Editorial

JBS USA Pays $11 Million to Cyber Criminals

In a June 9th release, JBS USA admitted to paying $11 million in ransom in the form of Bitcoin as a result of the cyber attack mounted against the company IT system on Sunday June 6th. According to preliminary reports issued on Monday June 7th the company confirmed the attack and announced a temporary closure of plants in the U.S. and Australia but indicated that there was no release of information relating to employees, suppliers or customers. The CEO Andre Nogueira noted that backup systems and the actions of IT professionals would reestablish operations the following day.


Andre Norgueira
CEO JBS USA

CHICK-NEWS as with other media dutifully reported on the situation quoting the press release authorized by the CEO.  On Wednesday June 9th the Company issued a statement confirming it had paid the equivalent of $11 million in ransom, a fact that was known previously to officers of the Company but not revealed.

 

The June 9th statement raises more questions than were settled by the bland and reassuring content:

 

  • Why if the company apparently spends more than $200 million annually on IT and employs more than 850 IT professionals was a group of admittedly sophisticated hackers able to penetrate security and literally close down company operations?

 

  • The CEO stated, “We felt the decision (to pay ransom) had to be made to prevent any potential risks for our customers.”  This is gaslighting.  The primary concerns were partly restoration of company function, given the potential losses involved and preservation of Company documentation.

 

  • But why pay the $11 million ransom after the company ascertained that it could operate plants?

 

The June 9th statement was somewhat self-congratulatory in that it attributes resolution to “cyber security protocols, redundant systems and encrypted backup service.”  If these had been effective the Company would not have been impacted in the first instance and would most certainly have detected attempts at infiltration and not have had to pay $11 million.

 

The magnitude of the ransom and the circumstances and timing of the $11 million payment has elicited a response from Congress. Rep. Carolyn Maloney (D-NY) Chair of the House Oversight Committee has requested all relevant documents and information relating to the decision made by JBS USA to pay the ransom.

 

A tactic of ransomware hackers has been to not only lock computer systems but also to threaten to release company data and documents.  It is possible that JBS could have restarted operations using their claimed redundant systems and encrypted backup servers but feared the release of memos, internal documents and financial data. This would have been embarrassing to JBS USA and JBS S.A the holding company, given many aspects of recent history and the ultimate intention to file for an IPO on the NYSE.

 

Cooperation between the Colonial Pipeline Company and the FBI resulted in clawing back the 69 Bitcoin that comprised the ransom.  It will be interesting to determine whether JBS USA presses forward with an attempt to reclaim the ransom or whether the $11 million was a justifiable expense to maintain confidentiality and avoid release of documents. They are obviously aware of the 2016 case involving Mossack Fonesca, a legal firm in Panama representing shady oligarchs and politicians who were hiding money offshore and also the politically calamitous hack of the Democratic National Committee in 2016.

 

A higher level of transparency would be beneficial to the image of the holding company and its U.S. subsidiary. Congress is entitled to learn the circumstances of this attack, why such a large ransom was handed over to criminals so quickly and whether the Company cooperated with appropriate Federal agencies.

 

Poultry Industry News

Sanderson Farms Considering Acquisition Offer

According to The Wall Street Journal, Sanderson Farms (SAFM) the third largest U.S. broiler producer has engaged Centerview Partners to advise on a possible acquisition by multinational Continental Grain, owner of seventh-ranked Wayne Farms. Sanderson Farms previously rejected a $142 per share offer from Durational Capital Management in October 2020

 

On release of the news Sanderson shares soared, having closed closing at $166.58 on Monday 21st June to open at $185.62 on Tuesday 22nd June. As of 10H00 EDT Sanderson market capitalization attained $4.1 Billion. The shareholding is distributed in the proportion of 10.0 percent insiders and 82 percent institutions.

 

 The transaction if finalized will undergo Federal scrutiny but will probably be approved since a merger with Wayne Farms will still place the combination behind industry leader Tyson Foods and second-ranked Pilgrim’s Pride. The combination would provide synergy and allow the combined enterprise to benefit from the international and comprehensive scope of Continental Grain. 

 

SAFM has traded over the past 12 months in the range of $108.57 to $185.62 with a 50-day moving average of $167.23.  On a trailing 12-month basis SAFM has returned 8.5 percent on assets and 11.6 percent on equity. The company posted an operating margin of 7.0 percent and a profit margin of 4.2 percent over the past 12 months. For the most recent 2nd Quarter of FY 2021 ending April 30th SAFM earned $96 million on sales of $1.13 Billion

 


 

COMMODITY REPORT

WEEKLY COMMODITY REPORT: June 17th 2021.

 

  • Markets declined sharply this past week influenced by upward pressure on the U.S. Dollar as a result of anticipated inflation; China tightening fiscal policy and stabilizing prices of pork and corn and China raising corn output by 4 percent to 271.8 million metric tons (10.709 billion bushels). There was little impact on prices from the June 10th WASDE Report that left areas and yields unchanged. Report #613 adjusted ending stocks for corn down by 10.0 percent and raised stocks for soybeans by 10.7 percent. Projected harvests and ending stocks will be restated in the July WASDE especially when there is greater clarity on the effect of weather.
  • S producers are now receiving and conversely livestock producers in the Midwest are paying above $6.50 per bushel for corn and crushers are paying $3.50 per bushel for soybeans plus transport and basis. Corn was a noteworthy 10.2 percent lower this week and the price of soybeans was 14.4 percent lower compared to the previous week. Soybean meal was down 5.5 percent for July delivery but will soon reflect the decrease in price of soybeans.
  • According to the USDA FAS Export Report for the week ending June 10th 2021, reflecting market year 2020-2021, outstanding export orders for corn for this market year amounted to 14.7 million metric tons (579 million bushels) with 54.6 million metric tons (2,151 million bushels) actually shipped. During the past week a net quantity of 0.18 million metric tons (7.1 million bushels) of corn was sold for delivery during the 2020-2021 market year. A total of 1.7 million tons (67.0 million bushels) of corn was shipped. For the succeeding 2021-2022 market year commencing in September, 0.3 million metric tons (12 million bushels) was ordered this past week with outstanding sales amounting to 15.4 million metric tons (607 million bushels) of new crop corn.
  • Outstanding export orders for soybeans for the 2020-2021 market year stand at 3.7 million metric tons (136 million bushels) with 57.9 million metric tons (2,125 million bushels) actually shipped. Weekly sales of soybeans attained <0.1 million metric tons (<3.7 million bushels) with 0.15 million metric tons (5.5 million bushels) shipped. For the 2021-2022 market year outstanding sales for soybeans amount to 7.6 million metric tons (279 million bushels) with 0.07 million metric tons (2.6 million bushels) sold this past week
  • During the past week 177,300 metric tons of soybean meal and cake were ordered, up 30.0 percent from the previous week. The quantity shipped attained 199,000 metric tons, 26 percent less than the previous week.

 

The following quotations for delivery in the months as indicated were posted by the CME at close of trading on June 17th 2021 compared with values posted at 13H00 on June 10th 2021 (in parentheses) reflecting specified months for delivery.

 

COMMODITY

Corn (cents per bushel)

 July 633 (705)

Sept 548 (640)

Soybeans (cents per bushel)

 July 1,325 (1,549)

Sept 1,252 (1,471)

Soybean meal ($ per ton)

 July 362 (383)

Sept. 364 (388)

 

Changes in the price of corn, soybeans and soybean meal over five trading days this past week were:-

COMMODITY CHANGE FROM PAST WEEK

 

Corn: July quotation down 72 cents per bushel (-10.2 percent)

Soybeans: July quotation down 224 cents per bushel (-14.4 percent )

Soybean Meal: July quotation down $21 per ton (- 5.5 percent )

 

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

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

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

 

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

The cost of egg production would change by 0.44 cent per dozen

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

 

This week the downward change in the prices of corn and soybean meal would decrease nest-run production cost for eggs by 4.1 cents per dozen and for broilers 2.3 cents per live pound. Over the past 23 weeks, escalation in the prices of major ingredients have added 10.6 cents per dozen and 6.6 cents per live-weight lb. to production cost

 

The USDA weekly wholesale feedstuffs prices expressed per short ton posted on June 16th (with previous week in parentheses) were:-

  • Corn: $238 ($242), Chicago
  • Soybean Meal: $374 ($391), Central Illinois
  • Meat and Bone Meal: $425 ($415), Central Midwest
  • DDGS: $213 ($215), Eastern corn belt

 

According to the June 10th WASDE, corn harvested in calendar 2021 will attain 14,990 million bushels with ending stocks projected at 1,357 million bushels, down 10.0 percent from the 1,507 million bushels in the May 2021 WASDE Report. Values will be updated reflecting production, ongoing export volumes and domestic use in the July WASDE report. Compared with the June 10th value, the CME quotation for corn at close of trading on June 17th was down 72 cents per bushel for July delivery to 633 cents.

 

The restrictions imposed in the U.S. as a result of COVID-19 will reduce ethanol demand by 1.5 billion gallons or 10 percent of projected 2020-2021 requirement accepting a nominal ten percent addition to gasoline. This past week 82.1 percent of the U.S. ethanol fermentation capacity was operational, based on January U.S. Energy Information Administration (US EIA) data. The outlook for increased production will depend on higher domestic demand with approximately ten percent of production exported. According to the U.S. EIA, for the week ending June 11th the industry produced on average 1,025,000 barrels per day down 3.9 percent above the week ending June 4th 2021. On June 11th ethanol stock was 3.0 percent above the previous week at 20.6 million barrels, (an approximately 20-day reserve).

 

Ethanol was priced at $2.48 per gallon on June 17th unchanged from the previous week and should be compared with a five-year low of $0.92 per gallon on March 26th 2020 during COVID restrictions. Concurrently RBOB gasoline at $2.15 per gallon (quoted, New York Harbor) was down 7 cents per gallon (3.2 percent) from the previous week presumably due to reduced demand, since WTI crude price ($70.97 per barrel) was fractionally higher than last week. Gasoline is 33 cents per gallon lower than ethanol but with a 63 percent higher BTU rating.

 

With most plants among the 201 that were operational on January 1st 2021 now functioning, DDGS is freely available but commanded a higher price than in the first quarter of 2021. Eastern Corn-belt DDGS was priced at $215 per ton on June 16th 2021, $4 per ton lower than the previous week but $63 per ton more expensive than on June 9th 2020. Generally DDGS is incorporated at low inclusion levels in egg-production formulas based on high price relative to the nutrient contribution of corn and other ingredients.

 

 Soybeans continue to be the beneficiary of export demand by China and other nations. The CME price at close of trading on June 17th lost 224 cents per bushel over the week to 1,325 cents per bushel for July delivery. The USDA documented a 2021 crop of 4,405 million bushels. 6.5 percent higher than for 2020. Ending stocks according to the June 10th 2021 WASDE projection will attain 155 million bushels, up 15 million bushels from the May Report. This is however close to a seven-year low and possibly represents an over-estimate.

 

According to a release on June 15th by the National Oilseed Processors Association, 164 million bushels of soybeans were crushed in May compared to an estimate of 165 million bushels. The May crush value was 2.9 percent lower than in April partly due to disruption caused by maintenance and a disinclination to purchase high-priced soybeans. On June 16th 2021 soybean meal quoted central Illinois attained $374 per ton, $17 per ton lower than the previous week and compared to $289 per ton on June 9th 2020.

 

On June 16th 2021 Meat and Bone meal quoted Central U.S. attained $425 per ton, $10 per ton higher than the previous week and compared to $290 per ton on June 9th 2020 when a surplus prevailed due to COVID-related disruption of packing operations requiring euthanasia and disposal of hogs.

 

On June 17th the conversion of CNY 1 to the BRL was 0.82 BRL, up CNY 0.03 from the previous week. The conversion of US$1 to the CNY was set at CNY 6.25 (up CNY 0.14, from the previous week.

 

For consecutive calendar years 2017 through 2019 the U.S. supplied 34.4 percent of soybean requirements for China amounting to 95.5 million metric tons. This was followed by a decline to 16.9 percent of 88.5 million metric tons in 2018 and 16.6 percent of 88.0 million metric tons in 2019. The USDA anticipates that soybean imports by China will amount to 95 million metric tons during the 2020-2021 market year.

 

For the 2019/2020 market year China imported 2.1 million metric tons of corn from the U.S., 4.8 percent of total exports of 43.3 million tons, but 12 percent less than in the 2018/2019 market year. The U.S. Grains Council documented sales of U.S. corn to China through December 31st 2020 during the 2020/2021 year amounting to 11.7 million metric tons (460 million bushels) with 65 percent yet to be shipped.

 

For the 2019/2020 market year China imported 16.3 million metric tons of soybeans from the U.S., 36.2 percent of total exports of 44.9 million metric tons, but 3.9 percent less than in the 2018/2019 market year.

 

COMMENTS

Subscribers are referred to the June 10th 2021th WASDE #613 under the Statistics TAB.

 

Consistent with the need for self-sufficiency China announced on January 8th that an additional 1.7 million acres would be planted to corn in 2021. China intends to rehabilitate 6.8 million acres of “polluted land” to be brought into production.


 

Turkey Week

Weekly Turkey Production and Prices June 22nd 2021

 

Poult Production and Placement:

The June 16th 2021 edition of the USDA Turkey Hatchery Report, issued monthly, documented 26.6 million eggs in incubators on June 1st 2021 (25.4 million eggs on May 1st 2021) and down 6.9 percent (2.0 million eggs) from June 1st 2020.

 

A total of 20.6 million poults were hatched during May 2021 (22.6 million in April 2021), and representing a decrease of 4.4 percent (0.9 million poults) from May 2020.

 

A total of 19.4 million poults were placed on farms in the U.S. in May 2021, (21.6 million in April 2021), and 1.0 percent less than in May 2020. This suggests disposal of 1.2 million poults during the month (1.0 million in April 2021). Assuming all tom poults were placed, up to 11.7 percent of May-hatched hen poults or 6.3 percent of all May-hatched poults may not have been reared. This is an unsubstantiated estimate with a fluctuating demand for processed toms and hens in a post-COVID affected market. (See relative numbers of hen and tom poults processed under Production Data below).

 

For the twelve-month period June 2020 through May 2021 inclusive, 269.3 million poults were hatched and 248.3 million were placed. This suggests disposal of 21.1 million poults. Assuming all tom poults were placed, (representing a broad assumption as above), 15.7 percent of hen poults or 7.8 percent of all poults hatched during the period were not placed.

 

To be updated in mid-July 2021 following release of monthly USDA data

 

Turkey Production:

The June 18th 2021 edition of the USDA Turkey Market News Report (Vol. 68: No.24) confirmed the following provisional data for turkeys slaughtered under Federal inspection:-

  • For the processing week ending June 12th 2021, 1.911 million young hens were slaughtered during the processing week at a live weight of 18.6 lbs. (last week 1.617 million hens at 17.3 lbs.). During the corresponding week in 2020, 1.617 million hens were processed, 15.4 percent more than the current week. Ready-to-cook (RTC) hen weight for the week attained 28.6 million lbs. (12,985 metric tons), 15.1 percent less than the corresponding processing week of 2020. Dressing percentage was a nominal 80.5. In 2021 RTC hen production attained 526.5 million lbs. (239,323 metric tons), 0.2 percent less than for YTD 2020.
  • For the processing week ending June 12th 2021, 1.959 million toms were slaughtered at 43.3 lbs, compared to 1.685 million toms processed during the previous week at 44.3 lbs. For the corresponding week in 2020, 2.100 million toms were processed, 7.2 percent more than in the past week. Ready-to-cook tom weight for the week attained 68.3 million lbs. (31,060 metric tons), 11.2 percent less than the corresponding processing week in 2020. Dressing percentage was a nominal 80.5 percent. In 2021 RTC tom product attained 1,776 million lbs. (807,119 metric tons), 8.0 percent less than for YTD 2020.
  • The National average frozen hen price during the past week was 123.8 cents per lb., 4.9 cent per lb. higher than the previous week and up approximately 31 cents per lb. from the three-year average. The following prices rounded to nearest cent were documented for domestic and export trading on June 18th 2021:-

 

Status of 2021 Corn and Soybean Crops

The USDA Crop Progress Report released on June 21st documented corn and soybean crop condition to June 20th compared to the 5-year averages. Corn planting is complete ahead of the 5-year average. Soybean planting is ahead of the five-year average, advancing 3 percent this past week to 97 percent completed. Corn and soybean emergence parallels the rate of planting at 100 percent for corn and 91 percent for soybeans.

 

U.S. average surface moisture levels were generally lower over the past week over the corn belt with Iowa, Illinois and Michigan deteriorating compared to last week and corresponding weeks in 2020. The severe drought in Western states and the Dakotas continues. Texas as a state is no longer in drought following prolonged and heavy rains with flooding across the Gulf Coast in early June. Topsoil moisture in Iowa improved 6 percent this past week to 64 percent compared to 39 percent two weeks ago in the “Very Short” and “Short” categories. Pennsylvania deteriorated slightly to 26 percent and Illinois recorded 32 percent representing the sum of the two driest topsoil categories.

 

CHICK-NEWS and EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of the 2021 harvest in November.

 

Reference is made to the June 10th WASDE Report #613 accessible in this edition for projected 2021 acreage and yields. This data will be updated after Report #614 is released in mid-July when acreage and projected yields have firmed.

 

WEEK ENDING

Crop

June 13th

June 20th

5-Year Average

Corn Planted (%)

Corn Emerged (%)

100

100

100

100

100

100

Soybeans Planted (%)

Soybeans Emerged (%)

Soybeans Blooming (%)

94

86

0

97

91

5

94

85

5

Crop Condition

V. Poor

 Poor

Fair

Good

Excellent

Corn 2021 (%)

Corn 2020 (%) 1

1. Late planting

1

1

5

4

29

23

54

57

11

15

Soybeans 2021 (%)

Soybeans 2020 (%)1

1. Late planting

2

1

7

4

31

25

51

58

9

12

 

Parameter

V. Short

Short

Adequate

Surplus

Topsoil moisture %: Past Week*

15

30

50

5

Past Year

8

26

59

7

Subsoil moisture %: Past Week

15

28

53

4

Past Year

6

22

65

7

 

*Western States with categories of “Very Short and “Short” Topsoil moisture combined (with previous week in parentheses):-

NM 90% (deteriorated, 75%)

SD 84% (deteriorated, 80%). This week 17% of corn and 35% of soybeans in “Poor” and “Very Poor” categories

ND 72% (deteriorated 62%). This week 20% of corn and 14% of soybeans in “Poor” and “Very Poor” categories

TX 31% (deteriorated, 20%; did improve following heavy rain in SE of State in early June)

CA 75% (stable 75%; low snow pack inadequate to support 2021 irrigation, dams depleted)

WY 71% (deteriorated 64%)

OR 84% (deteriorated 80%)

 

The major corn and soybean-producing states (KS, OH, IL, IN, IA, PA) have an average of 31% in the “Very Short” and “Short” categories (last week 28%) with a range of 11% for OH to 64% for IA.


 

Broiler Week

Weekly Broiler Production and Prices, June 22nd 2021.

 

Chick Placements.

The Broiler Hatchery Report released on June 16th 2021 confirmed that a total of 240.8 million eggs were set during the week ending June 12th 2021, up two percent from the corresponding week of the previous year and 0.2 percent (0.5 million eggs) less than the previous week in 2021.

 

A total of 178.7 million day-old chicks were placed among the 19 major broiler-producing states during the week ending June 12th 2021. Total chick placements for the U.S. amounted to 187.8 million, one percent more than in the corresponding week in 2020 and 0.5 percent (0.8 million chicks) more than the previous week. Claimed average hatchability was 80.0 percent for eggs set three weeks earlier, (79.8 percent for the previous week). Each 1.0 percent change in hatchability represents 2.4 million chicks placed per week with current settings. Cumulative placements for the period January 2nd 2021 through June 12th 2021 amounted to 4.30 billion chicks, up one percent from the corresponding period in 2020. During the period May 8th through June 12th 2021 weekly placements were on average 5.7 percent higher compared with the corresponding six weeks in 2020. This represents placement on average of an additional 10.7 million chicks per week.

 

Broiler Production

According to the June 18th USDA Broiler Market News (Vol. 68, No. 24) for the processing week ending June 12th 2021, 169.2 million broilers were processed during the past week (previous short week 116.9 million) at an average live weight of 6.48 lbs. (6.45 lbs. last week) and a nominal yield of 76 percent. The number of broilers processed was 3.9 percent more than the corresponding processing week in 2020. Processed (RTC) broiler production for the week was 833.0 million lbs. (378,641metric tons), (572.8 million lbs. last week), 4.9 percent more than the corresponding processing week in 2020. In 2021 Processed (RTC) production attained 18.59 million lbs. (8,448,275 metric tons), 1.3 percent less than YTD 2020.

 

Broiler Prices

The USDA National Composite Weighted Wholesale price on June 18th 2021 was down 0.2 cent per lb. from the previous week to 107.0 cents per lb., compared to 72.4 cents per lb. during the corresponding week of 2020; 105.4 cents per lb. for May 2021 and 95.0 cents per lb. for the three-year average. The industry still is impacted by the contraction in the food service segment following imposition of COVID-19 restrictions, although QSRs are using increasing quantities of breast meat for sandwiches.


 

Food Manufacturers Claim Collusion Among Railroads

Approximately 200 plaintiffs have been identified in a class-action lawsuit alleging that four Class-1 railroads (BNSF Railway Company; CSX Transportation; Norfolk Southern Railway Company and Union Pacific Railroad) colluded to impose a “fuel surcharge” on customers that exceeded fuel costs and was in fact intended to generate additional income.

The U.S. District Court for the District of Columbia previously ruled on multi-district litigation in favor of the Plaintiffs.  The ruling by Judge Paul L. Friedman denied a motion by the Defendants to exclude evidence of any discussion or agreement between or among rail carriers concerning interline movements and to enforce the statutory bar on inferring a conspiracy from specified evidence.”  Allegations of collusion and lawsuits commenced in 2007 and have continued without resolution.


U.S. District Court Washington DC

 

Watering Wisdom – Interview with Robert Hostetler, Ziggity Systems

Recently CHICK-NEWS had the opportunity to discuss nipple drinkers and watering concepts with Robert Hostetler, Vice-president of Ziggity Systems, a company that he co-owns with his brother Dale who serves as president. The Company was founded by Lloyd Bontrager and Eldon Hostetler in 1977 and is located in Middlebury, Indiana USA. Ziggity Systems specializes in the design and manufacturing of poultry watering systems for broilers, commercial layers, turkeys and ducks from day old to the end of their production cycle. Their products are sold worldwide through a distribution network serviced by account managers based around the world.

 

Ziggity’s strongly believes “that water supplied in a poultry house is your best friend if it ends up in the bird and your biggest enemy if it doesn’t” Ziggity believes that flocks should have constant access to water of a quality close to a potable standard as possible.


Robert Hostetler

 CHICK-NEWS:  How should a poultry watering system be evaluated?

 

 Robert: The suitability of systems should be evaluated based on what proportion of the water that goes through a meter in a poultry house is actually ingested, compared to the quantity that is not. The basic concept is to distinguish between water usage and actual consumption by the bird.  Usage is essentially the quantity of water that passes through the water supply pipe divided by the number of birds in a flock.  Consumption is what the bird actually ingests.  The difference between water usage and consumption is the quantity spilled.    

 

Unfortunately, nipple type drinkers are often evaluated and operated based on flow rate. A far better way to evaluate a watering system and a drinker is to evaluate and correlate bird performance with the moisture level of litter. Great broiler results including weight, conversion, livability and acceptable foot pad appearance means that the flock not only ingested adequate water but also had a favorable production environment. They were in fact raised on dry friable litter with little or no ammonia release. Comparing all the various brands and models of nipple type drinkers available today simply applying a flow rate formula may result in either too little water discharge or too much - either of which will have a negative effect on broiler performance.

 

CHICK-NEWS:  What is the difference between static flow rate and dynamic discharge?

 

 Robert:  “Static flow rate is the quantity of water released from the nipple drinker when the trigger pin is lifted vertically and held in the open position for a specific amount of time, usually for one minute with flow rate commonly expressed as ‘milliliters per minute’. Dynamic discharge is the quantity of water discharged from the drinker during the time that the bird is pecking intermittently at the trigger pin during the natural pattern of drinking “

 

CHICK-NEWS:  Can dynamic discharge be measured?

 

 Robert: “Unfortunately dynamic discharge cannot be directly measured. What we do know is that there is no direct correlation between the static flow rate when the trigger is lifted vertically compared to natural discharge with side-to-side dynamic activation. To demonstrate this Ziggity constructed a mechanical test bed that closely mimics the drinking pattern of a chicken pecking intermittently at a nipple trigger. Two available nipple drinker brands were selected for evaluation using the same water column pressure. Brand A had a static flow rate of 35 ml/min when the trigger was raised vertically while Brand B delivered 73 ml/min. yielding 109 percent more water than Brand A. When these two nipple drinkers were tested on the intermittent activation test bed Brand A discharged 12.2 ml/min of water while Brand B with the high static discharge rate released only 5.5 ml/min. Effectively Brand A discharged 120% more water than Brand B.  The takeaway is that a higher static flow does not automatically result in a higher dynamic discharge rate. While this does not tell how much water a chicken ingests when drinking it does question the validity of static flow rates in managing water column pressure or selecting a brand of nipple drinker to install or retrofit”.

 

CHICK-NEWS:  How do you relate the concept of dynamic discharge to management of water systems?

 

Robert: “Dynamic discharge or the amount of water that is released from the drinker when pecked by a bird is dependent on column pressure. Higher column pressure discharges more water into the bird’s beak than set at a lower column pressure. Selecting an appropriate column pressure is a function of beak capacity. Small chicks require a low column pressure so the drinker does not discharge more water than can be retained in the beak before swallowing. Any discharge of water above the capacity of the beak gravitates to the litter. The greater the volume of oversupply the higher the water content of litter. Growers are advised therefore to ‘read’ the litter directly under the drinker lines and adjust column pressure accordingly. Dusty dry litter under the drinker lines could mean column pressure should be raised and wet litter means it should be lowered. The ideal column pressure setting would provide dry friable litter with just a hint of moisture.” 

 

CHICK-NEWS:  What are the effects of wet litter?

 

 Robert:  “We are aware that wet litter can contribute to a number of health and quality problems.  These include pododermititis that is especially costly with heavy birds.  Feet that command a unit value of approximately $1,500 per ton when exported to China are downgraded or rejected if foot pads are damaged. Auditors consistently lower welfare scores if flocks demonstrate pododermititis either in the house or at the plant. Dermatitis is a concurrent problem occurring with pododermititis. Birds entering plants with fecal and litter-stained feathers increase the microbiological load entering scald tanks.  Wet litter also contributes to breast blisters that result in downgrades.  Wet litter is also associated with severity of coccidiosis and various forms of enteritis including clostridial necrotic enteritis.”

 

CHICK-NEWS:  Are there any other problems related to wet litter?

 

 Robert:  “Wet litter allows bacteria to generate ammonia that represents a manageable welfare criterion. Ammonia irritates the conjunctiva and corneas of eyes, degrading performance. Ammonia levels above 50 ppm for extended periods also damage the delicate lining of the respiratory tract, predisposing flocks to airsacculitis if respiratory viruses and pathogenic E. coli are present.”

 

CHICK-NEWS:  Don’t manufacturers sell nipple type drinkers with drip (catch) cups to prevent wet litter?

 

 Robert:  “That may be the intention but the reality is that a drip cup cannot absolutely ensure dry litter. Any watering system, even with catch cups can be mismanaged in a way that results in wet litter. But one thing a drip cup system cannot claim is that it permits an enclosed watering system. It is an open watering system birds drink and share their diseases. Whether in a floor system or in an aviary housing pullets or laying birds, drip cups represent a potential health hazard to flocks. There is no point in negating the beneficial effect of installing an enclosed drinking system and keeping it free of biofilm when inches below the water-bearing pipes, the flock can drink and sip from contaminated drip cups.  Numerous studies have shown that the bacterial level of water deposited in drip cups contains levels of E.coli quantified by laboratories as TNC (too numerous to count).  Drip cups are unnecessary if nipple drinkers are correctly selected on the basis of dynamic discharge and operated at an appropriate water column pressure.  Ziggity Systems has produced a series of instructional presentations in our Poultry Watering U series to demonstrate operation of nipple watering systems”

 

CHICK-NEWS:  What other topics are considered on Poultry Watering U?

 

 Robert: “The Ziggity Systems website <poultrywateringu.com> presents videos on topics including drinker management to optimize growth rate and feed conversion, bird welfare and prevention of biofilms.  Poultry Watering U is so popular that editions on the website are dubbed in Spanish, Mandarin, Korean, Japanese, French, Polish and Portuguese”.

 

 CHICK-NEWS:  What message do you wish to convey to service people and flock managers?

 

 Robert:  “Measure broiler performance by feed conversion, live weight and livability. Many of our international customers use the European Performance Factor that integrates these variables into a single figure. Quality and post-harvest criteria including saleable yield including top-grade feet, downgrades and re-work should also be considered”.

 

“Insufficient intake of water will obviously detract from genetic potential as water is a critical factor in growth and for temperature regulation. For that reason, it is important to have the proper  ratio of birds to nipples, the correct number of drinker lines based on house width, adjusting the height of drinker lines as the flock grows, adjusting column pressure based on beak size and preventing biofilm formation. But most importantly flock managers should be careful not to increase column water pressure too aggressively especially with young flocks. This will result in wet litter and release of ammonia creating a deleterious production environment.” 

 

“Ziggity Systems has invested in research and evaluation to ensure that our range of drinkers for broilers, breeders, commercial layers, ducks and turkeys function in accordance with the physiologic needs of flocks”.


 

Fired Danone CEO Expresses Grievance Over Board Governance

Emmanuel Faber was recently relieved of his position as CEO and Chairman of Danone, a multinational food company based in France.  Faber attributes his ouster to the policies of investor groups Artisan Partners and Bluebell Capital that were dissatisfied with short-term returns. 

 

From evidence emerging from inquiries it is likely that the Board of Danone was dysfunctional with considerable conflict as to future strategy, placing Faber in a difficult position. In testimony before the Economic Affairs Committee of the National Assembly of France, Faber called for restructuring of company boards and called for legislation and regulations to allow boards to resist pressure imposed by "disgruntled investors including activist shareholders".

 


 

WOTUS Still in Play

The original Waters of the United States (WOTUS) Rule that generated extensive opposition was set aside by the previous Administration and replaced with the Navigable Waters Protection Rule (NWPR) issued in June 2020.

 

Michael Regan, Administrator of the U.S. Environmental Protection Agency has announced that the EPA and the Department of the Army, Corps. of Engineers will revise the definition of WOTUS and will set aside the NWPR.  This should come as no surprise since Administrator Regan noted during his confirmation hearing that this action would be taken.  In testimony he noted that he was not in favor of reinstating the standards as developed by his predecessors in the Obama Administration. It was his intention to conduct a complete review.

 

It is the opinion of the EPA Administrator that the NWPR has resulted in a reduction of the level of protection for waterways especially in Western states that are currently under a prolonged and severe drought.  In accordance with the NWPR up to 1,500 stream were determined to be “non jurisdictional” and that 300 or more projects that would have required Section 404 permitting under WOTUS proceeded without review.

 

The Department of Justice is filing a motion to remand the NWPR. The Army Corps of Engineers in conjunction with EPA will then establish a new rule.

 

The EPA has established four requirements to guide the proposed new rule including:-

 

  • Adoption of scientific principles to quantify the effect of climate change on U.S. waters

 

  • Protecting water resources in accordance with the Clean Water Act

 

  • Ensuring that the proposed rule will be practical to implement

 

  • Developing a rule that incorporates the experience of landowners, the agricultural community, local governments, community organizations, environmental groups with appropriate input from all concerned.

 

The most recent release from the EPA commits the agency to “meaningful stakeholder engagement to ensure that a revised definition of WOTUS considers essential clean water protection in addition to how the use of water supports key economic sectors.

 

Further information is available at www.epa.gov/wotus


 

Specialty Food Producers Benefited from COVID Consumer Patterns

The cooking and eat-at-home trend resulting from COVID restrictions benefited producers of specialty foods.  According to the Specialty Foods Association, sales were 13 percent higher in 2020 attaining $170.4 billion.  Protein including meat, poultry, seafood and cheese were the top categories in value although sales soared in all sectors including confectionary, entrees and condiments.  Bill Lynch, president of the Association stated, “The ripple across all channels of the specialty food industry has been tremendous.”  He added, “We have seen businesses flex their creativity in ways they never could have imagined including pop-up specialty food groceries in closed restaurants to meet demand by consumers”.

 

Going forward, specialty food manufacturers will face increased competition from major companies including Conagra Brands, Campbell Soup Company, Smithfield Foods, Post Holdings and Hormel Foods. 


Bill Lynch

 

USPOULTRY 2021 Education Schedule

The following programs will be offered by USPOULTRY during 2021:

 

  • Financial Management Seminar; June 28-30, Amelia, FL

 

  • Hatchery Breeder Clinic; July 7-8, Nashville, TN

 

  • National Safety Conference for the Poultry Industry; August 16-18, Destin, FL

 

  • Women’s Leadership Conference; Aug 19-20, Destin, FL

 

  • Live Production, Welfare and Biosecurity Seminar; September 15-16, Nashville, TN

 

  • Environmental Management Seminar; September 16-17, Destin, FL

 

  • Human Resources Seminar; September 20-22, Destin, FL

 

  • Poultry Protein and Fats Seminar; October 6-7, Nashville, TN

 

  • Feed Mill Management Seminar; November 3-4, Nashville, TN

 

  • Poultry Processor Workshop; November 16-17, Nashville, TN

The Air Cargo Seminar, Grower Relations Seminar and Poultry Wastewater Operations Training Program will be scheduled on industry request.

 

For additional information access www.uspoultry.org/educationprograms


 

Tyson Foods Aims for Net Zero Greenhouse Gas Emissions by 2050

In a June 9th company release, Tyson Foods noted goals to achieve net-zero greenhouse gas emissions across all global operations and their supply chain by 2050.  The release referenced the 2020 Sustainability Progress Report. 

 

John R. Tyson, Chief Sustainability Officer for the company, noted “We believe progress requires accountability and transparency and we are proud to exemplify that, as we work to achieve net-zero greenhouse gas emissions by 2050.”  He added, “We hope to continue to push the industry as the leader and remain committed to making a positive impact on our planet.”


John R. Tyson

Tyson Foods operates 239 facilities with 140,000 employees and is in line to limit global temperature to a rise of 2.0 C (3.6 F) by 2030.  Practical steps to be implemented by Tyson include: -

  • Updating the baseline for emissions to align with limiting global temperature rise to 1.5 C (2.7 F) by 2023 consistent with the Paris Agreement to be achieved
  • Aiming for 50 percent renewable energy in domestic operations by 2030
  • Achieving a target of two million feed acres under land stewardship programs with a target of all feed purchased by 2030
  • Continuing efforts to eliminate deforestation throughout the global supply chain
  • Expanding the current five million acre grazing land target for sustainable beef production by 2025

 

The Tyson program conforms to the United Nations Sustainable Development Goals.  Tyson will also continue interacting with the World Wildlife Fund, Forestland and Agriculture Consultative Group, the Nature Conservancy, Environmental Defense Fund and World Wildlife Fund.


 

TransPacific Shipping Impacted by COVID Delays in China

An upsurge in COVID in the province of Guangdong has resulted in extended delays in handling containers at the ports of Nansha, Shiwan and Yantian. Delays at the last-named port are now at 16 days.  The number of container vessels waiting approval to dock has more than doubled to 50 compared to June 2020.

 

Delays and demurrage have imposed higher costs on shipment with freight rates from China to the EU rising to $11,000 per 40-foot container. The Baltic Dry Index reflects the escalation in sea-freight. On February 9th the low for 2021 to date, the Index was at 2,104. A sharp 5 percent escalation in recent weeks raised the Index  to 3,176 on June 16th

 

CHICK-NEWS reported on the problem of availability of containers to be filled by producers of agricultural commodities and products to be shipped to China and other Asian nations.  Vessels are undergoing rapid turnaround in West coast ports and are dead-heading with empty containers to the detriment of U.S. exporters.


 

USDA to Strengthen Enforcement of the Packers and Stockyards Act

It is becoming readily apparent that USDA Secretary Tom Vilsack is picking up where he left off on Inauguration Day 2017.  At this time the USDA had completed a study of contract conditions and circumstances governing the relationship of cattle producers, poultry and hog contractors with packers and integrators. 

 

Deficiencies in the food production chain were highlighted during the COVID outbreak that demonstrated that packing of red meat was a choke point in production extending from farmers to consumers. 

 

The USDA has announced that rule-making in terms of the Packers and Stockyards Act is in progress with specific attention to: -

  • Strengthening enforcement of unfair and deceptive practices, undue preferences, and unjust prejudices
  • A new poultry contractor tournament system rule will be issued
  • The rule will clarify that aggrieved parties do not need to demonstrate harm to competition in order to initiate action under the Packers and Stockyards Act

 

The USDA considers that modifying rules will “ensure fairer and more resilient markets for farmers, ranchers, and producers”.

 

With regard to the chicken industry, proposed changes to the tournament system will represent a re-evaluation of the relationship between integrators and growers necessitating new parameters to encourage compliance with best practices.

 


 

Hamlet Protein Co-Sponsors World Pork Expo

The 2021 World Pork Expo in Des Moines over June 9th -11th was the first large in-person industry event since the advent of COVID.  The success of the program augurs well for the 2022 IPPE. Hamlet Protein was a co-sponsor of the event that allowed interaction among pork producers, industry professionals, academia and allied suppliers.

 

Grady Fain, Regional Director for North America for Hamlet Protein commented, "we are excited to be returning to a physical trade show and proud to be co-sponsoring the World Pork Expo". 

 

Erik Visser, CEO noted, "we have a strong growth ambition for the North Central America region and particularly for the U.S.  We have invested in plant capacity, product development and local resources over the past twelve months.  With travel restrictions lifted we can now return to face-to-face meetings and speak about exciting new research data and the introduction of a new product range based on functional fibers".


 

Feathers and Pillows from China?

An article by Josh Zumbrun in the June 13th edition of The Wall Street Journal describes the financial plight of Down-light International, a U.S. manufacturer of feather-stuffed quilts and bedding.  The company was granted an exclusion from substantial duties on the feathers they import from China.  The company unfortunately still has to compete with manufactured products that incorporate lower labor rates and in some cases hidden subsidies and support extended by the Government of China. 

 

Discounting the question of import duties on raw material or finished products, the question arises as to whether importation of feathers or feather-containing products from China represents a potential danger to the U.S. poultry industry.  If feathers have been effectively sterilized then there should be no problem. Can we trust suppliers in China given that HPAI is endemic in that nation, placing our industry at potential risk? China previously imposed a blanket ban on all imports of live poultry and products from the U.S. immediately following a report of even a single case of LPAI in a backyard farm. Although China has accepted compartmentalization and regionalization with respect to some livestock diseases this is more a reflection of short-term need than a function of adherence to scientific principles or OIE regulations.

 

Perhaps it is time for the broiler industry to evaluate the relative income from feathers as a feed ingredient and consider producing a suitably processed commercial added value product for domestic use. At the very least importation of feathers from China should cease.


 

The Kroger Company Reports on Q1

In a press release dated June 17th The Kroger Company (KR) announced results for the first quarter of FY 2021 ending May 22nd.

 

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)

1st Quarter Ending

May 22nd 2021

May 23rd 2020

Difference (%)

Sales:

$41,298,000

$41,549,000

-0.6

Gross profit:

$9,351,000

$10,095,000

-7.4

Operating income:

$805,000

$1,326,000

-39.3

Pre-tax Income

Net Income

$179,000

$140,000

$1,585,000

$1,212,000

-88.7

-88.5

Diluted earnings per share:

$0.18

$1.53

-88.2

Gross Margin (%)

22.6

24.3

-7.0

Operating Margin (%)

2.0

3.2

-37.5

Profit Margin (%)

0.3

2.9

-89.7

Long-term Debt and lease obligations:

$12,924,000

$12,376,000

+4.8

12 Months Trailing:

Return on Assets (%)

4.2

Return on Equity (%)

28.6

Operating Margin (%)

2.4

Profit Margin (%)

2.0

Total Assets

$48,811,000

$46,922,000

-4.0

Market Capitalization

$29,330,000

52-Week Range in Share Price: $30.35 to $ 42.99 50-day Moving average $37.49

Market Close June 16 pre-release $37.54 June 17 post-release $39.18

Forward P/E 13.4 Beta 0.4

Same store sales growth Q1 2021 (4.1%) Q1 2029 +19.0


In commenting on Q1 results CEO Rodney McMullin stated "Kroger's strong execution delivered identical sales results in the first quarter that exceeded our original expectations. Customers are responding to the investments we have made in digital, as evidenced by our triple-digit growth in digital sales since the beginning of 2019. We were disciplined in driving costs out of the business and we achieved record growth in Kroger's alternative profit business, demonstrating the power and attractiveness of our long-term model”. 

 

He concluded "We are raising our guidance based on the strength of our results and we remain confident in our ability to deliver consistently attractive total shareholder return."

 

Guidance for FY 2021 included:-

  • EPS of $2.95 to $3.10
  • Operating profit of $3.5 billion to $3.7 billion
  • Capital expenditure of $3.4 billion to $3.6 billion.

 

The U.K. to Export Poultry Meat to Japan

In terms of a recent  bilateral trade agreement, the U.K. is eligible to export poultry meat to Japan with the potential to generate $18 million in value annually.

 

Victoria Prentis, Minister for Food in the U.K. government stated, "the Japanese market will now be able to enjoy more of our unique produce adding to an already varied collection of U.K. food including pork, beef and lamb available to its customers".  She added, "this is a significant opportunity for the U.K. poultry sector as we are working hard to open new markets for agri-food businesses".


 

China Claims to Have Restored their Sow Herd

Following a 35 percent decline in hog production in China during 2019 as result of African swine fever, the Department of Animal Husbandry initiated a program to rebuild the herd over a 3-year period.  According to a release by the Ministry of Agriculture and Rural Affairs, the growing-hog herd rose by 23 percent in May 2021 compared to the corresponding month in 2020.  The sow herd increased by 20 percent by May 2021 attaining a level of 98 percent of the population as at the end of 2017.


Hog Hiltons add to overproduction

The availability of live hogs can be inferred from the Dalian Commodity Exchange.  On February 1st, live hogs closed at $3,773 per short ton of standard product.  On June 1st, price had fallen by 24 percent to $2,880 per short ton.

 

The National Development and Reform Commission (NDRC), a government agency issued a warning to hog farmers in May to restrain production as the hog-to-grain price ratio fell to below 6:1.  The Commission attributed the sharp drop in price to farmers consigning heavy hogs to market.  The Dalian standard is 240 lb. liveweight. According to Pan Chenjun, Senior Analyst at Rabobank low prices are due to high domestic production and exacerbated by the large volume of pork imports coupled with weak seasonal demand.  Despite warnings from the Commission, live hogs are flooding the market as a result of panic selling.  At a hog-to-grain price ratio of 5:1, the NDRC may purchase pork to bolster prices. 


 

Argentine Beef Export Ban to be lifted?

Faced with a 50 percent inflation rate affecting food and especially beef, the Government of Argentina imposed an export ban that resulted in loss of foreign exchange and disruption within the livestock industry. 

 

After a month of protests and reevaluation, the Government appears to be close to a settlement with the beef industry, intending to relax the ban. Plants will be allowed to export 50 percent of normal volume during July.  Contractual commitments to the European Union and the United States would not be restricted.


 

National Cattlemen's Beef Association Petition USDA Over Origin Labeling

The National Cattlemen's Beef Association (NCBA) is advocating for a "Processed in the USA" generic label to replace the existing "Product of the USA" label currently used for meat products.  The “Product of the USA” label can be used even though the product has only been minimally processed or repackaged in a facility under USDA inspection.  The current label has neither source verification nor compliance with a food safety standard. 

 

The NCBA believes that a more descriptive label would benefit domestic producers and could form the basis of a consumer education program. This would ultimately allow cattle producers to benefit from a premium for local production.

 

The NCBA labeling proposal was developed by a Transparency in Labeling Working Group established in 2019 resulting in approval by the membership in 2020.

 

The issue relates to Country of Origin Labeling (COOL) introduced in 2002 with successive expansion of the range of food products marketed through 2015. In 2016 COOL was repealed for muscle cuts and ground pork and beef in accordance with a series of WTO rulings.


Covering the bases with consumer disclosure

 

Pilgrim's Pride Acquires UK Food Company

Pilgrim's Pride Corporation has purchased the meats and prepared meals division of Kerry Consumer Foods with facilities in Ireland and the U.K.  The transaction is valued at $950 million with the acquired company posting 2020 sales slightly in excess of $1 billion.  Brands distributed in the UK and Ireland include Richmond, Fridge Raiders, Henry Denny, available through all major food retailers and club stores under both national and customers brands. 

 

In commenting on the purchase, Fabio Sandri, CEO of Pilgrim's Pride stated, "we are pleased to have the opportunity to position Pilgrim's as a leading prepared foods and branded product player.  The transaction enhances our portfolio by adding market-leading brands that will deliver a higher and more stable margin profile".


 

Brazil Amends GMO Import Regulations

Faced with a soaring world price for corn and soybeans and a domestic drought, Brazil has amended import regulations to permit introduction of GM ingredients.  According to a recent entry into the official government gazette, different GM crops can be shipped in the same vessel provided each cultivar is approved.

 

Brazil recognizes the need to import both corn and soybeans from the U.S. since domestic production and


 

Shane Commentary

UGA Evaluates Drip Trays for Broilers

 Michael Czarick of the Poultry Science Department, University of Georgia recently completed Project F-085 funded by the USPOULTRY Foundation to evaluate drip trays for nipple type drinkers. The study was conducted on a commercial farm comprising three houses each divided into four sections.  Five of the sections were fitted with nipple drinkers with drip trays and five sections with identical nipple drinkers without drip trays as controls. Two sections were equipped with two drinker lines with drip trays and two without. The report did not specify the make or model of the nipple drinkers evaluated.

 

There were no significant differences in “water usage”, assumed to be the readings of water meters with or without drip trays beneath the nipple drinkers.  Litter from the sections fitted with drip trays had lower moisture content and water activity from day-7 through depletion.  Through the first 21 days of the trial, there were no differences in the prevalence of footpad lesions in flocks that could be attributed to installation of drip trays.  All four flocks without drip trays showed numerically higher (but non-statistically different) footpad lesion scores at 28-days of age.  Despite isolation of Salmonella from litter in preceding flocks, the pathogen was not isolated from drip trays.

 

The results that appear to favor installation of catch trays should be evaluated in relation to the concepts expressed in an interview with Robert Hosteler of Ziggity Systems posted in this edition of CHICK-NEWS.  Appropriate adjustment of water pressure in relation to the dynamic discharge rate of the nipple drinker line relative to the growth rate of the flock, house temperature and water quality, will determine the proportion of water ingested relative to the quantity of water released from a nipple.  The difference between water delivered and water ingested represents wastage.  Drip trays are intuitively beneficial if the water discharged from a nipple drinker delivers a volume in excess of the capacity of the oral cavity. Water will dribble from the beak opening before being swallowed.  An analogy is the ability to drink from a garden hose on a hot day.  Only a fraction of water released from the nozzle is actually swallowed. 

 

The observation that Salmonella could not be isolated from drip trays is inconsistent with the fact that bacteriologic assay of the muddy residue in trays invariably indicates heavy bacterial contamination recorded by laboratories as “Too Numerous to Count’ (TNC).  Since broilers display coprophagy, drinking from drip trays should in theory result in ingestion of whatever bacteria are present in the litter.  Installation of drip trays defeats the objective of a closed watering system intended to reduce intra-flock transmission of pathogens.

 

The conclusion that may be derived from the study is that if nipple drinker watering systems are managed inappropriately or if ventilation rate is too low to remove moisture from litter, drip trays are advantageous.  If nipple drinkers with appropriate dynamic water discharge rates are installed and the system is managed appropriately with respect to water column pressure and house ventilation, drip cups are unnecessary and could be deleterious.

 

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