Editorial

House Select Subcommittee Report on COVID is Unfairly Critical of the Meat Industry

On Thursday May 12th the Select Subcommittee on the Coronavirus Crisis issued a staff report highly critical of the red meat industry.  The Committee chaired by Rep. James E. Clyburn (D-SC) reviewed and reported on the interaction between the red meat industry and the Administration leading to the Presidential Executive Order of April 28th This mandated plants to remain in operation subject to complying with recommendations on prevention of COVID among line workers. The report documented action by USDA administrators including Dr. Mindy Brashears, the Undersecretary For Food Safety as facilitating action by the Department for the benefit of packers.

 

Chick-News

In retrospect commentary and perceptions relating to the entire sad period of the COVID epidemic and its impact on the red meat industry and agriculture in general can be compared to Rashomon the Japanese play.  The plot involves the murder of a samurai by a brigand and the assault on his wife, as recounted by each of the three participants in addition to a disinterested observer.  The characters recount the event from their individual perspectives suggesting that what could be regarded as a simple event may on analysis emerge as a series of complicated issues and what might appear as fact is subject to interpretation based on personal perception and bias. 

 

Beginning in March and extending through May, COVID demonstrated a high incidence rate in the U.S. population.  Little was known about the mechanism of transmission and epidemiologists made recommendations based on experience with influenza using previous pandemics including the 1918 outbreak as their model.  It is also evident in retrospect that the infection was politicized initially with a strong but misplaced message of denial followed by a response to the reality of an widespread and highly infectious disease.  The situation was complicated by lack of leadership and the culture within the CDC that failed to evaluate the situation and provide clear directives to guide the public and industry.  Many of the criticisms of the meat industry raised by the Select Committee could also be applied to schools, public transport and other essential activities involving close contact among people.

 

It must also be recognized that Canada and nations in Europe experienced similar high incidence rates of COVID in packing plants due to common factors that existed in U.S. facilities.  Low temperature, high humidity, suboptimal ventilation with infrequent air exchange and close proximity of line workers all facilitated transmission of the virus.  The infection also spread among plant employees in their communities and especially during shared transport to their work place. 

 

Decisions made by the Administration leading up to the Presidential Executive Order should be considered in the light of the impact of COVID especially on red meat plants.  Volume was reduced in both hog and beef operations to the point that it was necessary to euthanize animals awaiting shipment that could not be processed.  In contrast, the chicken industry that was fully integrated, with a short production cycle and a higher level of mechanization in plants was able to adapt with far less disruption in processing and with minimal impact on supply.

 

Chick-NewsA valid criticism of the Select Subcommittee Report is that it failed to recognize the actions by industry that addressed the problem of COVID in the absence of either treatment or a vaccine and with minimal diagnostic modalities during the first two months of the outbreak.

 

It s a matter of record that Perdue Farms invited representatives of the CDC and other agencies to visit their plants and to make recommendation to limit spread of infection.  Many companies encouraged workers to stay at home with pay if they experienced symptoms. At an early stage in the outbreak, health screenings were introduced to identify symptomatic workers before they entered plants.  Most companies attempted as far as possible to reconfigure production lines and they installed barriers between work-stations.  Many of the allegations concerning interaction between the Administration and producers could be interpreted as responding to an unprecedented crisis the proportions of which were evident but appropriate responses were not clearly understood.

 

Industry responded vigorously to the Select Subcommittee Report.  National Chicken Council president, Mike Brown emphasized “We must remember the importance of how uncertain and chaotic the early days of the pandemic were.”  He is justified in stating, “The Committee failed to shine a light on the momentous efforts between industry, government and state and local health officials to keep employees safe and to keep Americans fed.”

 

Julie Ann Potts, president and CEO of the North American Meat Institute stated, “The Committee could have tried to learn what the industry did to stop the spread of COVID among meat and poultry workers, reducing positive cases associated with the industry while cases were surging across the country.”

 

The unfortunate event resulted in as many as 60,000 cases of COVID among workers in the meat industry with over 250 fatalities but with proportions approximating infection in the general U.S. population.  The Select Subcommittee characterized Administration actions as favoring the meat industry at the expense of workers.  Applying the Rashomon parallel they could also have considered the necessity of maintaining a supply of protein to the public.  The motivation, actions and decisions of the participants will be debated going forwarded but if a study of the pandemic is to provide practical and beneficial recommendations, interpretation of actions and imputing motives should not be viewed through a partisan political prism.

 

 

Poultry Industry News

U.S. Broiler and Turkey Exports in January-April 2022

Chick-NewsTotal exports of bone-in broiler parts and feet for January-April 2022 attained 1,258,760 metric tons, 5.6 percent more than during the corresponding months in 2021 (1,191,632 metric tons). Total value of exports increased by 20.4 percent to $1,628 million ($1,351 million 2021).

 

Unit price is constrained by the fact that leg quarters comprise over 95 percent of broiler meat exports (excluding feet). From Q1-2021 to date unit value of leg quarters has risen consistent with international demand. Despite the recent welcome increase in unit price, leg quarters represent a relatively low-value commodity lacking in pricing power. Exporters of commodities are subjected to competition from domestic production in importing nations. Generic products such as leg quarters are vulnerable to trade disputes and embargos based on real or contrived disease restrictions.

 

Chick-NewsThe outbreak of African swine fever in China and Southeast Asia from early 2019 onwards coupled with disruptions in chicken production and logistics thereafter due to COVID restrictions, increased demand for protein with international repercussions on trade in chicken and pork. The demand for pork imports to China is abating as hog production is restored and mild overproduction is evident in the white-feathered broiler sector with implications for exports other than feet during the second half of 2022.

 

The following table prepared from USDA data circulated by the USAPEEC, compares values for poultry meat exports for January-April 2022 with the corresponding months of 2021:-

 

PRODUCT

January-April

2021

January-April

2022

DIFFERENCE

Broiler Meat & Feet

Volume (metric tons)

1,191,632

1,258,760

+67,128 (+5.6%)

Value ($ millions)

1,352

1,628

+276 (+20.4%)

Unit value ($/m. ton)

1,135

1,293

+158 (+13.9%)

Turkey Meat

Volume (metric tons)

79,580

62,729

 -16,851 (-21.2%)

Value ($ millions)

179

208

+29 (+16.2%)

Unit value ($/m. ton)

2,249

3,316

+1,067 (+47.4%)


 


Monthly Broiler Production and Prices, June 24th 2022

Chick Placements.

According to weekly USDA Broiler Hatchery Reports 1,456 million eggs were set over six weeks extending from May 14th through June 18th 2022

 

Chick-NewsTotal chick placements for the U.S. over the six-week period amounted to 1,039 million. Claimed average hatchability for the period averaged 80.2 percent for eggs set three weeks earlier Each 1.0 percent change in hatchability represents 1.9 million chicks placed per week with the current range of weekly settings.

 

For the month of May USDA reported 854.1 million broiler chicks hatched, up 0.4 percent from May 2021. Cumulative chick placements for the period January 8th 2022 through June 18th amounted to 4.49 billion chicks, less than one percent higher than the corresponding period in 2021.

 

Low chick placement during 2021 and the first quarter of 2022 was attributed to setting a proportion of hatching eggs with depressed fertility that were derived from high-yield breed combinations selected by some integrators. Additional breeder flocks were placed to compensate for reduced fertility and their contribution is reflected in broilers harvested during the second quarter of 2022. Pullet breeder chicks placed during April amounted to 8.47 million down 2.8 percent from May 2021 but up 220,000 chicks or 2.6 percent higher than the previous month of April 2022.

 

Broiler Production

Chick-News

 

According to the June 24th USDA Broiler Market News Report for the processing week ending June 18th 2022, 163.5 million broilers were processed at 6.39 lbs. live. This was 1.0 percent less than the 165.1 broilers processed during the corresponding week in the previous month of May 2022 and 2.6 percent less than the 167.8 million processed during the corresponding week in June 2021. Ready to cook (RTC) weight for the most recent week was 794.0 million lbs. (360,952 metric tons). This was 0.2 percent less than the 795.3 million lbs. processed during the corresponding week in May 2022 and 2.4 percent less than the 813.6 million lbs. during the corresponding week in June 2021. Dressing percentage was a nominal 75.0 percent. For 2022 to date RTC broiler production attained 19,637 million lbs. (8.926 million metric tons). This quantity is 1.2 percent more than the corresponding period in 2021.

 


 


Monthly Turkey Production and Prices, June 2022

Poult Production and Placement:

 

The June 15th 2022 edition of the USDA Turkey Hatchery Report, issued monthly, documented 26.07 million eggs in incubators on June 1st 2022 compared to 25.96 million eggs on June 1st 2021* The June set was up 0.4 percent (0.11 million eggs) from June 2021 and 2.0 percent down from the previous month of May 2022.

 

A total of 22.60 million poults were hatched during May 2022 compared to 20.91 million in May 2021*. The May 2022 hatch was up 8.1 percent (1.1 million poults) from the previous month of April 2022.

 

Chick-News

 

A total of 21.49 million poults were placed on farms in the U.S. in May 2022, compared to 19.71 million in May 2021*. The May placement was 9.1 percent, (1.8 million poults) more than the month of May 2021. This data suggests disposal of 1.11 million poults during the month, therefore approximately 4.9 percent of the May 2022 hatch was not placed.

 

For the twelve-month period January 2021 through May 2022 inclusive, 269.36 million poults were hatched and 250.29 million were placed. This suggests disposal of 18.97 million poults over the 12-month period, corresponding to 7.0 percent of all poults hatched.

* USDA revision from previous monthly report.


 


Poultry Meat Projection

Updated USDA-ERS Poultry Meat Projection for June 2022.

 

Chick-NewsOn June 16th 2021 the USDA-Economic Research Service released updated production and consumption data with respect to broilers and turkeys, covering 2021 (actual), a projection for 2022 and a forecast for 2023.

 

Broiler RTC production and consumption in 2022 were unchanged from the May 2022 report and reflected a 1.2 percent increase over 2021 to 45,419 million lbs. RTC (20.645 million metric tons.). Per capita consumption in 2022 will be 0.7 percent higher compared to 2021 at 97.2 lbs. (44.2 kg.). Exports will represent 16.2 percent of RTC production in 2022 attaining 7,376 million lbs. (3.352 million metric tons) comprising both RTC leg quarters and feet. The forecast for 2023 is for 45,675 million lbs. (20.761 million metric tons) with a per capita consumption of 97.3 lbs. (44.2 kg.) and exports of 7,465 million lbs. (3.393 million metric tons).

 

Turkey production for 2022 compared to 2021 will be held at 5,359 million lbs. (2.436 million metric tons) RTC approximately 3.5 percent lower than 2021. The June projection of per capita consumption was 1.3 percent lower than in 2021 at 15.1 lbs. (6.9 kg.), despite extensive promotions and introduction of further-processed items. Export volume for 2022 was reduced 32.4 percent to 372 million lbs. (0.169 million metric tons). Values for production and consumption of RTC turkey in 2022 are considered to be realistic, given the prevailing economy, variable weekly poult placements, production levels, losses from HPAI and inventories.

 

Chick-NewsThe June USDA forecast for the turkey industry in 2023 comprised annual production of 5,650 million lbs. (2.565 million metric tons) with consumption of 15.7 lbs. (7.1 kg.) per capita.

 

The export projections do not allow for a breakdown in trade relations with existing partners including Mexico and China nor the impact of catastrophic diseases including HPAI and vvND in either the U.S. or importing nations. Production values for the broiler and turkey segments of the U.S. poultry meat industry are tabulated below:-

 

Parameter

2020

(actual)

2021

(actual)

2022

(projection)

Difference %

2021 to 2022

Broilers

Production (million lbs.)

44,583

44,898

45,419

+1.2

Consumption (lbs. per capita)

95.8

96.5

97.2

+0.7

Exports (million lbs.)

7,637

7,367

7,376

+0.1

Proportion of production (%)

16.5

16.4

16.2

-1.2

Turkeys

Production (million lbs.)

5,743

5,558

5,359

-3.5

Consumption (lbs. per capita)

15.8

15.3

15.1

-1.3

Exports (million lbs.)

571

550

372

-32.4

Proportion of production (%)

 9.9

9.9

6.9

-30.3

Source: Livestock, Dairy and Poultry Outlook released June 16th 2022

 

Chick-NewsThe projection takes into account declining exports to China, ranked second by volume in 2021 with imports of 460,159 metric tons valued at $864 million with a unit price of $1,875 per ton. Average unit price for U.S. broiler exports including parts and feet but excluding imports by China, attained $1,139 per metric ton during 2021. For the first quarter of 2022 China imported 155,897 tons of broiler products valued at $282 million including 67 percent feet at a unit price of $2,158 per ton.

 

Subscribers are referred to the weekly updates of production and inventories of broilers and turkeys posted monthly on CHICK-NEWS and the review of monthly export data under the STATISTICS tab.


 

Sanderson Farms Inc. Reports on Q2 FY 2022

Chick-NewsIn an SEC Form Q-10 filing on May 27th Sanderson Farms Inc. documented results for Q2 of FY 2022 ending April 30th 2022.

 

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)

 

Second Quarter Ending

April 30th 2022

April 30th 2021

Difference (%)

Sales:

$1,539,714

$1,133,880

+35.8

Gross profit:

$487,787

$191,944

+154.1

Operating income:

$421,487

$127,699

+230.1

Pre-tax Income

Net Income

$420,190

$321,190

$122,015

$96,911

+240.9

+231.4

Diluted earnings per share:

$14.39

$4.34

+231.6

Gross Margin (%)

31.6

16.9

+87.0

Operating Margin (%)

27.4

11.3

+142.5

Profit Margin (%)

20.9

8.5

+145.8

Long-term lease liabilities:

$11,570

$16,122

-28.2

12 Months Trailing:

 

 

 

Return on Assets (%)

24.5

 

 

Return on Equity (%)

36.9

 

 

Operating Margin (%)

16.9

 

 

Profit Margin (%)

12.2

 

 

Total Assets

$2,826,514

$2,345,033

 

Intraday Market Capitalization

$4,133,000

 

 

 

Chick-NewsPoultry products represented 95 percent of sales. The product mix during the 2nd Quarter expressed as a percentage of sales value comprised:-

Fresh Vacuum-sealed 37.9%

Fresh chill-pack 30.9%

Fresh ice-pack 20.7%

Frozen presentations 5.1%

Prepared chicken 4.9%

Other 0.5%

 

Comparing Q2 2022 with Q2 2021 net unit revenue increased by 33.6% or $0.31 /lb.

 

Concurrently feed costs increased by 14.1% or $0.05/lb.

 

During Q2 Sanderson Farms consumed 32.1 million bushels of corn and 297,000 tons of soybean meal. Feed represented 44.4% of RTC in Q2 2022 (42.1% in Q2 2021)

 

52-Week Range in Share Price: $155.34 to $201.50. 50-day Moving average, $187.34

Market Close: Thursday May 26th $194.76. Open Friday May 27th post-release $201.12.

Forward P/E 7.4 Beta 0.6

 

The Q-10 Filing contained the following commentary by management on financial performance.

 

“Net sales for the second quarter ended April 30, 2022 were $1,539.7 million as compared to $1,133.9 million for the second quarter ended April 30, 2021, an increase of $405.8 million, or 35.8%. Net sales of poultry products for the second quarter ended April 30, 2022 and 2021, were $1,464.0 million and $1,087.2 million, respectively, an increase of $376.8 million, or 34.7%. The increase in net sales of poultry products resulted from a 32.9% increase in the average sales price of poultry products sold and a 1.4% increase in the pounds of poultry products sold, each of which is primarily the result of improved demand from food service customers and supply constraints. During the second quarter of fiscal 2022, the Company sold 1.22 billion pounds of poultry products, up from 1.20 billion pounds during the second quarter of fiscal 2021.

 

Overall, quoted market prices for poultry products increased during the second quarter of fiscal 2022 as compared to the same quarter of fiscal 2021. When compared to the second quarter of fiscal 2021, Urner Barry average market prices for boneless breast meat, boneless thigh meat and tenders increased by 85.2%, 58.6% and 47.5%, respectively, while Urner Barry average market prices for leg quarters and jumbo wings decreased by 0.6% and 19.8%, respectively. Average realized prices for chicken products sold to retail grocery store customers increased by 13.1% during the second quarter of fiscal 2022 as compared to the same period of fiscal 2021, and retail grocery store demand remains strong.

 

Net sales of prepared chicken products for the quarters ended April 30, 2022 and 2021 were $75.7 million and $46.6 million, respectively, an increase of 62.3%. This increase is primarily attributable to a 39.9% increase in the average sales price of prepared chicken products sold and a 16.1% increase in the pounds of prepared chicken products sold. The increase in pounds and sales price of prepared chicken products was primarily the result of improved demand from our food service customers. During the second quarter of fiscal 2022, the Company sold 28.4 million pounds of prepared chicken products, up from 24.5 million pounds during the second quarter of fiscal 2021”.

 

Management of Sanderson Farms anticipates completion of the acquisition by the consortium including Continental Grain and Cargill to be completed during the current quarter.


 

Foster Farms Acquired By Atlas Holdings

Chick-NewsFoster Farms, the major West Coast broiler producer with complexes in California, Washington state, Oregon and additional farms in Louisiana, Alabama and Colorado, has been acquired by Atlas Holdings, an investment conglomerate.  Foster Farms, ranked 10th among U.S. broiler producers, has annual revenue of $2 billion, employs over 12,000 and has been under family ownership for over 80 years. 

 

Atlas has appointed Donnie Smith, former CEO of Tyson Foods, as Chairman and CEO of the company.  In commenting on the acquisition and appointment, Smith stated, “I have long been an admirer of the Foster family and the business they built over the past eight decades.”  He added, “In this new era we will maintain and further that legacy, rooted in animal welfare, superior product quality, customer service and community engagement.”

 

Chick-NewsPreviously Tyson Foods considered acquisition of Foster Farms but the transaction did not progress beyond initial due diligence. Given the present antagonism towards agribusiness it is doubtful whether the Administration would bless a takeover by a top 10 broiler integration.

 

Atlas Holdings is based in Greenwich, CT and owns 25 enterprises in diverse industries including building materials, food manufacturing and distribution, power generation and wood products.  According to the Wall Street Journal, the holding company generates $15 billion in annual revenue.  Details of the transaction were not announced.


 

Welcome to Jamesway Chick Master Incubator as a Sponsor

Jamesway and Chick-Master have joined to form a single company, Jamesway Chick Master Incubator Inc., providing a comprehensive range of equipment and services to the International and North American poultry industry. With 230 years of combined experience in operation, the Company serves 2,500 customers in 150 nations with two leading incubator brands.

 

Chick-News

Jamesway Chick Master continues to supply equipment, parts and support for both the Jamesway single-stage Platinum™ and multi-stage setters and hatchers as well as the Chick Master Avida™ single-stage and Classic™ multi-stage machines.

 

Jamesway Chick Master equipment is used by the top poultry producing companies Internationally which includes broiler, turkey and egg producers and primary breeders.

Chick-News

The Company provides planning and design including Airway – Complete Climate Control ventilation for “worry-free” hatcheries, and maintains experienced installation teams, technical specialists as well as their PRT 24/7 support service.

 

Headquartered in Cambridge ONT Canada, Jamesway Chick Master maintains offices in the U.S., U.K., China and Malaysia. For additional information, access the Company website by clicking on to the Jamesway Chick Master logo on the right side of the Welcome Page.


 

Republican House Initiative To Reverse Administration’s Burdensome Rules

Chick-NewsRepresentative Glenn Thompson (R-PA) introduced a bill into the House intended to preemptively negate many of the burdensome requirements that the Administration intends to impose.  The bill addresses proposed rules under the Packers and Stockyards Act and will require the USDA to conduct cost-benefit analyses for intended rules. These include alleged unfair practices and undue preferences and to enhance transparency in contract growing.  The bill also will require the USDA to allow broiler plants to operate at line speeds in excess of current limitations.

 

Representative Thompson stated, “This bill will reverse many of the more harmful regulatory burdens spearheaded by this Administration, address escalating input costs and provide certainty to farmers, ranchers, agribusinesses and other entities across our food and agriculture supply chains.”


 

Eight Proposed Beef Packing Plants Would Add 18,000 Head per Day Daily Capacity

Chick-NewsIn response to the disruption in the supply chain caused by COVID, various investment and producer groups have proposed eight new packing plants with a total capacity of 18,700 head per day.  Of this quantity, Western Legacy Developments to be established in Rapid City, SD. would represent 43 percent of the total with 8,000 head per day.  Other plants range in size from 500 to 3,000 head per day.  In an incisive commentary by Greg Henderson, posted on Farm Journal AG-WEB  he questions the feasibility of establishing new plants given the delays in construction, high capital cost and concerns over the availability of labor.

 

His article noted that the cattle industry needs a number of strategically placed niche plants to serve specific markets.  Henderson noted that for the first week of June, 523,698 head were packed representing a utilization factor of 91 percent.  It is questioned whether an increase in capacity of five percent would lead to higher cattle prices.  If plants break ground in 2022, they will only be functional in 2024 and 2025 coinciding with low availability of steers and heifers given current high cow slaughter.

 

Chick-NewsBeef producers forming associations to establish new packing plants will have to find customers.  This will involve competition with the existing output from the four large packers that collectively supply 85 percent of the market.


 

By-Product Plant for Proposed Rapid City, SD. Beef Facility

Kingsbury and Associates have announced that Farmers Union Industries plan to establish a by-product processing facility linked to the proposed Rapid City, SD plant currently in the feasibility stage of development. According to Dale Bednarek, the CEO of Farmers Union Industries, the proposed plant would produce meat and bone meal and tallow as feed ingredients.

 

Chick-NewsThe proposed Kingsbury plant would cost $1.1 billion and could process up to eight thousand head per day, employing 2,500.

 

The South Dakota Stock Growers Association is supporting the proposed plant based on the perception that the “Big Four” represent an oligopoly and that additional competition among meat packers is required.

 

At this time, there is insufficient information concerning the project to assess feasibility and obvious concerns including available supply of cattle, odor and waste disposal and availability of labor.


 

U.S. Faces Diminishing Exports To South Africa

According to USDA-FAS GAIN report SF2022-0015 dated June 16th, the imposition of unjustified anti-dumping duties on chicken imports from the U.S. will reduce volume shipped.             

 

The GAIN report compared imports for consecutive 12-month periods April 2020 March 2021 with the most recent completed 2021/2022 year. U.S. imports decreased by 8.7 percent to 59,800 metric tons, representing 84 percent of the previously negotiated quota of 71,290 metric tons.  Comparing origin of imports over the consecutive 12-month periods, Brazil increased exports to the Republic of South Africa by 31.3 percent in 2021/2022.

 

Chick-NewsDecreased imports from the U.S. were due, in part, to riots and destruction of cold-storage and port facilities in mid-2021 and the additional anti-dumping duties introduced in April 2022.  In all probability, these duties will be extended beyond the November 2023 expiry date, given that their purpose is to protect the domestic broiler industry.

 

Impediments facing the U.S. also include the adverse currency exchange between the SA Rand and the U.S. Dollar, competitive prices from Brazil and the difference in product range with the U.S. offering mainly leg quarters and Brazil, can supply wider selection, including mechanically deboned meat.


 

Foster Farms Experiencing Disruption in Corn Transport

Chick-NewsAccording to news reports, Union Pacific Railroad has failed to consistently supply Foster Farms with adequate quantities of corn resulting in disruption in feed production.

 

As with many rail companies, Union Pacific has experienced problems in maintaining schedules, a fact acknowledged by the CEO of the company who has pledged to supply Foster Farms.

 

Chick-NewsWith the risk of having to depopulate farms early in the event of shortages of feed, Foster Farms has requested  and received an emergency order from the Surface Transportation Board  impelling the rail company to supply corn comdignments. These are normally delivered in 100-car train loads that realistically require small crews but considerable support staff.

 

The vulnerability of all livestock producers in the three West coast states is evidenced by the ingredient supply problems experienced by Foster Farms.


 

COVID Vaccination Claims Against Tyson Foods Dismissed

Chick-NewsA lawsuit involving twelve claims by employees of Tyson Foods alleging discrimination against workers not receiving COVID vaccination was recently heard by the U.S. District Court in the District of Western Tennessee.  Nine claims relating to alleged violation of the First and Fourth Amendments to the U.S. constitution, the Religious Freedom Restoration Act and the Americans with Disabilities Act. were dismissed  Chief U.S. District Judge Thomas Anderson noted the failure of plaintiffs to file charges with the Equal Employment Opportunity Commission.  Three claims will be referred to the Attorney General of Tennessee alleging that Tyson Foods did not follow the Tennessee Human Rights Act with regard to granting religious or health accommodations.

 

Chick-NewsAlthough the issue of COVID vaccination is in all probability moot, the outcome of the case will influence future policy by packers and processors. Case law concerning the rights of employers is evolving with regard to requiring vaccination against emerging or prevailing infections that impact health and may consequently result in disruption of production.


 

Smithfield Foods To Close Farmer John Plant

Chick-NewsSmithfield Foods will close the Farmer John plant in Vernon, CA. during early 2023.  Concurrently, the company will end ownership of hog farms in Arizona and California.

 

After onset of COVID, the Farmer John plant experienced a series of outbreaks among workers that resulted in fines by OSHA and by the California Occupational Safety and Health Administration.  Farmer John lost their contract to supply hot dogs to the Los Angeles Dodgers‘s stadium, possibly as a result of negative publicity.Chick-News

 

United Food and Commercial workers, Local 770, was apparently ready to initiate negotiations for a new contract before the announcement that will remove 1,800 jobs from an economically depressed area.


 

North Carolina Cooperative Extension Considering Mobile Poultry Processing

Chick-NewsThe last plant not affiliated with a major U.S. poultry integrator in North Carolina closed in 2017.  This indicates the non-viability of small processing plants operating as independent entities or as cooperatives.

 

In an attempt to support and encourage independent broiler growers, the North Carolina Cooperative Extension Service is constructing a mobile poultry processing plant.  The project is awaiting an allocation of funds in the 2023 budget for completion.

 

Chick-News

The project is considered to be financially infeasible but will make for good politics and appropriate photo-ops.  North Carolina was the largest broiler producer in the nation during 2021 and any number of mobile processing plants will have an imperceptible impact on supply. The project may indirectly contribute to foodborne infection, given the absence of equipment, control and inspection that is associated with small un-inspected plants compared to a conventional high-capacity facility.


 

Outbreak of Campylobacteriosis In Japan Attributed To Consuming Raw Chicken

Chick-NewsAccording to ProMED mail on June 6th a localized outbreak of campylobacteriosis occurred in the city of Kyotanabe associated with a specific restaurant.  The vehicle of infection was chicken thigh sashimi, consumed virtually uncooked, having been briefly seared.  This specialty is only offered at a few restaurants in the U.S. but is common in major metropolitan areas in Japan.  Given the high prevalence of Campylobacter jejuni contamination of chicken, cooking to 165F for at least 30 seconds down to the bone is necessary to ensure freedom from this and other non-spore forming pathogenic bacteria.

 

Chick-NewsDuring the mid-1980s, an extensive outbreak of campylobacteriosis was diagnosed among fraternity members at the University of Georgia.  An investigation showed a temporary fad of consuming raw chicken, resulting in outbreaks.


 

President Jawbones Ocean Carriers Over Rates

Chick-NewsOn Friday, June 10th, the White House released extracts from a speech delivered by President Biden on oligopolistic practices by ocean carriers.  Apparently, only nine major shipping companies are responsible for freight between Asia and West Coast ports.  These operators have progressively raised freight rates, adding to inflation.

 

During the past year, efforts have been made to improve efficiency of West Coast ports with 24/7 operations and incentives to move containers. The Administration has assisted Chick-Newsports, including Savannah, GA, with improved facilities, including a “pop-up” container storage area remotely from the port.  The Administration has also provided grants to the port of Long Beach and has increased funding from the Port Infrastructure Development Program, amounting to $685 million.  The Administration has also implemented a Trucking Action Plan and has directed the Federal Motor Carrier Safety Administration to develop a truck leasing taskforce to expedite transport to and from ports.


 

Tyson Foods Litigates Against Former Executive

Chick-NewsTyson Foods filed an injunction on Wednesday, June 8th, in Washington County Circuit Court in Fayetteville, AR.  The intent of the filing was to prevent Brian Baker, previously V.P. of Poultry Optimization, from providing his new employer, Foster Farms, with proprietary information.  Foster Farms has been named as a co-defendant.

 

Tyson claims that Baker violated the Arkansas Trade Secrets Act and also violated a known-compete agreement entered into in May 2019 that imposes a one-year hiatus after leaving Tyson Foods to a competitor.

 

Chick-NewsIn commenting on the action, Tyson Foods issued a statement stating, “We are obligated to enforce non-compete contracts to protect our business and ensure fair competition.” It is evident that Brian Baker had access to confidential company information and as a senior executive, possessed knowledge of the business in any position with a competitor.

 

Tyson Foods has a policy of enforcing non-compete agreements as evidenced by previous litigation.


 

Rabobank Forecasts High Demand For Chicken

Chick-NewsThe Rabobank quarterly industry report is optimistic with respect to demand and trade volume for chicken.  The outstanding problem relates to increased cost of production, due in part to the invasion of Ukraine by the Russian Federation and drought in Brazil and neighboring nations, impacting availability of ingredients.  Demand will be strengthened as nations relax COVID restrictions, leading to higher restaurant and QSR servings, providing customers have available disposable income.

 

Chick-NewsAvian influenza remains an ongoing threat with the 2021-2022 panornitic continuing in many nations.  The large number of wild birds species affected, suggests that H5N1 infection may become endemic and lead to additional cases in both commercial and backyard flocks.  Outbreaks of HPAI in the E.U. and the U.S. have disrupted shipments of hatching eggs and breeding stock. This will be of significance to nations depending on regular supplies from the E.U.

 

CHICK-NEWS will quantify World production and export figures when released by USDA.


 

J-S Ranch Receives Approval for Broiler Project in Oregon

Chick-News

The Oregon Department of Agriculture has approved an application by J-S Ranch to develop a broiler grow-out facility near Scio, OR. to supply Foster Farms

 

The plan calls for eleven houses with a capacity of approximately 48,000 birds to produce 3.4 million broilers annually. J-S Ranch is yet to receive a permit for handling storm-water. 

 

The application was approved despite objections from landowners in the area based on the usual concerns of odor, traffic and environmental pollution.

Chick-News

Chick-News

 

USDA Chicken Purchases

Chick-NewsOn May 20th USDA-AMS purchased 332 tons of split breasts at an average price of $3.48 per lb. and 1,287 tons of whole bagged frozen chicken at a price range of $1.44 to $1.62 per lb.

 

On May 23rd, the USDA-AMS purchased 605 tons of frozen chicken fillets and 1,326 tons of frozen chicken strips with both products at $5.00 per lb.

 

The total value of the purchases amounted to $28.4 million, with product to be Chick-Newsdelivered during the third quarter for child nutrition and food assistance programs.

 


 

Hormel Posts Q2 Results for FY 2022

Chick-NewsIn a release dated June 2nd Hormel Foods (HRL) reported on the second quarter of fiscal 2022 ending May 1st 2022.  For the quarter the company earned $261.7 million on revenue of $3,097 million with a diluted EPS of $0.48.  Comparable values for Q2 of fiscal 2021 ending April 25th were net income of $227.9 million on revenue of $2,607 million with a diluted EPS of $0.42. Profit margin fell from 8.7 percent in Q2 FY2021 to 8.4 percent for the most recent quarter.

 

For Q2 FY 2022 the Jennie-O Turkey Store Segment generated sales of $407.3 million with an operating profit of $61.8 million reflecting an operating margin of 15.2 percent.  For the second quarter of fiscal 2021, revenue and operating profit were $351.2 million and $12.7 million respectively yielding an operating margin of 3.6 percent.  Volume in the Jennie-O segment was up 29.7 percent to 261.6 million lbs. Sales value was higher by 16.0 percent. Unit revenue declined from $1.74 per lb. in Q2 2021 to $1.56 per lb. for the most recent quarter. Segment contribution was however up 387 percent. Growth was derived from a return in food service, demand for whole birds and branded products. As in Q1 2022 increases in feed and logistic costs detracted from earnings.

 

In commenting on Corporate results Jim Snee, Chairman and CEO stated “We delivered strong top- and bottom-line growth during the quarter, leveraging our balanced business model, leading brands and experienced management team," He added "The second quarter marked our sixth consecutive quarter of record sales, and we achieved earnings growth for the third consecutive quarter. Operating margin increased compared to the first quarter, an indication that our efforts to mitigate inflationary pressures are working. We also made meaningful progress across our supply chain, where our investments in capacity and a recovery in staffing levels contributed to improved fill rates, inventories and production volumes”.

 

Chick-NewsIn relation to the turkey Segment, Snee observed "Our Jennie-O Turkey Store segment had an outstanding quarter, as its ability to adjust to current market conditions and meet strong foodservice demand drove higher results” He sounded a note of caution for the subsequent quarter stating, "After an excellent first quarter and significant profit growth in the second quarter, our Jennie-O Turkey Store team is facing an uncertain period ahead. We are actively managing the impacts from highly pathogenic avian influenza (HPAI) on turkey supply and will take the appropriate actions to protect the health of the turkeys across our supply chain. Similar to what we experienced in 2015, HPAI is expected to have a meaningful impact on industry poultry supplies over the coming months. Beginning in the third quarter, we anticipate large supply gaps in the Jennie-O Turkey Store vertically integrated supply chain, caused by flock losses to date. Our dedicated and experienced team is managing through operational challenges caused by the outbreaks and adapting to changing business conditions. The team has shown unwavering commitment and resolve in the face of a very difficult situation." 

 

Hormel Foods posted total assets of 13,122 million on May 1st of which $6,750 comprised goodwill and intangibles. Long-term debt was $3,454 against an intraday market capitalization of $26,290 million. HRL has traded over the past 52 weeks in a range of $40.48 to $55.11 with a 50-day moving average of $51.60.  HRL trades with a forward P/E of 24.8 and a beta of 0.1.  For the trailing 12-month period, operating margin attained 10.0 percent and profit margin 7.7 percent.  The company has generated returns on assets of 6.6 percent and on equity 13.6 percent. HRL closed at $48.08 on June 1st but fell sharply at the open following the release to $45.75On June 2nd.

 

Subscribers can review the financial performance of competitor Butterball by entering “Seaboard” into the SEARCH tab.


 

Tyson Achieves Zero Waste Landfill at Six Plants

Chick-NewsGold-Level validation has been granted to Tyson Foods with respect to six broiler plants in Tennessee, Arkansas, Kentucky, and Georgia that have achieved Zero Waste to Landfill status.  All of the plants recycle animal waste to byproducts and have eliminated delivery of other materials include packaging, compost, liquids, and food to landfills.

 

Chick-News

Tyson Foods has designed integrated waste management systems that will reduce greenhouse gas emissions with all facilities subject to third-party validation.  To achieve the Zero Waste to Landfill Gold-Level certification, each plant was required to document methods for handling waste and avoid disposal to landfills.

 

Additional information on Tyson sustainability programs can be accessed at <www.tysonfoods.com/sustainability>.


 

Future Of Vegetable-Based Meat Alternatives

Chick-NewsNegative comments from Maple Leaf Foods regarding slow growth in sales, evidence that the McPlant™ Burger is failing to gain traction in test markets and data from IRI all suggest a pause in the upward sales trajectory of alternatives to meat. Following the release of various ground beef substitutes for both consumer and institutional markets, CHICK-NEWS suggested that initial growth was associated with a “curiosity factor” and that future sales would depend on equivalence in organoleptic qualities and cost in comparison with real products. 

 

Chick-News

A recent survey conducted by Ingredion, Inc. showed that consumers of alternatives to meat concurrently purchase beef, pork and chicken. Given that 65 percent of the respondents to the survey rated taste as their top requirement followed by 48 percent motivated by label additives it may be assumed that plant-based meat alternatives are failing on both counts.  In surveys, “taste” may also include texture and odor in addition to appearance when cooked.  Clearly, there are differences disfavoring substitutes.  To attempt to reproduce the organoleptic qualities of real meat, manufacturers of plant substitutes include a number of additives that obviously concern many consumers.

 

Among those surveyed by Ingredion, three quarters noted that they would be prepared to pay more for plant-based substitutes, provided they were equivalent or superior to real products as served in restaurants.  At this time, all of the red meat substitutes are priced higher than quality ground beef displayed in supermarket coolers without offering equivalence in properties as perceived by the consumer.

 

CEOs of companies producing alternatives to meat should follow the lead of Maple Leaf Foods and re-evaluate product quality, pricing and volumes or just simply heed the advice of Fagin in the musical Oliver, “I think I better think it out again!”


 

China Slashes Pork Imports

Chick-NewsWith more rapid recovery from African swine fever than expected, China has drastically reduced importation of pork.  According to the USDA-FAS, pork exports for the first quarter of 2022 amounted to 39,000 metric tons representing a 75 percent decline from the corresponding quarter in 2021.  U.S. pork exports were also impacted by reductions of 15 percent for Japan, 17 percent for Canada and 7 percent for South Korea, contributing to an overall 21 percent decline to 522,000 metric tons.  Mexico did, however, increase imports by 40 percent during the first quarter.

 

Chick-NewsThe U.S. is in a noncompetitive situation in China compared to the E.U. since a tariff of 25 percent is applied to U.S. imports.


 

ADM Enters into Joint Venture with Eat Just

Chick-NewsADM will assist Eat Just with development of cell-cultured meat including Good Meat™ cultivated chicken.

 

Leticia Gonzalves, President of Global Foods for ADM noted, "cultivated meat solutions have an exciting role to play in this space and we are eager to work together with Good Meat to bring innovative cultivated meat products to the Singapore market and beyond".

 

Previously Eat Just has claimed that it is serving cell-cultured meat in restaurants raising questions as to why technical support from ADM is required.

 

Previous unfounded claims and questionable business ethics on the part of the founder of Eat Just and its predecessors, presumes that ADM has performed appropriate due diligence.  The joint venture will enhance the image of the companies established by the founder and CEO.


 

Beyond Meat Appoints Kim Kardashian as a Spokesperson

Chick-NewsIn a May 24th announcement Beyond Meat Inc. announced that Kim Kardashian will be featured in a campaign as a "professional tastemaker" to promote the claimed sustainability of the Beyond Meat brand.  Despite her statements regarding support of plant-based meat substitutes, she has little creditability as an environmentalist, health advocate or commentator on food.

 

The value of the Kardashian endorsement was tarnished by a flood of critical comments following airing of her commercial. A review of the spot clearly shows that she failed to actually taste the Beyond Meat burger she was holding.

 

Chick-NewsGiven the abysmal financial performance of Beyond Meat, the Company needs to define their market and adopt appropriate promotional activities. Vulnerabilities that need to be countered include a product that is inferior in nutritional quality to real ground beef, a label indicating numerous additives and above all an uncompetitive price compared to the real product. 

 

The choice of "ambassadors" including Snoop Dogg and Ms. Kardashian suggests a lack of focus and inappropriate selection of spokespersons relative to the potential market comprising affluent, health and environmentally conscious consumers.  The expense involved in enlisting the assistance of Ms. Kardashian will obviously reflect in the ever-declining operating margin of the company coupled with a less than stellar growth rate in the U.S. market.


 

Seaboard Foods Settles with OSHA

Chick-NewsSeaboard Foods has agreed to pay $6,800 to resolve citations issued by the Occupational Safety and Health Administration alleging negligence in preventing and documenting repetitive motion injuries acquired by workers at the Guymon, OK. plant.  The settlement agreement did not constitute an admission by Seaboard of violating OSHA standards.  The company has until August 31st to Chick-Newsestablish interim and long-term procedures to prevent ergonomic injuries through retraining and reconfiguring workstations to eliminate lifting and bending and musculoskeletal stress.


 

USDA Attempting To Duplicate Existing Training Programs

Chick-NewsIn recent months, CHICK-NEWS and EGG-NEWS have reported on programs established by major broiler integrators to provide educational and training opportunities for their employees.  These include in-company training and grants to community colleges to establish specific programs for workers to develop digital and managerial skills that would allow them to advance in their companies and become more productive.

 

The Extension Risk Management Education and Sustainable Agriculture Research Education Program will dispense $5 million to develop meat and poultry processing training and educational materials. Again as is the policy of the USDA, funds will be directed to small-sized operations.  Training workers to operate mobile processing units, on-farm processing and farm-to-fork enterprises will make no material difference to the national food supply chain.

 

 This program represents an additional example of the USDA pursuing altruistic endeavors using public funds to satisfy the collective desire of political appointees to move U.S. agriculture back to the 19th century by training butchers in a digital age.


 

Salmonella Contamination Impacts U.K. Chicken Supply

Chick-NewsUK broiler producer Cranswick County Foods plc. has initiated a recall and closed a plant in Hull to be decontaminated following an investigation of the source of Salmonella identified on a wide range of further-processed chicken products including salads, deli fillers and wraps to be supplied to supermarkets and restaurants. The problem was identified on routine quality control.

 

A spokesperson for the company noted, "as a precautionary measure we have asked our customers to remove any of their products containing our ready-to-eat chicken produced during the affected period and we are working closely with the Food Standards Agency to resolve the matter".

 

Chick-NewsThe recall has had a profound impact on the retail market since Cranswick supplies raw material incorporated into salads, sandwiches and meal kits.  Virtually all U.K. supermarkets including Marks and Spencer, Tesco, Waitrose, Aldi and Sainsbury's have removed product from shelves.  Coffee shops Costa, Starbucks and sandwich store Pret a Manger have also recalled product.


 

Oklahoma to Regulate Chicken Waste

Chick-NewsAccording to Oklahoma House Bill HB2983, standard management practices to handle poultry waste will be placed under the direction of the Oklahoma Department of Agriculture, Food and Forestry in place of the USDA - Natural Resources Conservation Service.

 

Chick-NewsThe bill sponsored by State Rep. David Hardin was signed into law by Governor Kevin Stitt.  In approving the bill, the Governor stated, "this was truly a collaborative effort to address the needs of Oklahoma poultry farmers and HB2983 helps provide stability and relief for them.


 

Minnesota Funds Mobile Meat Processing

Funds from the American Rescue Plan will be used to develop and install mobile meat processing and to train butchers. A total of $2.9 million will be assigned to the Farmers Union Foundation to create 150 new jobs, retain 200 jobs and generate private investment.

 

Chick-NewsIt is difficult to see how this small drop in the bucket can do more than benefit small and local communities.  It will not in any way address disparities between processing capacity and demand under unusual circumstances such as the 2020 COVID pandemic that shuttered or constrained output of both hog and beef plants.  Expenditure on small, and by definition inefficient, meat processing is a diversion from the problem of inadequate capacity in large plants.  In recognition of the situation in 2020 and the consequences of the Tyson Foods fire in the Holcomb, KS. plant, private enterprise will invest close to a $1 billion in extensions and improvements. This expenditure along with the establishment of a few new large plants and installation of mechanization should provide spare capacity to account for unusual situations.

 

Chick-News

The comment by the Secretary of Commerce, Gina M. Raimondo, that the proposed investment in Central Minnesota “will help address supply chain issues and increase U.S. competitiveness in the global market” is unrealistic political puffery.


 

Tekni-Plex Consumer Products Launches PET Trays

Tekni-Plex Consumer Products has launched a new range of PET trays containing 50 percent post-industrial, recycled content.  Trays are recyclable and are shatter resistant, even at low temperature.  Transparent packaging allows optimal product display especially for premium items.

 

In commenting on the launch, Jay Arnold, VP and General Manager of Tekni-Plex Consumer Products stated, “We are continuing to expand our material and product offerings to include more eco-minded solutions as our customers and their commitment to sustainability continues to drive industry-wide changes.”  He added, “PET is the most widely recycled and favorably- viewed plastic in the eyes of the public, making it a great option to help our customers meet their goals.”

 

Tekni-Plex processor trays incorporate Hidden Rim Technology™ a proprietary technique preventing the overwrap film from tearing.  Trays can be packed and transported at high density, increasing volume shipped per vehicle.

 

PET processor trays are available as a transparent presentation in addition to translucent and opaque colors.  All trays irrespective of tint can be delivered to a recycling stream.  For additional information, access www.Tekni-Plex.com/consumer.

 


 

Shane Commentary

Cheesecake Factory To Require California Proposition #12 Standards For Pork

Following on from their 2021 Corporate Social Responsibility report, Cheesecake Factory, Inc. will require 75 percent of its pork supply to be derived from sows held under group housing by the end of 2022.  During 2021, 30 percent of pork supply was derived from producers that maintained sows in gestation crates for less than 28 days.

 

Megan Bloomer, VP for Sustainability at the Cheesecake Factory stated, “The welfare of all animals throughout our supply chain is critically important to us.”  She added, “We are on the path to eliminating gestation crates and thanks to our valued pork suppliers, we are able to further improve the welfare of sows in our supply chain by aligning with California Proposition #12 standards.” Irrespective of the outcome of the appeal by the National Pork Producers Council to the Supreme Court, customers including restaurants and the retail segment have adopted standards conforming to California Proposition #12.

 

The implications are that standards may be imposed on customers by animal rights organizations through coercion, irrespective of whether they are practical and beneficial. They may demand that retailers and restaurants adopt requirements usually applicable to and devised in the E.U. and then superimposed on U.S. production systems.  Where applicable and beneficial, producers have accepted changes to traditional housing and management as exemplified by production of organic broilers and adoption of lower-level GAP requirements for broilers that add to cost but may have the potential to expand the customer base.  Providing there is an incremental margin derived from specified welfare standards, producers will be motivated to comply.  It is, however, an unfortunate reality that in an inflationary environment, lower income demographics are obliged to be cost conscious. These consumers do not perceive either welfare or sustainability as attributes for which they are willing to pay extra.

 

Livestock producers and especially those involved in broiler production should be proactive in promoting the welfare of existing systems to preempt negative publicity. This strategy will in the long-term, be more productive than maintaining a reactive and defensive response after the moral high ground has been seized through web-postings and protests.

 

Visit our Companion Website
http://egg-news.com/
Dr. Simon M. Shane
Simon M. Shane
Contact     C. V.
 
Copyright © 2022 Simon M. Shane Managed by Goosedown