Editorial
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Uncertainty Over Future Exports
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The September USDA-ERS projection for the export of U.S. broiler products in 2024 was 6,776 million lbs. (3.075 million metric tons), down 6.8 percent from 2023. The forecast for 2025 is for 6,875 million lbs. (3.125 million metric tons) equivalent to 14.5 percent of production. For the first eight months of 2024, Mexico represented 22.2 percent of export volume followed by Cuba with 7.8 percent and Taiwan 6.1 percent.
The forecast for 2025 may however be influenced by factors beyond the control of the industry.
China, previously the principal importer ranked highly in both volume and especially value, has declined in importance and for the first eight months of 2024 was ranked fifth in volume with five percent of exports but was still the second largest importer by value. It is clear that this nation may play a significant role in future exports depending on the outcome of the 2024 Presidential election and developing global events. Should a new administration intensify tariffs on China, exports amounting to 405,313 metric tons valued at $711,172 in 2023 and 108,502 metric tons valued at $247 million for the first eight months of 2024 may be sharply lower. China has in any event reduced imports due to over production of domestic pork and attaining self-sufficiency in broiler meat derived from white-feathered birds and hybrids. Although there will be a demand for feet, it appears that there is a trend to diverting imports through Hong Kong to the mainland. If it is politically expedient, as a countervailing action to U.S. tariffs, consumers in China may have to do without their U.S.-origin feet if the Central Party so decrees.
China may also play a role in constraining exports to Taiwan. During mid-October the greatly expanded navy of the Peoples Liberation Force conducted a mock embargo of Taiwan that would effectively have prevented imports of oil required to generate power and to receive food shipments. Third ranked Taiwan over the first eight months of 2024 imported 131,229 metric tons and represented 6.3 percent of our export volume. This would be placed in jeopardy in the event of a confrontation with China over the independence of the island Nation.
Conflict between Israel, and our adversary Iran and its terrorist surrogates in Gaza, Lebanon, Syria and Yemen might broaden into an international conflict impacting exports to the Middle East and other nations especially if there are additional restrictions on shipping over and above the present situation in the southern Red Sea and Gulf of Aden. Any major conflict in the Mideast involving hostilities between Saudi Arabia and the Gulf states on the one hand and Iran backed by China and the Russian Federation would inevitably drive up the price of crude. Current production costs are in part restrained by the prevailing low price of crude that has ranged from $70 to $80 per barrel in 2024. Escalation in the price of WTI with a $100+ handle would increase costs and shrink margins as energy-driven inflation returns.
The potential emergence of HPAI in Brazil could also affect exports of U.S. broiler products. During 2023 Brazil recorded 166 cases of H5 N1 HPAI in wild birds along the eastern coast and three reported cases in backyard flocks but miraculously, no commercial farms. In addition, authorities in Brazil reported a case of “Newcastle disease” in mid-July in the State of Rio Grande do Sul. Whether this was in fact END or a cover-up for an isolated HPAI break in a small broiler unit will probably never be determined. Based on the previous reluctance of Brazil to disclose outbreaks of spontaneous bovine spongiform encephalopathy (BSE), and the implications of an HPAI diagnosis on exports, the true diagnosis remains a speculation.
Broiler exports over the first eight months of 2024 were over 10.7 percent lower than for the corresponding period during the previous year. Exports in 2023 were four percent lower than in 2022 principally due to reduced shipments to China although there is a general trend for traditional importers, with the exclusion of Mexico and Canada, to have lowered imports from the U.S. This is based on increasing self-sufficiency, decreased demand attributed to deteriorating economies and greater competition from Brazil, Eastern Europe and Russia.
Our USMCA partners represent 27 percent of exports. This quantity might be at risk in the event of imposition of punitive duties on automobiles and parts produced in Mexico, as hinted in pre-election political rhetoric. This would require re-negotiation or worse still a precipitous cancellation of the USMCA by any future Administration.
Given uncertainties and faced with declining exports, the broiler industry should look within the U.S. and establish a wider domestic market for leg quarters. This will require development of new products incorporating dark meat favored among the nations receiving broiler leg quarters. This category comprised 96 percent of export volume for RTC broiler products and 89.8 percent of value ($2.81 billion) over the first eight months of 2024.
While there will always be a demand for low-priced leg quarters, ($1,327 per metric ton 2024 Y-T-D), unit value and margin could be enhanced by further processing and incorporation into high value protein products that could displace pork and beef.
The U.S. broiler industry cannot assume continued profitable exports of broiler leg quarters. Geopolitical factors may impact both demand and logistics requiring long-term alternatives to exporting what is effectively a commodity, susceptible to embargos, higher shipping costs and lacking in pricing power.
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Poultry Industry News
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Hormel Foods to Face Mismanagement Suit Over Retirement Plan
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In February a former employee of Hormel Foods filed a lawsuit against the Board of Directors of Hormel Foods alleging mismanagement of the company retirement plan. A Federal court in the District of Minnesota has rejected a motion by Hormel for dismissal, allowing the case to proceed.
The claimant maintains that Hormel directors deviated from their “fiduciary duty of prudence” by including equities with high risk in the $1.2 billion retirement plan. While the outcome of this case will not affect the ongoing operations of Hormel Foods, disaffection of employees may result if the allegations are substantiated.
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Minimal Expansion of Broiler Production for Canada in 2025
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The September 25th USDA-GAIN Report on Canada, CA2024-44, projected a 2.5 percent increase in broiler production to 1.465 million metric tons (6.66 million lbs.) in 2025. Producers in Canada operate according to a controlled quota system with independent farmer-growers purchasing feed and chicks, often through cooperatives and selling live birds to processors.
In 2025, USDA estimates total imports at 215,000 metric tons, up 4.9 percent from 2024. Exports will amount to 125,000 metric tons resulting in net importation of 90,000 metric tons. Given a population of 39 million, per capita consumption will attain 44.7 kg. (98.4 lbs.) close to that of the U.S.
In 2023, Canada was ranked 7th among importers of U.S. broilers and products with a total quantity of 142,434 metric tons valued at $435 million. Imports in 2023 were respectively down 7 percent in volume and 11 percent in value with a unit price of $3,054 per metric ton indicating whole birds and added-value product.
For the first seven months of 2024, Canada moved to 6th place, importing 84,766 metric tons valued at $258 million with a unit price of $3,044 per metric ton. This can be compared to the average of all exports for the seven-month period of $2,631 million with an average unit price of $1,382 per metric ton confirming a different range of products.
For 2024, the U.S. held 80.4 percent of Canadian broiler and product imports followed by Brazil at 7.5 percent, Thailand at 5.1 percent and Chile rising to 3.9 percent as a result of membership in the Comprehensive and Progressive Transpacific Partnership with a relatively low tariff rate quota.
Exports to Canada peaked in 2020 at 160,791 metric tons but this included deceptively-described broiler products as “spent fowl” to avoid paying a tariff. With stricter border controls, this practice has ceased together with stricter scrutiny of the import for re-export program.
The Canadian Food Inspection Agency enforces a ban on re-export of chicken from Brazil to the U.S. Chicken products from Brazil do not enter non-eligible Canadian facilities that are authorized to export to the U.S.
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Chick-fil-A Expansion in the United Kingdom
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After an initial failure to establish a foothold in the U.K. in 2019, Chick-fil-A intends to expand internationally with a second initiative involving stores in London and Northern Ireland and in industrial centers including Leeds and Liverpool.
Chick-fil-A is a closely held corporation and does not release financial data. Technomic a market research company specializing in the food industry estimates that annual sales are in the region of $20 billion annually. With approximately 3,000 U.S. locations, each store generates annual sales approaching $6.5 million, far in excess of competitors McDonald’s, Burger King and Wendy’s.
Joanna Symonds the designated head of U.K. operations noted, “We have always cared about the impact of our restaurants on the local communities that we serve, and we strive to positively impact areas throughout the U.K. She added, “Caring for people, while delivering great food is at the heart of our brand and we encourage our local Owner Operators to partner with organizations that support their local communities.
Chick-fil-A intends sourcing both chicken and free-range eggs from local suppliers adhering to acceptable welfare certification. Surplus food will be distributed to shelters and foodbanks and restaurants will donate to nonprofit charities. The PR campaign should offset some of the xenophobia directed against the first store established in Reading, Berkshire in 2019.
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Experimental Live Attenuated Reovirus Vaccine Evaluated
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Dr. Sagar Goyal of the University of Minnesota has made progress in developing live attenuated vaccines to protect flocks from turkey reoviral arthritis (TARV) and hepatitis (THRV).
Six different vaccines were prepared using three strains of field isolates of reovirus. Candidate vaccine viruses were subjected to either serial passage or cold adaptation. The attenuated vaccines did not induce clinical changes confirming safety. There was apparently no stimulation of measurable systemic antibody. Challenge with field strains of TARV indicated that protection was inadequate based on histopathologic examination of tendons.
Dr. Goyal suggests that although a single vaccine administered at 10 days provided inadequate protection, multiple doses of vaccine may be required. Further studies are in progress to evaluate alternative frequencies and routes of vaccination. Ultimately protection will be possible from the sequence of primary stimulation with one or more attenuated products followed by a subsequent inactivated booster vaccine to establish maternal antibody transfer for breeder hens.
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Perdue Animal Care Summit
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The Ninth Perdue Farms Annual Care Summit, reviewed the requirements to produce under the pasture-raised claim. The USDA has requested comments, after approval in principle for a working definition. The key requirement for applying the term “pasture” is that poultry and cattle should be raised on land having rooted vegetative cover of grasses and plants. Perdue initiated the petition to promote transparency and to differentiate “pasture-raised” from “free-range”.
The comment period will end on November 12th and if the proposal is adopted any label claims for “pasture-raised” will have to conform to the standard.
Ryan Perdue, Senior Vice-President of Perdue Premium Meats, an emerging brand, stated, “Consumers deserve transparency and clarity when it comes to how their food is raised.” He added, “This new standard developed in partnership with nearly 1,000 small pasture poultry producers, shows that “pasture-raised” means what it says, raising chickens that spend the majority of their lives on pasture”.
In addressing the Summit, Dr. Bruce Stewart-Brown, Chief Science Officer at Perdue Farms, stated, “At Perdue we’re dedicated to advancing the health and welfare of our chickens through research-driven practices and technology.” He added, “By prioritizing the well-being of animals, we create healthier environments that benefit livestock while also enhancing product quality.”
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Meat Institute Interaction with U.S. Trade Representative
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The Meat Institute is urging the U.S. Trade Representative (USTR) to be aggressive in supporting exports of red meat and poultry in 2025.
Julie Anna Potts, President and CEO of the Meat Institute, stated, “The resilience of the U.S. meat and poultry industry is inextricably linked to the trade policy and promotional initiatives that foster growth in meat and poultry export.” The Meat Institute also highlighted the importance of imports of beef from Canada and Mexico since trade within the USMCA is interlinked.
The Meat Institute urged the USTR to attempt to remove tariffs imposed by China. This prospect would appear to be even less attainable in the event that tariffs are imposed by an incoming Administration.
Other issues raised by the Meat Institute include removal of unjustified embargos based on disease and market diversification as a means of counteracting competition.
At the end of the day, there is little that the USTR can achieve if importing nations are self-sufficient. It is unlikely that diplomacy will support trade if the U.S. imposes punitive tariffs on imports from nations to whom we wish to export agricultural products including meat and poultry.
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Expansion of Saudi Investments in Broiler Production
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The Saudi Agriculture and Livestock Investment Company (SALIC) has acquired a 13 percent stake in MHP SE of Ukraine. The holding company of MHP operates Perutnina Ptuj that process meat and poultry in Slovenia, Croatia, Serbia and Bosnia. Perutnina Ptuj also distributes through subsidiaries in 15 EU nations.
This investment by SALIC adds to their broiler-production portfolio which includes an investment in BRF S.A. with 11 percent of the equity allowing transfer of technology and expanding domestic production in addition to importation from Brazil. The investment in MHP will generate synergy since the company will cooperate with Tanmiah Food Company in existing facilities and a proposed joint venture in Saudi Arabia.
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USDA Approves Importation of Turkey Rhinotracheitis Vaccine
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Turkey producers in the U.S. will now be able to administer an imported Boehringer Ingelheim vaccine against turkey rhinotracheitis.
The inactivated TUR-3 product is licensed for use against avian metapneumovirus in the E.U.
Permission to import the vaccine was supported by the National Turkey Federation to protect flocks against an emerging and widespread erosive infection.
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Economic Impact of U.S. Broiler Industry
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USPOULTRY in collaboration with the National Chicken Council funded an economic impact study conducted by John Dunham and Associates. Using data from 2024, it was calculated that the broiler industry is responsible for 1.4 million jobs, $90.9 million in wages, $450 million in economic activity and $36.7 billion in government revenue.
In commenting on the release of the study Gary Kushner Interim president of NCC stated, “We know that chicken is nutritious, affordable and versatile but chicken also means jobs – whether i on the farm in the processing plant, the transportation sector, manufacturing, or retail restaurants.” He added, “This data will prove extremely helpful as we welcome a new Congress to Washington next year.”
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Boar’s Head Recall Impacts Volume and Value of Deli Meat
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For the month of July prior to the July 26th Boar’s Head recall that grew to 7 million lbs. of product, deli meat sales attained 69.1 million lbs. with a value of $732.7 million similar to the preceding month. During August, deli meat sales were down 11 percent from July and 9.3 percent from August 2023. The greatest loss was in deli-service lunchmeat, down 17 percent. The situation continued through September with deli meat sales at a 13-week low attaining 60.8 million lb. down 12 percent from July with sales attaining $626.4 million down 15 percent.
In contrast, packaged sandwich meat was generally unaffected and in September sale of pre-sliced lunchmeat was up 4.9 percent on a volume basis.
Concern over the extent of the Listeria outbreak and revelations of improper production and handling has obviously diverted demand from deli-service meat to pre-sliced packaged product benefiting the turkey and chicken industries.
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E.U. Parliamentarians Oppose JBS Listing on NYSE
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Members of the European Parliament have addressed a letter to Gary Gensler, Chairman of the U.S. Securities and Exchange Commission, urging rejection of the application by JBS S.A. to be listed on the New York Stock Exchange.
The action by the legislators reflected concern over environmental issues with JBS contributing to deforestation of the Amazon rainforest and noting the history of the company as led by the Batista brothers involving alleged unethical and illegal activities in Brazil.
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Shane Commentary
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