Editorial

Delays in Framing Regulations for Cell Based Meat will Impede Commercialization

To date only Singapore has developed standards for cell cultured meat. Israel is due to follow, given government support and advanced technology from universities facilitating at least three major developers, all heavily supported by venture capital and major protein producers. 

 

It is not expected that the United States will soon release a comprehensive set of standards and regulations, given the split jurisdiction between the USDA on production and FDA on technology.  It would appear that both U.S. agencies are approaching cell cultured meat from the their narrow perspectives of conventional food production and safety.  What is needed is a novel and coordinated approach through a central food safety agency yet to be established.

 

In the E.U. cell based meat will fall under the Novel Food Regulation issued in 2018.  This document has yet to be approved by all member states and despite technical progress in the Netherlands, commercialization will be years in the future.

 

The Center for Rural-Marketing Strategies, a quasi-government body in Japan, is considering regulations, but again it is noted that Japan moves slowly on food-related innovations.

China is reviewing regulations for cell-cultured meat. The Nation has the technical capability to establish standards and issue regulations within a year. This would require a directive from the highest levels of the central government and only after evaluation of the economic, political, and social desirability of an alternative source of protein.

 

As technology is advancing it may be possible within a few years to achieve cost parity with conventional meat. Accordingly the regulatory framework is urgently required to allow developers to plan production facilities and procedures that will be compliant with standards A regulatory framework will be necessary for investors to commit funds to a new industry that will require considerable fixed and working capital. A further complication will be the inevitable lack of harmonization in standards among North America, the E.U.-U.K. and Asia that will result in islands of production and limited trade.

 

Apart from the regulatory considerations, there are profound questions as to consumer acceptance.  Vegetarians will in all probability reject cell cultured products. There will be intense competition from both plant-based and natural meat. Consumers who regard sustainability and welfare as important attributes will probably not represent a sufficiently large base on which to establish an extensive industry capable of becoming a significant source of protein.

 

Poultry Industry News

Broiler Week

Weekly Broiler Production and Prices, July 23rd 2021.

 

Chick Placements.

The Broiler Hatchery Report released on July 21st 2021 confirmed that a total of 237.3 million eggs were set during the week ending July 17th 2021, up two percent from the corresponding week of the previous year and 0.6 percent (1.5 million eggs) less than the previous week in 2021.

 

A total of 176.9 million day-old chicks were placed among the 19 major broiler-producing states during the week ending July 17th 2021. Total chick placements for the U.S. amounted to 186.4 million, two percent less than the corresponding week in 2020 and 0.1 percent (0.2 million) more than the previous week. Claimed average hatchability was 80.1 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 July 17th 2021 amounted to 5.24 billion chicks, up one percent from the corresponding period in 2020.

 

During the period June 12th through July 17th 2021 weekly placements were on average 1.0 percent lower compared with the corresponding six weeks in 2020. This represents on average, placement of 1.9 million fewer chicks per week. This is due to setting a proportion of hatching eggs with depressed fertility in high-yield breed combinations maintained by some integrators. Additional breeder flocks have been placed to compensate for reduced fertility and hence hatch but their contribution has yet to be attained based on age.

 

Broiler Production

According to the July 23rd USDA Broiler Market News (Vol. 68, No. 29) for the processing week ending July 17th 2021, 163.1 million broilers were processed during the past week (previous short week 146.9 million) at an average live weight of 6.43 lbs. (6.44 lbs. last week) and a nominal yield of 76 percent. The number of broilers processed was 0.6 percent more than the corresponding processing week in 2020. Processed (RTC) broiler production for the week was 796.9 million lbs. (362,234 metric tons), (7`8.7 million lbs. last week), 5.9 percent less than the corresponding processing week in 2020. In 2021 Processed (RTC) production attained 22.6 million lbs. (10,253,767 metric tons), 0.4 percent less than YTD 2020.

 

Broiler Prices

The USDA National Composite Weighted Wholesale price on July 17th 2021 was up 0.6 cent per lb. from the previous week to 105.8 cents per lb., compared to 71.3 cents per lb. during the corresponding week of 2020; 106.4 cents per lb. for June 2021 and 87.0 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 and nuggets.

 

The USDA Southern States (SS) benchmark prices in cents per lb. (rounded to nearest cent) as documented in the Broiler Market News Reports July 23rd 2021 are tabulated with a comparison with the previous week:-

Product

USDA SS1. Past week

Cents/lb.

USDA SS1. Previous week

Cents/lb.

Difference.

%

Whole Index

53

53

Unchanged

Tenderloins

268

264

+1.5

B/S Breast

179

180

-0.6

Whole Breasts

72

73

-1.4

B/S Thighs

196

193

+1.6

Whole Thighs

47

46

+2.2

Drumsticks

41

41

Unchanged

Leg Quarters

43

43

Unchanged

Wings (cut)

302

307

-1.6

  1. USDA Southern States prices

 

The USDA posted live-weight data for the past week ending July 17th 2021 and YTD 2021 were:-

Live Weight Range (lbs.)

<4.25

4.26-6.25

6.26-7.25

>7.76

Proportion past week (%)

21

25

29

25

Change from 2020 YTD (%)

-7

-7

+5

+2

 

During the week ending July 17th broilers for QSR and food service (live, 3.6 lb. to 4.3 lb.) represented 21 percent (previous week 17%) of processed volume.

 

On July 19th 2020 cold storage holdings of processed poultry other than chicken at selected centers amounted to 80,012 lbs., 1.1 percent less than the inventory of 80,968 lbs. on July 1st 2021.

 

According to the most recent July 22nd 2021 USDA Cold Storage Report, issued monthly, stocks as of June 30th 2021 compared to June 30th 2020 showed differences with respect to the following categories:-

 

  • Total Chicken category attained 738.4 million lbs. (335,620 metric tons) corresponding to an average of two weeks production based on average YTD 2021 weekly RTC output. The June 30th 2021 inventory was down 17.1 percent compared to 866.7 million lbs. (393,961 metric tons) on June 30th 2020
  • Leg Quarters were up by 0.3 percent to 68.4 million lbs. consistent with the data on exports. Inventory was up 6.0 percent from May 31st To evaluate year-over-year comparisons, anticipated purchases by China were initially delayed by COVID-19 port disruptions during the first quarter of 2020. The USDA combined the categories of feet and in-bone products into a comprehensive figure from the second quarter of 2020 onwards. Given the trend in inventory of leg quarters it is evident that this category continues to be shipped to a number of importing nations including China.
  • The Breasts and Breast Meat category was down 9.2 percent from June 30th 2020 to 195.1 million lbs. indicating stable domestic demand from retail and a slow recovery of the food service sector
  • Wings showed a 21.1 percent decrease from June 30th 2020, contributing to a stock of 44.6 million lbs. The level of inventory in this category declined with resumption of college and professional sports events. This category was 6.1 percent higher than on May 31st
  • Paws and Feet increased on June 30th 2021 by a noteworthy 30.0 percent to 32.9 million lbs. from June 30th 2020 although inventory decreased 6.0 percent from May 30th 2021*. March and April 2020 export data suggested displacement of sales from Hong Kong to China by comparing previous data for Hong Kong. Prior to April 2020 it is presumed that approximately half of the shipments of paws and feet destined for Hong Kong were landed and transshipped to the Mainland. Data released by the USAPEEC confirmed that for the first five months of 2021 105,000 metric tons of paws were shipped to China. This represented 57.5 percent of volume and 80.4 percent of value of shipments to China at a unit price of $2,457 per metric ton.
  • It is noted that the Other category comprising 305.8 million lbs. was down 21.1 percent from June 30th 2020 but represented a significant 41.1 percent of inventory on June 30th The high proportion in the Other category suggests further classification or re-allocation by USDA to the designated major categories.

*(See Poultry Meat Export Report covering January-May 2021 under the STATISTICS Tab)

 

June 2021 Production

The USDA Poultry Slaughter Report released on July 23rd 2021 covering June 2021 comprising 22 working days, recorded a total of 802.2 million head processed (up 3.7 percent from June 2020); Total live weight of 5.19 billion lbs. was up 3.6 percent from June 2020; Unit live weight of 6.47 lbs. was down 0.2 percent from June 2020. RTC attained 3.91 billion lbs., up 3.5 percent from June 2020 with a WOG yield of 75.3 percent. The proportion marketed in June 2021 as chilled comprised 93.2 percent of output. Ante-mortem condemnation as a proportion of live weight attained 0.20 percent in June 2021 (0.20 percent in June 2020). Post-mortem condemnations as a proportion of processed mass corresponded to 0.50 percent in June 2021. (0.55 percent in June 2020).

 

Comments

Mexico has recognized the OIE principle of regionalization after intensive negotiations between SENASICA and U.S. counterpart the USDA-APHIS assisted by USAPEEC. Provided importing nations adhere to OIE guidelines on regionalization, localized outbreaks of avian influenza and Newcastle disease should not materially affect exports. The response of China is less predictable given their action regarding E.U. nations in response to African swine fever and avian influenza but their action will be influenced more by self-interest than scientific considerations.

 

During 2020 broiler exports to Mexico attained 683,018 metric tons. This represented 21.1 percent of export volume and 18.7 percent of export value (amounting to $605 million) of the total $3.23 billion. In the absence of the USMCA signed a year ago, tariffs on chicken could have risen to 75 percent of value creating a non-competitive situation favoring Brazil and Argentina. Fifth-ranked Canada imported 149,851 metric tons of broilers and parts during 2020 valued at $289.2 million. Collectively our NAFTA/USMCA neighbors imported broiler products to the value of $869 million during 2018, $901 million in 2019 and $864 million in 2020.

 

During 2020 exports of broiler products to China including feet attained 512,587 metric tons valued at $732 million with a unit price of $1,428 per metric ton. Shipments to China were offset by losses to Hong Kong with at least half of U.S. imports transshipped to the mainland prior to April 2020.

 

For the first five months of 2021 exports of broiler parts and feet combined attained a volume of 1,536,432 metric tons (1,462,851 metric tons in January-May 2020) with a value of $1,749 million ($1,496 January-May 2020). Unit value increased 13.7 percent from January-May 2020 to $1,163 for the most recent 5-month period in 2021.

 

Subscribers are referred to the Monthly Export Review in this edition and the 2021 USDA Projection under the STATISTICS Tab.


 

Turkey Week

Weekly Turkey Production and Prices July 23rd 2021

 

Poult Production and Placement:

The July 14th 2021 edition of the USDA Turkey Hatchery Report, issued monthly, documented 26.0 million eggs in incubators on July 1st 2021 (26.0 million eggs on June 1st 2021) and down 6.2 percent (1.7 million eggs) from July 1st 2020.

 

A total of 21.8 million poults were hatched during June 2021 (20.9 million in May 2021), representing a decrease of 9.1 percent (2.2 million poults) from June 2020.

 

A total of 20.9 million poults were placed on farms in the U.S. in June 2021, (19.5 million in May 2021), and almost the same as in June 2020. This suggests disposal of 0.9 million poults during the month (1.2 million in May 2021). Assuming the proportion of placements corresponded to the respective numbers of toms and hens reared year to date (55:45) 3.7 percent of June-hatched tom poults (0.4 million) and 4.6 percent of hen poults (0.5 million) were not 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 July 2020 through June 2021 inclusive, 267.5 million poults were hatched and 246.7 million were placed. This suggests disposal of 20.8 million poults. Assuming the proportion of placements corresponded to the number of toms and hens reared year to date (55:45), 6.8 percent of tom poults (9.4 million) and 8.2 percent of hen poults (11.4 million) were not reared.

 

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

 

Turkey Production:

The July 23rd 2021 edition of the USDA Turkey Market News Report (Vol. 68: No.29) confirmed the following provisional data for turkeys slaughtered under Federal inspection:-

  • For the processing week ending July 17th 2021, 1.865 million young hens were slaughtered during the processing week at a live weight of 17.3 lbs. (last short week 1.240 million hens at 16.6 lbs.). During the corresponding week in 2020, 1.567 million hens were processed, 16.0 percent less than the current week. Ready-to-cook (RTC) hen weight for the week attained 25.9 million lbs. (11,813 metric tons), 18.9 percent less than the corresponding processing week of 2020. Dressing percentage was a nominal 80.5. In 2021 RTC hen production has attained 634.8 million lbs. (288,535 metric tons), 0.6 percent less than for YTD 2020.
  • For the processing week ending July 17th 2021, 2.173 million toms were slaughtered at 43.3 lbs, compared to 1.813 million toms processed during the previous week at 43.2 lbs. For the corresponding week in 2020, 2.409 million toms were processed, 9.8 percent more than in the past week. Ready-to-cook tom weight for the week attained 75.8 million lbs. (34,437 metric tons), 10.6 percent less than the corresponding processing week in 2020. Dressing percentage was a nominal 80.5 percent. In 2021 RTC tom product has attained 2,127 million lbs. (967,156 metric tons), 8.7 percent less than for YTD 2020.
  • The National average frozen hen price during the past week was 123.0 cents per lb., unchanged from 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 July 23rd 2021:-

 

Product

cents per lb.

Change from previous Week (%)

Frozen hens

123

Unchanged

Frozen toms

125

+0.6

Fresh hens

141

+0.7

Fresh toms

141

Unchanged

Breasts 4.0-6.5 lb. (frozen)

142

No new quotation

Breasts (B/S) tom

253

No new quotation

Drums (toms for export)

113

Unchanged

Wings (V-cut tom)

96

No new quotation

Wings (V-cut hens)

240

No new quotation

Thigh Meat (frozen for export)

170

No new quotation

Mechanically Separated (export)

73

No new quotation

 

Inventories:

On July 19th 2021 cold storage holdings at selected centers amounted to 68,475 lbs., 10.9 percent more than the inventory of 69,101 lbs. on July 1st 2021.

 

The July 22nd 2021 edition of the USDA Cold Storage Report issued monthly, documented a total turkey stock of 406.0 million lbs. (184,549 metric tons) on June 30th 2021, equivalent to 4.5 weeks of current production and down 14.4 percent compared to the inventory on June 30th 2020. The June 30th value was 3.9 percent above the May 31st 2021 level. This increase is consistent with season and denotes an imbalance between supply and the combination of domestic demand and exports.

 

The Whole Turkey category of 228.4 million lbs. representing 56.2 percent of total storage of 406.0 million lbs. on June 30th 2021 was 10.6 percent lower than the inventory on June 30th 2020. Tom carcasses in storage increased by 0.5 percent from June 30th 2020 to 144.1 million lbs. on June 30th 2021. Hen carcasses in storage decreased by 24.8 percent from June 30th 2020 to 84.3 million lbs. on June 30th 2021.

 

Breasts in storage declined by 29.1 percent from June 30th 2020 to 59.5 million lbs. on June 30th 2021.

 

The “Other” and “Unclassified” categories collectively amounted to 105.0 million lbs. or 25.9 percent of inventory on June 30th 2021. The magnitude of these two non-specified categories suggests that the USDA should attempt to classify product more accurately as to specific product.

 

June 2021 Production

According to the USDA Poultry Slaughter Report released on July 23rd 2021 covering, June 2021 comprising 22 working days, 18.9 million young turkeys were processed. (0.4 percent less than in June 2020); live weight attained 605.1 million lbs. (2.9 percent less than June 2020); Average live weight was 32.0 lbs. (2.5 percent less than June 2020); RTC attained 483.8 million lbs. (down 2.8 percent from June 2020) with a yield of 79.9 percent. The proportion of frozen product in June 2021 attained 39.5 percent of total RTC produced. In May 2021 ante-mortem condemnation attained 0.32 percent of live weight, (0.27 in June 2020). During June 2021, 1.3 percent of RTC weight was condemned (1.3 percent in June 2020)

 

Comments:

Please review comments in the Weekly Broiler Report and the year-to-date export data under the Statistics Tab.

 

The USMCA has been in effect since July 1st 2020. The U.S. turkey industry shipped 173,544 metric tons to Mexico or 62.6 percent of all turkey exports, valued at $389 million during 2018. In 2019 Mexico received 176,789 metric tons representing 60.9 percent of turkey exports valued at $427 million. Thailand commenced importing raw turkey effective January 1st 2021 after lifting an avian influenza embargo that was placed on the U.S. allowing only cooked turkey in 2015. During 2020 Mexico imported 166,771 metric tons of turkey products valued at $379 million with a unit value of $2,273. During 2020 China imported 17,260 metric tons of turkey products with a value of $28.7 million representing a unit value of $1,663 per metric ton.

 

For the first five months of 2021 exports of turkey products attained 102,547 metric tons valued at $237 million down 0.4 percent in volume and 2.5 percent in value compared to 2020. Unit value declined by 2.1 percent from January-May 2020 to $2,311 per metric ton over the corresponding five months in 2021.


 

Crop Progress

Status of 2021 Corn and Soybean Crops

The USDA Crop Progress Report released on July 26th documented corn and soybean crop conditions to July 25th compared to their 5-year averages. This past week 79 percent of corn was silking. For soybeans 76 percent of the crop was blooming and 42 percent was setting pods.

 

U.S. average surface moisture levels were generally lower during the past week over the corn-belt attaining an average of 22.3 percent of area classified in the two lowest categories of dryness. The severe drought in Western states and the Dakotas continues with extensive wildfires in the Northwest. Topsoil moisture in Iowa deteriorated this past week from 33 percent to 53 percent in the “Very Short” and “Short” categories. The topsoil moisture levels in significant corn/soy-producing states in the Midwest also deteriorated as noted by the increase for 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 July 12th WASDE Report #614 and the Acreage Report retrievable under the STATS tab for projected 2021 acreage and yields. This data will be updated when WASDE #615 is released in mid-August with a firmer projection of yields and ending stocks.

 

  WEEK ENDING  

Crop

July 18th

July 25th

5-Year Average

Corn Planted (%)

Corn Emerged (%)

Corn Silking (%)

Corn Dough (%)

100

100

56

8

100

100

79

18

100

100

73

17

Soybeans Planted (%)

Soybeans Emerged (%)

Soybeans Blooming (%)

Soybeans setting pods

100

100

63

23

100

100

76

42

100

100

71

36

Crop Condition

V. Poor

 Poor

Fair

Good

Excellent

Corn 2021 (%)

Corn 2020 (%) 1

1. Late planting

3

2

7

5

26

21

50

55

14

17

Soybeans 2021 (%)

Soybeans 2020 (%)1

1. Late planting

3

1

9

5

30

22

47

57

11

15

Parameter

V. Short

Short

Adequate

Surplus

Topsoil moisture %: Past Week*

18

26

50

6

Past Year

11

26

57

6

Subsoil moisture %: Past Week

18

25

52

5

Past Year

10

25

60

5

 

The major corn and soybean-producing states have an average of 22% in the “Very Short” and “Short” categories (last week 10%) with a range of 9% for IN to 53% for IA.

  • Iowa 53% (was 33%)
  • Illinois 15% (was 8%)
  • Indiana 9% (was 4%)
  • Kansas 34% (was 25%)
  • Kentucky 25% (was 6%)
  • Michigan 13% (was 10%)
  • Missouri 10% (was 2%)
  • Ohio 20% (4%)
  • Pennsylvania 22% (was 12%)

 

Beyond Meat Enters Online Market in China

Based on an alliance with JD.com, Beyond Meat™ products, will be available online for delivery in four major cities in China.  JD.com operates eighteen warehouses with the capability to distribute frozen foods. The company currently provide services to Starbucks Corp., Yum China Holdings and Alibaba Group Holdings.


 

Tyson Foods Adopts Five Domains Welfare Program

In a Friday, July 16th release, Tyson Foods announced the adoption of the Five Domains system to evaluate, monitor, and implement flock and herd welfare.  The system was devised by Professor David Melor of the University Edinburgh Royal (Dick) School of Veterinary Studies to provide a comprehensive platform incorporating functional and behavioral components.

 

The Five Domains essentially replaces the 25 year old “Five Freedoms” welfare system.


Dr. Ken Opengart

According to Dr. Ken Opengart, Tyson Foods’ Vice President of Global Animal Welfare. “Incorporating the Five Domains into our daily conversations and actions is essential for Tyson Foods to drive continuous improvement in our welfare program and culture throughout our global operations.  The Five Domains incorporates nutrition, physical environment, health, and behavioral opportunities.  Dr. Dorothy McKeegan of the University of Glasgow stated “The Five Domains model represents a forefront of current efforts to conceptualize and assist animal welfare.”  She added, “Tyson’s adoption of the Five Domains represents an admirable commitment to embrace animal welfare improvements and a scientifically sound, evidence-based way.

 

Tyson Foods supports an External Animal Welfare Advisory Panel comprising 13 subject-matter experts in addition to an internal Global Animal Welfare Council. The Company employs 54 specially trained animal welfare specialists dedicated to promoting animal welfare, maintaining standards, and facilitating improvements. 

 

Additional information can be downloaded from <www.tysonsustainability.com>.


 

Agreement Between Major Food Distribution Company and Cell-Based Meat Developer

Tiv Ta'am, a leading processor, producer and distributor of meat and seafood in Israel has signed a letter of intent with MeaTech an aspirant developer of cell-cultured meat.

 

Hagai Shalom, CEO of the Tiv Ta'am Group said, "today we are taking a significant step in expanding the business strategy of our company in light of the accelerating development of the food-tech industry as a whole and in particular synergy with the cultivated meat industry".

 

Sharon Fima, CEO of the MeaTech Group stated, "we are proud that a significant player in the Israeli food industry with activities in both retail and meat processing fields has chosen MeaTech to be its partner in the competitive and evolving food-tech field in Israel and around the world".


 

Increase in Pork Production in China

According to Reuters, official Chinese statistics claim pork production during the second quarter of 2021 attained 13.46 million metric tons.  This represented a 40 percent increase compared to the corresponding quarter in 2020.  Most of the incremental volume was derived from large integrated producers. The sixteen industry leaders collectively increased production to 42.8 million hogs during the first half of 2021.  Large producers have been able to control African swine fever more effectively than traditional small family units with deficiencient biosecurity.

 

The large increase in production has contributed to a reduction in the price of pork.  Outbreaks of African swine fever in Sichuan Province have motivated producers to consign hogs to market adding to downward price pressure.

 

The implications from increased production are that China will reduce imports perhaps by as much as half the 2020 level.  This in turn will reduce the price of pork in the U.S. and will compete with the broiler and turkey industries.

 

The live hog settlement price on the Dalian Commodity Exchange (‘DCE’) fell 56 percent from the equivalent of $1.98/live lb. on March 1st 2021 to $1.27/live lb. on July 19th.


 

Impossible Foods to Introduce Vegetable-Based “Chicken” Nuggets

Following the lead of competitor Beyond Meat, Impossible Foods intends launching a vegetable-based nugget simulating chicken.  The product will include soy protein, sunflower oil and other vegetable products but will not include the heme pigment added to beef to create the appearance of blood.

 

The introduction of nuggets will precede an IPO, inevitably through a special purpose acquisition company following the lead of many recent start-ups. It is questioned whether Impossible Foods is profitable based on the published results of competitor Beyond Meat and the data provided by Maple Leaf Foods for their Vegetable Protein division.


Temporary evaluation of vegetable nuggets

 


 

Salmonella Outbreak in France

The General Directorate of Food of the Directorate of Health in France reported on an outbreak of Salmonella Typhimurium involving 45 diagnosed patients including 27 children. Cases were identified between June 24th and July 15th.

 

According to the National Reference Center for Salmonella applying whole genome sequencing determined the commonality of the pathogen among patients and from the implicated dried sausage (‘fuet’) imported from Spain.

 

A similar Salmonella Typhimurium  outbreak outbreak during July and August of 2020 attributed to a dried sausage product imported from Spain.

 


 

Costco Wholesale Corp. Retaining Special Hours for Seniors

Costco has reversed a previous decision and will continue operating special hours for seniors and those with predisposing health conditions for COVID to shop at warehouses from 09h00 to 10h00 on Tuesday and Thursday. These hours will be available to those sixty and older and will include customers with disabilities or who are immunocompromised. 

 


Original Senior Shopping Hours

The recent announcement reverses the previous announcement that Costco would cease offering special hours.  The decision was prompted by the upsurge in incidence of COVID attributed to prevalence of the delta variant that is now responsible for 80 percent of infections and is present in all states. 

 

Costco operates 809 warehouses worldwide and increased sales in 2020 through online ordering and home delivery.


 

Chipotle Mexican Grill Posts Q2 Results

On July 20th Chipotle Mexican Grill (CMG) posted results for the second quarter of fiscal 2021 ending June 30th.  For the period, the company generated net earnings of $188 million on revenue of $1,892 million with an EPS of $6.60.  Comparable figures for Q2 of fiscal 2020 impacted by COVID restrictions were net earnings of $8.2 million on revenue of $1,364 million with an EPS of $0.29.

 

In commenting on results, Brian Niccol, Chairman and CEO stated, "Chipotle's second quarter results highlight the strength of our brand and our people as we demonstrated growing momentum in the business".  He added, "we remain confident in our key growth strategies and believe they will help us achieve our next goal of $3 million average unit volume with industry-leading returns on invested capital". 

 

During the quarter, digital sales increased by 10.5 percent and represented 48.3 percent of sales.  Chipotle opened fifty-six new restaurants and achieved a 31 percent increase in comparable store sales compared to the corresponding quarter in 2020 that was impacted by COVID.

 

Chipotle Mexican Grill has a market capitalization of $43.9 billion. Shares of the company have traded in a range of $1,094 to $1,744 with a fifty-day moving average of $1,471.  CMG closed at $1,575 on Tuesday, July 20th and opened post-release higher attaining $1,743 at noon.

 

Twelve-month trailing operating margin is 6.6 percent and profit margin 6.4 percent. The company has generated a return on assets of 4.6 percent and 21.6 percent on equity. 

 

Chipotle provided forward guidance for the third quarter with growth of comparable restaurant sales projected in the low- to mid- double digit range.  It is projected that 200 new restaurants will be opened in 2021.


 

Protein PACT Established as a Promotional Activity

The Protein PACT (People, Animals, and Climate of Tomorrow) was initiated to “accelerate momentum and verify progress towards global sustainable development goals across all animal protein sectors”.  Participants in the Protein PACT initiative include the North American Meat Institute, the Animal Agricultural Alliance, the Beef Alliance, Dairy Management Inc, Elanco Animal Health, the Institute for Feed Education and Research, the National Corn Growers Association, the National Pork Board, the National Pork Producers Council, the United Soybean Council, the U.S. Meat Export Federation and the U.S. Roundtable for Sustainable Beef.

 

It is intended that members will establish targets for defined focus areas including:

  • Improvement of the environment including land, air and water
  • Providing high quality protein to consumers
  • Following procedures that promote animal health and humane care
  • Enhanced food safety
  • Supporting a diverse workforce and safety

 

According to Julie Anna Potts, President and CEO of the North American Meat Institute, “The Protein PACT is the first initiative to unite meat, poultry, and dairy farmers and processors in a common vision for transparent communication, continuous improvement and ambitious commitments to ensure the sustainability of the high-quality protein foods Americans rely on everyday.”

 

The Meat Institute Sustainability Framework encompasses 100 metrics developed through collaboration with experts in production, supply chain, animal health and logistics.

 

The Protein PACT will be funded by farmers and ranchers through checkoffs and the contributions from allied commercial companies.


 

RFS Still in Limbo

The Renewable Fuels Standard for 2021 is more than six months late ostensibly due to COVID.  In reality, political considerations have delayed a decision as to the quantities of ethanol and vegetable oil to be added to gasoline and biodiesel respectively.  The Administration is receiving considerable pressure from legislators and lobbyists respectively representing the agricultural sector and petroleum refiners.  According to recent statements by Ron Klain, Chief of Staff at the White House, the President will now become involved in discussions given the intensity of pressure for a resolution. Even a compromise will not satisfy both parties hence the delay.


 

Initial Success of JBS USA and Pilgrim’s Pride Better Futures Program

The Better Futures free college tuition program established by JBS USA and Pilgrim’s Pride, established in March 2021, has attracted 1,286 employees and dependents.  According to Andre Nogueira, CEO of JBS USA, “The program is off to an outstanding start in only four months.”  He added, “The number of students attending college has been in a decline for more than a decade, especially among minority communities and across rural America. We believe providing free access to community college can help strengthen rural economies and make a lasting and meaningful difference in the lives of people.” 

 

The two companies, subsidiaries of JBS S.A. of Brazil, have partnered with 36 colleges in 22 states and counties where they operate to provide tuition-free education to both employees and dependents.  Approximately 70 percent of the initial 1.250 enrollees are team members.  Corey Friend, Manager of the Better Futures program, stated “We have been pleasantly surprised that so many of our team members have decided to take advantage of this opportunity to upscale and prepare themselves for the workforce of the future through education.”  Eligibility for the Better Futures program requires employment for six months and remain in good standing through completion of their education.  There are no restrictions on areas of study. 


 

Pork Industry Pressing for H-2A Visa Reform

In testimony before the Senate Judiciary Committee Jen Sorenson, President of the National Pork Producers Council, urged reform of current visa programs following legislation passed by the U.S. House.  Sorenson pointed to the need for workers eligible to work the entire year.  His testimony noted that the pork industry is restrained by non-availability of workers and relies heavily on non-U.S. citizens eligible to work under an agricultural visa program. Sorenson warned that if not resolved, the labor shortage would lead to closure of some packing plants leading to higher food prices and disruption of the supply chain.

 

The National Pork Producers Council is advocating year round H-2A visas without limits on numbers.  The Council is concerned over competition among segments of the agricultural industry for available workers with a limited number of visas.

 

Sorenson concluded his testimony stating “Our industry is vital to the U.S. economy and prosperity in rural communities.  Our foreign-born workforce is an essential part of our supply chain and we need visa reform to reflect our year-round needs.”

 

 


 

Wakefern-ShopRite Introduce Private Label Chicken Line

ShopRite has introduced the Bowl and Basket Fresh Chicken® range including parts and whole birds at discount prices. The Brand will be available in ShopRite stores extending from D.C. up to Connecticut on the East coast.  Wakefern claim that their chicken is antibiotic free and raised in accordance with an animal welfare and care program.  In commenting on the initiative Roger Savoia, VP of the Meat Division at ShopRite stated, “We are excited to launch this new product in our stores and build on our long tradition of offering customers fresh, high-quality poultry at competitive prices.”

 

Wakefern will support the launch of Bowl and Basket® with an omnichannel marketing campaign using dieticians and celebrity chefs.

 

Wakefern Food Corp is a cooperative with 50 members operating 363 supermarkets under a variety of banners.  The company is ranked 23 on the Progressive Grocer-100 listing for 2021


 

Foster Farms Workers Reject Contract Offer

Workers at a Foster Farms, further-processing plant in Compton, CA., affiliated to Teamsters Local 630 have rejected the latest contract offer by the company.  They have been working under an extension of their contract that expired in mid-June 2020.  At issue are wages, health benefits and conditions of employment.  Products from the plant are distributed to major warehouse stores and to food service distributors.


 

USDA-AMS Announces Chicken Purchases

On July 19th the USDA Agricultural Marketing Service announced purchase of 293 tons of chicken for child nutrition and related domestic food assistance programs to be delivered in September.  Purchases comprised:-

  • Frozen Chicken fillets: 156 tons at a price range of $3.77 to $4.37
  • Frozen Chickwen strips: 137 tons at a price range of $3.38 to $3.51

 


 

Tyson Foods Joins McDonald's in Diversity Commitment

In a July 22nd release, Tyson Foods Inc. announced that it has joined the McDonald's Mutual Commitment to Diversity, Equity and Inclusion.  Tyson qualifies through employing a multinational workforce representing 50 different languages and the Company has a longstanding commitment to diversity.  Tyson has a track record of promoting education and training, implementing representation goals, diversifying supplier purchases and entering into partnerships to encourage inclusion.

 

John R. Tyson, Chief Sustainability Officer at Tyson Foods stated, "our team members reflect every part of America today - diversity is not a concept, it is something we witness at every single one of our Company facilities.  He added, "we are proud to have our commitment reflected in McDonald's Mutual Commitment to Diversity, Equity and Inclusion".

 

More than twenty companies have joined with Tyson Foods in affiliating with the McDonald's commitment.


 

JBS USA Settles Lawsuit with Indirect Buyers

JBS USA has agreed to settle with indirect purchases of pork who alleged collusion in setting prices.  The plaintiff class includes restaurants and retail stores purchasing pork processed by JBA USA over the period January 1st 2009, through April 2nd 2021.  JBS will settle for $20 million although it has denied wrongdoing.  As with other companies that have settled, JBS has agreed to provide cooperation in ongoing litigation against other defendants including Hormel Foods, Smithfield Foods, Tyson Foods, Triumph Foods and AgriStats.


 

Shoppers Returning to Brick and Mortar After Covid

According to data gathered by the Feedback Group, more shoppers intend purchasing items from brick-and-mortar stores than using alternative channels.  Thirty-four percent of Walmart shoppers will use stores compared to 11 percent that will reduce visits to stores.  For Costco the ratio is 33 percent more to 16 percent less and for conventional grocery stores, 28 percent more to 11 percent less. 

 

Rural residents and the elderly are more inclined to in-store shopping.  In contrast, urban residents will shop more on-line along with Millennials.  Whole Foods and Amazon Fresh will experience the highest expected on-line grocery shopping support followed by Walmart.com and Target. Rural consumers will favor Walmart and Aldi.


 

South African Port and Rail Operations Disrupted by Ransomware Attack

Following extensive civil disturbances, centered on the Province of KwaZulu-Natal, the National transport and port operator Transnet was impacted by a cyber-attack.  The extent of the disruption that has affected the ports of Durban, Port Elizabeth and Cape Town is presently unknown.  Officials of Transnet consider that the problem is separate from the riots.  Due to the intrusion, containers cannot be consigned from ports and there is no indication of when or how the problem will be resolved.

 


 

Restrictions Lifted on California Counties following LPAI

Effective June 15th and 27th respectively, restrictions on Stanislaus and San Francisco counties in California were lifted.  This follows the statutory World Organization of Animal Health maximum restriction of 90 days after depletion of a backyard flock with low pathogenicity avian influenza. The restrictions imposed by importing nations caused some inconvenience and disruption in shipments from the West coast.


 

OSHA Imposes Penalties for Foundation Food Group Fatalities

Following detailed investigations, the Occupational Safety and Health Administration (OSHA) has imposed fines close to $1 million for 59 violations arising from the January nitrogen release at the Foundation Food plant in Gainesville, GA.

 

Foundation Food Group the operator of the plant was cited for six violations including exposing workers to suffocation hazards, failing to develop documentation on safety, inadequate lockout procedures and inappropriate training resulting in penalties of $595,474. 

 

Messer LLC the supplier of liquid nitrogen was cited for violations including exposure of workers to injuries and suffocation, failure to provide safe exits and absence of documented lockout procedures.  The company incurred penalties of $74,118.

 

Packers Sanitation Services received 17 citations for violations relating to training of workers in the hazards of liquid nitrogen.  Packers Sanitation Services is a repeat offender having been cited in 2017 and 2018.  The company faces penalties of $286,720.

 

FS Group that provided mechanical services was cited for 8 violations relating to training and emergency procedures with penalties amounting to $42,325.

 

It is indeed unfortunate that three maintenance workers and three plant workers died as a result of the release of liquid nitrogen resulting in peracute anoxia.  The incident and subsequent investigations disclosing deficiencies should serve as a warning for plant operators to confirm that workers are trained, lockout procedures are followed, and that egress from plants should be unobstructed with functional emergency lighting. An additional outcome from the investigation was the need for communication on risks among plant operators, maintenance contractors and equipment manufacturers to establish a safe working environment.

 


 

Pilgrim’s Pride Workers at Waco Vote for Union Representation

According to the Texas AFL-CIO, 400 workers at the Pilgrim’s Pride poultry plant in Waco, TX. will be represented by a union. According to the union all procedures relating to the ballot were in accordance with prevailing Department of Labor rules.


 

Shane Commentary

Nature’s Fynd Receives VC Funding

Chicago-based Nature’s Fynd Inc. has raised $158 million from VC companies apparently representing Jeff Bezos, Bill Gates, and Al Gore. These names are quoted (or misquoted) frequently in press reports on wannabee IPOs. Implied endorsement provides a measure of implied approval, verging on the sanctification of any business plan involving sustainability, welfare and even profit. Natures Fynd intend to deliver meatless breakfast patties and burgers based on a range of fungal cultures early in 2022. 

 

The entire alternative foods sector with an emphasis on dairy products achieved sales of $7 billion in 2020, representing a 27 percent increase over the previous year, albeit from a small base.  Sales of alt. foods should be compared to the $733 billion conventional food industry.  Aware of the growth and popularity of alt. meats, major protein producers including Hormel, Cargill, Perdue, and Maple Leaf Foods have invested in their own brands competing with Beyond Meat and Impossible Foods. 

 

Considerable publicity is accorded to the adoption of an alt. meat product by a QSR or restaurant chain even if only as a test. In contrast there is less media coverage following the quiet removal of alt. meat menu items. 

Much of the growth in alt. meat products is attributed to the curiosity factor.  Given the low number of committed vegetarians among consumers and the shifting volume of flexitarians, demand will increase, but at a slower rate but nowhere near attainment of a 60 percent market share of global sales of conventional meat by 2040. Projections by some industry observers are simply extrapolations of recent annual increases over the long term.  Alt. meats as with any product undergo life cycles.

 

A major restraint to future expansion of alt. meat is the apparent lack of profitability.  Reports from public-quoted companies where financial data is disclosed denote a high cost of production and the absence of economies of scale of production.

 

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