Suspension of Regular Mailing of CHICK-NEWS

This edition will be the last regular mailing of CHICK-NEWS. Special editions will be prepared in the future relating to pivotal events or announcements of significant new products or technology.

 

It is hoped that in the eight years of publication CHICK-NEWS has provided comprehensive and factual information and has benefitted the poultry meat industry.

 

EGG-NEWS will continue with weekly mailings each Friday incorporating editorial content, industry statistics, news, information on products and services and relevant commentary.

 

Thank you for your support,

 

Editorial

Reflections on 2021 and Future Prospects

 

The past year was clearly more profitable for the chicken industry, though no less challenging than 2020. Trends that emerged during the past year will have implications for the next 52 weeks. Factors that influenced production and profitability included both extrinsic and intrinsic concerns:-

 

      COVID and Labor
            The infection dominated the national economy and disrupted markets. Shifts in demand for products resulted in changes in presentation with some integrators displaying a considerable level of flexibility and adaptation representing a competitive advantage. With the availability and extensive administration of effective vaccines the immediate and critical problems associated with availability of labor are now less pressing. Suppression of COVID will continue at a high cost both from increased wages and benefits but also in expenditure on preventive measures.  The industry will now be obliged to introduce mechanization and robotics to displace manual and repetitive labor. Fortunately technology has advanced to permit purchase and installation of off-the-shelf lines to displace labor in first processing, portioning and deboning, albeit requiring capital expenditure.
      Inflation
            The past year witnessed high inflation in all inputs. Increased cost of feed ingredients, fuel, labor and packaging detracted from gross profit. The upward trend will continue in 2022 given the difficulty for the Federal Reserve to suppress inflation by increasing interest rates without precipitating a recession.  Management of cash-flow, hedging and financial planning will be important concerns in 2022.
      Regulatory Environment
            The current Administration has adopted policies opposing large-scale processing of red meat and poultry, failing to recognize efficiencies of scale and at the same time promoting infeasible alternatives with public funds. The intercession of the Department of Justice in the proposed acquisition of Sanderson Farms is but one of a number of actions regarded as opposing a well-functioning industry, benefitting contractors, consumers and shareholders. Increased regulatory action will be evident in 2022 in the areas of labor, the environmental and trade.

 

      Production Efficiency
            2021 was marked by relative freedom from disease. Flock livability has held at 95 percent and post-mortem condemnation at 0.5 percent of processed mass. There is however a growing risk of H5N1 avian influenza that will require considerable upgrading of structural biosecurity and diligence in operational biosecurity.
      Consumerism and Welfare
            Despite an undertone of concern over shelf prices most consumers recognize that inroads into budgets are due to inflation without a sense of price gouging. Given the price of alternative proteins, chicken is regarded as an available, relatively low-priced nutritious food. Demand should increase in 2022 over the current year at the expense of red meat. Plant based alternatives to chicken will not represent any meaningful competition in either retail or food service segments in 2022. Welfare along with sustainability will continue to be issues of concern in the coming year. Higher levels of welfare including less efficient “slow growing” strains or “free-range” products will be marketed at high prices to a small but affluent concerned demographic without materially affecting existing metrics in the industry.

 

      Sustainability
            Major chains will impose increasingly higher standards of sustainability involving conservation of energy, packaging, use of water and greenhouse gas emissions. Defining the components in the supply chain extending from contractor to end user that will be required to make investments and how costs will be passed on are questions to be addressed more intensively in 2022.

 

      Exports
            Exports to China were disappointing in 2020 with the exception of feet. There  are no potential prospects for any incremental demand from that nation given the restoration of the hog herd and overproduction of white-feathered broilers. Rabobank note a moderate increase in international trade but the U.S. offers predominantly leg quarters, comprising the major export product that as a commodity offers little prospect of added value or pricing power.

 

      Production
            USDA projects a 1.7 percent increase in output in 2022 to 45,600 million lbs. with an almost corresponding 1.6 percent increase in consumption. This should be attainable given increasing hatchability and a compensatory increase in placements of heavy-strain parents following the self-inflicted problem of inappropriate selection.

 

There will be many challenges facing the chicken industry in 2022. Let us work for a reduction in COVID by increasing rates of vaccination, preventing avian influenza through exclusion and biosecurity and restraining the socialistic inclinations of the Administration.

 

Poultry Industry News

Aviagen Harnesses Virtual Reality for Customer Support and Training

In a January 4th release, Aviagen announced a virtual reality package comprising bonded cellular networking, mesh Wi-Fi and augmented reality headsets incorporating advanced technology.  The package will allow live-streaming capability among Aviagen technical specialists who will now be able to “visit” any farm or hatchery where their expertise can benefit customers.

 

Jan Henriksen, CEO of Aviagen, stated “Being there for our customers to ensure their continual success is our number-one priority and this new suite of tools is meant as a complement to the world-class support our customers get from Aviagen local teams.  They will now have immediate remote access to our array of specialists in addition to regular face-to-face personal support.”  Avian specialists include veterinarians, nutritionists, geneticists, and experts in flock management and incubation.  The virtual reality suite provides the opportunity for immediate answers to issues anywhere in the world without delay or the need for travel.

 

Dr. Marc deBeer, President of Aviagen North America, stated “We are passionate about continually improving our service to customers.”  He added, “We have adapted augmented reality and virtual reality headsets to support our efforts to provide the perfect complement to one-on-one care and collaboration from our local Aviagen customer teams.”

 

Aviagen intends applying this technology to improve sharing of information and ideas in addition to internal company training for the Asia Pacific, Latin America, and North American regions.  Customers will benefit from this initiative in early 2022 following structured regional introduction. 

 

Aviagen, founded in 1923, is a global primary broiler breeding company offering a full portfolio of breeding stock under the Arbor Acres®, Indian River® and Ross® brands. Speciality products include the Rowan Ranger® and Speciality Males® for slower-growing and other niche markets.

 

Based in Huntsville, AL, Aviagen has operations in the U.K., the E.U., Turkey, Latin America, India, Australia, New Zealand, numerousAfrican nations, and joint ventures in Asia.  The company employs close to 8,000 and serves customers in over 100 nations.  Additional information is available on <www.Aviagen.com>.

 

Aviagen will exhibit at the 2022 IPPE on Booth 4225.

 

 

 


 

Aviagen to Participate in the 2022 IPPE

 

Aviagen will be present at the 2022 IPPE to exchange ideas on the latest innovations in poultry breeding. The following Aviagen experts will share their knowledge on Wednesday, January 26th at Booth B3649:-

 

  • Dr. Sara Reichelt, Aviagen Director of Animal Welfare and Sustainability, will discuss the topic, “There Aren’t Any Finish Lines in Poultry Welfare.”
  • Dr. Santiago Avendaño, Director of Global Genetics will present, “Poultry Breeding’s Contribution to the Environmental Sustainability of the Meat Sector.”
  • Dr. Jose J. Bruzual, Senior Poultry Veterinarian, will discuss “Coccidiosis Vaccination Management in Broiler Breeders.”

 

Aviagen CEO Jan Henriksen commented, “This immense gathering of poultry professionals from around the globe is the ideal place to showcase our broad portfolio of Arbor Acres®, Indian River®, Ross®, Rowan Range® and Specialty Male® breeding stock. We will share our Breeding Sustainability messages with others who have a passion for poultry and a common mission of ending hunger and achieving food security for people on every corner of the earth.”

 

Dr. Marc de Beer, President of Aviagen North America added “We are happy to be back at the IPPE 2022 in person and part of this exhibition that is important to the industry worldwide. While webinars and other virtual events have worked well over the past year and a half, nothing can replace the networking and interaction that takes place in person.”

 


 

China to Favor Domestic Pork Producers

According to a statement from the Ministry of Finance early in 2022, China will increase import duties on pork products. Tariffs will return to 12 percent on January 1st, up from the current 8 percent of value.  The intent is to encourage domestic production that is increasing. African swine fever is now more effectively controlled by higher levels of biosecurity and a marked shift  to larger production units with integration.

During October China imported 200,000 metric tons of pork, down 40 percent from October 2020. For the first ten months of 2021, total pork imports attained 3.34 million metric tons down eight percent from the corresponding period in 2020.

 


 

Ham and Products Recall Expands

A previous posting on CHICK-NEWS noted that Alexander and Hornung Inc. had issued a recall for a ton of cooked ham and pepperoni products due to possible contamination with Listeria.

 

Possibly due to an inability to designate specific batches, the Company has been forced to increase the recall over ten-fold to 1,160 tons.  In effect most of this product will have been consumed without reports of illness.


 

DOJ Requests Information on Sanderson Farms Acquisition

The Department of Justice has requested additional information on the proposed acquisition of Sanderson Farms by a consortium comprising Cargill Inc. and Continental Grain Company.

 

The Agency has not provided any reason for the request, but it is understandable given the value of the transaction at $4.5 billion representing $203 per share. The intercession of the DOJ reflects concern expressed by agricultural associations and Congress over consolidation in the meat industry.  The transaction would merge Sanderson Farms with Wayne Farms, but the relative ranking of Sanderson Farms as the third largest broiler producer would not change as combined production would be less than second-ranked Pilgrim's Pride and Tyson Foods, the industry leader.

 

Should the transaction be terminated as a result of an adverse decision by the Department of Justice relating to consolidation and monopoly, Sanderson Farms would be liable for a termination fee of $158 million.  Accordingly, Sanderson Farms in an SEC filing stated, "the payment of a termination fee may also have an adverse impact on our financial condition and could affect the structure, pricing and terms purposed by a third party seeking to acquire or merge with us or detour such third party from making a competing acquisition proposal".

 

Sanderson Farms had a market capitalization of $4.18 billion, posted after FY 2021 results were released on December 21st.  Possibly as a result of the DOJ request, Sanderson that opened at $190.50 on Wednesday, December 22nd fell to $187.36 by 15h00 and has traded in a narrow range thereafter. SAFM was priced at $187.49 after the Christmas weekend attaining $187.49 at 10H00 on December 27th.


 

Pure Prairie Farms to Reactivate Charles City, IA Plant

Pure Prairie Farms has completed purchase of the previously named Simply Essentials plant in Charles City, IA. in a sale approved by the U.S. Bankruptcy Court.  The plant has not operated since August 2019.

 

 

 

 

Pure Prairie Farms intends to market organic chicken and will use the combined experience and acumen of managers previously affiliated with GNP, acquired by Pilgrim's Pride in 2016.  Pure Prairie intends to market product during the spring of 2022.


 

Future Meat Technologies Raises $350 Million in Venture Capital

Future Meat Technologies of Israel has raised $350 million in a series B financing led by ADM Ventures and supported by S2G Ventures, Tyson Ventures, Monterey Ventures, Emerald Technology Ventures and others.  Proceeds will be used to erect a production facility in the United States during 2022.  Future Meat founded by Professor Yaakov Nahmias uses unique technology to propagate animal cells in fermenters without the use of serum in media.  Dr. Nahmias stated, “We have demonstrated that our proprietary media rejuvenation technology enables cell densities greater than 100 billion cells per liter translating to production capability ten-fold higher than the industrial standard.”  Future Meats claims that it is producing cultivated chicken breast for $7.00 per pound down from $18 per pound in mid 2021.

 

 

 

Dr. Nahmias stated, “This financing consolidates Futures Meat’s position as a leading player in the cultivated meat industry, just a few years after our launch.”


 

Secretaries of Transportation and Agriculture Urge Resolution of Port Congestion

Secretary of Transportation Pete Buttigieg and Secretary of Agriculture Tom Vilsack released a joint letter urging ocean carriers to cooperate with importers and exporters.  The letter documented that the Pacific Coast ports of Oakland and Portland were denied service by a number of carriers resulting in supply chain congestion at the ports of Los Angeles and Long Beach.  Denial of service increases shipping costs along the Pacific seaboard with fewer containers available to ship U.S. agricultural commodities.

 

 

 

 

The Western Growers Association and United Fresh support the position of the two Secretaries and urge the Administration to improve service.  Both organizations point to recent passage of the Ocean Shipping Reform Act by the House of Representatives with subsequent adoption by the Senate a forgone conclusion.


 

UFCW Approves Five-Year Contract with Foster Farms

Members of Local #555 of the United Food and Commercial Workers Union (UFCW) approved a five-year contract with Foster Farms covering the Kelso, WA. plant.

 

According to local news reports, the agreement incorporates a wage increase, bonuses for second and third shifts and a 401(k) matching program.  The contract will cover 500 employees at the plant.  The agreement follows a September contract with Teamsters Local #630 covering 245 workers at the Compton, CA. plant.


 

Simbe Robotics Develops Tally Supermarket Unit to Monitor Produce Quality

Simbe Robotics, manufacturers of the Tally Robot that transits supermarket aisles checking stock levels, has received a patented upgrade to detect overripe produce.  According to a recently awarded patent (#11,200,537: Method for Tracking and Characterizing Perishable Goods in a Store), the robot is currently capable of evaluating the quality of produce and possibly the status of meat products in the future.

 

 

 

 

Robots are equipped with hyperspectral and color cameras and other sensors.  Computer systems can interpret inputs from cameras and by application of artificial intelligence determine the degree of ripeness of produce.  The sensors should be able to provide a profile including water content, rancidity and color of meat products.  In-store trials have demonstrated the ability of the Tally 3.0 Robot to detect rotten, damaged or bruised produce and rancid meat.


 

2020 FDA Report on Antimicrobials in Food-Producing Animals

In mid-December 2021, the FDA Center for Veterinary Medicine published a summary report on antibiotic use in livestock entitled Antimicrobials Sold or Distributed in 2020 for Use in Food-Producing Animals.  The report should be considered in relation to FDA Guidance for Industry: Documents #213 and #152 that classified antibiotic classes as either “medically important for human therapy” or “not medically important”.  From 2017 onwards, veterinary feed directives (VFDs) or prescriptions were required for feed additives or water-administered antibiotics respectively.

 

The report documented usage of all medically important antibiotics in 2020 amounting to 6,002,056 kg.  This value was three percent lower than in 2019 and 27 percent lower compared to 2011.  Among the medically important antibiotics, tetracyclines predominated at 65.8 percent of use among the nine classes of medically important drugs.  Penicillins, the second largest use class, represented 12.7 percent of antibiotics used in food animal production.  Macrolides comprised 7.2 percent, aminoglycosides, 5.4 percent, and sulfonamides, 4.7 percent.  The FDA documented ionophore use of 3,619,265 kg with these drugs classified as non-medically important. Ionophores comprised 81.4 percent of the non-medically important drugs used for food animal production.  Ionophore use was down 15 percent from 2019 and 12 percent from 2011.

 

In reviewing antibiotic usage by species, chicken represented 2.3 percent of the 2020 total and turkeys 11.5 percent.  Both cattle and swine consumed 40.8 percent respectively of antibiotic use.  The use of antibiotics in chicken was down 27 percent from 2019 and 72 percent from 2016.  Turkey use was up seven percent from 2019 but nine percent lower than in 2016.

 

For chickens, tetracycline use was down 29 percent from 2019 and 63 percent from 2016.  For turkeys, tetracycline use was up 24 percent from 2019 and up three percent from 2016.  For penicillins, turkey use increased three percent from 2019, but was down eight percent from 2016.  Macrolide use in chickens declined by 20 percent from 2019 and 89 percent from 2016.

 

Of the medically important classes of antibiotics for all species, 62 percent was administered in feed under a VFD and 30.5 percent in water under prescription.

 

For 2020, 20.265 million metric tons of RTC chicken was produced with use of 141,793 kg of medically important antibiotics.  This corresponds to an antibiotic use rate of 6.9 mg per kg. RTC.  In 2020, 2.610 million metric tons of RTC turkey was produced with consumption of 690,841 kg medically important antibiotics. This corresponds to a use rate of 265.7 mg per kg. of  RTC demonstrating the relatively higher use of antibiotics for this species.

 

The broiler industry has managed to eliminate antibiotic use by abandoning growth-stimulating antibiotic products in accordance with FDA Guidance documents.  By the middle of the 2010s it was recognized that antibiotic growth promoters were basically ineffective or provided marginal benefit in relation to cost. The industry has improved disease control through vaccination, especially against immunosuppressive infections and respiratory diseases and has enhanced ventilation and control of litter moisture.  Regrettably less progress has been made in application of alternate modalities to antibiotics in the turkey industry for both prevention and therapy. The poultry meat industry has clearly reduced antibiotic use relative to other segments producing animal protein, benefitting consumers, public health and the environment.


 

Philippines to Remain Significant Importer of U.S. Chicken Parts in 2022

USDA-FAS GAIN Report for the Philippines RP 2021-0076 released on December 10th projects continued imports of chicken benefitting both Brazil and the U.S. in 2022.  Domestic production will increase by two percent through 2021 to 1.36 million metric tons.  Imports will be down 4.8 percent from 2021 to 400,000 metric tons.  Assuming a population of 110 million, per capita consumption will be 16 kg (35 lb). 

 

Continued imports are predicated on lower availability of pork with production of 460,000 metric tons in 2021 and  a forecast of 375,000 metric tons in 2022.  Despite some rebuilding of herds, losses due to African swine fever continue due to extensive movement of live hogs and raw products in the absence of effective biosecurity or a vaccine.

 

According to the GAIN report, metro Manila prices were $0.82/lb for live farm gate broilers with a processed RTC wholesale value of $1.45/lb (Conversion PP1 = $0.02).

 

2021 imports of chicken totalling 302,220 metric tons will comprise 10.5 percent chicken cuts, 31.2 percent leg quarters, and 55.0 percent deboned product with a higher proportion of leg quarters compared to 2020.

 

For the period January through September 2021, U.S. imports attained 129,340 metric tons or 37.6 percent of the total.  U.S. imports were up by 136 percent compared to the first nine months of 2020 due to a sharp reduction in supply from the European Union following outbreaks of avian influenza.  For the first nine months of 2021, Brazil slightly edged the U.S. in volume of exports to the Philippines with 132,640 metric tons. 


 

Sad Passing of Former Senator Johnny Isakson

Former Senator Johnny Isakson, (R-GA) has passed at the age of 76 following a series of illnesses including cancer and Parkinson’s disease.

 

Senator Isakson was a member of the Chicken Caucus and was a strong supporter of the industry with regard to allocations to the USDA, export promotion, labor policy, infrastructure and other issues.  He served 14 years in the Georgia Legislature in both the House of Representatives and the Senate.  In 1999 he was elected to Congress and in 2003 advanced to the Senate. 

 

Senator Isakson was a strong proponent of bipartisan legislative action referring to the principle as a “state of being.” He was always a consensus builder respected on both sides of the aisle.  In 2019 he retired after 15 years in the Senate stating “I’m leaving a job I love because my health challenges are taking their toll on me, my family and my staff.”  He added, “It goes against every fiber of my being to leave in the middle of my Senate term but I know it’s the right thing to do on behalf of my state.”

 

Paying tribute to the late Senator Isakson, Governor Brian Kemp (R) stated, that the state has lost a giant and he remembered Isakson as a statesman with a dedication to Georgia and nation.

 

He will be sadly missed and it is hoped that the USDA will name a suitable building such as the proposed National Poultry Disease Center in his memory.


 

Perry County, PA. Fire Destroys Turkey Barn

According to local media reports, a fire occurred in the early hours of December 23rd at Hoover’s Turkey Farm in Newport, PA. near Harrisburg. Despite the response of the Newport Fire Company the 450’ by 60’ barn was a total loss together with 17,000 poults.

 

The fire was confined to one structure and no injuries were reported. The cause is currently under investigation.


 

Federal Collusion Trial of Chicken Executives Ends in Jury Deadlock

Defendants in the case included Jayson Penn and William “Bill” Lovette, former CEOs of Pilgrim’s Pride, Mikell Fries, President of Claxton Poultry Farms, his Vice President Scott Brady, and six others indicted for alleged collusion and price fixing.

 

According to Bloomberg in early 2020, Tyson Foods cooperated with the Department of Justice (DOJ) and took advantage of a federal policy on leniency concerning voluntary disclosure of anti-competitive practices. In February 2020, Pilgrim’s Pride, a subsidiary of JBS SA, pleaded guilty to price-fixing and paid a fine of $108 million. 

 

Robert Bryant was a star witness for the government who testified under a grant of immunity that illegal action took place and that defendants “conspired to raise their prices and to hold strong as a united front together against the request of customers to reduce prices.” The defense maintained that it is not illegal to share pricing information and apparently the government failed to convince the jury that the defendants participated in a single conspiracy

 

It is now up to the DOJ to decide whether to retry one or more of the defendants in U.S. v Penn and others, either in Colorado or another jurisdiction.  A mistrial is neither a reflection of guilt nor innocence.  Given the issues involved and the fact that the employer of at least two and the most prominent defendants pleaded guilty to price-fixing and paid a substantial fine it is anticipated that the DOJ will retry some of those  indicted.


 

Shane Commentary

State Attorneys General Urge Stricter Enforcement of Packers and Stockyards Act

Attorneys General of a number of agricultural states have urged USDA Secretary Tom Vilsack to intensify enforcement of the Packers’ and Stockyards Act 0f 1921.

 

The Attorneys General maintain that consolidation especially in the beef industry has weakened the bargaining position of beef ranchers and hog producers.  The letter stated "this consolidation makes it more difficult for producers to get the best prices for their products, forcing many smaller cattle, hog and chicken farms out of the market".

With regard to broilers, their contention is incorrect since the major integrators own their flocks and provide chicks and feed to contract growers. These independent farmers house and care for flocks during the growing cycle and are paid for the use of their facilities, labor and utilities.  The broiler contract system absolves the independent contractor from fluctuations in the market and input costs and ensures regular income as each flock is harvested.  The Packers’ and Stockyards Act protects contract growers with regard to accuracy of weight and prevents any manipulation of he basis of payment.

 

With regard to beef, the Attorneys General encouraged interagency collaboration of government departments and sharing of information with regard to markets. The letter urged the USDA to monitor the relationship between packers and suppliers.  The Attorneys General suggested investment in new competitive entrants into meat and poultry processing adding strength to existing small and very small facilities. 

 

Financial support of small operations would be an unfair use of government funds and would ultimately support inefficiency at the expense of shareholders in existing packing companies.  The Attorneys General are obviously interested in exercising existing antitrust legislation for political ends.  The letter proposes that the USDA and DOJ investigate ways in which large packers can be dismembered such as occurred with AT&T. This company served as a virtual landline monopoly in the 1970's until enforced breakup occurred in January 1982 after eight years of litigation.  Prior to the AT&T breakup, the previous exercise of the Sherman Antitrust Act of 1890 took place in 1911 following the successful lawsuit brought against Standard Oil by the U.S. government.

 

History is the witness to the fact that when governments attempt to intervene and regulate industries, unintended consequences hurt shareholders and consumers with the major benefit, if any, accruing to politicians and bureaucrats.

 

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