Editorial

A Tsunami of COVID-19 Litigation to Confront the Poultry Industry?

Pierce Atwood writing in Lexology® documented lawsuits filed to date relating to COVID-19 across many industries, jurisdictions and areas of law.

 

Banks, businesses, food processors, health care providers and even government agencies are vulnerable to lawsuits as evidenced by filings during the past two month.  Areas of contention include:

 

 

 

 

  • CARES Act and the Payroll Protection Program (PPP):- Numerous cases have been filed against banks relating to alleged maladministration of loans under the CARES Act and the Payroll Protection Program, claiming financial losses and demanding injunctive relief.

 

  • Debt relief:- Cases have been filed against financial institutions requesting suspension of foreclosure, loan repayments and debt collection.  Some cases involve forbearance on mortgages, allegations of incorrect credit reporting.

 

  • Educational institutions:- Over 120 class action claims have been instituted by students as a result of campus closures.  Students have alleged breach of contract relating to university tuition, dormitory housing and related fees.  State institutions, independent colleges and for-profit entities have been named as defendants.

 

  • Employment:- Lawsuits are based on alleged deviation from workplace safety, paid leave, discrepancies over wages and hourly rates, privacy, disability and discrimination.  Litigants have cited The Family First Coronavirus Response Act, state labor laws and the CARES Act.

 

  • Event cancellations and service disruptions:- This category of claims will evolve as COVID restrictions are extended possibly through entire 2021.  Claims have been instituted against airlines for cancelled flights, breach of contract and contravention of consumer protection laws with both U.S. and international airlines as defendants.  Travel companies are also the subject of lawsuits seeking refunds of payments for cancelled itineraries.  Claims have been filed against organizers of sports events and concerts for cancellations.

 

  • Membership services and subscriptions:- Plaintiffs allege breach of contract and consumer protection laws against fitness clubs, amusement parks and other entertainment venues.  Cases have been filed against detention and corrections facilities seeking relief based on exposure to COVID-19.  Numerous cases have been filed at will and have yet to emerge relating to constitutional claims challenging reopening of public schools, wearing protective face coverings, discrimination against minorities, mail-in ballots, implementation of the CARES Act, stay-at-home orders and worship.

 

  • Health care providers:- Despite an executive order shielding health care providers from civil liability, operators of long-term and rehabilitation facilities are vulnerable to legal action for failure to provide appropriate care.

 

  • Insurance:- Owners of businesses are claiming under policies purchased to provide compensation for disruption in business and especially forced business closure as a result of COVID-19 orders.

 

  • Pricing and marketing:- Cases have been filed against manufactures and sellers of products and providers of services with respect to alleged misrepresentation in advertising and labeling, invoking consumer protection laws.  It is noted that food delivery services including GrubHub may have initiated an advertising campaign to convince customers that competitor’s restaurants are closed.  Cal-Maine Foods is the defendant in a class action suit alleging price gouging during the late March and early April rise in price.

 

  • Exacerbation of COVID-19:- This category of claims relates to negligent spread of COVID-19 or deliberate withholding of information on risks relating to transmission of the infection.  This category specifically was directed against cruise lines and senior care facilities that allegedly failed to protect residents. It is expected that a number of lawsuits will be forthcoming alleging failure to protect workers in meat-packing and poultry processing plants. These will take a form of class action suits brought by unions and by groups of employees in a specific plant.  The Executive Order requiring plants to open, provided some degree of indemnity subject to compliance with OSHA and CDC guidelines.  Since late March, guidelines have been changed and whether operators of plants were in fact adhering to requirements could represent the potential for litigation. 

 

The Coronavirus Relief bill introduced in the Senate would provide broad protection for employers and cap damages unless plaintiffs can demonstrate willful misconduct or gross negligence. The alternative House bill does not provide indemnity for employers and calls for stricter standards of protection.

 

It is evident that employers in agriculture clearly define risks associated with COVID-19 and is intended to ensure that the employees understand company regulations imposed to limit the spread of COVID-19 in the workplace.  Human resources managers should work closely with their legal departments or advisors to develop appropriate policies based on the recommendations of industrial hygienists and epidemiologists.

 

Poultry Industry News

COMMODITY REPORT: August 7th 2020.

  • The financial and economic implications of the COVID-19 pandemic continue but will gradually ease as society returns to a “new normal” despite a recent serious upsurge in cases.
  • Corn and soybeans fell in price this past week despite orders booked by China. Since July 10th orders for corn have attained 5.2 million metric tons [204.8 million bushels]. Orders for soybeans amounted to 5.70 million tons (209.2 million bushels).
  • Prospects for commodity exports to China at the beginning of the 2020/2021 market year have improved. China may have reduced their domestic short-term demand for soybeans as a result of continuing losses from African swine fever but chicken production has now recovered. China is also taking advantage of low shipping rates. The Baltic Panamax Index decreased from 1,000 in January to 800 in June but is now rising. There is concern in China regarding future disruption in consigning commodities due to COVID-19. Shipments have been embargoed on arrival due to COVID-19 among crews.

 

Uncertainties still include:-

  • Whether China will satisfy obligations in terms of the Phase One Trade Agreement during 2020 is still in question. The Agreement signed in mid-January incorporated U.S. tarif rescissions, promised purchases of agricultural commodities (valued at $36.5 billion in 2020 and $43.5 billion in 2021), concessions on some structural issues by China and strengthened enforcement provisions. For the first half of calendar 2020 China imported agricultural commodities to the value of $7.3 Billion. The Phase-One Trade Agreement still appears intact despite negative comments by White House advisor, Dr. Peter Navarro who issued a subsequent “correction”. A videoconference discussion between Ambassador Robert Lighthizer and his counterpart Vice-Premier Liu He will take place on August 15th. Given the prevailing political and diplomatic factors conditioning relations between China and the negotiation on a Phase-Two Agreement has been deferred.
  • Domestic U.S. soybean and soybean meal demand is now less constrained by Covid-induced cutbacks in the intensive livestock and poultry sectors.
  • Justifiable uncertainty exists regarding the spread of African swine fever and COVID-19 to other Asian nations, Europe and North America with the potential to create a worldwide depression as economic activity is curtailed

 

Questions still exist:-

  • The eventual sizes of corn and soybean crops will influence price going forward. Yields of corn and soybeans are less likely to be impacted by drought and excessive temperature in the corn-belt. Projections were updated in the July WASDE released mid-month and are retrievable under the STATISTICS section of this newsletter. Weekly crop progress reports are posted on CHICK-NEWS and EGG-NEWS
  • A U.S. trade agreement with the U.K. was projected to be concluded in 2020 but trade with the U.S. will be conditioned by existing commitments to the E.U. Negotiations commenced in early January between Ambassador Robert Lighthizer and his U.K. counterpart, Minister Elizabeth Truss and are continuing at appropriate levels in working groups. A bilateral agreement will have to incorporate U.S objections over the use of Huawei communications equipment by the U.K. that now appears likely. Contentious issues reflecting protectionism include the application of chlorine (in only five percent of U.S. plants) and alternative anti-bacterial solutions such as peracetic acid in processing U.S. chicken and feeding beta agonists to livestock must be resolved.

 

Corn to be harvested in calendar 2020 is expected to attain 15,000 million bushels with ending stocks projected at 2,648 million bushels, with the final value modified by yield and exports. Compared with the July 31st 2020 close, the CME quotation for September corn on August 7th was down for September delivery by 7 cents per bushel to 308 cents continuing the decline of the preceding week. The soft price for corn is based on an anticipation of a near-record crop.

 

The social 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 requirement for addition to gasoline. More than thirty percent of U.S. ethanol fermentation capacity is off-line at present and the outlook for increased demand is static. Ethanol was priced at $1.11 per gallon on August 7th down 6 cents per gallon from the previous week and compared with a five-year low of $0.92 per gallon on March 26th. Currently gasoline at $1.20 per gallon (quoted, New York Harbor) is 8.1 percent more expensive than ethanol but has a 63 percent higher BTU rating.

 

Soybeans, expected to be the beneficiary of the Phase-One agreement, were down 26 cents per bushel to 871 cents for August delivery. The USDA anticipates a 2020 crop of 4.125 billion bushels, up a noteworthy 16 percent from 2019 but subject to future climatic conditions. Ending stocks are projected at 425 million bushels.

 

From May 12th to June 9th the Yuan remained constant at CNY 7.08 to US$1 except for a brief spike at the end of May. During this time the Brazilian Real strengthened against the US$ from BRL 5.9 to BRL 4.9 and the BRL strengthened against the CNY from BRL 0.83 to BRL 0.69, effectively favoring purchases of soybeans by China from the U.S. The value of the BRL then declined with an increase in the incidence rate of COVID-19 in Brazil. On August 7th the BRL exchange with the CNY was 0.78, compared to 0.75 for the previous week. The conversion of the US$ to the CNY was set at 6.97 on August 7th compared to 7.02 on July 31st.

 

The USDA reported the following sales over the past six weeks:-

  • 390,000 metric tons (14.3 million bushels) of soybeans was ordered by China on 22nd
  • 37 million metric tons (53.9 million bushels) of corn was ordered by China during the first week of July with 56 percent to be delivered in the 2019/2020 market year
  • 76 million metric tons of corn (69.4 million bushels) was ordered by China on July 13th for delivery early in the 2020/2021 market year.
  • 389,000 metric tons of soybeans (14.3 million bushels) was ordered by China on July 15th.
  • 132,000 metric tons of corn (5.2 million bushels) was ordered on July 15th by China for delivery in the 2020/2021market year.
  • 522,000 metric tons of soybeans [19.2 million bushels] was ordered on July 16th by China with 75 percent for market year 2020/2021.
  • 351,000 metric tons of soybeans [12.9 million bushels] was ordered by a non-disclosed nation on July 16th with 82 percent for market year 2020/2021.
  • 126,000 metric tons of soybeans [5 million bushels] was ordered by a non-disclosed nation on July 17th for delivery in market year 2020/2021.
  • 126,000 metric tons of soybeans [5 million bushels] was ordered on July 21st by China for delivery in the 2020/2021market year.
  • 180,000 metric tons of soybeans [6.6 million bushels] was ordered by a non-disclosed nation for delivery during the 2020/2021 market year.
  • 207,880 metric tons of corn [8.2 million bushels] was ordered by a non-disclosed nation with 88 percent to be delivered in the 2020/2021 market year.
  • 453,000 metric tons of soybeans [16.6 million bushels] was ordered on July 22nd by China with 85 percent for delivery in market year 2020/2021.
  • 262,000 metric tons of soybeans [9.6 million bushels] was ordered by China on July 22nd for delivery in the 2020/2021market year.
  • 211,300 metric tons of soybeans [7.8 million bushels] was ordered on July 22nd for delivery to a non-disclosed nation.
  • 132,000 metric tons of soybeans [4.8 million bushels] was ordered by China on July 23rd for delivery in the 2020/2021 market year.
  • 225,000 metric tons of soybeans [8.3 million bushels] was ordered on July 24th by a non-disclosed nation with 73 percent for delivery in the 2020/2021 market year.
  • 250,370 metric tons of soybeans [9.1 million bushels] was ordered on July 27th by Mexico for delivery in the 2020/2021 market year.
  • 132,000 metric tons of soybeans [4.8 million bushels] was ordered on July 27th by China for delivery in the 2020/2021 market year.
  • 114,300 metric tons of corn [5.2 million bushels] was ordered on July 31st by Mexico for delivery in the 2020/2021 market year.
  • 94 million metric tons of soybeans [71.2 million bushels] was ordered on July 31st by China for delivery in the 2020/2021 market year.
  • 260,000 metric tons of soybeans [10.2 million bushels] was ordered on August 3rd by a non-disclosed nation with 97 percent for delivery in the 2020/2021 market year.
  • 126,000 metric tons of soybeans [5.0 million bushels] was ordered on August 6th by China for delivery in the 2020/2021 market year.

 

For consecutive 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 following extracts from the June 30th 2020 edition of the Quarterly USDA Grain Stocks Report indicate the levels of storage on farms and in fields and off-farm for corn and soybeans. The data will be updated at the end of September.

  • Corn stocks in all positions on June 1st 2020 totaled 5.22 billion bushels, up less than one percent from June 1st Of the total stocks, 3.03 billion bushels are stored on farms, up three percent from a year earlier. Off-farm stocks, at 2.20 billion bushels, are down two percent from a year ago. The March - May 2020 indicated disappearance is 2.73 billion bushels, compared with 3.41 billion bushels during the same period last year.
  • Soybeans stored in all positions on June 1st 2020 totaled 1.39 billion bushels, down 22 percent from June 1st On-farm stocks totaled 633 million bushels, down 13 percent from a year ago. Off-farm stocks, at 753 million bushels, are down 28 percent from a year ago. Indicated disappearance for the March - May 2020 quarter totaled 869 million bushels, down 8 percent from the same period a year earlier. The June 11th WASDE projected the 2020 harvest for corn from 89.6 million acres and from 82.8 million acres for soybeans. These values were lower than the projections developed before the advent of COVID-19.

 

The following quotations for September and August delivery were posted by the CME at close of trading on August 7th compared with values posted on July 31st (in parentheses) reflecting specified months for delivery.

COMMODITY

Corn (cents per bushel)

 Sept. 308 (315)

Dec. 321 (326)

Soybeans (cents per bushel)

 Aug. 871 (897)

Nov. 869 (892)

Soybean meal ($ per ton)

 Aug. 280 (289 )

Dec. 287 (297)

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

COMMODITY CHANGE FROM PAST WEEK

Corn: Sept. quotation              down 7 cents per bushel    (-2.3 percent)

Soybeans: Aug. quotation        down 26 cents per bushel  (-2.9 percent)

Soybean Meal: Aug. quotation down $9 per ton                  (-3.1 percent)

 

The shortage of meat and bone meal in May and June due to reduced processing of pork and beef has ended. Prices for this ingredient for Central U.S. delivery settled at $200 per ton on August 4th down $3 per ton from the previous week. On August 4th 2019 meat and bone meal was priced at $219 per ton. The production of meat and bone meal from euthanized whole hogs will require adjustment of ingredient matrices for meat and bone meal depending on source.

 

With more plants producing ethanol, DDGS is now available at a lower price. Eastern Corn-belt product was priced at $130 per ton on August 7th, $6 per ton lower than on July 28th 2019.

  • 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

 

COMMENTS

Subscribers are referred to the July 10th WASDE #602 accessed under the STATISTICS tab.

 

Dr. Joe Glauber of the International Food Research Institute and formerly a USDA economist for 30-years, expressed the view that China would not be able to comply with obligations under the Phase One Agreement. Imports of U.S. commodities amounted to $9 billion for the first half of 2020, comprising pork, cotton, corn and wheat. The volume of commodities delivered would have to increase to $13 billion for each of the succeeding quarters to attain the promised $36.5 billion for the current year. Dr. Glauber anticipates that China might even fail to meet the 2017 baseline of $24 billion. Escalating tensions with China over COVID-19, espionage and pressure on Hong Kong will not benefit exports to that Nation.

 

The President opined on July 10th that he is “not contemplating a second phase of a trade agreement with China”

 

Approximately $16 billion will be disbursed under the Coronavirus Food Assistance Program (CFAP). As of June 3rd, $540 million has been distributed. This effectively represents a transfer of funds from taxpayers and their grandchildren to the agricultural sector.


 

Broiler Week

Weekly Broiler Production and Prices

Chick Placements.

The Broiler Hatchery Report released on August 5th 2020 confirmed that a total of 230.4 million eggs were set during the week ending August 1st 2020, down two percent from the corresponding week in 2019 and 0.7 percent (1.5 million eggs) less than the previous week. A total of 178.2 million day-old chicks were placed among the 19 major broiler-producing states during the week ending August 1st 2020. This was the same as the corresponding week in 2019 and 0.9 percent more (1.7 million chicks) than the previous week. Total chick placements for the U.S. amounted to 187.2 million, the same as the corresponding week in 2019. Claimed average hatchability was 82.4 percent for eggs set three weeks earlier, (82.6 percent for the previous week). Cumulative placements for the period January 4th through August 1st 2002 amounted to 5.77 billion chicks, less than one percent lower than the corresponding period in 2019.

 

Broiler Production

According to the August 7th 2020 USDA Broiler Market News Report (Vol. 67: No. 32) for the processing week ending August 1st 2020, 165.9 million broilers were processed during the past week (last week 164.0 million) at an average live weight of 6.25 lbs. (6.16 lbs. last week) and a nominal yield of 76.0 percent. The number of broilers processed was 3.9 percent less than the corresponding processing week in 2019. Processed (RTC) broiler production for the week was 787.9 million lbs. (358,163 metric tons), (767.8 million lbs. last week) 2.7 percent less than the corresponding processing week in 2019. For YTD 2020 Processed (RTC) production attained 24,197 million lbs. (10,998,721 metric tons), 1.9 percent more than YTD 2019.


 

Turkey Week

Weekly Turkey Production and Prices

Poult Production and Placement:

The July 15th edition of the USDA Turkey Hatchery Report, issued monthly, documented 26.8 million eggs in incubators on July 1st 2020 (28.0 million eggs on June 1st 2020) and down 4.0 percent (1.3 million eggs) from July 1st 2019.

 

A total of 23.9 million poults were hatched during June 2020 (19.6 million in May 2020), representing a decrease of 3.7 percent from June 2019.

 

A total of 22.7 million poults were placed on farms in the U.S. in June 2020, (19.3 million in May 2020), 3.7 percent less than in June 2019. This suggests disposal of 1.1 million poults during the month. Assuming all tom poults were placed (an unsubstantiated estimate in a fluctuating demand for products), 9.2 percent of June-hatched hen poults or 4.6 percent of all June-hatched poults were not placed.

 

For the twelve-month period July 2019 through June 2020 inclusive, 280.8 million poults were hatched and 257.6 million were placed. This suggests disposal of 23.2 million poults. Assuming all tom poults were placed, (representing a broad assumption), 16.5 percent of hen poults or 8.2 percent of all poults hatched during the period were not placed.

 

Turkey Production:

The August 7th 2020 edition of the USDA Turkey Market News Report (Vol. 67: No. 32) confirmed the following provisional data for turkeys slaughtered under Federal inspection:-

  • For the processing week ending August 1st 2020, 1.810 million young hens were slaughtered at a live weight of 16.8 lbs. (last week 1.948 million at 17.7 lbs.). During the corresponding week in 2019, 1.802 million hens were processed, 0.4 percent less than the current week. Ready-to-cook (RTC) hen weight for the week attained 23.8 million lbs. (10,822 metric tons), 2.2 percent less than the corresponding processing week of 2019. Dressing percentage was a nominal 80.5. For YTD 2020 RTC hen production attained 690.5 million lbs. (313,845 metric tons), 2.5 percent less than during YTD 2019.

  •  

U.S. Broiler and Turkey Exports for January-June 2020.

Export data for the first half of the current year confirmed a 5.4 percent increase in exports of broiler parts including feet, in comparison to January-June 2019. An encouraging sign is the continuation of the trend in the increase in both unit price at 2.4 percent and total value of 7.9 percent compared to the first half of 2019, although there were progressive reductions in value during May (7 percent) and June (11 percent).

 

Unit price is constrained by the fact that leg quarters comprise over 96 percent of chicken meat exports including feet, whole birds and specialty products contributing to the remaining volume shipped. Leg quarters and feet represent relatively low-value commodities lacking pricing power. Exporters of commodities are subjected to competition from domestic production in importing nations. Generic products such as leg quarters are vulnerable to trade disputes and embargos based on real or contrived disease restrictions.

 

The extensive outbreak of African swine fever has boosted U.S. livestock and poultry exports to Asia over the intermediate-term, as all animal protein will rise in price as pork supply is restricted. The effect of increased demand from Viet Nam is apparent but disruption in ports and transport infrastructure due to the COVID-19 outbreak impacted exports to China during January and February 2020.

 

The following table prepared from USDA data circulated by the USAPEEC, compares values for poultry meat (including feet) exports for January-June 2019 with the corresponding months in 2020:-

 

PRODUCT

JAN.- JUNE 2019

 JAN.- JUNE 2020

DIFFERENCE

Broiler Meat & Feet

Volume (metric tons)

1,647,688

 1,736,455

+88,767 (+5.4%)

Value ($ millions)

1,635

1,764

+129 (+7.9%)

Unit value ($/m. ton)

992

1,016

+24 (+2.4%)

Turkey Meat

Volume (metric tons)

141,703

120,149

-21,544 (-15.2%)

Value ($ millions)

311

281

-30 (-9.7%)

Unit value ($/m. ton)

2,195

2,339

+144 (+6.2%)

Chicken Paws

JAN-MARCH 2019

Volume (metric tons)

39,358

Not disclosed

Value ($ millions)

48

Not disclosed

Unit value ($/m. ton)

1,219

Not disclosed

COMPARISON OF U.S. CHICKEN EXPORT DATA FOR JANUARY-JUNE 2020 COMPARED TO CORRESPONDING MONTHS IN 2019

EXPORTS OF CHICKEN PARTS AND FEET, JANUARY-JUNE 2020

 

Total broiler parts, predominantly leg quarters but including feet, exported during the first half of 2020 as compared with 2019 increased by 5.4 percent in volume and 7.9 percent in value. Unit value increased 2.4 percent from $992 per metric ton to $1,016 per metric ton.

 

The U.S. broiler industry sells mostly leg quarters, an undifferentiated commodity, in a relatively static and price-sensitive market against competition from other exporters and domestic production in importing nations. The fluctuation in value of the U.S. Dollar relative to the currencies of Brazil, Argentina and Thailand adversely impacted competitiveness through May. Notwithstanding these restraints volume and unit value were higher during the first six months of 2020 compared to 2019. The uncontrolled outbreak of African swine fever in China and Southeast Asia from early 2019 onwards coupled with disruptions in chicken production during January and February 2020 associated with COVID-19 has increased demand for protein with international repercussions on trade in chicken and pork.

 

The top five importers of broiler meat represented 48.9 percent of shipments during January-June 2020. The top ten importers comprised 65.3 percent of the total volume reflecting greater concentration among the top importers.

 

Mexico was the largest importer of broiler meat from the U.S. during January-June 2020 with a volume of 335,054 metric tons representing 19.3 percent of volume and 16.6 percent of total value at a unit price of $873 per metric ton.

 

China was ranked 2nd among importers of broiler parts and feet combined over the period February through June 2020 with 11.9 percent of volume and 16.7 percent of value with a unit price of $1,433 per ton indicating the proportion of feet shipped. The average unit price of broiler products excluding purchases by China during the first half of 2020 was $960 per ton. Given a unit price of $1,551 for feet shipped to Hong Kong during the first quarter of 2020 it is concluded that a high proportion of shipments to China comprised feet. The relative volume of shipments of feet to Hong Kong and China during March and April reflect that about half the consigned feet to Hong Kong prior to March 2020 were in all probability trans-shipped to mainland China.

 

Taiwan was the 3rd ranked importer during January-June 2020 with 7.9 percent of U.S. export volume (136,646 metric tons) and 7.1 percent of value ($125.2 million) attributed to the product mix with a unit price of $916 per metric ton suggesting leg quarters as the principal product.

 

Viet Nam was the 4th ranked broiler meat importer during January-June 2020 receiving 89,434 metric tons representing 5.2 percent of volume and 3.8 percent of value with a unit price of $893 per ton. Viet Nam increased purchases by 19.5 percent in January-June 2020 compared to 2019. Shipments are expected to progressively increase due to reduced availability of pork attributed to an extensive and currently uncontrollable outbreak of African swine fever. In late January and during early February some shipments of chicken were diverted to Viet Nam as a result of port congestion in China arising from the COVID-19 shutdown. In June Viet Nam was 4th in rank among importers up 41.3 percent from June 2019.

 

Cuba fell to 5th in rank over January-June 2020 with 4.8 percent of volume and 3.9 percent of value. Shipments in January-June 2020 were 41.9 percent lower than in January-June 2019. It is hoped that this trade worth $191 million in 2019 and $68 million over the first six months of 2020 will not be compromised by injudicious diplomatic activity or politically inspired restraints such as enforcement of the Helms-Burton Act and additional restrictions on travel. This market is courted by both Brazil and Argentina. Cuba has lost financial support from Venezuela in addition to collapse of tourism due to COVID-19, reducing availability of foreign currency. Cuba belatedly banned imports and transshipments through the Carolinas in late June as a result of the outbreaks of AI in turkeys during late March and early April. Following representations by USDA-APHIS the embargo was reduced to the three affected counties and should now be completely lifted. Purchases by Cuba in June amounted to 6,614 metric tons, down 69 percent from June 2019.

 

Hong Kong Ranked 7th as an importer of parts and feet combined during the first half of 2020. For the first six months in 2020 value attained 3.2 percent of the total of exports amounting to $68.4 million. Volume was down 59.2 percent from the corresponding six months in 2019 suggesting that previous to restoration of trade with China, Hong Kong served as a receiving point and trans-shipment base for the Mainland. The average unit value of shipments to Hong Kong during January-April 2019 was $1,234 per metric ton. The average price for feet exported to Hong Kong during the first quarter of 2019 was $1,230 per metric ton. In June 2020 the unit prices of shipments to Hong Kong and China were $1,374 and $1,436 per metric ton respectively, suggesting commonality of product with feet predominating.

 

Canada was the 9th largest importing nation with a volume of 66,545 metric tons, an increase of 4.6 percent over the first six months of 2019. Value in 2020 attained $134.0 million but was lower by 9.1 percent notwithstanding unit prices of $2,013 for the first six months of 2020 and $2,412 for the corresponding period in 2019.

 

There is constant fluctuation among the ten, second-tier nations importing broiler meat with average monthly volumes ranging from 3,000 to 8,000 metric tons. Expanding volume is due to the promotional activities of USAPEEC and their regional representatives interacting with traders.

 

EXPORTS OF TURKEY PRODUCTS

The volume of turkey meat exported during January-June 2020 declined by 15.2 percent and value fell by 9.7 percent compared to January-June 2020 with an average unit value increase of 6.2 percent from $2,195 per metric ton in the first six months of 2019 to $2,339 per metric ton in January-June 2020.

 

Mexico, the leading importer received 63.7 percent of turkey meat shipped during January-June 2020 (76,539 m. tons), 6.2 percent less than during the first six months of 2019 (81,572 m. tons). Exports to Mexico amounting to $185.6 million at a unit price of $2,424 represented 66.2 percent of the total value of $281 million shipped.

 

China continued as a distant second-ranked importer with 7,571 metric tons imported in February-June comprising 6.2 percent of volume and 4.3 percent of value for the six months with a unit value of $1,585, confirming shipment of a low-value product mix. Exports were constrained by COVID-19 disruption during the review period but this market represents potential for U.S. turkey producers.

 

Canada was the third-ranked importer during the first half of 2020 with 2.6 percent of volume and 4.1 percent of total value at a high unit value of $3,673 per metric ton.

 

South Africa, ranked 5th during January-June 2020, imported 2,549 metric tons at a unit value of $1,216 per ton. Tariffs were not raised on imported turkey meat in comparison to broiler meat. Volume and value were down 65.3 percent and 68.7 percent respectively compared with January-June 2019 possibly relating to the unfavorable exchange rate of the Rand relative to the U.S. Dollar.

 

During the first quarter of 2020 the U.S. concluded a limited trade agreement with Japan that will place U.S. exporters on parity with EU competitors. This could restore the ranking of Japan as a significant importer. In 2019 turkey shipments were valued at $21.9 million but with a unit price of $4,153 per metric ton. Negligible shipments were recorded from March through June.

 

Collectively during the first six months of 2020 the Caribbean Region (including the Dominican Republic and Haiti) and Central America represented 7.9 percent of turkey meat exports and 6.7 percent of value.

 

CHICKEN PAWS AND FEET

For April and May the data distributed by USAPEEC combined feet with broiler meat products preventing evaluation of the respective quantities and prices of feet and leg quarters. Accordingly values for the first quarters of 2019 were 2020 are documented as a basis for comparison.

 

According to the July 22nd USDA Cold Storage Report, the stock level of Paws and Feet on June 30th 2020 was down 5.1 percent to 24.3 million lbs. from June 30th 2019. Stock rose 7.3 percent from May 31st 2020 despite exports to China. It will take until the end of the third quarter to determine the effect of the Phase-One trade agreement with China coupled with the end of the COVID-19 lockdown on the total export of feet. March and April export data suggest displacement of sales from Hong Kong to China by comparison with previous data for Hong Kong. Prior to April approximately half of shipments destined for Hong Kong were apparently landed and transshipped to the Mainland.

 

PROSPECTS FOR 2020

The July 16th 2020 Livestock, Dairy and Poultry Outlook Report, projected broiler exports would attain 3.335 million metric tons in 2020. This value represents 16.4 percent of the 20.29 million metric tons (44,638 million lb.) of broiler RTC to be produced by the U.S. industry. The USDA projects exports in 2021 to attain 3.364 million metric tons (7,399 million lbs.)

 

The USDA projects that exports of turkey products in 2020 will amount to 245,000 metric tons, (539 million lb.), 15.8 percent below 2019 and representing 9.5 percent of 2020 production projected to be 2.58 million metric tons (5,678 million lb.)

 

The Administration successfully renegotiated NAFTA into a new trilateral USMCA on September 30th 2018.This agreement has been ratified by legislatures of the three nations and took effect on July 1st 2020. It is important to recognize that exports of chicken and turkey meat products to our NAFTA partners amounted to $1.288 billion in 2017, $1.279 billion in 2018 and $1.407 billion in 2019.

 

Both the END outbreak in backyard flocks in southern California and the localized outbreaks in turkey flocks in the Carolinas are now officially over. In accordance with OIE principles no embargos should be imposed on either the states or counties affected.

 

 The live-bird market system supplying metropolitan areas, numerous backyard flocks, fighting cocks and laying hens allowed outside access, potentially in contact with migratory birds represent an ongoing danger to the entire U.S. commercial industry. These segments of poultry production place at risk the export eligibility of the broiler and turkey industries.


 

Status of 2019 Corn and Soybean Crops

The USDA Crop Progress Report released on August 10th documented corn silking and soybeans setting pods close to or ahead of the 5-year averages despite the earlier start in 2020. The condition of both corn and soybean crops are superior to 2019.

Subsoil and surface moisture levels are now similar to the corresponding week in 2019 apparently reducing concern in some states over drought. Topsoil moisture was partly restored by rains during the past three weeks. The corn-belt has experienced unseasonal high temperatures in combination with elevated humidity that may predispose to mycotoxicosis in the 2020 corn harvest. 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 2020 harvest in October.

Reference is made to the July 10th WASDE Report #602 under the STATISTICS tab documenting projected 2020 acreage, yields and ending stocks for corn and soybeans.

WEEK ENDING

Crop

August 2nd

August 9th

5-Year Average

Corn Silking (%)

Corn Dough (%)

Corn Dough (%)

92

39

-

92

59

11

95

52

12

       

Soybeans Blooming (%)

Soybeans setting pods (%)

85

59

92

75

89

68

 

       

Crop Condition

V. Poor

 Poor

Fair

Good

Excellent

Corn 2020 (%)

Corn 2019 (%) *

* late planting

2

3

 

6

10

21

30

53

47

18

10

Soybeans 2020 (%)

Soybeans 2019 (%)*

 * late planting N/A

1

3

4

10

21

33

57

46

17

8

Parameter

V. Short

Short

Adequate

Surplus

Topsoil moisture: Past Week

13

27

55

5

Past Year

11

27

57

6

Subsoil moisture: Past Week

11

26

58

5

Past Year

7

24

63

6


 

Sprouts Farmers Market Releases Second Quarter Results

In a release dated July 29th, Sprouts Farmers Market (SFM) reported results for the second quarter of FY 2020 ended June 28th. 

 

For the period, SFM posted net income of $67.0 million on net sales of $1,640 million with an EPS of $0.57.  Comparative figures for the second quarter ended June 30th 2019 were net income of $10.6 million on net sales of $1.42 million with an EPS of $0.30.

 

Jack Sinclair, CEO, stated, "our strong second quarter performance was driven by the strategic changes we have begun to implement across our business and the continued positive impact on demand from the COVID-19 pandemic". He added "as we head into the second half of the year our early strategic wins give me confidence in our long-term direction and our team members dedication that shows me we will continue to provide our communities and customers healthy food for their families".

 

The company posted total assets of $2,963 million and carries a long-term debt and lease liabilities of $1,544 million.

 

Sprouts Farmers Market has a market capitalization of $3,120 million and has traded for the past 52-weeks over a range of $13.00 to $28.00 with a 50-week moving average of $24.97.

 

On Wednesday, July 29th, SFM closed at $27.17.  An hour before the close of trading on July 30th, SFM traded at $26.51, down 2.3 percent.

 

Sprouts Farmers Market generated a trailing twelve-month operating margin of 5.1 percent and a profit margin of 3.6 percent.  Return on assets was 6.9 percent and the return on equity attained 34.0 percent. Sprouts employs 35,000 and operates 350 stores in 23 states.


 

Beyond Meat Reports on Q2 of FY 2020

In a press release dated August 4th Beyond Meat (BYND) announced results for the 2nd Quarter ending June 27th.

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)

 

 

2nd Quarter Ending

June 27th 2020

June 29th 2019

Difference (%)

Sales:

$113,338

$67,251

+68.5

Gross profit:

$33,651

$22,741

+48.0

Operating income:

$(8,166)

$2,167

-476

Pre-tax Income

Net Income

$(10,189)

$(10,205)

$(9,420)

$(9,441)

-7.9

-8.1

Diluted earnings per share:

$(0.16)

$(1.24)

-33.3

Gross Margin (%)

29.7

33.8

-12.1

Operating Margin (%)

-7.2

3.2

-325.0

Profit Margin (%)

-9.0

-14.0

+35.7

Long-term Debt:

$22,056

$20,136

+9.5

12 Months Trailing:

Return on Assets (%)

0.5

Return on Equity (%)

-1.3

Operating Margin (%)

1.0

Profit Margin (%)

-1.1

Total Assets

$527,818

$451,923

+16.8

Market Capitalization

$8,260,000

 

Comments:

SGA increased from 23.1 percent in Q2 2019 to 30.2 percent in Q2 2020

Gross margin declined 12.1 percent

Restructuring costs of $1.5 million were incurred in Q2 2020

$6 million in R&D represented 5 percent of sales in Q2 2020 and $4 million in Q2 2019.

In Q2 2020 U.S sales represented 86 percent of revenue, Retail sales amounted to 93 percent of U.S. revenue after the collapse of food service in Q1 2020.

 

52-Week Range in Share Price: $ 48.18 to $172.27 50-day Moving average $137.68

Market Open: August 4th $128.24: Close post-release $142.16.

Close August 5th $132.68 down 6.7 percent

Forward P/E 666.7

Institutional shareholders represented 31 percent. Short of float 12 percent.


In commenting on Q2 results Ethan Brown CEO of Beyond Meat commented, "I am proud of our record net revenues and growth during a very challenging period. As the toll of the COVID-19 pandemic took hold across the foodservice industry, we repurposed assets and repacked and rerouted products to meet increased consumer activity in the retail aisles. Throughout the quarter, our brand experienced an enviable combination of consumer trends – increasing household penetration; increasing buying levels per household; and strong repeat purchase rates of nearly 50%, well above the success threshold for consumer-packaged goods. Further, we forged ahead with our long-term growth strategy. We invested in expanded operations and sales in the EU and Asia, in innovation, and in targeted pricing measures during this period of high beef prices. Most notable in this regard was the retail introduction of our Cookout Classic™ value pack, which significantly reduced the price of our burgers from nearly twice that of conventional beef patties to an approximate 20% premium, on a per pound basis. Though the Cookout Classic™ only reached stores in the last two weeks of the second quarter, it accounted for 16 points of the year-over-year volume growth in our U.S. retail business. We look forward to continuing to serve our consumers and customers alike as we all hope for a resolution to the COVID-19 pandemic.”


 

Seaboard Corporation Posts Q2 Results

According to a July 28th release, Seaboard Corporation (SEB) posted results for the quarter ended June 27th. The company posted a loss of $26 million on net sales of $1,808 million with an EPS of $(22.35).  Corresponding values for the second quarter ended June 29th 2019 were a net profit of $58 million on total net sales of $1,822 million with an EPS of $50.13.

 

Seaboard Corporation is a conglomerate with investments in hog production, power generation, commodity trading and shipping.

 

Seaboard is a 50 percent shareholder in Butterball that apparently lost $27 million during the quarter down from a loss of $32 million in the quarter ended June 29th 2019.  Net sales for Butterball in the most recent quarter attained $327 billion compared to $343 million in the corresponding quarter in 2019.

 


 

Bachoco Reports on Second Quarter of 2020

In a release dated July 27th Industrias Bachoco S.A.B. de C.V. (IBA NYSE) reported on the second quarter ended June 30th.  The company generated a loss of $1.2 million on total sales of $740 million.  Approximately 90 percent of sales comprised chicken with 69 percent in Mexico and 31 percent in the U.S. from the OK Foods subsidiary.  For the second quarter of fiscal 2019, total revenue was $761million with net earnings of $71.7 million.

 

In commenting on performance, Rodolfo Ramos Arvizu, CEO stated, “During the second quarter of fiscal 2020 we faced unprecedented challenges in our operations in Mexico and the U.S. due to COVID-19.  Confinement measures established in both countries and the slowdown in economic growth caused contractions in demand in our markets and particularly in our food service channel.”

 

He added, “The Mexican peso depreciated with respect to the U.S. dollar more than 20 percent quarter-over-quarter having a negative impact on our cost of sales despite the good levels on prices of our main raw materials.”

The comments by Snr. Arvizu reflect the results obtained by Pilgrim’s Pride in their Mexican operations. 

 

Bachoco (IBA) has a market capitalization of $1.8 billion and has traded over the past 52 weeks in a range of $28.04 to $57.00 with a 50-day moving average of $36.00.  IBA closed at $35.46 on Wednesday August 5th up 2 percent. The trailing 12-month return on assets is 2.5 percent and 8.5 percent on equity.

 


 

Elanco Animal Health Reports on Second Quarter of FY 2020

For the period ending June 30th Elanco Animal Health Inc. reported revenue of $586 million compared to $781 million for the corresponding second quarter of fiscal 2019.  Net loss for the quarter was $53.2 million compared to a profit of $35.9 million in Q2, 2019.  The most recently completed quarter included a provision of $119 million for asset impairment and restructuring compared to an expense of $32 million in Q2, 2019.  The quarter also included a net income of $48 million associated with disposal of facilities mandated by the acquisition of Bayer AG Animal Health.  Diluted EPS was a loss of $0.13 compared to a positive $0.10 in Q2 2019.  The breakdown of sales for the quarter included companion animals at 43 percent and food animals representing 54 percent with the remainder classified as “strategic exits”.

 

Management provided financial guidance for the third quarter with revenue in the range of $660 to $710 million.  The company anticipates that sales will be reduced by $30 to $50 million as a result of COVID-19.

 

The Food Animal Ruminant and Swine segments posted a 52 percent decrease in revenue for the quarter attributed to lower demand in key products including Rumensin® and Paylean® and Optaflexx®.

 

With regard to the acquisition of Bayer AG Animal Health business, significant progress has been made with regard to antitrust clearances from the European Commission and the U.S. Federal Trade Commission with Australia, Brazil, Canada, Mexico and New Zealand yet to be finalized.

 

Jeff Simmons, president and CEO stated, “Our team has diligently navigated challenges during the second quarter.  When our performance was significantly affected by actions to reduce channel inventory and by pandemic-related impacts our efforts are already yielding results including better competitive positioning and greater financial flexibility.”

 

Elanco Animal Health (ELAN) has a market capitalization of $9.4 billion and has traded over 52 weeks in a range from $15.17 to $33.92 with a 50 week moving average of $22.27.  The trailing 12 month operating margin is 7.6 percent and profit margin -3.6 percent.  The return on assets is 1.4 percent and on equity -1.7 percent.

 

Elanco traded at $25.36 up 2.3 percent shortly before the close on Wednesday 5th August.

 


 

Zoetis Reports on Q2

In a release dated August 6th, Zoetis (ZTS) reported on results for the second quarter of fiscal 2020 ending June 30th.  The Company reported net income of $377 million on revenue of $1,548 million.  These values correspond to the second quarter of 2019 with net earnings of $371 million on sales of $1,547 million.  EPS advanced from $0.77 in the second quarter of FY 2019 to $0.79 for the most recently completed quarter.

Total revenue from companion animal products amounted to $882 million (57.0 per cent of Company sales) revenue from livestock products amounted to $649 million (41.9 percent).  The remainder was derived from other products and services. 

 

In the U.S. sales of livestock products represented 27.8 percent of U.S. Company revenue of $823 million, down 19 percent from Q2 2019.  International sales of livestock products represented 59.3 percent of non-U.S. Company revenue of $708 down three percent from Q2 2019.  Poultry products represented 20.8 percent of livestock sales of $649, a six percent decline from 2019.

 

In commenting on Q2 results, Kristin Peck, CEO stated, "as an essential business supporting the global food supply and the care of people's pets during the pandemic, Zoetis demonstrated greater resiliency than expected in the second quarter with four percent operational growth in revenue and four percent operational growth in adjusted net income".  She added "our strong companion animal portfolio based on our internal innovations helped offset some of the deeper challenges in the livestock market".


Kristin Peck CEO of Zoetis

 

Zoetis increased guidance for fiscal 2020 with revenue ranging from $6.3 billion to $6.5 billion and EPS of $3.14 to $3.32.

 

Zoetis with a market capitalization of $74.93 billion has traded over the past 52-weeks over a range of  $90.14 to $163.98 with a 50-day moving average of $142.59. Near close-of -trading on August 7th ZTS was down 3 percent on the day to $157.79. The Company has achieved a trailing twelve-month operating margin of 35.8 percent and a profit margin of 25.5 percent.


 

Darling Ingredients Post Q2 Earnings

Darling Ingredients Inc. (DAR) released Q2 results on August 5th for the quarter ending June 27th.  The company posted net income of $66.5 million on revenue of $848.7 million.  Corresponding figures for Q2 fiscal 2019 were, net income of $26.3 million on revenue of $827.3 million.  Diluted income per share increased from $0.16 in Q2 2019 to $0.39 in Q2 FY2019.  The Feed Ingredients segment (meat and Bone meal and animal fat) contributed $33.2 million on net sales of $503.7 million with a gross margin of 26.9 percent. 


Darling plant

 

Commenting on Q2 results, Randall C. Stuewe, chairman and CEO stated, "we had another solid quarter of execution from our employees worldwide who delivered a strong second quarter financial performance, generating $195 million of combined adjusted EBITDA".  He added "our core business navigated through a turbulent second quarter with our feed segment posting its best quarterly EBITDA of $85.2 million over the last three years.  We did benefit from over 40 million pounds of depopulated hog volume through our processing locations during the quarter". 

 

In July, Darling received an $80 million distribution from the joint venture Diamond Green Diesel operation with the proceeds used to pay down outstanding debt.


 

China Favors Soybeans From Brazil in May and June

According to a report prepared by Reuters the General Administration of Customs for China recorded soybean imports from Brazil amounting to 10.5 million metric tons (386 million bushels) in May and 8.86 million metric tons (325 million bushels) in June. Soybean imports from Brazil were up by 19 percent and 91 percent respectively from the corresponding months in 2019. 

 

During June, China imported 11.16 million metric tons (410 million bushels) of soybeans with the U.S. supplying 0.27 million metric tons (9.8 million bushels) down 57 percent from June 2019 and representing 2.4 percent of the imports by China. 

 

By July 21st soybean inventories in China rose to 7.4 million metric tons (271 million bushels) This quantity has replenished inventories and will satisfy the demand for soybean meal to be used for improved hog production and growing chicken output.

 

Given that Brazil has now been vacuumed dry, China is now placing orders aggressively for U.S. beans.  As noted in the Weekly Commodity Reports, China took advantage of favorable foreign exchange against Brazilian currency and also low shipping rates during May and June.


 

USDA Scientist Develop Cell Line to Diagnose African Swine Fever

Dr. Douglas Glaude at the USDA Plum Island Laboratory has announced that a cell line has been developed that can isolate and detect the presence of African swine fever virus allowing diagnoses from tissue derived from dead animals.

 

Research leading to the development of the cell line was funded through an agreement between the U.S. Department of Homeland Security, the U.S. Department of Energy and the USDA.

 

African swine fever is prevalent in Eastern Europe and Southeast Asia and ia yet there is no vaccine available to control the infection.


 

Ongoing Opposition to Importation of U.S. Chicken into the U.K.

According to Tim Smith, Chair of the U.K. Trade and Agriculture Commission, "there is no prospect of ‘chlorinated chicken’ or any of those other products entering the U.K. market".  Quoted in the August 3rd edition of the USAPEEC MondayLine, Smith is persisting with established protectionist rhetoric based on chlorine immersion or spraying in plants as an antibacterial measure.  Currently only five percent of U.S. chicken is treated with chlorine.  Other antibacterials including peracetic acid are used to reduce pathogen counts and as a food safety measure.


Amb. Woody Johnson declares chicken imports essential to agreement


Misleading and emotional opposition to

U.S. chicken imports to U.K.

For the information of Mr. Smith the incidence rate of campylobacteriosis in the U.K., predominantly acquired from processed poultry, was 80 per 100,000 population over the period 1990 to 1999. The comparable incidence rate with U.S. chicken treated with antibacterial rinses is 20 per 100,000 population.

 

U.S. Trade Representative Ambassador Robert Lighthizer has expressed an opinion that a U.K. ban on U.S. chicken would be a "deal breaker" with respect to a bilateral trade agreement.


 

Dumping or Competition - It Depends on Definition and Perception

According to international trade regulations, “dumping” is defined as a nation exporting a product at a price below the prevailing domestic value or at a price lower than shipped to other nations.  In contrast, “competition” reflects a price charged by a nation applying scale of production, efficiency or an inherently lower cost structure than the importing nation.

 

The contrast between dumping and competition is especially relevant to the situation in the Republic of  South Africa (RSA).  In 2016, FairPlay was established By Francois Baird to "end predatory practices regarded as being immoral". Baird is the founder and co-Chairman of Baird's CMC, a public relations operation representing multinational organizations with an emphasis on southern Africa. 


Francois Baird

 

He was previously the managing director of Edelman in South Africa before locating to the U.S.  He has managed election campaigns for African politicians and represented companies such as ESKOM, the dysfunctional electric utility in the RSA that is rife with corruption and mismanagement and he has extensive government connections.

 

The FairPlay movement is intent on preserving jobs within the South African chicken industry that appear threatened by imports from Brazil the U.S. and the EU.

 

Although Baird claims that the U.S. is dumping chicken into South Africa, evaluation of cost of production and selling prices prove otherwise.  The FairPlay movement initiated by Baird has also campaigned against importation of textiles, cement and steel and is obviously funded by industry associations with or without official declaration or government approval.

 

From 2016 onward, the U.S. exported predominantly leg quarters according to a negotiated quota and tariffs.  Despite the agreement that was leveraged applying the advantages South Africa receives under the Africa Growth and Opportunity Act, opposition in the form of continual legal and political action by the South African Poultry Association has detracted from adherence to the Agreement.


 

Food Retailers Included in Top-10 Listing on Harris Poll

According to the Progressive Grocer the Axios Harris Poll 100 list included five major food retailers in the top-ten ranking.  Amazon, Publix, Wegmans, Cosco, and the Kroger Company were included, based on a calculated Reputation Quotient.  The ranking is based on seven key perameters

 

 

  • Trust
  • Vision
  • Growth
  • Products and Services
  • Culture
  • Ethics
  • Citizenship

Amazon was ranked 3rd, Publix 4th, Wegman’s 6th, Cosco 7th and Kroger 9th.

Target advanced from 72 in the 2019 survey to 51 in 2020.  Kraft Heinz fell sharply from 14th in 2019 to 30th in the most recent Axios Harris Poll.



 

WaWa to Serve Beyond Breakfast Sausage

WaWa has announced that the Sizzli Breakfast Sandwich will be available in 650 stores in the mid-Atlantic operating area with immediate effect and with a projected extension to an additional 220 stores in Florida in mid-August.

 

Mike Sherlock, Chief Product Marketing Officer for WaWa Inc, stated, “We are pleased to offer Beyond Breakfast Sausage, a plant-based protein option, to our customers to continue fulfilling lives as a food and beverage destination for everyone.”


 

FSNS Now Offering Ractopamine Assays

Food Safety Net Services (FSNS) has been approved by the USDA-AMS Laboratory Approval Program for Export of Meat and Poultry Products to analyze ractopamine a beta-agonist in animal muscle and liver tissues applying LC-MS/MS (Trace Residue Level). The internally-validated FSNS method references USDA CLG-AGON1.10; Screening, Determination and Confirmation of Beta-Agonists by LC/MS/MS.

This method can precisely quantify ractopamine levels below the USDA action level of 0.1 ppb to support regulatory compliance. Features of the FSNS assay include:-

 

  • USDA-AMS-approved methodology and laboratory quality procedures
  • FSNS is a Certified ISO 17025:2005 Accredited Laboratory
  • Trace level detection beyond required USDA Action Level (0.1 parts per billion) is available
  • Validated for both muscle and liver tissue
  • Rapid turnaround options available

Sophisticated GLC-MS/MS Assay Instrument

 

Testing will be conducted at the San Antonio Laboratory with an option for expedited analysis. For additional information, contact <customerservice@fsns.com> or call 888-525-9788.


 

Inordinate Publicity for Lab-Cultivated Meat Substitutes

On August 3rd the SmartBrief in the FMI DailyLead extolled the virtues of laboratory cultivated meat substitutes. The article documented that 55 ventures have announced their intention to eventually market a commercially available product and collectively raising $75 million in 2019. Time will differentiate between the serious contenders and the scam artists that have emerged.

 

The problems facing cultured meat include:

  • Absence of a regulatory framework with standards for safety and labeling.  The situation in the U.S. is complicated by split jurisdiction between USDA and FDA.
  • Public acceptance is questionable.  Sentiments such as sustainability and welfare are rapidly losing traction since the advent of COVID-19 with the accompanying recession and massive unemployment dictating frugality in purchasing.
  • No producer can predict when products could be available at prices even remotely competitive with either plant-based protein or conventional beef, pork, chicken, and fish.

 

The article cites improvements in technology to reduce costs, but these reductions are only incremental.

 

The Good Food Institute is a leading protagonist for laboratory cultivated meat substitutes but it will have to apply more than hype and denigration of conventional meat production to stimulate consumer interest.  Invoking the transitory disruption of the supply chain due to COVID-19 appears irrelevant to the long term.  Ultimately, reputable companies with proven technology will emerge and produce a cell-cultured product of questionable acceptibility. Opponents of agricultural technology have yet to commence a negative campaign emphasizing the use of animal stem cells, bovine or porcine serum in production and bestowing an epithet such as “Frankenmeat” 

 

Whether cell-cultured meat substitutes will attract a clientele will depend on quality, price, and public perception.


 

Tyson Foods Names Dean Banks as CEO

In an August 3rd release, concurrent with publication of the third quarter results, Tyson Foods Inc. announced that Dean Banks will succeed Noel White as CEO and President effective October 3rd. White has led Tyson for the past two years and will remain as Executive Vice Chairman of the Board of Directors.

 

John Tyson, Chairman of the Board of Tyson Foods stated, “The Board and I are truly excited about the breadth and depth of capabilities of Dean and the entire executive leadership team and we look forward to the energy and vision they will bring in leading Tyson Foods into the future.”  Tyson added, “It is clear to the Board that Dean’s impressive background in entrepreneurship, technology, and the healthcare industry make him ideally suited to lead Tyson in its efforts to integrate advanced technologies into our operations and further our focus on team member health and safety.”

 

In accepting the appointment, Banks stated, “I want to offer my sincere thanks to the more than 1,400 team members who have given me a warm welcome over the past three years.  I am honored to lead Tyson Foods as its next CEO and look forward to working with our company’s leadership in executing our strategy to capitalize on opportunities across the protein spectrum.”

 

Dean acknowledged the contributions of Noel White for 37 years of service with IBP and then subsequent to the acquisition by Tyson Foods.  Banks acknowledged the experience gained by White.

 

Banks earned a B.A. from Miami University and an MBA from Harvard Business School.  Prior to joining Tyson Foods, he was affiliated with Google and various venture capital organizations in the health field.

 


 

Concern Over JBS Acquisition of Mountain States Rosen Assets

In April, Mountain States Rosen, a lamb and mutton packer filed for bankruptcy.  JBS USA a subsidiary of JBS SA of Brazil successfully bid and purchased the facility located in Greeley, CO.  It is the intent of JBS USA to convert the plant to process beef, there by depriving lamb producers of a market. In response to critics of the transaction JBS USA offered to lease back the plant for 90 days to avoid an interruption in orderly processing and marketing of lamb. A plant dedicated to slaughter of sheep is under construction in Brush, CO.

 

Legislators from the House and Senate in addition to the Governors of lamb-producing states have addressed a letter to Assistant Attorney General, Makan Delrahim of the DOJ Antitrust Division, expressing concern over the transaction which the legislators maintain "may irreversibly harm competition in the domestic lamb market". 

 

It is noted that JBS USA imports lamb into the U.S., presumably from a subsidiary in Australia for distribution.

 

The largest producer of lamb in the U.S. is the Mountain States Lamb Cooperative with members in fifteen states.  The Governor of Wyoming Mark Gordon has expressed his concern to Secretary of Agriculture, Dr. Sonny Perdue, indicating that conversion of the MSR plant which is responsible for over five percent of U.S. lamb packing will reduce competition and deprive producers of a market. 

 

The lamb issue is only a side-show to a far larger concern relating to consolidation in meat packing and the influence of foreign ownership on U.S. production and distribution.


 

China Allows Imports from South Carolina

After more than the ninety-days following depopulation and disinfection of a single turkey grow-out farm with H7N3 avian influenza, China has agreed that poultry products emanating from and transshipped through South Carolina will be eligible for export with effect from August 6th.


Loading at Port of Charleston SC.

Ten asymptomatic turkey flocks in North Carolina and one in contiguous South Carolina were infected over the period March 13th to April 6th.  The isolate from one additional flock in Chesterfield County, South Carolina yielded a highly pathogenic H7N3 that was characterized after depletion of the flock.  Surveillance and quarantine were implemented, and surveys failed to show evidence of any infection after April 6th with sequential rounds of testing in accordance with OIE protocols.


 

Hamlet Protein Extends Presence in Latin America

Hamlet Protein has appointed Dr. Jose Luis Laparra and Dr. Angela Mejia as Technical Sales Consultants for Mexico and Central America.  Dr. Laparra earned a veterinary degree from the National Autonomous University of Mexico followed by a Master's degree in nutrition from the University of Wisconsin-Madison.  Dr. Mejia is a veterinarian with a Master's degree in nutrition from the Caldas University in Columbia.  Both technical consultants have extensive experience and knowledge of their markets and will be in a position to assist customers to obtain benefits from Hamlet Protein products.


Dra. Angela Meijia

Erik Visser CEO

 

Eric Visser, CEO of Hamlet Protein stated, "supported by our state-of-the-art production facilities in Denmark and the U.S. we have managed to create leading positions in Europe, North America and Asia.  Our coverage in Latin America has being relatively limited so far, but we strongly believe we can support local producers with knowledge transfer and an exceptional service level". 

 

For further information, access the Hamlet Protein website by clicking on to the Hamlet logo on the right side of the welcome page.


 

Tyson Foods Completes Union City, TN. Expansion

Tyson Foods has announced the completion of an expansion project at the Union City complex in Obion County, TN.  Approximately 40,000 square feet have been added to the existing plant and together with other improvements and projects, represented an incremental capital investment of $88 million.  The complex was established over 20 years ago and has operated at a high level of efficiency and productivity benefiting contractors in the area, the local community and the shareholders of Tyson Foods.


 

Impact of COVID-19 Restrictions on Food Service

The quarterly reports by US Foods and Aramark posted on August 4th emphasize the impact of COVID-19 on the food service sector, reducing both revenue and earnings.

 

For Q2 of fiscal 2020 ending June 27th U.S. Foods reported revenue of $4.56 billion down 29.2 percent from the corresponding second quarter of fiscal 2019.  Net loss for the quarter was $97 million compared to a net profit of $116 million in Q2 of 2019.  For the half year, U.S. Foods recorded a 12.6 percent decline in revenue to $10.90 billion with a loss of $224 million compared to a profit of $187 million for the first half of fiscal 2019.

 

Aramark heavily committed to universities, hospitals and institutional and corporate dining, reported a loss for the third quarter of fiscal 2020 ending June 26th.  Revenue was down 46 percent to $2.15 billion.  The quarterly loss was $256 million compared to a profit of $82.9 million for Q3 of 2019.  Operating income for food service in the U.S. operation declined 252 percent from $128 million in Q3 of FY 2019 to a loss of $194 million for the most recent quarter.


 

Smithfield Settles with OSHA Over Disclosure of COVID Data

In early July, Smithfield Foods opposed a subpoena from the Occupational Safety and Health Administration [OSHA] concerning the release of statistical data on prevalence of COVID-19 among Smithfield employees.  In addition the OSHA requested copies of communications with the South Dakota Department of Health and statements by workers.

The State Health Department of South Dakota fully complied with the subpoena issued by OSHA.

 

In commenting on what must be regarded as a retreat, Keira Lombardo, Executive Vice President, Corporate Affairs and Compliance stated, “From the beginning our COVID-19 response has focused exclusively on two things - keeping employees as healthy and safe as possible and fulfilling our obligation to the American people to maintain the food supply.”  She added, “To this end we are pleased to have reached a resolution with OSHA whereby all necessary documentation requested has been provided, and at the same time private employee medical and confidential business information will be protected from disclosure to the public and will not be made available to our competitors.”

 

The disputed  information was requested by a Federal agency in order to determine the prevalence of COVID-19 infection in packing plants with specific reference to protective measures. From an epidemiologic perspective numbers are critical to understanding the mechanismes of transmission and the interactions between workers and the pathogen responsible for COVID-19 in the context of an operating plant. Withholding data invoking the false justification of “confidentiality” was an attempt to prevent or delay disclosure to the detriment of Smithfield workers, the communities where they reside and ultimately the image of their brand.


 

Tyson Foods Files for Dismissal of COVID-19 Death Lawsuit

Tyson Foods has filed for dismissal of a lawsuit in the U.S. Eastern District of Texas.  At issue is the demise of a worker in the Shelby County, TX plant operated by Tyson Foods who passed on April 17th.

 

Plaintiffs maintain that "Tyson Foods failed to protect its employees from the known dangers associated with the coronavirus and as a result of the defendant's failure to use ordinary care the decedent was infected with coronavirus at work".

 

Tyson Foods maintains that the plaintiffs have not advanced any evidence that the infection was acquired in the workplace.  Tyson Foods also point to the Presidential Executive Order designating packing plants as essential infrastructure and absolving tem of liability subject to  conforming to CDC guidelines.

 

Congress is currently debating broad indemnity for employers in a COVID-19 relief package. This would protect against frivolous lawsuits relating to COVID-19. Indemnity will not however apply to circumstances in which plaintiffs can demonstrate willful neglect.

 

Irrespective of the ruling in this case, additional lawsuits have and will be filed in various jurisdictions due to the extensive prevalence of COVID-19 with specific reference to red meat packing plants and some poultry processing facilities.


 

Merck Animal Health Acquires IdentiGEN

Merck Animal Health has announced the acquisition of IdentiGEN from Growth Capital Partners of Ireland.  IdentiGEN Technology is capable of identifying DNA by species and is incorporated into DNA TraceBack to accurately identify beef, seafood, pork and poultry as part of a traceability program.

 

Rick DeLuca, President of Merck Animal Health stated, "enhanced digital technology will play an increasingly important role in food traceability in food safety, providing customers critical information and actionable data to help ensure a sustainable supply of quality food to protect public health".  He added, Merck Animal Health will now be able to provide end-to-end animal traceability solutions at industry scale".

 

In April of 2019 Merck Animal Health acquired Antelliq Corportation involved in animal identification and data management.  Merck Animal Health has made other strategic investments in companies with advanced technology in intensive livestock production and aquaculture.


 

Shane Commentary

Request for Compensation by Ethanol Industry Unjustified

Recently the Renewable Fuels Association representing ethanol producers requested Congress to authorize disbursement of funds from the USDA Commodity Credit Corporation to support the industry.

 

Dr. Joseph Glauber, previously a Senior Economist with the USDA for over 30 years and now a Senior Research Fellow at the International Food Policy Research Institute and a Visiting Scholar at the American Enterprise Institute considers that supporting the ethanol industry would be "a bad idea".  The industry claims losses as a result of decreased revenue of $7 billion in 2020 attributed to COVID-19.  Glauber correctly points out that the major cost input in the production of ethanol is in fact corn, the substrate for fermentation.  USDA estimates that decreased ethanol production would correspond to 600 million bushels effectively lowering the price of corn received by farmers.


Dr. Joseph Glauber

 

The University of Illinois has calculated that net profit to ethanol producers over the past four years has amounted to 5 cents per gallon.  The price of ethanol has fluctuated widely in recent months.  On July 17th ethanol was priced at $1.17 per gallon, down 23 cents per gallon from the previous week but higher than the five-year low of $0.92 a gallon on March 26th.  During March, approximately 50 percent of ethanol production was off-line, but with increased demand for gasoline, prices for ethanol have risen above the critical “shutdown value”.

 

Glauber notes that thirty-three ethanol plants received between $25 million and $60 million in Small Business Administration, Paycheck Protection Program grants.  Without new legislation, transferring funds from the Commodity Credit Corporation would conflict with the Act chartering the corporation.  Funds were intended by Congress to be disbursed to farmers, not for purchasers of agricultural commodities including ethanol producers.  Legislation introduced by corn-state senators is intended to reimburse ethanol producers for the value of corn purchased between January 1st and March 31st.  Glauber considers this to be preferential treatment since it is not contemplated that grain traders would receive support funds.  The intention to subsidize ethanol plants from the Commodity Credit Corporation is construed as an unfortunate precedent and will lead to additional claims and unintended consequences. But what the heck it’s an election year and the grandkids will pay eventually.

 

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