In a May 17th statement, Hormel Foods confirmed that it has been in compliance with Proposition #12 since January 2022 and is serving consumers in the state of California.

Hormel stated that it faces no risk of material losses following the May 11th and SCOTUS ruling on the constitutionality of California Proposition #12.  The company statement added, “While these measures will add complexity to our supply chain including costs associated with compliance, California and Massachusetts are important markets for Hormel and we will continue to meet the needs of our customers throughout the states.”

Hormel is in the company of Niman Ranch, a subsidiary of Perdue Foods, Coleman Natural have operated in accordance with Proposition #12 since mid-to-late 2021.  JBS USA has purchased assets from TriOak Foods in Iowa that houses sows in communal pens during gestation.

Smithfield Foods, Tyson Foods and other companies have moved towards compliance not only for the state of California but also to satisfy the requirements of major customers throughout the U.S.

Kemin has assembled data on controlled experimental and field evaluations demonstrating the benefits of supplementing broiler diets with Kem-TRACE® chromium.  Trials conducted by a Land Grant university demonstrated a six-point improvement in adjusted feed conversion ratios in 48-day birds receiving a 200ppb level of feed supplementation.  Concurrently, carcass meat yield was statistically significantly improved from 78.9 percent for controls to 80.05 percent in the supplemented treatments.  Breast meat yield was improved from 28.79 percent to 29.35 percent. 

With the approach of summer weather, integrators and nutritionists could consider supplementation with Kem-TRACE® a highly available organic source of chromium for optimal absorption and performance.

Additional information is available on www.kemin.com/chromium or by clicking on to the Kemin logo on the right side of the welcome page.

The states of Arizona, California and Nevada have agreed on the volume of water to be abstracted from the Colorado River depleted by prolonged drought.

In accordance with the agreement, the Federal Government will pay $1.2 billion to compensate irrigation districts, municipalities and tribes for reduced availability of water. Collectively the agreement calls for a 13 percent reduction in total abstraction in the Lower Colorado basin.

The Colorado River supplies drinking water to 40 million residents of seven states and irrigates 5.5 million acres of farmland.  Power is generated in both Lake Mead and Lake Powell providing green energy for millions of homes and businesses.

Chief District Judge Richard E Meyers granted a petition by Mountaire Farms to dismiss a lawsuit filed in January 2023 by employees at a North Carolina plant.

At issue was the demand by workers that they be paid overtime for donning and doffing protective gear before and after meal periods.

Mountaire Farms argued that company was subject to the Federal Fair Labor Standards Act and accordingly exempt from the demanded payments based on compliance with overtime and minimum wage coverage.

Senator Joe Manchin (D-WV) has sponsored a bill that would allow meat and poultry products processed under state inspection to be transported for sale across state lines.  The proviso is that the state inspection programs, of which there are 29, meet or exceed federal standards imposed by the USDA-FSIS.  Currently, only products with a federal inspection stamp are allowed to be transported interstate for sale.

Cosponsor of the bill, Senator Kevin Cramer (R-ND) considers that passage of the bill would expand opportunities for small-scale processors and would indirectly benefit ranchers.

Predictably, the legislation is supported by the Ranchers-Cattlemen Action Legal Fund, United Stock Growers of America (R-Calf in USA). A spokesperson stated, “This long-needed bill recognizes that states are equally competent and qualified to ensure the safety and wholesomeness of meat produced from locally-raised livestock.”  He added, “It helps alleviate the supply chain bottleneck, is good for livestock producers and consumers and will provide out-of-state customers with more choices.”

In a structured trial to evaluate autonomous driving technology, Tyson Foods will shuttle product between Dallas and San Antonio, TX. using self-driving vehicles.  Initially, safety drivers will be in cabs during the test period.

Currently, federal regulations disallow interstate use of autonomous vehicles although a number of states including Texas permit limited application of the technology.

Meat industry groups, including the National Cattlemen’s Beef Association and the North American Meat Institute are opposed to the Processing Revival and Intrastate Meat Exemption (PRIME) Act.  The objective of the Bill is to allow intrastate distribution of custom-slaughtered meat to retail customers.

Opposition to the Bill is based on food safety concerns.  There are also legislative implications since the proposed PRIME Act would conflict with the Federal Meat Inspection Act.

Julie Anna Potts, President and CEO of the North American Meat Institute, stated, “Allowing meat to enter commerce without inspection and without alerting consumers they are buying uninspected meat jeopardizes food safety and will undermine consumer confidence in all meat products.”  In terms of federal-state cooperative agreements, the Food Safety and Inspection Service of the USDA ultimately has oversight of operations with respect to ante-mortem and post- slaughter inspection with appropriate traceback.

Potts noted, “While this Bill may be well intentioned, it poses unnecessary risks, given the many resources available to help new and small facilities gain inspection from FSIS.”

Todd Wilkinson, President of the National Cattlemen’s Beef Association, stated, “Our organization is in favor of reducing regulatory burdens but not at the expense of food safety.”  He added, “Allowing uninspected beef to enter the retail market is dangerous to consumers.”

Sigma Alimentos, based in Mexico, has acquired the soon-to-be closed West Liberty Foods plant located in Mount Pleasant, IA, for a consideration of $12.4 million.

Sigma will repurpose the plant to process lunchmeat by their subsidiary Bar-S-Foods.

Sigma is a multinational operating in the Americas and Europe with 65 plants and 183 distribution centers, producing packaged meats in refrigerated and frozen presentations.

In commenting on the transaction, Jesus Lobo, CEO of Sigma U.S. Inc., stated, “This investment is part of our ongoing efforts to expand capacity in the region to better serve customers and consumers as well as to continue delivering value to all stakeholders.”

Following noteworthy departure from the egg industry by independent free-range producers, broiler farmers are now in a difficult financial situation in the U.K.

Unlike the U.S. with full integration and a beneficial relationship between integrators and contractors, the U.K. industry is largely fragmented with individual farmers purchasing chicks and feed and selling broilers to packers with others serving as contractors.

The principal challenge facing farmers is the disparity between escalation in the cost of feed and other inputs and the unit revenue offered by packers who are attempting to preserve margins in a competitive and inflationary environment.  In addition to feed and power costs that have soared since the commencement of hostilities in Ukraine, interest rates are severely impacting independent farmers.  Over and above financial stress, farmers are concerned over ongoing highly pathogenic avian influenza. 

Farmers and packers in the U. K. face competition from less expensive imports from the E.U. including from Poland with a low cost of production and also from Brazil.  The U. K. received 742,000 metric tons of poultry meat in 2022, up 2.3 percent and experienced a 24 percent decline in exports to the E.U. down to 208,000 tons.

The Chairperson of the National Farmers Union Poultry Board noted, “Producers are in a really, really terrible position and are losing on each bird.” The National Farmers Union is calling on the government to intervene and to establish equitable price adjustments.

Although many farmers have contracts with packers that index payment to feed cost, power is an additional expense.  It is noted that in the U. K. mortgages are not fixed for an extended term and farmers have been confronted with higher interest costs.

The economic plight of U. K. egg and broiler farmers could have been foreseen with the advent of Brexit, a disaster of incalculable proportions. This has been exacerbated by the disruption in trade caused by the invasion of Ukraine by the Russian Federation.

The USPOULTRY and the USPOULTRY Foundation have approved a series of research grants through the Comprehensive Research Program based on recommendations from the Research Advisory Committee.  Projects that will be funded included:-

• Use of Qualitative and Quantitative Microbial Data to Determine if Turkey Pre-Chill and Post Chill Sampling Are Predictive of Salmonella enterica Contamination in Ground Turkey

The study will be conducted at Kansas State University with a grant from Cargill Inc.

• Discovery of Novel Anthelmintic Resistance Genes to Reduce Production Loss Caused by Blackhead Disease

The study to be conducted by Northwestern University with a grant from Pilgrim’s Pride Corporation

• Control of Enterococcus cecorum Through Identifying Its Dynamics of Adaptation to the Chickens and Its Environment

Research to be conducted at Mississippi State University with a grant from Wayne-Sanderson Farms

• Investigation Into the Contribution of Rooster, Hens and Social Dynamics on the Reduced Hatchability in Broiler Breeders

Research will be conducted at Auburn University with a grant from Mar-Jac Poultry Inc.

In commenting on the awards, USPOULTRY chairman Jarod Morrison of Farbest Foods stated, “Research is one of the cornerstones of USPOULTRY’s service to the poultry industry.  The Foundation Research Advisory Committee is the core of the research program with members volunteering hours reviewing and evaluating research proposals before making recommendations for funding.”

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Following a program of consolidation and rationalization, Pilgrim’s UK, a subsidiary of Pilgrim’s Pride Corporation, is proposing to reduce hog processing operations at the Ashton-under-Lyne plant to four days each week.    Even reduced production would allow closure of plants located in Bury St. Edmonds, Suffolk and Coalville, Leicestershire, resulting in a net redundancy of approximately 440 workers.

The Company has not made a firm commitment to close the Ashton site. The decision to reduce operations and eventual termination is based on the age and location of Ashton within a densely populated area precluding any feasible opportunity to modernize or grow the facility. The Company stated “A key part of our work to return to growth includes ensuring we fully optimize our operational footprint”.

The U.K. component of Pilgrim’s Pride Corporation is faced with a recent annual loss partly due to a reduction in the domestic sow herd by 15 percent attributed to declining demand for pork and farmers ceasing production due to high production costs.

In a filing to comply with the Federal Worker Adjustment and Retraining Notification Act, Tyson has listed the employees who will be terminated in mid-August as a result of their opting not to relocate from Dakota Dunes, SD. and Downer’s Grove IL. to the corporate campus in Springdale, AR.

Many of the positions that will be vacated include experienced senior managers including the Group president of Fresh Meats, the Director of Engineering and managers responsible for environmental compliance. In total a quarter of personnel employed at the two locations elected not to move and either retired or terminated their employment with Tyson Foods.

In order to combat illegal deforestation to graze beef cattle, financial institutions are now required to collaborate in a program to monitor the financing of beef companies.  Specific attention will be paid to packers purchasing animals from the Amazon and Maramhao Regions to establish traceability. Banks that do not cooperate may receive sanctions from the Brazilian Federation of Banks (FEBRABAN).

Beef packers in Brazil subscribe to ABIEC, a trade group including Marfrig and JBS SA that support the initiative but require the cooperation of banks to ensure environmental compliance.  ABIEC claims to have blocked the purchase of 20,000 cattle for noncompliance with environmental restrictions. The question arises as to the disposition of these animals and their carcasses. If exported, their destination and the packers and traders involved? If consumed by the domestic market which companies, politicians and officials benefitted?

According to Reuters, report, Cargill Inc. has disposed of its broiler production assets to private equity firm DCP.  Established in 2011, the Cargill enterprise located in Zhuzhou in Anhui Province processed 1.3 million birds each week in a plant erected in 2019.

The white-feather broiler segment in China has recovered from COVID restrictions but is faced with high production costs and intense competition.  It is apparent that Cargill has identified other markets with lower risk and higher return on investment than in China.

Innovad® is promoting EstarTE©, the latest generation combination of esterified butyrins comprising three molecules of butyric acid combined with glycerol to produce a tributyrin ester with slow release properties.  The product is more stable and biologically available compared to alternative forms of butyric acid including sodium and calcium butyrate salts and encapsulated butyric acid.  To be beneficial, butyric acid, a short-chain fatty acid, must reach the distal ileum and cecum.

The quantum of butyrate released in the distal intestinal tract is significantly higher with Estar TE© than alternative commercial forms of butyrate. Estar TEB® is formulated to achieve a concentration of 54 percent butyric acid. Approximately 95 percent of the additive is delivered to the distal intestinal tract. Estar TEB© is stable and will maintain structural integrity for 120 minutes at a pH of 3.5.

The relative availability of butyrate from Estar TEB© should be taken into account when comparing the cost of alternative forms of butyric acid , given the approximately two-fold advantage in terms of availability of the active ingredient.

Butyrate, when delivered to the distal ileum and cecum, stimulates beneficial intestinal flora including Bifidobacterium and other probiotic genera resulting in release of acetic and propionic acids with a range of positive responses. These include:-

• Proliferation of intestinal villi to enhance absorption.
• Immunostimulation of enterocytes.
• Modulation of inflammation of the intestinal sub-mucosa and reducing the effect of oxidative stress.
• Enhancing secretion of pancreatic enzymes.
• Promoting enhanced intestinal vascularization.
• Stimulation of hepatic function.

The combination of beneficial effects results in enhanced growth rate and feed conversion efficiency as demonstrated in controlled pen trials and field evaluation.

Estar TEB© is recommended for broilers at an addition rate of 0.5 to 2 lb. per ton and for turkeys at 1 to 2 lb. per ton.  Advantages in terms of increased growth rate and enhanced immune function of the intestine in broilers should be expected in replacement egg production and broiler breeder pullets.

Meyn America LLC a major manufacturer of poultry and food processing equipment will construct an 80,000 square foot distribution center in Oconee County, SC scheduled for operation during late 2024.  The distribution center involving an investment of $11 million will expedite the supply of spare parts to support customers through North and Latin America. The project will be designed to attain Green Globe certification.

Todd Rhodes, VP and General Manager of Meyn America stated, “As part of our continuous improvement effort we are always exploring opportunities to improve the customer experience.  This new distribution facility will enable us to fulfill our growing customer parts orders more quickly and accurately.

Michael Otterbach Vice-president of Parts Operations for Meyn America added, “When  this facility becomes operational it will harness state-of-the-art automation technology that will significantly improve on time and error-free shipment to consumers.”

Currently parts are shipped by air from distribution centers in the E.U. to Meyn customers.  Establishing the distribution center in the U.S. will reduce high transportation cost and reduce greenhouse gas emissions.

Meyn is a subsidiary of CTB Inc.a member of the Berkshire Hathaway Inc. group of companies Meyn has a presence in more than 100 countries and equipment contributes to enhanced quality, safety, capacity, yield and efficiency of processing, portioning and packaging.

At the 2023 Animal Care and Handling Conference, Dr. Dianna Bourassa, Associate Professor and Extension Specialist at Auburn University provided a perspective on controlled atmosphere stunning.  Currently 90 percent of U.S. poultry plants apply electric stunning using either AC or pulsed DC water-bath equipment.  Controlled atmosphere stunning using carbon dioxide is applied at ten percent of U.S. plants. 

Following E.U. welfare standards, some retailers that are subsidiaries of multinational chains and supermarkets are specifying controlled environment stun-to-kill since this eliminates the need for shackling.

Dr. Bourassa stated, “We do not have enough processing plants in the United States with gas stunning systems to produce enough chicken for all customers.”  She added, “Something is going to happen in the next couple of years: there’s going to be a push away from gas stunning or adoption.  Let’s see what happens”.

A ProMED posting on April 30th confirmed an outbreak of Angara disease in approximately 7,000 broiler breeder chickens aged 30-days in Iran.  This condition is caused by an adenovirus (FAdV-4) but is exacerbated by intercurrent infection with other immunosuppressive infections including Marek’s disease and infectious anemia.

Angara disease appears as acute spiking mortality with losses attaining one percent per day. Affected birds show hydropericardium and hepatitis.  First diagnosed in Pakistan and then extending to India in the 1980s, the condition later emerged in Latin America. Administration of specific vaccines, control of immunosuppressive viral infections, single-age placement programs and enhanced biosecurity have reduced the incidence of the disease which is now regarded as an economically insignificant condition in most broiler producing nations.

The question arises as to whether this is an isolated outbreak or is the industry in the Middle East to be confronted with a reemerging problem

On May 25th Costco Wholesale Corporation (COST) posted results for Q3 of FY2023 ending May 7th. This big-box club chain serves as a bellwether for hybrid retail in-store and on-line spending and is a barometer of consumer confidence, offering groceries and household necessities in bulk in addition to discretionary appliances, recreational, luxury and electronic items.

For the most recent quarter, the Company earned $1,302 million on revenue (including fuel and membership fees) of $53,648 million with a diluted EPS of $2.93. For the corresponding Q3 of FY2022, Costco earned $1,353 million on equivalent revenue of $52,596 million with a diluted EPS of $3.04.  Revenue was 2.0 percent higher than in Q3 of FY2022 but net earnings fell by 3.8 percent. Gross margin for Q2 FY2023 was 12.1 percent, lower than the corresponding Q3 of FY2022 at 13.5 percent percent. Concurrently operating margin fell from 3.4 percent in Q3 FY2022 to 3.1 percent for the most recent quarter attributed to increased freight, transport, wages and utilities.

Comparable global same-store sales for Q3 2023 (excluding fuel and foreign exchange) attained 3.5 percent. U.S. same store sales were up 1.8 percent; Canada by 7.4 percent and the Other International category, 8.4 percent. E-Commerce was down by 9.0 percent

On May 7th Costco posted total assets of $66,752 million. Long-term debt and lease obligations attained $11,471 million. Costco had an intraday market capitalization of $229,660 million on June 6th. COST trades with a forward P/E of 38.4 and has ranged over the past fifty-two weeks from $443.20 to $564.74 with a 50-day moving average of $497.87. Costco closed pre-release at $486.72 on May 25th but closed on May 26th at $507.41 with the market up by two percent. COST fell short of a consensus  $3.29 EPS but was in line with expected sales that were depressed by lower unit fuel prices. According to CFO Richard Gallanti, consumers have shifted purchases of beef to chicken and less expensive protein that he correlates with an impending mild recession, notwithstanding favorable parameters characterizing the economy.

Twelve-month trailing operating margin was 3.4 percent and profit margin 2.6 percent.  The Company generated a return on assets of 7.6 percent and 28.4 percent on equity.

At the end of Q3 FY2023, Costco operated 853 warehouses. There are 587 in the U.S; 107 in  Canada; 40 in Mexico; 32 in Japan; 29 in the U.K. and 58 others in seven other nations among the E.U., Asia and Australia.

The CVM in Brazil, analogous to the U.S. Securities and Exchange Commission has cleared Joesley and Wesley Batista of insider trading.

The allegations of wrongdoing arose in 2017 and an investigation was initiated to determine whether they were involved in potentially illegal share transactions, based on information concerning their plea bargain with Brazilian Federal Justice authorities.

The CVM Agency determined that sales were made to increase the cash reserve of holding company J & F Investimentos and that the Batista brothers could not have predicted a market response based on a leak by undisclosed parties.

The decision clears the Batistas of accusations of violation of fiduciary duty, abuse of power of control and insider trading. This has positive implications for an intended but delayed IPO of U.S. protein-production businesses on the NYSE in late 2023 or early 2024.

As a family-controlled enterprise Chick-fil-A Inc. does not release financial results. The Company did however confirm sales of $18 billion during 2022, higher than industry estimates.  In the 2022 Global Impact Report, the company noted serving iconic chicken sandwiches to 2.1 billion guests during the year suggesting an average unit ticket of close to $9 that appears high. Given the number of restaurants in operation and the claimed sales, units apparently generate $6.7 million on average that also appears excessive in comparison to competitors,  

The restaurant chain comprises 2,700 units in 47 states, Washington, DC. and Canada. During 2022, Chick-fil-A established operations in Puerto Rico and Hawaii. 

For comparison the KFC Division of YUM! Brands posted worldwide revenue of $8,057 million during the 1st Quarter of 2023 from 28,003 stores representing an average sales value of $1.2 million per location.

Chick-fil-A is noted for its support of workers and generosity supporting disaster relief, Feeding America and similar organizations in the U.S. and Canada.

Apparently, as a prerequisite for approval of the acquisition of Sanderson Farms by the Cargill and Continental Grain consortium, the re-structured combined company, Wayne-Sanderson Farms, agreed to cease penalizing sub-standard contractors applying the tournament system. This well-proven and effective approach to contractor payment rewards diligence manifest as superior performance and detracts from grower payment for results falling below peer standards.

Secretary of Agriculture, Tom Vilsack, has consistently promoted abolition of the tournament system, stating, “We are on the side of the hardworking producers.  We are on the side of the farmer out there who is taking financial risks and who needs to be treated fairly.”

CHICK-NEWS has frequently questioned the business acumen of the Secretary and his understanding of the broiler industry.  Effectively, integrators bear the financial risk of fluctuation in feed and other inputs and the vagaries of the marketplace, Contractors are protected from these realities. Tyson Foods posted an operating loss of $258 million for the second quarter of Fiscal 2023. Irrespective of the financial result posted by the largest broiler integrator in the U. S., contractor payment during the quarter was not affected.

Integrators own the flock, providing chicks, feed, transport and technical support.  Farmers supply housing with federal guaranteed loans, utilities and their labor.  For more than seven decades, the system has worked to the mutual advantage of integrators and contractors and indirectly, also consumers who have enjoyed an available a supply of inexpensive protein. 

Does Secretary Vilsack wish the broiler industry to transition to the U. K. model?  Broiler farmers in this Nation are going out of business because they are unable to generate positive margins on their flocks. This is attributed to an escalation in feed cost coupled with low prices paid by packers. This intermediate in a fragmented industry is faced with intransigence by the supermarket chains with respect to fair payment.

The U.S. broiler production model has evolved to the benefit of all stakeholders.  Secretary Vilsack and his acolytes should first understand the structure and economics of the industry and then calculate the damage they could cause by disturbing proven methods of conducting business. Farmers have protection through GIPSA regulations that allow for processing and remediation for proven cases of exploitation or improper or unethical practices.  The fact that most integrators have a waiting list for aspirant contractors suggests that the system works to the advantage of both parties.

Given the uncertainties relating to the economy, despite easing inflation, demand is not rising in proportion to expansion in production. Domestic sales and international shipments are relatively stagnant, and integrators will experience potentially higher costs for interest, feed, overhead, fuel and wages.  The April 2023 Poultry Production and Value Summary for 2022 indicates  $50.4 billion value for broilers produced, up 60 percent from 2021 with 9.2 billion birds processed.  This is far too large an industry to disrupt with well-meaning, socialist-inspired meddling.