.3 percent of total assets

52-Week Range in Share Price of TSN:  $44.94 to $61.71.  50-day Moving average,  $57.43

Market Close: Friday May 3rd $61.93. Monday May 6th Open post release, $61.02.

Forward P/E 27.0                  Beta 0.8

The Chicken Segment attained sales of $4,065 million ($4,430 million in Q2 FY 2023) representing 31.1 percent of Company revenue. GAAP operating income attained $158 million in Q2 representing 50.5 percent of net Company operating income. Operating loss in Q2 FY 2023 was $(258) million.  For the Chicken Segment the report stated:- “The USDA projects chicken production will be up 1.0% in FY 2024”. Anticipated adjusted operating income for the segment was forecast at $700 to $900 million for FY 2024. Improvement in the Chicken Segment is attributed to lower feed cost estimated at $190 million for Q2 and reduced operating expenses with consolidation following closure of six plants in four states.

For comparison among Tyson Foods’ business segments the adjusted operating income (loss) in Q1 2024 were respectively:- Pork, $(1) million; Beef, $(35) million; Prepared Foods $230 million and International $(40) million.

In commenting on results Donnie King, president and CEO stated, “During the second quarter, we continued our positive momentum and made progress on our key initiatives. The strategies we have implemented are delivering tangible results, as evidenced by our return to year-over-year bottom line growth." He added, "Looking to the back half of the year, we will continue to focus on executing the fundamentals and leveraging our multi-protein portfolio. We are energized by our progress to-date and laser-focused on driving long-term value."

Despite improved Q2 earnings TSN fell on negative comments during the investors’ call suggesting headwinds in Q3.

Guidance for FY 2024 included Revenue unchanged from FY 2023. Adjusted operating income for the Company was raised to $1.4 to $1.8 billion with Prepared Foods contributing $850 to $950 million. Capital expenditure was projected at $1.2 to $1.4 billion. In the Q2 2013 report Tyson Foods projected $1 billion in savings from the “Productivity Program” by the end of 2024 although this prediction was not confirmed as a quantitative value in the most recent quarterly report.

On May 1st Wingstop Inc. (WING) reported on Q1 ending March 30, 2024. Results exceeded consensus estimates on revenue by 7.2 percent and on earnings by 27 percent. For the period, total revenue including royalties and advertising fees attained $145,789 million. Net income was $28.8 million with a diluted EPS of $0.98. For Q1 FY 2023, total revenue was $108.7 million with net income of $15.7 million and a diluted EPS of $0.52.

Comparing Q1 FY 2024 with Q1 2023, revenue was up 34.1 percent and operating margin was 31.6 percent compared to 26.4 percent.

For Q1 growth in same-store sales attained 21.6 percent and digital orders represented 68.3 percent of systemwide sales.  At the end of Q1 Wingstop operated 2,279 locations of which 98 percent were franchised including 305 international units. The chain was extended by 65 locations during Q1.

In commenting on Q1, Michael Skipworth CEO stated, “Our fiscal first quarter 2024 showcased the momentum behind the Wingstop brand and the continued strength of our strategies, delivering same-store sales growth driven almost entirely by transaction growth,” He added, “Our domestic average unit volume exceeded $1.9 million, further strengthening returns for our brand partners and is strengthening our development pipeline, which gives us confidence in our ability to scale Wingstop into a Top-10 Global Restaurant Brand.”

Guidance for FY 2024 included low double-digit growth in domestic same-store sales.

The company posted total assets of $412.3 million of which $167.8 million comprised intangibles including goodwill, trademarks and ‘relationships’.  The company carries long-term debt of $730.8 million. 

Wingstop has a market capitalization of $11,410 million and has traded over 52-weeks in a range of $150.08 to $396.00 with a 50-day moving average of $368.85. The company generated a twelve-month trailing operating margin of 29.3 percent and a profit margin of 16.8 percent.  The return on assets attained 19.1 percent.  Shareholding is held almost entirely by institutions, but on April 15th, 6.9 percent of the float was short. 

USDA posted a wholesale price of $2.31 per pound for cut wings for the week ending April 19th.  According to the April 24nd USDA Cold Storage Report, there was a 19.6 percent decrease in inventory of wings on March 31st 2024, compared to the corresponding date in 2023 with a stock of 51.8 million pounds. During March 2024, inventory fell 1.7 percent reflecting stable demand despite sports events associated with consumption of chicken wings.

Rhode Island Beef and Veal Inc. and owner Michael Quattrucci were found guilty of fraud by claiming that uninspected meat products had passed federal inspection.  The verdict resulted in a $20,500 fine for the company and three years of federal probation and a $1,000 fine, and one year of federal probation for the owner. 

The USDA-FSIS terminated federal inspection of the plant on August 20th for cause. Rhode Island Beef and Veal continued to process carcasses, fraudulently applying the USDA mark.  Subsequent inspection confirmed the violation resulting in the guilty plea and penalty.

The National Cattlemen’s Beef Association supports the USDA Animal and Plant Health Inspection Service Program to introduce electronic ID ear tags.  The objective is to enhance traceability especially in the event of an outbreak of an exotic disease.  The recent emergence of bovine influenza-H5N1 is an example of how APHIS could regulate and control movement of both lactating and immature cattle to prevent dissemination of the infection.  Previously the need for positive and rapid traceability was demonstrated in investigation of cases of rare spontaneous atypical bovine spongiform encephalopathy.

Although the NCBA is concerned over cost, USDA has provided $15 million in funding to support the transition from existing “dumb” ear tags subject to detachment and fraud to a more effective and secure system.

In a press release dated May 2nd Maple Leaf Foods Inc. (MFI-TO) announced results for Q1 FY 2024 ended March 31st 2023.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS (conversion of CAN$1=US$0.73)

1.  Restructuring charge: Q1 2023, $5.6 million;

2.  Other expenses: Q1 2024, $0.9 million: Q1 2023, $3.1 million

52-Week Range in Share Price:  $15.71  to  $23.09   50-day Moving average  $17.01

Forward P/E 30.5      Beta  0.5

Insider shareholding 40.0%. Institutional shareholding 25.8%

In commenting on Q4 results Curtis Frank president and CEO stated “In the first quarter of 2024, we delivered Adjusted EBITDA of $116 million, 55% higher than the same period last year. With sales growth within our prepared meats portfolio, and a sequential improvement in our meat protein Adjusted EBITDA margin to 10.8%, and a 310 basis point improvement over last year, we took a meaningful step forward toward delivering our full business potential”.

Frank explained,  “The modest decline we saw in overall sales compared to Q1 2023 was primarily a function of sourcing decisions to reduce outside purchases in poultry and pork, impacting sales in the short term while setting us up to deliver on our plans moving forward.

He concluded, “Looking ahead, we expect the momentum in our business to continue to accelerate. Pork headwinds, while still a challenge, are easing, and our attention is squarely on executing our refreshed Strategic Blueprint,” continued Frank. “With a powerful platform of brands, a network of world-class assets and our leadership in sustainability, we have the right strategy and team in place to drive growth in Canada, accelerate our reach in the U.S. and fully realize the benefits of our recent capital investments.”

The Company provided the following comments on strategy and guidance:-

“The Company has combined its Meat and Plant Protein businesses and aligned its organizational structure to focus on its growth potential in key markets, drive operational efficiencies, and provide clear accountability for strategic execution. Based on this realignment and focus as a protein company, as of the first quarter of 2024, Maple Leaf Foods is reporting its business and operational results as a consolidated protein company, to align with how management monitors and measures business performance. With these changes, the Company believes it is positioned to achieve a consolidated Adjusted EBITDA margin target of 14% to 16% in normal market conditions. Previously, the Company's Adjusted EBITDA margin target of 14% to 16% in normal market conditions was solely for meat protein. The Company achieved an Adjusted EBITDA margin for meat protein of 10.8% in the first quarter of 2024”.

“As a consolidated protein company, Maple Leaf Foods has two operating units: Prepared Foods and Pork, which represent on average approximately 75% and 25% of total Company revenue respectively. Prepared Foods combines the operations of prepared meats, plant protein, and poultry, which represent on average approximately 50%, 5% and 20% of total Company revenue respectively”.

It will no longer be able to evaluate the plant-protein business or to confirm that this previous segment achieved profitability. It appears that Maple Leaf Foods has followed the approach of “if you can’t fix it, bury it”!

Seaboard Corporation is the majority shareholder in Butterball LLC with 52.5 percent of equity The subsidiary is ranked as the second largest turkey producer in the U.S.

The Seaboard Corporation SEC 10-Q filing recorded net income from Butterball of $7 million  corresponding to a Q1 net income for Butterball of $13.5 million based on shareholding. The Company statement noted:- “Net income for Butterball decreased $33 million for the three-month period of 2024 compared to the same period in 2023. The decrease in net income was primarily the result of a $38 million decrease in sales due to a 7 percent decrease in the average selling price related to a decline in commodity pricing and a 3 percent decrease in volumes sold. The decrease in sales was partially offset by a 14 percent decrease in production costs, primarily related to lower feed costs. Management is unable to predict market prices for turkey products or the cost of feed for future periods; however, management anticipates this segment will be profitable for the remainder of 2024”.

At the end of FY 2023 on December 31st 2023, Butterball LLC posted assets of $1,120 million, with $172 million represented by goodwill and intangibles.  Given total liabilities of $408 million the shareholders’ equity is $702 of which $365 million accrues to the majority shareholder.

Nan-Dirk Mulder, Senior Analyst at Rabobank anticipates a four to five percent annual growth rate in poultry production in South Asia and Southeast Asia through 2030.  Growth is anticipated due to an increase in population and a growing preference for poultry meat.  His projection suggests that supply will come from domestic production with only Thailand expanding their export market.  Mulder envisages restructuring of poultry production with greater integration and modernization.  Expansion will also involve marketing of poultry meat through a cold chain, disfavoring live-bird markets.

Rabobank recognizes investment opportunities in Southeast and South Asia both in poultry production and the cultivation and processing of oilseeds.

The State Senate of Arizona has enacted a more moderate version of the State House Bill requiring labeling of cell-cultured meat and poultry products.  The House version would have banned the terms “meat” and “poultry” on cell-cultured products.  The amended version will require labeling that specifies that the product was not derived from a live-animal. As a result of the modification, the bill has been transformed from protectionist to informative in intent.

To facilitate exports, members of Congress representing constituencies with significant chicken production have requested the Director of  the USDA-APHIS, Dr. Michael Watson to petition the World Organization for Animal Health (WOAH) to revise the definition of “poultry”.  Currently WOAH fails to distinguish between commercial production of chickens and turkeys from non-commercial operations that have negligible influence on exports.  Embargos placed on entire states or counties have impeded exports from major broiler production and exporting areas including Georgia, Arkansas and North Carolina. Restrictions have been imposed by importing nations on U.S. states and regions as a result of outbreaks on farms that are not commercial operations unrelated to export.

It is the contention of the chicken caucus that the U.S. suffers from discrimination with respect to competitors including Brazil and Canada that are beneficiaries of exemptions or perhaps have failed to completely disclose the extent of outbreaks of HPAI. 

The letter to Dr. Watson included, “Because WOAH is not taking prompt action on this important matter, APHIS as our Country’s representative to the international body must elevate this issue as an urgent priority for the sake of our farmers’ livelihoods and in order to maintain the value of American agriculture.”  The letter noted that the U.S. Animal Health Association distinguishes among backyard, wild and commercial flocks in the context of international trade. The letter concluded, “America’s agriculture competitiveness depends on having fair, up-to-date global animal health rules which would provide producers with a level playing field.”

While the requested changes in definition are justified, it is questioned whether this will make any difference with respect to nations that discriminate against U.S. exports including China.  This nation only conforms to international standards and agreements when it suits their interests as exemplified by their action since the emergence of the H5N1 panornitic.

It is however ironic that as a segment of the U.S. poultry industry, broiler producers are at this time opposed to vaccination against avian influenza, notwithstanding WOAH policy accepting immunization as an adjunct to biosecurity and quarantines.  The concern by broiler producers is that introduction of vaccination even with appropriate monitoring and surveillance will imply that HPAI infection is endemic.  In reality, HPAI is both regionally and seasonally endemic and despite the depopulation of 80 million birds, over three years, the infection has not been eradicated. Given the epidemiology of the disease involving seasonal introduction by migratory waterfowl and marine birds, infection will persist.  With gathering scientific and anecdotal evidence of aerogenous infection, albeit over short distances biosecurity, however intensive and efficient cannot provide absolute protection.

Mitigation of the financial impact of avian influenza will not be achieved by changes in definitions and trade rules or continued futile attempts at ‘stamping out’. A structured and regulated program of vaccination of turkeys, egg-production flocks and breeders in areas at high risk of infection will lower the incidence rate of seasonal outbreaks. This will reduce the unlikely probability of H5N1 or other pathogenic influenza viruses infecting avian and mammalian livestock from becoming zoonotic.  Acceptance of regional and sector-specific preventive vaccination should be the focus of APHIS representations to the WOAH and our trading partners.