Editorial

GAIN Report on China Broiler Production Raises Questions

The U.S. Broiler industry relies on USDA-FAS GAIN reports for data on production and consumption especially with respect to importing and competitive nations. The GAIN report on China, CH2020-0040 released on March 27th reflecting the most important potential market for the broiler and turkey industries was disappointing with respect to scope and detail.

 

The Beijing FAS Post projected that in 2020 chicken meat production will attain 15.75 million metric tons a 14.5 percent increase over 2019. This double-digit expansion begs some justification given the facilities required to produce the incremental volume of 19 million broilers per week. Imports will amount to 675,000 tons representing 4.1 percent of availability.  China will operate with a 300-ton net import figure given total exports of 375,000 tons.  Domestic consumption of 16.05 million metric tons actually represents a per capita consumption of 11.7 kg (22.8 lbs.) given a population of 1.4 billion. An example of superficiality in preparation of the report is demonstrated by the Production, Supply and Demand table that is devoid of units and the first year tabulated should have been 2018, not 2019.

 

According to the GAIN report, chicken meat consumption comprises 45 percent white-feathered broilers, 30 percent traditional "yellow birds", 10 percent derived from spent hens and 15 percent a hybrid between yellow birds and conventional broilers.

 

A graph showing imports of grandparents stated in tons, taken straight from a National Bureau of Statistics report is meaningless unless converted to packages or individual chicks. The data demonstrates the sharp drop in imports from 2016 to 2017.  At the beginning of 2016, China demanded that exporters of grandparents suppliers provide great-grandparent level strains.  The major EU and U.S. primary breeders of broilers demurred for obvious reasons. Eventually China was able to obtain great grandparent stock from a second-tier supplier in the EU.  It is not surprising that the report notes that a large integrator "has announced a breakthrough in white broiler genetics and will commence suppling grandparents domestically and internationally”. This revelation justifies the previous decision of the major primary breeders not to supply GGPs in 2016 since the reliability of China to adhere to contract provisions relating to competitive restrictions is always in question. The emergence of China as an exporter of GP broiler packages is a clear example of coercive agreements with international suppliers with forced transfer of intellectual property, in this case genetic traits intrinsic to GGP level strains.

 

The imposition of spurious disease-related barriers to importation of GGPs in 2016 restricted the availability of breeding stock. Accordingly producers in China were forced to molt GPs and parents restricting the availability of commercial broiler chicks.   This self-inflicted problem has come back to haunt the industry in China given the current demand for chicken meat following the advent of African swine fever.  Imports of grandparent stock increased sharply from August 2019 onwards with product supplied from ultra- high biosecurity farms in New Zealand.

 

The GAIN report on China superficially notes the escalation in price of pork as a result of ASF.  The report is woefully lacking in costs of production including feed, chicks and labor and does not provide wholesale and retail prices of chicken both whole and portions that would be of value to a U.S. exporter.  The report also fails to provide production parameters for yellow birds, conventional broilers and the so-called H17 hybrid.  Again this information would be of value to the U.S. industry.

 

Given the importance of China, the GAIN report has profound deficiencies and does not reflect favorably on the FAS.  It would appear that the report was a hastily assembled document relying only on data released by the Government of China data that is always suspect, supplemented by somewhat obvious observations lacking in quantitative support.

 

Poultry Industry News

Broiler Week

Weekly Broiler Production and Prices

Chick Placements.

The Broiler Hatchery Report released on April 1st 2020 confirmed that a total of 239.5 million eggs were set during the week ending March 28th 2020, three percent higher than the corresponding week in 2019. A total of 182.2 million day-old chicks were placed among the 19 major broiler-producing states during the week ending March 28th 2020. This was four percent more than in the corresponding week in 2019. Total chick placements for the U.S. amounted to 190.9 million. Claimed average hatchability was 81.3 percent for eggs set three weeks earlier.

Broiler Production

According to the April 3rd 2020 USDA Broiler Market News Report (Vol. 67: No. 14) for the processing week ending March 28th 2020, 169.7 million broilers were processed during the processing week at an average live weight of 6.14 lbs. (6.29 lbs. last week) and a nominal yield of 76.0 percent. The number of broilers processed was 5.2 percent more than the corresponding processing week in 2019. Processed (RTC) broiler production for the week was 791.8 million lbs. (359,912 metric tons), 4.8 percent more than the corresponding processing week in 2019. For YTD 2020 Processed (RTC) production attained 10,429 million lbs. (4,741,543 metric tons), 7.5 percent more than YTD 2019.

Broiler Prices

The USDA National Composite Weighted Wholesale price on April 3rd 2020 was down a substantial 17.1 cents per lb. from the previous week to 66.6 cents per lb. compared to 96.6 cents per lb. during the corresponding week of 2019; 79.4 cents per lb. for March 2020 and 102 cents per lb. for the three-year average.

The USDA Southern States (SS) benchmark prices in cents per lb. (rounded to nearest cent) as documented in the Broiler Market News Reports April 3rd 2020 are tabulated with a comparison with the previous week:-

 

Product

USDA SS. Previous week

  Cents/lb.

USDA SS. Past week

Cents/lb.

Difference. %

Whole Index

     52

            50

     -3.9

Tenderloins

   173

          164

     -5.3

B/S Breast

   138

          123

   -10.9

Whole Breasts

     81

            81

 Unchanged

B/S Thighs

     84

            81

     -3.6

Whole Thighs

     38

            36

     -5.2

Drumsticks

     35

            35

 Unchanged

Leg Quarters

     38

            37

     -2.6

Wings (cut)

   178

          164

     -7.9

                                

.

The USDA posted live-weight data for the past week ending March 28th 2020 and YTD 2020 were:-

 

Live Weight Range (lbs.)

 

<4.25

 

4.26-6.25

 

6.26-7.25

 

>7.76

 

Proportion past week 2018 (%)

 

25

 

26

 

27

 

22

 

Change from 2018 YTD (%)

 

  +9

 

     -12

 

    +16

 

+15

 

During the past week broilers for QSR and food service (live, 3.6 lb. to 4.3 lb.) represented 25 percent (last week 19 percent) of processed volume.

 

On March 30th 2020 cold storage holdings at selected centers amounted to 99,951 lbs., 1.4 percent more than the inventory of 98,564 lbs. on March 1st 2019.

According to the most recent March 23rd 2020 USDA Cold Storage Report, issued monthly, stocks as of February 29th 2020 compared to February 28th 2019 showed differences with respect to the following categories:-

  • Total Chicken category increased by 6.5 percent to 925.1 million lbs. (420,495 metric tons) on February 29th 2020 compared to 868.8 million lbs. (394,922 metric tons) on February 28th 2019
  • Leg Quarters were up by 45.3 percent to 93.5 million lbs. consistent with the data on exports. Intended purchases by China were delayed by COVID-19 port disruptions. Imports by China should reflect in the April Cold Storage Report. Unit revenue attained is documented in the Monthly Export Report under the STATISTICS Tab.
  • The Breasts and Breast Meat category was up by19.3 percent to 221.9 million lbs. despite increased domestic demand from retail.
  • Wings showed a 21.7 percent decrease, contributing to a stock of 51.2 million lbs.

 Stock of this category may rise due to cancellation of college and professional sports seasons and events.

  • Paws and Feet increased by 22.9 percent to 37.0 million lbs. as a result of variable demand from Hong Kong but at a progressively lower unit price. It will take until the second quarter to determine whether the Phase-One trade agreement and the COVD-19 outbreak had any material effect on total export of feet.
  • It is noted that the Other category comprising 391.0 million lbs. down 2.9 percent from February 28th 2019, represented a significant 43.2 percent of inventory on January 31st The high proportion in the Other category suggests further classification or re-allocation by USDA to the designated major categories.

*(See Poultry Meat Export Report under the STATISTICS Tab)

February 2020 Production

The USDA Poultry Slaughter Report released March 24th covering February 2020 comprising 20 working days recorded a total of 715.8 million head processed (up 2.6 percent from February 2019); Live weight of 4.53 billion lbs. (up 4.6 percent from February 2019); Unit weight of 6.33 lbs. (up 1.9 percent from February 2019). RTC attained 3.41 billion lbs. (up 4.6 percent from February 2019). The proportion marketed in February 2020 as chilled attained 92.8 percent. Condemnations as a proportion of live mass corresponded to 0.21 percent.

Comments

Placements of chicks and level of slaughter are assumed to be consistent with USDA projections.

The first cases of Newcastle disease in 2020 were diagnosed in San Bernardino County on January 8th and 13th. New cases were confirmed on February 18th, 21st and 25th, however the incidence rate suggests that the outbreak is ending.

APHIS recorded 476 cases of velogenic viscerotropic Newcastle disease (vvND) in backyard flocks (predominantly “fighting cocks” and some maintained for table eggs) in the Counties of San Bernardino (164), Riverside (262), Los Angeles (46), Alameda (1), San Diego (1) and Ventura (1) from late-May 2018 to April 3rd 2020. A single case of ND was diagnosed in a backyard flock (type and size not specified by CDFA near Redwood City in Alameda County during the week of March 27th 2019.There was no extension from this location.

The successive monthly incidence rate of vvND declined in November 2018 but a surge in cases in Riverside County occurred in mid-December 2018. Presumed extension from cases of vvND was confirmed in a flock of 103,000 replacement pullets aged six weeks near Perris, CA. on December 14th 2018 resulting in rapid depletion and disposal. This outbreak was followed by infection of three spatially and temporally related egg production farms with a combined population of approximately 250,00 hens. The infection was diagnosed in a flock of fighting cocks in Utah County, UT. on January 18th 2009 and Coconino County, AZ (near Flagstaff) in early April 2019, presumably due to illegal movement of birds from the quarantined area in Southern California.

 

Mexico has recognized the OIE principle of regionalization after intensive negotiations between SENASICA and U.S. counterparts in USDA-APHIS assisted by USAPEEC. Exports of broiler parts, fertile eggs and breeding stock should not be impeded unless there is extensive dissemination of vvND with involvement of the commercial poultry industry in central or northern California or adjoining states.

Provided importing nations adhere to OIE guidelines on regionalization, the limited cluster of apparently now controlled outbreak of H7N3 low pathogenicity avian influenza in turkey flocks in North Carolina should not materially affect exports.

CHICK-NEWS previously commented on the possible impact of failure to reconcile differences to achieve an equitable extension to the NAFTA agreement. Provisional agreement was reached at the end of August 2018 in negotiations between the U.S. and Mexico. An eleventh-hour agreement with concessions on all sides was concluded on September 30th and signed on November 30th 2018 at the G-20 Meeting. This has created a trilateral successor to NAFTA entitled the USMCA.

The Senate of Mexico approved the Agreement on Wednesday 19th June 2019 and the U.S. Congress on January 16th 2020, followed by the legislature of Canada during the second week of March 2020.

During 2019 broiler exports to Mexico attained 683,018 metric tons. This represented 21.1 percent of export volume and 18.7 percent of export value (amounting to $605 million) of the export value of $3.23 billion. In the absence of the USMCA signed a year ago, tariffs on chicken could have risen to 75 percent of value creating a non-competitive situation favoring Brazil and Argentina. Sixth-ranked Canada imported 130,132 metric tons of broilers and parts during 2019 valued at $296.1 million. Collectively our NAFTA/USMCA neighbors imported broiler products to the value of $869 million during 2018 and $901 million in 2019.


 

COMMODITY REPORT: April 3rd 2020.

The financial and economic implications of the COVID-19 pandemic are becoming apparent with a sharp downturn in commodities this past week. Corn futures for May delivery fell by 4.6 percent compared with the quotation on March 27th. Soybeans were 3.4 percent lower comparing the March 27th quotation for May delivery. Anticipated increases in price have not materialized after signing the Phase-One trade agreement with China and following ratification of the USMCA. Prospects for commodity exports to China are apparently still restrained by the logistic restrictions imposed by the last phases of the COVID-19 outbreak. In addition China has a low demand for soybeans as a result of losses from African swine fever and disruption of poultry production.

 

Uncertainties still include:-

  • The extent and timing of soybean purchases by China in 2020. The U.S - China Phase-One agreement signed in mid-January incorporating U.S. tariff rescissions, promised purchases of agricultural commodities, concessions on some structural issues by China and strengthened enforcement provisions
  • The market is now less optimistic that future shipments of soybeans to China will take place according to the quantities promised by the Administration after signing the Phase-One agreement. Total soybean shipments YTD have amounted to 1.13 million tons, (41.5 million bushels), approximately 22 percent of the quantity consigned during the corresponding period in 2019.
  • Justifiable uncertainty regarding the spread of 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:-

 

  • Traders are reviewing projected ending stocks for the 2019 crop and taking into account the initial planting intentions reflecting a February USDA survey of corn and soybean acreage for 2020.
  • The optimistic projections for planting corn and soybeans in 2020 as published on March 31st by the USDA may not materialize.
  • Brexit is now a reality following legal departure of the U.K. from the E.U. on January 31st 2020 and a final customs break scheduled at the end of January 2021.
  • A U.S. trade agreement with the U.K. should be concluded in 2020 but trade with the U.S. will be conditioned by commitments to the E.U. by the departing nation. A bilateral agreement appears in jeopardy over disagreements over the use of Huawei communications equipment by the U.K. and chlorination applied to process U.S. chicken.
  • The relationship with the E.U. is tenuous especially with the threat of retaliatory tariffs by the U.S. on food products from France and auto imports from Germany.

 

Compared with the March 27th 2020 close, the CME quotation for May corn posted near close of trading on April 3rd was down a substantial 16 cents per bushel to 330 cents.  China purchased 567,.000 tons of corn on Friday 3rd April valued at $73 million. This quantity represents 1.3 percent of projected U.S. corn exports in 2020. The restrictions imposed as a result of COVID-19 will reduce ethanol demand by 1.5 billion gallons or 10 percent of projected 2020 demand.

May soybeans, expected to be the beneficiary of the Phase-One agreement, were down 30 cents per bushel to 853 cents erasing gains over the past two weeks.

 

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.

 

China placed orders for one million metric tons of soybeans from Brazil during the first week of February 2020. A total of 20.5 million metric tons has been ordered for delivery through May 2020. This quantity is equivalent to 754 million bushels or 42 percent of the projected total U.S. export of soybeans in 2020 as documented in the March 2020 WASDE #598. The purchases by China from Brazil are ascribed to competitive prices compared to the U.S. The USDA recorded exports of previously- ordered consignments amounting to132,000 tons (two shiploads) of U.S. soybeans during the week ending February 27th.

The following extracts from the March 31st 2020 edition of the USDA Grain Stocks Report indicate the levels of storage on farms and in fields and off-farm for corn and soybeans.

  • Corn stored in all positions on March 1st, 2020 totaled 7.95 billion bushels, down 7.7 percent from March 1st Of the total stocks, 4.45 billion bushels are stored on farms, down 13.3 percent from a year earlier. Off-farm stocks, at 3.50 billion bushels, are up 0.5 percent from a year ago. The December 2019 through February 2020 data indicated disappearance at 3.45 billion bushels, compared with 3.32 billion bushels during the same period last year.

 

  • Soybeans stored in all positions on March 1st 2019 totaled 2.25 billion bushels, down 17.4 percent from March 1st Soybean stocks stored on farms totaled 1.01 billion bushels, down 20.3 percent from a year ago. Off-farm stocks, at 1.24 billion bushels, are down 14.8 percent from March 1st 2019. Indicated disappearance for December 2019 through February 2020 totaled 1.00 billion bushels, down one percent from the same period a year earlier.

 

The USDA Prospective Planting Report released March 31st estimated 97 million acres of corn and 83.5 million acres of soybeans, up respectively 8 and 10 percent from 2019. Without an assurance of MFP payments for 2020 it is doubtful whether these acreages will be planted as indicated by respondents in February 2020.

 

The following quotations for May were posted by the CME near close of trading on April 3rd 2020 compared with values for March 27th 2020 (in parentheses) reflecting specified months for delivery.

 

COMMODITY

 

Corn (cents per bushel)

  May  330  (346)        

July  336  (352)

Soybeans (cents per bushel)

  May  853  (883)

July  859  (888)            

Soybean meal ($ per ton)

  May  304  (323)

July  304  (319)    

 

 

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

 

COMMODITY            CHANGE FROM PAST WEEK

Corn:                  May quotation down 16 cents per bushel        (-4.6 percent)               

Soybeans:          May quotation down 30 cents per bushel        (-3.4 percent)

Soybean Meal:   May quotation down $19 per ton                     (-5.9 percent)

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

COMMENTS

 

Subscribers are referred to the March 11th WASDE #598 under the STATISTICS tab. To be updated when released

 

USDA Chief Economist Robert Johansson speaking at the 96th Agricultural Outlook Forum indicated that U.S. agricultural commodities to the value of $14 billion would be imported by China in 2020, far short of the $40 to $50 billion per year promised by the White House in terms of the Phase-One Agreement. In the light of decreased demand in China due to COVID-19, purchases from Brazil and port congestion, now easing, the volumes suggested by Dr. Johansen may be optimistic. In an April 3rd. interview Johansson noted that the Administration target of $40 billion “is still feasible”

 

During 2018 and 2019 a total of $28 billion was disbursed to the agricultural sector in Market Facilitation Program (MFP) payments. Additional requests are being made by industry groups for 2020 MFP relief and these may be justified by delayed or possibly lower imports by China. President Donald  Trump stated in late February 2020 that the Federal Government would “provide additional aid to U.S. farmers as needed until recently negotiated trade deals with China, Mexico, Canada and other countries fully kick in”. At least one round of 2020 MFP payments that now appears inevitable would be funded by tariff revenue representing a transfer of money from consumers to the agricultural sector.

 


 

Turkey Week

Weekly Turkey Production and Prices

Poult Production and Placement:

The March 16th edition of the USDA Turkey Hatchery Report, issued monthly, documented 28.0 million eggs in incubators on March 1st 2020 (28.2 million eggs on February 1st 2020) and down 0.3 percent (70,000 eggs) from March 1st 2019.

A total of 22.6 million poults were hatched during February 2020 (23.9 million in January 2020) representing a decrease of 0.3 percent from February 2019.

A total of 20.6 million poults were placed on farms in the U.S. in February 2020, (21.4 million in January 2020), 2.9 percent more than in February 2019. This suggests disposal of 1.9 million poults during the month. Assuming all tom poults were placed, 16.8 percent of February-hatched hen poults or 8.4 percent of all February 2020-hatched poults were not placed.

For the twelve-month period March 2019 through February 2020 inclusive, 282.9 million poults were hatched and 258.3 million were placed. This suggests disposal of 24.6 million poults. Assuming all tom poults were placed 17.4 percent of hen poults or 8.7 percent of all poults hatched during the period were not placed.

Turkey Production:

The April 3rd 2020 edition of the USDA Turkey Market News Report (Vol. 67: No. 14) confirmed the following provisional data for turkeys slaughtered under Federal inspection:-

  • For the processing week ending March 28th 2020, 1.617 million young hens were slaughtered at a live weight of 17.4 lbs. (last week 16.1 lbs.). During the corresponding processing week in 2019, 1.658 million hens were processed. Ready-to-cook (RTC) hen weight for the week attained 21.5 million lbs. (9,769 metric tons), 7.6 percent less than the corresponding processing week of 2019. Dressing percentage was a nominal 80.5. For YTD 2020 RTC hen production attained 285.6 million lbs. (129,804 metric tons), 1.3 percent less than during YTD 2019.

 

  • For the processing week ending March 28th 2020, 2.426 million toms were slaughtered at 43.8 lbs. compared to 2.460 million toms processed during the previous week at 44.2 lbs. For the corresponding processing week in 2019, 2.485 million toms were processed. Ready-to-cook tom weight for the week attained 87.5 million lbs. (38,863 metric tons), 3.1 percent less than the corresponding processing week in 2019.  Dressing percentage was a nominal 80.5 percent. For 2019 YTD, RTC tom product attained 1,113.0 million lbs. (505,910 metric tons), 3.2 percent more than for the YTD 2019.

 

  • The National average frozen hen price during the past week was 101.0 cents per lb., 4.0 cents per lb. higher than the previous week and up 13 cents from the three-year average. The following prices rounded to nearest cent were documented for domestic and export trading on April 3rd 2020:-

 

Product

cents per lb.

Change from previous Week (%)

Frozen hens

       101

                          -1.0

Frozen toms

       101

                      Unchanged

Fresh hens

       120

                         +1.7

Fresh toms

       119

                      Unchanged

Breasts 4.0-6.5 lb. (frozen)

       112

                       Unchanged

Breasts (B/S) tom

       147

                           -5.1

Drums (toms for export)

         77

                        +11.6

Wings (V-cut tom)

         79

                          +3.9

Wings (V-cut hens)

       225

                      No new quotation

Thigh Meat (frozen for export)

       136

                      No new quotation

Mechanically Separated (export)

         28

                          Unchanged

Inventories:

On March 30th 2019 cold storage holdings at selected centers amounted to 73,334 lbs., 8.7 percent more than the inventory of 67,488 lbs. on March 1st 2020.

The March 23rd edition of the USDA Cold Storage Report issued monthly, documented a total turkey stock of 340.5 million lbs. (154,789 metric tons) on February 29th 2020, approximately equivalent to three weeks production and down 24.7 percent compared to February 28th 2019 inventory. The February 29th 2020 value was 12.9 percent above the January 31st 2020 level due to decreased seasonal sales during the month relative to production.

The Whole Turkey category representing 38.6 percent of total storage of 340.5 million lbs. on February 29th 2020 and was 24.7 percent lower than the inventory on February 28th 2019. Tom carcasses in storage decreased by 26.2 percent from February 29th 2019 to 75.2 million lbs. on February 29th 2020. Hen carcasses in storage decreased by 50.2 percent from February 28th 2019 to 56,299 million lbs. on February 29th 2020.

The “Other” and “Unclassified” categories collectively amounted to 106.1 million lbs. or 31.2 percent of inventory on February 29th 2020. The magnitude of these two non-specified categories suggests that the USDA should attempt to classify product more accurately as to specific product.

February 2020 Production

According to the USDA Poultry Slaughter Report released on March 24th 2020 covering February 2020 comprising 20 working days, 17.1 million young turkeys were processed. (down 1.9 percent from February 2019); live weight attained 556.4 million lbs. (2.4 percent above February 2019); Average live weight was 32.7 lbs. (0.5 percent less than February 2019); RTC attained 444,344 million lbs. (down 2.4 percent from February 2019) with a yield of 79.9 percent. The proportion of frozen product in February attained 36.1 percent of total produced. In February 2020, 0.27 percent of live weight was condemned (0.30 percent in February 2019

Comments:

Please review comments on prospects for exports as outlined in the weekly Broiler Report in this edition and the year-to-date export data under the STATISTICS tab.

In early February 2019 a sporadic case of H5 LPAI was diagnosed in a turkey flock (age and type not specified) in Chippawa County, MN. This flock was depleted without lateral transmission and export restrictions on Minnesota expired in June.

Outbreaks of H7N3 avian influenza were reported in three turkey flocks in North Carolina over the weekend of March 13th. Surveillance and quarantine were implemented and the index flock and four other flocks from which virus was isolated were promptly depleted with biosecure disposal. If this outbreak is attributed to migratory birds as in Minnesota in March 2015, it denotes infection of the Atlantic Flyway with implications for broiler flocks in Eastern North Carolina and on the Eastern Shore.

The Newcastle disease outbreak in Southern California is detailed in the Broiler Weekly Report posted in this edition. The outbreak appears to have ended with no incident cases since February 25th. No turkey flocks have been infected with Newcastle disease from 2018 to date.

The Administration concluded a last-minute modification to NAFTA to create the trilateral USMCA on the last day of September 2018 and the draft document was signed on November 30th 2018. Modifications to the USMCA were negotiated and signed in Mexico in early December 2019. Subsequently the USMCA was approved by the Senate of Mexico in late 2019 and by the U.S. Congress in January 2020. The Agreement was eventually ratified by the Parliament of Canada during the second week of March. The U.S. turkey industry shipped 173,544 metric tons or 62.6 percent of all turkey exports to Mexico, valued at $389 million during 2018. In 2019 Mexico received 176,789 metric tons representing 60.9 percent of turkey exports valued at $427 million.


 

Meat Exports

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

Export data for the first two months of the current year confirmed a 4.3 percent increase in exports of broiler parts in comparison to January-February 2019. An encouraging sign is the continuation of the increase in both unit price and total value evident in the fourth quarter of 2019. Unit price is constrained by the fact that leg quarters comprise over 96 percent of exports. This product represents 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. The extensive outbreak of African swine fever has boosted U.S. exports to Asia over the intermediate term as all animal protein will rise in price as pork supply is restricted by availability. The effect of increased demand from Viet Nam is apparent but disruption in ports and in the transport infrastructure due to the COVID-19 outbreak impacted exports to China during January and February.

 

Total exports of broiler parts in January-February 2020 attained 534,185 metric tons, 4.3 percent more than in January-February 2019 (512,184 metric tons). Total value of exports increased by a substantial 19.3 percent to $545.4 million ($457.1 million Jan.-Feb. 2019).

 

During January-February 2020 the National Chicken Council (NCC), citing USDA-FAS data, documented exports of 570,413 metric tons of chicken parts and other forms (whole and prepared) valued at $602 million with a weighted average unit value of $1,055 per metric ton, 13.0 percent higher in unit value than in January-February 2019 ($934 per metric ton).

 

The NCC breakdown of chicken exports during January-February 2020 by proportion and unit price for each broiler category compared with January-February 2019 (with the unit price in parentheses) comprised:-

 

  • Chicken parts        5%;  Unit value $996 per metric ton  ($858)
  • Prepared chicken         2%;  Unit value $3,641 per metric ton ($3,491)
  • Whole chicken 3%;  Unit value $1,055 per metric ton  ($934) 

 

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

 

PRODUCT

       JAN.-FEB. 2019

     JAN.-FEB.  2019

DIFFERENCE

Broiler Meat

 

 

 

Volume (metric tons)

512,184

   534,185

 +22,001 (+4.3%)

Value ($ millions)

              457.1

               545.4

  +88.3    (+19.3%)

Unit value ($/m. ton)

              893

               1,021

   +128    (+14.3%)

Turkey Meat

 

 

 

Volume (metric tons)

42,245

           39,479

 -2,766    (-6.5%)

Value ($ millions)

              90.6

               98.3

  +7.7      (+8.5%)

Unit value ($/m. ton)

              2,145

             2,489

 +344    (+16.0%)

Chicken Paws

 

 

 

Volume (metric tons)

           22,840

           27,527

+4,687   (+20.5%)

Value ($ millions)

             28.2

               39.2

    +11.0 (+39.0%)

Unit value ($/m. ton)

            1,235

             1,424

    +189   (+15.3%)

 

COMPARISON OF U.S. POULTRY MEAT EXPORT DATA FOR JANUARY-

FEBRUARY 2019 COMPARED TO CORRESPONDING MONTHS IN  2020

 

EXPORTS OF BROILER PARTS JANUARY-FEBRUARY 2020

 

Total broiler parts, predominantly leg quarters, exported during the first two months of 2020 compared with 2019 increased by 4.3 percent in volume and 19.3 percent in value. Unit value increased 14.3 percent from $893 per metric ton to $1,021 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 the domestic production in importing nations. The gain in value of the U.S. Dollar relative to the currencies of Brazil, Argentina and Thailand adversely impacts competitiveness. Notwithstanding these restraints volume and unit value were higher in January-February 2020.

 

The top five importers of broiler meat represented 48.1 percent of shipments during January-February 2020. The top ten importers comprised 65.8 percent of the total volume representing greater concentration among the top importers.

 

Mexico was the largest importer of broiler meat from the U.S. during January-February 2020 with a volume of 119,927 metric tons representing 22.4 percent of volume and 20.3 percent of total value at a unit price of $921 per metric ton.

 

Viet Nam was the 2nd ranked broiler meat importer during January-February 2020 receiving 45,035 metric tons representing 8.4 percent of volume and 8.0 percent of value with a unit price of $966 per ton. Viet Nam increased purchases by 82.2 percent in January-February 2020 compared to 2019. Shipments will progressively increase due to reduced availability of pork resulting from an extensive and probably uncontrollable outbreak of African swine fever. In late January and February some shipments were diverted to Viet Nam as a result of port congestion in China due to COVID-19.

 

Taiwan was the 3rd ranked importer during January-February 2020 with 8.2 percent of U.S. export volume (43,677 metric tons) and 7.6 percent of value ($41.3 million) attributed to the product mix with a unit price of $946 per metric ton.

 

The nation of Georgia was ranked 4th among importers in January-February 2020. Volume (24,945 metric tons) and value ($19.5 million) increased by 50.8 percent and 59.8 percent respectively compared to January-February 2019.

 

Cuba fell to 5th rank in January-February 2020 with 4.3 percent of volume and 3.9 percent of value. Shipments in January-February 2020 were 46.3 percent lower than in January-February 2019. It is hoped that this trade worth $191 million in 2019 will not be compromised by injudicious diplomatic activity or politically inspired restraints such as enforcement of the Helms-Burton Act. This market is courted by both Brazil and Argentina. Cuba has lost financial support from Venezuela in addition to collapse of tourism following the outbreak of COVID-19, reducing availability of foreign currency.

 

Angola was 19th among importers in January-February 2020 despite being ranked 4th among importers in 2019 with a volume of 166,566 metric tons comprising 5.2 percent of U.S. broiler shipments. Imports in 2020 to date are 70.9 percent lower than in 2019. The market in this nation is currently restrained by an unjustifiable policy intended to stimulate domestic production of agricultural products.

 

The Philippines ranked 7th among importers in January-February with 4.0 percent of volume (21,396 metric tons) and 3.7 percent of value ($20.4 million). Volume for the period in 2020 increased by 13.2 percent over the first two months of 2019.

 

South Africa was the subject of considerable litigation and Congressional pressure to remove trade barriers in 2015 and 2016. The nation ranked 9th during January-February 2020 with imports of 17,723 metric tons of bone-in product with a total value of $16.1 million (Unit value of $908 per metric ton). Domestic producers in South Africa continue to aggressively oppose imports from the U.S., the E.U. and Brazil by applying both legal and political pressure. The nation announced an increase in tariff from 37 percent to 62 percent on half-chickens and bone-in parts, effective March 13th 2020.

 

There is consistent expansion of the ten, second-tier nations importing broiler meat with average monthly volumes ranging from 3,000 to 8,000 metric tons. This is attributed to the promotional activities of USAPEEC and their regional representatives interacting with traders.

 

TURKEY EXPORTS

 

The volume of turkey meat exported during January-February 2020 declined by 6.5 percent but value rose by 8.5 percent compared to January-February 2020 due to average unit value increasing by 16.0 percent from $2,145 per metric ton in 2019 to $2,489 per metric ton in January-February 2020.

 

Mexico, the leading importer received 64.0 percent of turkey meat shipped during January-February 2020 (39,479 m. tons) 6.5 percent more than during the first two months of 2019 (42,245 m. tons). Exports to Mexico amounting to $66.5 million, represented 67.7 percent of the total value of $98.3 million shipped.

 

China emerged as the second ranked importer with 1,701 metric tons in February comprising 4.3 percent of volume and 2.4 percent of value with a unit value of $1,441 confirming a low-value product. Exports were curtailed by COVID-19 during the review period but this market represents potential for U.S. turkey producers.

 

Canada was the third-ranked importer in January-February 2020 with 3.1 percent of volume and 4.4 percent of value with a unit value of $3,563 per metric ton.

 

South Africa, ranked 4th in January-February 2020 imported 1,041 metric tons at a unit value of $1,345 per ton. Tariffs were not raised on turkey meat. Volume and value were down 60.6 percent and 60.0 percent respectively compared with January February possibly relating to the unfavorable exchange rate of the Rand relative to the U.S. Dollar

 

The U.S. recently concluded a limited trade agreement with Japan that will place U.S. exporters on parity with EU competitors. This should 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.

 

Collectively in January 2020 the Caribbean (including the Dominican Republic and Haiti) and Central America represented 8.5 percent of turkey meat exports and 6.7 percent of value.

 

Benin, ranked 2nd for 2019 imported 10,369 metric tons of low-value turkey product valued at $13.2 million with a unit price of $1,291 per metric ton.  This market has evaporated given the clamp-down on smuggling to Nigeria, their Eastern neighbor across a previously porous border.

 

CHICKEN PAWS AND FEET

 

Exports of chicken paws during January-February 2020 increased by 20.5 percent in volume to 27,527 metric tons and 39.0 percent in value to $39.2 million compared to the corresponding two months in 2019. There was a 15.3 percent increase in unit value to $1,424 per metric ton. Hong Kong imported 57.5 percent of leg and paw shipments and China received 41.7 percent.

 

The increase in volume was attributed to shipment of 4,554 metric tons to China representing 35.0 percent of exports in January 2020 before the advent of COVID-19 disrupted the supply chain. Shipments in January-February combined amounted to 11,406 metric tons. Trade in feet was impacted by the unjustified blanket embargo imposed on the U.S. by China, the largest importer of paws at the beginning of May 2015. It is now evident from the relative proportions sent to China and Hong Kong with a similar total volume that a high proportion of shipments of feet to Hong Kong were previously trans-shipped to China

 

According to the March 23rd USDA Cold Storage Report, the stock level of Paws and Feet on February 29th 2020 increased by 22.9 percent to 37.0 million lbs. compared to February 28th 2019. Subsequent USDA reports will indicate the extent of purchases and shipments to China and the effect on inventory in cold storage.

 

PROSPECTS FOR 2020

 

The March 16th 2020 Livestock, Dairy and Poultry Outlook Report, projected broiler exports (except feet) would be 3.377 million metric tons in 2020. The 2020 projection represents 16.1 percent of the 20.943 million metric tons (46,075 million lb.) of broiler RTC to be produced by the U.S. industry.

 

The USDA projects that exports of turkey products in 2020 will amount to 295,000 metric tons, (649 million lb.), 1.4 percent above 2019 and representing 11.0 percent of 2020 production projected to be 2.691 million metric tons (5,920 million lb.)

 

The Administration successfully renegotiated NAFTA into a new trilateral USMCA on September 30th 2018.This agreement has recently been ratified by legislatures of the three nations.

 

It is important to recognize that exports of chicken and turkey meat products to our NAFTA and now USMCA partners amounted to $1.288 billion in 2017,  $1.279 billion in 2018 and $1.407 billion in 2019.

 

Over the past 22 months 476 diagnoses of END were recorded in backyard flocks comprising a high proportion of fighting cocks in southern California together with four cases in commercial egg production units. This outbreak appears to be at an end.

Diagnoses of LPAI were made in organic commercial turkey farms in northern California followed by nine LPAI H5N2 diagnoses among three counties in Minnesota eight months ago. These sporadic and rapidly-diagnosed, quarantined and depleted flocks did not affect exports of broiler or turkey products from the U.S. The most recent outbreak of low pathogenicity H5N3 avian influenza was diagnosed in seven turkey flocks in North Carolina and a single flock in contiguous South Carolina in mid-March. The asymptomatic flocks were identified on routine surveillance leading to depletion and disposal.

 

 The live-bird market system, backyard flocks, fighting cocks and laying hens with outside access and potential contact with migratory birds represent an ongoing danger to the entire U.S. commercial industry and these segments of poultry production place at risk the eligibility of the broiler and turkey industry to export.

 


 

Multinational Louis-Dreyfus Company Posts Reduced Revenue and Net Income

The Louis-Dreyfus Company reported results for fiscal 2019 ending December 31st.  For the year, the company posted net income of $228 million on net sales of $33.64 billion.  Comparative figures for fiscal 2018 were a net income of $366 million on revenue of $36.01 billion.  Gross margin for FY 2019 was 2.8 percent compared to 3.7 percent in the previous year.  The company has $19.54 billion in total assets with long term debt of $3.27 billion.

 

The results posted by Louis-Dreyfus can be regarded as typical of the major commodity production and trading enterprises collectively referred to as “ABCD”.

 

Margarita Louis-Dreyfus commented on global volatility, political unpredictability, changing consumer trends and environmental issues as factors challenging operations and profitability.


Margarita Louis-Dreyfus. Chairperson

Ian McIntosh, the CEO noted that strategy for 2020 will include more intense trading and vertical integration especially with regard to coffee.  The company intends diversifying revenue through value-added products and introducing innovation and technology.


 

Position Announcement: Technical Director, Eggland’s Best

Eggland’s Best LLC., the leading U.S. specialty egg producer with national production and distribution, is recruiting for the newly-created position of Technical Director. The incumbent will report to the president and will be responsible for food safety, quality assurance, production compliance and product development as a member of a professional team.

 

Qualifications include graduation as a Veterinarian with ACPV certification preferred and relevant field experience an advantage. Residence within commuting distance of the corporate office in Malvern, PA is required. Relocation is available.  Approximately 25 percent travel is anticipated.

 

The position offers a competitive salary and fringe benefits. Applications attaching a CV should be addressed to Ellen Shea, Eggland’s Best LLC, at eshea@eggland.com.  Eggland’s Best is an equal opportunity employer.

 


 

Target Withdraws Fiscal 2020 Guidance Based on COVID-19 Uncertainties

Brian Cornell announced that Target will withdraw FY 2020 guidance and will place on hold store upgrades and expansion due to an uncertain business environment. On Wednesday 25th March Target announced a 12 percent increase in sales from stores and digital channels compare with March to date in 2019. Target noted a 50 percent increase in household goods, food and beverages offset by a 20 percent decline in higher priced items including clothing. The data recorded by Target probably reflect other chains all of whom have incurred additional costs for staffing to clean and restock stores and worker benefits.

 

The future profitability of chains will be a function of economic recovery. Commentators including Ex-Chairman of the Federal Reserve Bank, Ben Bernanke have projected a short recession possibly extending over two quarters followed by a recovery.  This sentiment was echoed by James Bullard, president of the St. Louis Federal Reserve who suggested that the economy will "take a big short-term hit but then snap back strongly".  Bullard earlier forecast that unemployment may increase over the short term to 30 percent although the effect will be cushioned by the $2 trillion relief package negotiated on March 24th and finally passed by the House on February 26th.

Brian Cornell, Target CEO


 

Prospects for Poultry Exports to China Improve After Recision of Retaliatory Tariffs

The U.S. can expect to ship large quantities of chicken to China following the recission of retaliatory tariffs in early March.  Easing of congestion at major ports of entry will also permit larger volumes that should be reflected in future monthly USDA-FAS data.

 

During the first two months of 2020, the U.S. shipped only 1,150 metric tons of chicken products compared to total imports by China of 160,000 metric tons.  Of this volume of imports, Brazil represented 60 percent with the remainder sourced from Argentina (20 percent), Russia (11 percent), and Thailand (9 percent).  China imported a variety of products including legs, wings, and paws.

 

According to the March 30th USAPEEC MondayLine, domestic chicken production in China has resumed following lifting of Covid-19 restrictions on travel and transport.


 

Second Generation Meat Substitutes Under Development

Vegetable-based meat substitutes are intended to displace beef patties in burgers.  This is exemplified by the products and marketing programs of both Beyond Meat and Impossible Burger.  The technology required to produce the approximate texture of ground meat using a combination of vegetable protein from pulses, oils and additives is apparently not complicated. Reproducing the mouth feel of real meat is yet another challenge.

 

NovaMeat in Spain has patented micro-extrusion technology in an attempt to reproduce the texture of meat cuts. Plant-based ingredients are forced through a dye to form thin fibers simulating muscle tissue.  The fibers are then layered to produce a product with the approximate appearance and texture resembling either beef or chicken.  Trials are in progress in Barcelona to perfect a product that will be acceptable to patrons of fine dining establishments.  According to developers it may be a number of years (and presumably considerable invested capital!) before the technology is perfected.

 

Irrespective of the outcome it is evident that the level of sophistication will add to cost and it is questioned whether a textured vegetable protein substitute will be competitive with real products.  Currently simple vegetable burgers cost on average $1 per serving more than conventional beef.  None of the vegetable protein companies appears to be generating profits or even an acceptable return on investment, despite demand and expanding volumes of production.  If, as expected, demand for vegetable meat substitutes plateaus, as the curiosity factor evaporates, there may well be a lot of disappointed venture capital investors.


 

BARDA to Fund COVID-19 Vaccination Initiatives

In an announcements on Monday, March 30th, Johnson and Johnson Inc. announced a $1 billion project to expand manufacturing capacity to produce one billion doses of a potential COVID-19 vaccine.  Approximately 42 percent of the required capital will be funded by the Biomedical Advanced Research and Development Authority [BARDA], a component of the U.S. Department of Health and Human Services.

 

Moderna [MRNA] has commenced tests of a vaccine candidate and also will be funded by BARDA. 

 

The Agency ultimately plans to sponsor up to six experimental vaccine candidates with the anticipation of two successful products available for administration within 12 to 18 months. It is understood that numerous COVID-19 vaccines are under development worldwide, although there is no assurance of either safety or efficacy among the candidates.

 

 

Rick Bright, Director of BARDA, stated “Government and industry is working in unprecedented ways.” He added, “The hope is to work as quickly as possible and manufacture enough vaccines for the U.S. and the rest of the world in a short time frame.”

 

Johnson and Johnson made the decision to initiate aspects of production in advance of preliminary testing of their candidate vaccine.  Dr. Paul Stoffels, Chief Scientific Officer of the Company, stated that they have an early 2021 target and anticipates having data proving efficacy by the end of 2020.  The company is basing their progress on technology previously applied to develop an Ebola vaccine.  It is possible that when finalized, the vaccine may be produced in the U.S. and Europe simultaneously in anticipation of a resurgence of COVID-19, even if the infection is suppressed by mid-summer.


 

Tyson Foods to Provide Bonuses to Workers

Tyson Foods has announced that it will assign $60 million in the form of bonuses to approximately120,000 workers in plants and for truck drivers working through the coronavirus pandemic.  Bonuses of $500 will be paid during the first week of July.

 

Noel White, CEO, stated "our company recently relaxed our attendance policy and we encourage our team members to stay at home if they are exhibiting symptoms of COVID-19 infection."  He added "we are taking additional precautionary measures such as daily temperature checks  of workers at all our facilities and daily cleaning with extra sanitizing in high traffic areas."

 

In addition to the bonus program, Tyson Foods will waive co-pay, co-insurance and deductibles for medical visits associated with COVID-19.

 

Tyson Foods previously announced a $13 million donation to support local communities where the company operates.


 

Alberta Beef Plant Closed Following COVID-19 Diagnosis

A Harmony Beef in Alberta with a capacity of 750 head per day was closed as a result of COVID-19 infection. Confirmation of a diagnosis in a worker resulted in temporary withdrawal of inspectors by the Canadian Food Inspection Agency.  This action followed the diagnosis and quarantine of contacts in the facility.

 

As reported previously in CHICK-NEWS the FSIS has assured processors that the Agency has developed contingency plans to maintain inspection in U.S. plants in the event of outbreaks of COVID-19 among either plant workers or inspectors.

 

The advent of COVID-19 and the temporary shutdown in the Harmony plant occurred at a time when demand for beef in Canada and the U.S. has sharply increased.  Plants operated by Cargill and JBS have added additional shifts and increased production in Alberta, the major beef -producing province in Canada.


 

Rise in Purchases from Convenience Stores

The National Association of Convenience (C) Stores recorded an increase in sales of grocery items as a result of increased patronage attributed to reluctance of shoppers to visit large supermarkets.

The national survey conducted by the Association showed: -

  • Of retailers responding to a questionnaire, 52 percent noted that grocery sales have increased
  • Most C-Stores are adding cleaning and toiletry items, hot meals and in some cases multipack items
  • Some C-Stores have now introduced curbside pickup and a small proportion are offering delivery
  • As with QSRs, C-Stores have closed sit-down dining and curtailed self-serve foods

Dennis McCartney, Director of Operations for Landhope Farms of Pennsylvania commented "the emphasis on cross-contamination and customer safety is something that has been highlighted over and over during this crisis and something that will continue long after this is over."


 

Mountaire Farms Donates Chicken to Robeson County Community

Mountaire Farms that operates a processing plant in Lumber Bridge, NC. delivered 9,600 pounds of chicken to be distributed by the office of the Sheriff, the Lumberton City Council and The Local Housing Authority.

 

The Director of The Housing Authority for the city of Lumberton stated "our residents benefitted from the generosity of Mountaire Farms with a poverty rate of a third of the community comprising 21,000”.


 

Investigations into Disparity Between Producer and Retail Beef Prices

A number of beef-state members of Congress are calling for inquiries into the low price paid to farmers for cattle compared to the disproportionate retail price. Senator Chuck Grassley [R-IA] noted “Beef is flying off grocery shelves, but farmers are seeing prices go down. If packers are illegally manipulating markets during the crisis, we need USDA, DOJ, and CFTC to investigate and help farmers.”

 

Senators Mike Rounds [R-SD]; Steve Daines [R-MT]; John Hoven [R-ND]; and Kevin Cramer [R-ND] have addressed a joint letter to the department of justice requesting an investigation into allegations of price fixing and to establish that the beef packing industry is in compliance with antitrust law given that four companies control 80 percent of the market.

Cattle futures have dropped significantly, partly in fear that plants will close as a result of COVID-19 outbreaks among workers.  Production in some plants is slower than normal due to non-availability of workers attributed to delays in obtaining visas.  The current situation is exacerbated by closure of a JBS plant in Pennsylvania as a result of COVID-19.


 

Shane Commentary

WTO Develops Alternative Arbitration Strategy

The current U.S. Administration refuses to approve new candidates to be appointed to the World Trade Association (WTO), Appeals Arbitration Board, based on allegations of bias in past decisions. Accordingly the World Trade Organization has established a Multiparty Interim Appeal Arbitration Board.  Participants in the initiative comprise 45 nations including the EU as a group in addition to Australia, Brazil, Canada, China, New Zealand among others in Asia and Latin America.

 

The EU Commissioner for Trade stated "this is a stop-gap measure to reflect the temporary paralysis of the WTO appeal function for trade disputes.  This agreement bears testimony to the conviction held by the EU and many other member countries of the WTO that in times of crisis working together is a productive option.

 

The Multiparty Interim Appeal Arbitration Arrangement will become active within weeks following agreement on procedures.

This action by the WTO effectively sidesteps the U.S. and demonstrates the decline in power of the World's largest economy to influence international trade policy and represents both isolationism and a failure in diplomacy.

 

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