Poultry Industry News

Chick-fil-A Inc. has formed a subsidiary to erect and operate a distribution center in Olathe, KS.  This will be the 5th distribution unit in a series established by the privately-held QSR chain and will commence operation in 2024.  The facility will employ more than 60 workers and will be owned and managed by a Chick-fil-A Supply Inc.

In 2013, the WH Group acquired Smithfield Foods for $4.7 billion, representing the largest acquisition by China of a U. S. company.  The transaction was approved by the Committee on Foreign Investment in the U. S. that found no national-security risk from the purchase.

In recent weeks there has been growing concern over China represented by military aggression, support of the Russian Federation, the apparent danger of Tik Tok and the spy balloon episode, all solidifying opposition to China our greatest strategic and commercial adversary.  Politicians are now questioning the wisdom of China owning a major agri-business enterprise, slaughtering 30 million hogs annually and representing an important component of the food supply chain.

Senator Tom Cotton (R-AR) noted, “From purchasing fields and pastures to gobbling up companies like Smithfield, Chinese influence in American agriculture means that China’s needs, not America’s, come first”. This somewhat inflammatory statement is at variance with fact since the WH Group only acquired a small acreage with their acquisition of Smithfield plants.

Shane Smith, CEO of Smithfield, has devoted considerable time meeting with legislators and officials in Washington, assuring them of the independence of Smithfield and its commitment to the U. S.  All pork products sold by the company are derived from hogs bred, raised and processed in the U. S.

Smith pointed to an increase in annual sales from $13 billion to $18 billion following the acquisition 10 years ago. This is a meager three percent per year and clearly below the rate of inflation. He pointed to the fact that the company has hired 3,000 more employees in the U. S. and expanded into other meat categories. Smith noted that the acquisition has resulted in export of some new products to China including bacon. Smithfield supplies by-products comprising heads and feet, that are traditionally consumed in China but have no markets in the U.S.

On March 14th, Tyson Foods Inc. announced the closure of the Van Buren, AR and the Glen Allen, VA complexes. It is intended to transfer growing and processing activities to other complexes to reduce production costs.

This action will impact approximately 1,600 jobs. Tyson Foods is working with state and local agencies to provide assistance to workers who will not move to accept positions at other Tyson complexes.

In a company statement, Tyson noted, "while the decision was not easy, it reflects our broader strategy to strengthen our poultry business by optimizing operations and using the full available capacity at each plant.

Mark Federici, President of the United Food and Commercial Workers Local 400 Union representing Glen Allen workers stated, "it has been our honor and privilege to represent the workers at this plant for decades and we were appalled by today's news and the terrible impact it will have on close to 700 of our Union members".

A consumer has filed a lawsuit alleging that Buffalo Wild Wings Inc. has engaged in deceptive advertising.  The Chicago resident claims that ‘boneless wings’ are slices of chicken breast meat that have been deep-fried. The plaintiff claims that the term ‘boneless wings’ is an incorrect descriptor and represents false advertising.  The lawsuit claimed that “customers should be able to rely on the plain meaning of a product’s name and receive what they are promised”.

In response to the lawsuit, Buffalo Wild Wings confirmed the allegation but claims that deceptive descriptions of menu items are common in the restaurant industry.  They state that the company’s “buffalo wings do not contain buffalo and that hamburgers have no ham”.  This flippant response containing an admission of the validity of the plaintiff’s claim, presumes a settlement in what is obviously shakedown litigation.  It will, however, be up to the plaintiff to quantify the magnitude of his alleged financial injury.

At best, Buffalo Wild Wings and other servers of faux wings will have to find a new name for their menu offering.

U.S. Broiler and Turkey Exports for January 2023.                   

OVERVIEW

Total exports of bone-in broiler parts and feet during January 2023 attained 313,629 metric tons, 9.8 percent more than in January 2022 (285,591 metric tons). Total value of broiler exports declined by 0.3 percent to $374.6 million ($375.6 million).

Total export volume of turkey products during January 2023 attained 12,098 metric tons, 26.6 percent less than in January 2022 (16,471 metric tons Jan. 2021). Total value of turkey exports declined by 27.6 percent to $42 million (55 million Jan. 2021).

Unit price for the broiler industry is constrained by the fact that leg quarters comprise over 97 percent of broiler meat exports by volume (excluding feet). From the first quarter of 2021 to date, unit value of leg quarters increased consistent with international demand but with a decline in January 2023 compared to the previous month. Leg quarters represent a relatively low-value undifferentiated 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 outbreaks of African swine fever in China and Southeast Asia from early 2019 onwards coupled with disruptions in chicken production and logistics thereafter due to COVID restrictions, increased demand for protein with international repercussions on trade in chicken and pork. The demand for pork imports to China has diminished as hog production is restored and mild overproduction is evident in the white-feathered broiler sector with implications for exports other than feet during 2033.

EXPORT VOLUMES AND PRICES FOR BROILER MEAT

During January 2023 the National Chicken Council (NCC), citing USDA-FAS data, documented exports of 315,435 metric tons of chicken parts and other forms (whole and prepared) valued at $5,381 million with a weighted average unit value of $1,208 per metric ton,.

The NCC breakdown of chicken exports for January 2023 by proportion and unit price for each category compared with the corresponding month in 2022 (with the unit price in parentheses) comprised:-

• Chicken parts                          97.7%; Unit value  $1,149 per metric ton  ($1,279)
• Prepared chicken                      1.8%; Unit value  $4,183 per metric ton  ($3,528)
• Whole chicken                          0.5%; Unit value  $1,621 per metric ton  ($965) 

The following table prepared from USDA data circulated by the USAPEEC, compares values for poultry meat exports in January 2023 compared to January 2022:-

             COMPARISON OF U.S. CHICKEN EXPORTS JANUARY 2022 AND 2023

BROILER EXPORTS

Total broiler parts, predominantly leg quarters but including feet, exported during January 2023 as compared with January 2022 increased by 9.8 percent in volume but declined 0.3 percent in value. Unit value was 9.2 percent lower at $1,196 per metric ton.

Broiler imports in 2022 were projected to attain 80,200 metric tons (176 million lbs.) falling to 72,000 metric tons (160 million lbs.) in 2023.

The top five importers of broiler meat represented 52.9 percent of shipments during January 2023. The top ten importers comprised 68.5 percent of the total volume reflecting concentration among the significant importing nations.

During January 2023 exports of all broiler products to first-ranked (by value) China were 21.2 percent lower by volume to 40,427 metric tons and 30.7 percent lower by value at $66 million compared to January 2022. Volume and value of exports to China represented 12.9 percent and 17.5 percent respectively with an average unit price of $1,620 per metric ton. The average unit price for all exports to China in 2022 was $1,747 per ton compared with $1,376 per ton for all exports, but excluding China, $1,397 per ton, demonstrating the weighting of feet on export value.

According to USDA statistics during 2022 feet accounted for 77.7 percent of volume at 483,538 metric tons, valued at $931 million with a unit price of $1,925 per metric ton. Other broiler products exported to China during 2022 included legs and leg quarters at 17.0 percent of volume with a unit price of $901 per ton. Due to HPAI restrictions monthly volumes of feet have declined by double digits on a Y-O-Y comparison. The USAPEEC note that 37 states with 444 of 577 approved plants and cold storage installations are ineligible to export to China. Other products shipped to China including wings and edible giblets comprising 5.3 percent of volume and 5.5 percent of value at a unit price of $2,862 per metric ton.

During January 2023 Mexico was the first-ranked importer by volume with 63,125 metric tons representing 20.1 percent of export volume down 22.0 percent from January 2022. Value at $60 million was 16.0 percent of the total for exported broiler products during January 2023 and down 1.6 percent from January 2022, with an 18.9 percent decline in unit price to $947 per metric ton. 

During January 2023 nations gaining in volume compared to the corresponding period in 2022 (with the percentage change indicated) in descending order of volume were:-

Mexico, (+22%); Cuba, (+54%); Angola. (+9%); Guatemala, (+7); Canada, (+10%); Haiti, (+36%); Congo-Brazzaville, (+49%); Iraq, (+337%) and Viet Nam, (+7%);

Losses during January 2023 offset gains in exports with declines for:-

China, (-21%); Taiwan, (-9%); and Philippines, (-24%).

TURKEY EXPORTS

The volume of turkey meat exported during January 2023 decreased by 26.6 percent to 12,098 metric tons from January 2022 and value fell by 27.6 percent to $42 million compared to January 2022 Average unit value declined by 1.4 percent from $3,521 per metric ton to $3,472 per metric ton. Imports of turkey products are projected to rise to 38,640 metric tons in 2023.

For the entire year of 2022 export volume declined by 25.6 percent to 184,537 metric tons compared to 2021 and value fell by 3.6 percent to $642 million reflecting a 1.4 percent decrease in unit value to $3,473 per metric ton.

During January 2023 only Canada gained in volume posting a seven percent increase over January 2022. Volume to Mexico declined by 23 percent; to Benin (effectively Nigeria) by 46 percent, China by 33 percent and Guatemala by 24 percent.

PROSPECTS FOR 2023

The March 14th 2023 Livestock, Dairy and Poultry Outlook Report, updated 2023 exports of broiler products to 3.325 million metric tons (7,315 million lbs.). This value represents 15.6 percent of the projected production of 21.277 million metric tons (46,750 million lb.) of broiler RTC by the U.S. industry.

Projected export of turkey products in 2023 will be 163,600 metric tons, (360,000 million lbs.) or 6.4 percent of annual production of 2.539 million metric tons (5,585 million lbs.).

It is important to recognize that exports of chicken and turkey meat products to our USMCA partners amounted to $1,264 million in 2021 and $1,647 million during 2022. It will be necessary for all three parties to the USMCA to respect the terms of the agreement since punitive action against Mexico or Canada on issues unrelated to poultry products will result in reciprocal action by our trading partners to the possible detriment of U.S. agro-industries.

 The emergence of H5N1strain avian influenza virus with a Eurasian genome in migratory waterfowl in all four Flyways was responsible for sporadic outbreaks of avian influenza in backyard flocks and serious commercial losses in egg-producing complexes and turkey flocks but to a minimal extent in broilers. The probability of outbreaks of HPAI over succeeding weeks appears likely but will be a function of continuous shedding by migratory and domestic birds and mammals. The extent of protection of commercial flocks at present relies on intensity and efficiency of biosecurity, representing investment in structural improvements and operational procedures. To date 3.2 million broilers on 18 farms in 7 states and in excess of 9.8 million turkeys on 231 farms in 7 states have been depleted as a result of HPAI.

The application of restricted county-wide embargos following the limited and regional cases of HPAI in broilers with restoration of eligibility 28 days after decontamination has supported export volume for the U.S. broiler industry. Exports of turkey products have been more constrained with plants processing turkeys in Minnesota, the Dakotas, Wisconsin and Iowa impacted.  Most nations are now lifting embargos that were previously placed on entire states or counties as the WOAH (OIE) mandated post-decontamination period expires.

The live-bird market system supplying metropolitan areas, the presence of numerous backyard flocks, fighting cocks and commercial laying hens allowed outside access, potentially in contact with migratory and now some resident bird species, all represent an ongoing danger to the entire U.S. commercial industry. The live-bird segments of U.S. poultry production represent a risk to the export eligibility of the broiler and turkey industries notwithstanding compartmentalization for breeders and regionalization to counties or states for commercial production.

Updated USDA-ERS Poultry Meat Projection for March 2023.

On March 14th 2023 the USDA-Economic Research Service released updated production and consumption data with respect to broilers and turkeys, covering 2021 (actual), an update for 2022 and a projection for 2023.

Broiler RTC production in 2022 was almost unchanged in the March 2023 report at 46,206 million lbs. RTC (21.003 million metric tons.). Per capita consumption in 2022 will be 98.9 lbs. (45.0 kg.). Exports will represent 15.8 percent of RTC production in 2022 attaining 7,278 million lbs. (3.308 million metric tons) comprising RTC leg quarters, other products and feet.

The 2023 projection for broiler production is 46,750 million lbs. (21.250 million metric tons) up 1.2 percent from 2022. USDA projects per capita consumption of 100.2 lbs. (45.5 kg.), up 1.3 percent from 2022 with exports of 7,315 million lbs. (3.325 million metric tons), 0.5 percent above the previous year.

Turkey production for 2022 will be 5,222 million lbs. (2.374 million metric tons) RTC. The March 2023 projection for per capita consumption will be unchanged from 2021 at 14.6 lbs. (6.6 kg.), despite extensive promotions and introduction of further-processed items. Export volume for 2022 will attain 408 million lbs. (0.185 million metric tons). Values for production and consumption of RTC turkey for 2022 are considered to be realistic, given the prevailing economy, variable weekly poult placements, production levels, losses from HPAI and inventories.

The March 2023 USDA projection for the turkey industry included annual production of 5,585 million lbs. (2.539 million metric tons), up 7.0 percent from 2022 with consumption of 15.9 lbs. (7.2 kg.) per capita, up 8.9 percent from the previous year. Export volume will decline by 11.8 percent in 2023 to 360 million lbs. (163,000 metric tons).

Production values for the broiler and turkey segments of the U.S. poultry meat industry are tabulated below:-

Source: Livestock, Dairy and Poultry Outlook released March 14th 2023

Export projections do not allow for a breakdown in trade relations with existing major partners including Mexico and China nor the impact of catastrophic diseases including HPAI and vvND in either the U.S. or importing nations

The USDA projection takes into account declining broiler product exports to China. For 2022, China imported 622,099 tons of broiler products valued at $1,087 million including feet at an average unit price of $1,263 per ton. Feet represented 77.8 percent of volume over 2022 (483,538 metric tons) at a unit price of $1,926 per ton.

Subscribers are referred to the monthly update of production and cold storage inventories of broilers and turkeys posted in each end of month edition of CHICK-NEWS with the previous monthly data under the STATISTICS tab.

Animal Equality, a welfare activist organization, has filed a complaint with the European Commission claiming that fast-growing broilers represent a violation of Article 13 of the Lisbon Treaty, recognizing animals as “sentient beings”.  Citing European Directive 98/58/EC, Animal Equality submitted data to the European Parliament and the Commission suggesting that fast-growing and high-yield strains are subject to skeletal disorders.

The European Commission responded indicating that welfare legislation will be updated in the light of scientific evidence.  The European Food Safety Authority is the body responsible for assessing claims and providing opinions that guide legislation.

The submission to the European Commission is heavy on sentiment, quoting, “This is why it is necessary to put an end to the exploitation of fast-growing chickens which are condemned from birth to be prisoners of their own bodies for the profit of the meat industry.”

Animal Equality has campaigned against intensive poultry production for two decades. As with kindred organizations in North America, members of the organization undertake undercover investigations and intrusion onto farms to gather images used to solicit funds and to oppose intensive livestock production.

Effective October 2022, Hormel reorganized their operating divisions into retail, food service and international.  The Jennie-O Turkey Store Division was integrated among the new three operating divisions.  Accordingly, the release for the first quarter of Fiscal 2023 on March 2nd did not disclose either volume or cost data for the subsidiary as in previous years.  In reviewing the release, there was no specific mention of the turkey business other than the reality that lower volumes were produced, following infection of flocks with highly pathogenic avian influenza.

In a press release dated March 9th Maple Leaf Foods Inc. (MFI-TO) announced results for the fourth quarter and FY 2022 ended December 31st.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS (conversion of CAN$1=US$0.78)

For FY 2022 Maple Leaf Foods posted a net loss of $(224,562) on revenue of $3,41 million with a diluted EPS of $(1.81). For FY 2021 Maple Leaf Foods posted net earnings of $74,032 on revenue of $3,25 million with a diluted EPS of $0.59. 

FY 2022 Meat Protein Segment:

Sales, $3,307 million, up 5.2% from FY 2021.

Adjusted operating earnings $137 million down 46.0% from FY 2021.

FY 2022 Plant Protein Segment:

Sales, $121.8 million, down 8.0% from FY 2021.

Adjusted operating loss $(89.6) million 17.1% improvement from FY 2021.

52-Week Range in Share Price:  $13.57  to  $22.06   50-day Moving average  $18.82

Market Close pre-release March 8th $20.13  

Market Open post-release March 9th  $18.16

Insider shareholding 40.1%. Institutional shareholding 28.0%

In commenting on FY 2022 results Michael H. McCain, president and CEO of Maple Leaf Foods stated, “This was clearly a year of unprecedented challenges for us on many fronts, including hyper-inflation, dislocation in the pork markets, supply chain dysfunction, job vacancies and a cyber-attack,” He added “Despite this tumultuous environment, we have maintained a steady hand on executing our plans including aggressively building our sustainability platform, starting up over CN$1 billion of new assets and converting our plant-based business model to profitable growth. Of course, our fourth quarter results are not where we like them to be, given these unprecedented market conditions and the impacts of the cyber-attack, but the underlying health of the business in normal markets is solid and in-line with where we expected to be at this point.”

McCain concluded “We continue to see an inflection point in our business” He noted, “The start-up of the London Poultry plant is going exceptionally well and on schedule, we are on-track to get to Adjusted EBITDA neutral or better in our plant-based business this year, our supply chains are normalizing now, the imbalance in our pricing for inflation is now coming into line and important Asian regions have opened up again for us. These unprecedented markets will normalize; they always do.”

The report included the following commentary:-

“During late 2021, the Company announced that it was re-evaluating its outlook for the Plant Protein Group and launching a comprehensive review of the overall plant protein category. This decision was driven by a pronounced slowdown in growth rates in the category, particularly in the second half of the year, which fueled the Company’s imperative to identify and thoroughly assess the causes, near and long-term trends, and overall implications. While the Company’s analysis is ongoing, the results to date confirm that the very high category growth rates previously predicted by many industry experts are unlikely to be achieved given current customer feedback, experience, buy rates and household penetration. Based on this new information, the Company believes that the category will continue to grow at more modest, but still attractive rates. Current estimates suggest that the category will grow at an average annual rate of 10% to 15%, making it a CN$6 billion to CN$10 billion market by 2030. Accordingly, the Company has pivoted its strategy and investment thesis for the Plant Protein Group and has set a new goal to deliver neutral or better Adjusted EBITDA in the latter half of 2023. Work is ongoing to implement this strategy. The Company expects at least a 50% improvement in Adjusted EBITDA losses in the first quarter of 2023 versus the same period last year, representing another sequential improvement versus the fourth quarter of 2022.

In late 2021, the Company announced that it was re-evaluating its outlook for the Plant Protein Group and launching a comprehensive review of the overall plant protein category. This decision was driven by a pronounced slowdown in growth rates in the category, particularly in the second half of the year, which fueled the Company’s imperative to identify and thoroughly assess the causes, near and long-term trends, and overall implications. While the Company’s analysis is ongoing, the results to date confirm that the very high category growth rates previously predicted by many industry experts are unlikely to be achieved given current customer feedback, experience, buy rates and household penetration. Based on this new information, the Company believes that the category will continue to grow at more modest, but still attractive rates. Current estimates suggest that the category will grow at an average annual rate of 10% to 15%, making it a $6 billion to $10 billion market by 2030.

 The Company announced in May 2022 that it is moving forward with a planned leadership transition plan for the Board and Management.  Michael McCain will serve as the Executive Chair of the Board and will continue as CEO for the next year as part of the management transition plan. Curtis Frank, currently the President and COO, will assume the role of CEO during Q2 of 2023.  

Joining Koch Foods, Perdue Farms and Tyson Foods, Wayne-Sanderson Farms will pay $17 million to settle antitrust litigation.  The class action lawsuit arose from claims that broiler integrators colluded to reduce grower payment through sharing data derived from an industry benchmark costing system. The alleged action occurred before acquisition of Sanderson Farms by the Cargill and Continental Grain consortium.

In a prepared statement, Wayne-Sanderson Farms opted to settle as “the most efficient way to move forward to avoid litigation” although the company did not acknowledge wrongdoing.

The Broiler Hatchery Report released on March 8th 2023 confirmed that a total of 241.3 million eggs were set during the week ending March 4th 2023, the same as the corresponding week of the previous year and 0.2 percent (0.6 million eggs) more than the previous week in 2023.

A total of 177.4 million day-old chicks were placed among the 19 major broiler-producing states during the week ending March 4th 2023. Total chick placements for the U.S. amounted to 186.6 million, unchanged from the corresponding week in 2022 and 1.7 percent (3.2 million) less than the previous week. Claimed average hatchability was 79.3 percent for eggs set three weeks earlier, (79.4 percent for the previous week). Each 1.0 percent change in hatchability represents 2.4 million chicks placed per week with current settings.

Cumulative placements for the period January 7th 2023 through February 25th 2021 amounted to 1.49 billion chicks, up one percent from the corresponding period in 2022.

The ongoing USDA evaluation of higher line speeds for pork plants has been extended to November 30th 2023.  Currently six plants are evaluating ergonomics, automation and labor requirements to enhance productivity without sacrificing food safety or wellbeing of workers.  Increased line speeds were approved for a trial period of one year as from November 2021 with approved establishments functioning in accordance with the New Swine Inspection System.

The National Pork Producers Council supported the decision to continue with structured evaluation that will allow collection of data.

Higher line speeds have been opposed by unions who have engendered support from pro-labor members of Congress and their fellow legislators who are opposed to intensive livestock production motivated by environmental concerns or a vegan lifestyle.

Demonstrating the benefits of higher line speeds in pork processing may have subsequent benefits for the broiler segment of the U.S. poultry industry. Automation, machine vision and robotics is further advanced in chicken plants compared to red meat packing justifying higher line speeds without sacrificing either quality or food safety.

To date, eight nations comprising Venezuela, Columbia, Peru, Ecuador, Bolivia, Chile, Argentine, and Uruguay have reported cases of H5N1 highly pathogenic avian influenza (HPAI) in free living birds, backyard farms or in most nations in commercial flocks.  The latest nations to report cases include Uruguay and Argentine.  In response this country has suspended exports of chicken with a volume of approximately 0.3 million metric tons annually.

It is considered noteworthy that only Brazil, surrounded by the affected nations has not detected infection or reported cases to the World Organization of Animal Health to date.

A case of HPAI in Brazil would have profound repercussions for both the Nation’s industry and international poultry trade. This is based on the dominant position of Brazil as a supplier to countries with deficits in domestic production. An extensive outbreak would alter the approach to restrictions imposed by importing countries including wider adoption of regionalization and acceptance of vaccination as a component of control.

The price of day-old chicks in China is a reflection of market demand for white-feathered broilers.  During the past twelve months, the price of chicks has increased three-fold reflecting an imbalance between supply and demand. The broiler industry in China is fragmented with numerous hatcheries supplying day-old chicks to independent growers in addition to companies with integrated multiplication, grow-out and processing facilities. 

Supply was restricted following disruption in the import of grandparent stock necessary to maintain an adequate supply of day-old chicks by hatcheries.  A decline in demand for white-feathered broilers in late 2021 was attributed a reduction in the price of pork, the preferred protein in China as African swine fever was controlled and demand was constrained by restrictions to suppress COVID. Travel bans reduced the frequency of commercial air flights to China, limiting the volume of shipments of grandparent stock. Outbreaks of avian influenza in the U.S. and the E.U. resulted in unjustified bans on importation, disrupting placement schedules.

The current embargo on imports from all U.S. states other than Alabama is a self-inflicted wound.  Major breeders have qualified for compartment status in accordance with WOAH regulations. Shipments of grandparent stock would not have represented any risk of introduction of avian influenza that, in any event, is endemic in China.  The two major broiler breeders have established hatcheries in New Zealand permitting airfreight of grandparent stock from a nation free of most avian diseases.

The Government of China encouraged the poultry industry to become independent of the U.S. and the E.U. with respect to broiler breeding stock.  A major domestic breeder in China has imported great-grandparent level broiler stock but efforts to produce and market a national strain with the genetic potential equivalent to the strains offered by the major breeders has yet to be accomplished.

According to USDA-FAS GAIN Report E420233-005 released on March 1st, production by the E.U. 27 nations will increase by 0.3 percent to 11.000 million metric tons in 2023 compared to the previous calendar year.  Net exports (exports minus imports) will increase by 8.6 percent in 2023 to 1.01 million metric tons.  Consumption within the E.U. will increase by 1.2 percent attaining 10.08 million metric tons.

Among the major producing nations, chicken meat from Poland will decline in 2023 mainly affected by HPAI and by higher energy and fuel costs.  Poland will also receive chicken meat from the adjoining Ukraine. Imports were up by 60 percent in 2022 as a result of concessions granted to Ukraine following the invasion by the Russian Federation.  Production in Spain will increase mainly due to resumption of travel following COVID restrictions with greater demand from the hotel and restaurant segment of the market.  Production of chicken in France will decline due to higher production costs with feed up by 25 percent in 2022.  Outbreaks of HPAI have also reduced availability of chicks.  Consumption of chicken meat will increase by 1.4 percent in 2023 based on affordability compared to other animal protein. With a population of 447 million, per capita consumption in the E.U. will attain 50 lbs.

In response to demand, imports will increase by 8 percent in 2023 with product from Brazil and Thailand but with reduced quantities from the U.K.  Exports in 2023 will drop by 1.5 percent to 1.71 million metric tons following a 5.6 percent decline in exports from 2021 to 2022. The E.U. will record reduced shipments to the Democratic Republic of Congo. Ghana imposed restrictions on E.U. nations based on HPAI and the availability of foreign exchange.  Due to higher cost of production, the E.U. is less competitive compared to Brazil or the U.S.

There will be ongoing concern over HPAI strain H5N1 in 2023 with significant outbreaks recorded during 2022 in France, Netherlands, Italy and Poland.  France will implement a vaccination program in the current year with limited vaccination in other nations depending on exposure and farming programs.

The Missouri House has passed from Committee a Bill to increase restrictions on foreign ownership of farmland in the state. The bill reduces to 0.5 percent of State farmland that can be owned by a non-U.S. entity, down from the existing one percent.  The Bill is opposed by the Missouri Chamber of Commerce and the Missouri Association of Realtors.

Secretary of State Jay Ashcroft who advocates for the Bill stated, “We need protect Missouri farmland and farmers wanting to preserve generational land ownership.  The Bill will have to pass the Missouri House and then be approved by the State Senate.

Support for the Bill was intensified following the transcontinental passage of a balloon launch by China intensifying Sinophobia. It is ironic that those most opposed to China and their possible land ownership concurrently derive benefits from exports of agricultural commodities to the nation that rightly deserves censure for international aggression.

The Maryland Department of the Environment recently issued a wastewater discharge permit for the Valley Proteins plant in Linkwood, MD.  This National Pollutant Discharge Elimination System permit will be effective February 1st 2023 through January 31st, 2028. This will permit the facility to release large quantities of treated wastewater into the Transquaking River, a tributary of the Chesapeake Bay. The Company is required to meet progressively strict pollution limits after a three-year compliance period.

Five environmental groups including the Chesapeake Bay Foundation, Eastern Shore have filed a lawsuit in Dorchester County Circuit Court seeking a reversal of the state permit. The petitioners claim that the Maryland Department of the Environment relied on insufficient data to grant the permit. It is also claimed that the quantity of pollutants released will have long-term deleterious effects on the Transquaking River and watershed.

Valley Proteins has a history of noncompliance with the Maryland Department of the Environment. The facility was ordered to suspend operations in December 2021 to effect numerous upgrades of their water treatment facility to reduce discharge.  In September 2022 Valley Proteins reached a settlement with the state following alleged illegal discharge of pollutants including ammonia, phosphorus and other compounds into the Transquaking River that occurred over a year.  According to court documents, Valley Proteins demonstrated failure to implement a stormwater pollution plan, to apply best management practices and were responsible for unauthorized discharge of wastewater, sludge and solids in violation of an emissions permit.

On February 28th, the House Agriculture Committee arranged a hearing entitled "Uncertainty, Inflation, Regulations: Challenges for American Agriculture".  The focus involved regulatory barriers impeding agricultural productivity.  The hearing was chaired by Representative Glenn Thompson (R-PA) who served as Ranking Member during 117th Congress and Vice Chairman during the 116th Congress.

Mike Brown, President of the National Chicken Council testified at the hearing stating, “The chicken industry is a model of American innovation and efficiency and there is no more important food source in America. Chicken is healthy, sustainable, and affordable and supports millions of jobs and thousands of rural communities.”

Brown emphasized the negative aspects of over-regulation and ‘red tape’ noting “Overzealous and misguided regulations threaten to take chicken off the plate for millions. Those most vulnerable would be first in line including lower income earners, children who receive free and reduced cost school meals, and needy individuals who rely on food banks to feed their families. With soaring across-the-board inflation, the looming threat of recession, and geopolitical disruption, there has never been a worse time for needless governmental regulation.”

Brown specifically pointed to attempts to amend rulemaking under the Packers and Stockyards Act, attempts to reduce processing line speeds and new food safety regulations as potentially burdensome.

Brown concluded “All of these regulatory programs share two things in common: One, there is no compelling justification for them, and two, they would drive unprecedented levels of food inflation and food scarcity.”

In an address to the Open Market Institute, Senator Elizabeth Warren (D-MA) supported the pro-competitive measures advanced by USDA secretary Tom Vilsack. Senator Warren points to the concentration within four packers responsible for processing 70 percent of pork and 85 percent of beef.  She urges dismantling of oligopolies to create “real competition”.  Senator Warren also supports the proposal by her colleague Senator John Tester (D-MT) to establish an Office of the Special Investigator to review antitrust violations by meat packers.

A representative of the National Cattlemen’s Beef Association noted that enforcement is currently conducted by the USDA Stockyards Division, in accordance with the Packers and Stockyards Act.  This existing entity would parallel and compete with the Special Investigator proposed in legislation sponsored by Senator Tester.

Senator Warren also criticized the merger between Sanderson Farms and Wayne Farms. She is opposed to awarding USDA supply contracts to JBS and Pilgrim’s Pride based on prior contravention of the U.S. Foreign Corrupt Practices Act.

Given the opposition of Senator Warren and also Senator Cory Booker (D-NJ) to intensive livestock production, industry associations will have to be more active in lobbying and presenting the advantages of concentration to consumers.  By the same token, the disadvantages that will accrue from disruption of supply chain and higher cost should also be publicized. 

There may be some inefficiency and inequity in the current structure of meat production that can be addressed. Radical proposals advanced to “break up the big meat packers to create competition” is analogous to throwing out the baby with the bath water.

China has suspended beef shipments from Brazil following an announcement of a diagnosis of bovine spongiform encephalopathy (BSE).  Initial epidemiologic investigation suggests that this is a case of atypical BSE with specimens currently under investigation in a specialist laboratory in Canada.  The suspension of imports by China follows a previous belated report by Brazil during 2021 and is in accordance with an agreement between the nations.

Senators Mike Rounds (R-SD) and John Tester (D-MT) have reintroduced legislation to suspend imports of beef from Brazil subject to verification of acceptable food safety and animal health risks. Legislation would require beef from Brazil to be deemed safe for consumption before it enters U.S. markets. 

The Bill was first introduced in November 2021 when it was disclosed that Brazil had delayed reporting two cases of atypical bovine spongiform encephalopathy (BSE) to the World Organization of Animal Health. Disclosure was also delayed following cases in 2012, 2014 and 2019.

Senator Rounds noted, “Brazil has a history of failing to report in a timely and accurate manner diseases found in their herds.”  He added, “This poses a significant threat to both American producers and consumers who should be able to confidently feed their families beef that has met the rigorous standards required in the United States.”

Ethan Lane, Vice President of Government Affairs for the National Cattlemen’s Beef Association stated, “The United States has some of the highest food safety and animal health standards in the world and any country that wishes to trade with the United States must demonstrate that they can meet those standards.”  He added, “Brazil’s track record of failing to report atypical BSE cases is unacceptable and we must hold all trade partners accountable without exception.”

The history of Brazil with respect to atypical BSE raises the question of whether authorities in the nation might withhold reports of HPAI in wild birds, backyard flocks or even commercial farms.  At the present time, all countries surrounding Brazil have reported BSE.  It would indeed be unusual if the infection were not to enter that Nation, given the migratory patterns of free-living birds and the possibilities of introduction across the extensive borders with neighboring states.

In a press release dated February 3rd Beyond Meat Inc. (BYND) announced results for the 4th Quarter of FY 2022 ending December 31st 2022. The Company attained consensus on the top line with sales of $79.9 million. The bottom line miss was a negative EPS of $(1.05). Compared to Q4 of FY 2021 results can be characterized as “less bad” but it is questioning if and ever profitability will be attained given declining sales and a persistently negative gross margin.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS)

Notes for the 4th Quarter and FY 2022 derived from data presented:

SGA FY ’22 $47 million comprising 58.9% of sales compared to FY’21 $66.5 million or 66.0% of sales

R&D FY ’22 $13.0 million comprising 16.0% of sales compared to FY’21 at $7.2 million or 22.0% of sales

Inventory: Dec 31st 2022, $236 million represented 56.3% of annual sales compared to $242 million or 52.1% at end of FY2021

In Q4 ’22 16.1 million lbs. sold compared to 19.4 million lbs. in Q4 ‘21

In Q4 ’22 Unit revenue attained $4.96/lb. compared to $5.19/lb. in Q4 2021

In Q4 ’22 each of claimed 190,000 outlets received an average of 85 lbs. product compared to 130,000 outlets receiving 149 lbs. in Q4 ‘21

For FY 2022 Beyond Meat lost $(366.2) million on sales of $418.9 million with a negative diluted EPS of $(5.75). Comparative values for FY 2021 were a loss of $(182.1 million) on sales of $464.7 million with a negative diluted EPS of $(2.88)

In Q4 2022 U.S sales represented 69.9 percent of revenue of which 74.2 percent was retail, the remainder, food service.

In Q4 2022 International sales represented 30.1 percent of revenue of which 40.3 percent was retail, the remainder, food service.

52-Week Range in Share Price: $53.47 to $18.42 50-day Moving average $15.42

In commenting on Q4 2022 results, Ethan Brown Founder and CEO stated, “We are making solid progress in our transition to a sustainable growth model, one that emphasizes the achievement of cash flow positive operations within the second half of 2023. We continue to execute this pivot upon three primary pillars. One, driving margin recovery and operating expense reduction through the implementation of lean value streams across our beef, pork, and poultry platforms. Two, bringing inventory levels down while generating cash flow through more aggressive, efficient management. And three, placing greater emphasis on near-term retail and foodservice growth drivers while also supporting strategic key long-term partners and opportunities.”

Brown continued, “Our fourth quarter results clearly demonstrate delivery against our strategy and plan, including solid sequential progress on margin recovery and operating expense reduction, and continued inventory drawdown. We are proud of our team's continued pace of innovation including Beyond Steak, which continues to win awards for its taste and outstanding health profile, as well as the just launched McPlant Nuggets in Germany, the second plant-based protein co-developed with Beyond Meat as part of the McPlant platform. As we navigate current conditions, we remain intently focused on positioning Beyond Meat to capture the vast opportunity to be a major protein provider in the $1.4 trillion meat industry and play a leadership role in transitioning global consumers to delicious plant-based meats in support of critically important health, climate, environmental, and animal welfare objectives."

Despite this optimistic statement of affairs the reality includes:-

• An accumulated deficit of $203.6 million.
• Trailing 12-month negative operating cash flow of $407 million
• Effective June 31st 41 percent of float was short
• News reports of mismanagement and failure to execute and deliver on products offered to food service prospects
• Share price off 65 percent in FY 2022

Notwithstanding the Q4 report BYND opened Friday 24th February post release at $22.00 but closed at $18.88 on a down-market. Management may attribute this market affirmation to promises to cut expenses by laying off non-essential staff and other economies to reduce cash burn. A more likely explanation is that some investors see the inevitability of an acquisition with a premium or alternatively a short squeeze in the near future. Analysts still envision Beyond Meat running out of cash with a share price below $5. As stated after the release of Q2 financials “This will create an opportunity for a Grey or even a Black knight (the White knights have passed it over) to acquire and dismember the Company.” Tyson Foods correctly assessed the prospects for Beyond Meat when they disposed of their equity before the IPO.

In a February 14th meeting, the USAPEEC reviewed key issues impeding exports with Alexis Taylor, Under Secretary of Trade and Foreign Agricultural Affairs. The outstanding topic of concern was funding of export promotion programs. The second issue involves the possible use of vaccination as an adjunct to control the infection in the U. S. Currently HPAI has resulted in unjustified restrictions on entire states by some importing nations as a result of an HPAI diagnosis.  These include bans by China, South Africa and the Dominican Republic that are deviating from WOAH policy that allows for regionalization.  Many importing nations have confined embargos to counties.  In the case of China and South Africa, HPAI is endemic in those nations so that their unjustified restrictions are contrary to WOAH rules relating to trade.

Monthly Broiler Production and Prices, February 24th 2023.

Chick Placements.

According to the February 14th USDA Broiler Hatchery Reports 959.24 million eggs were set over four weeks extending from January 21st 2022 through February 11th 2023.

Total placements for the U.S. over the four-week period amounted to 744.04 million chicks. Claimed hatchability for the period averaged 79.8 percent for eggs set three weeks earlier (80.1 percent for the preceding four-week period). Each 1.0 percent change in hatchability represents 1.84 million chicks placed per week with the current range of weekly settings.

Cumulative chick placements for the period January 7th 2023 through February 11th amounted to 1.12 billion chicks, approximately one percent higher than the corresponding period in 2022.

Low chick placement during 2021 and the first quarter of 2022 was attributed to setting a proportion of hatching eggs with depressed fertility that were derived from high-yield breed combinations selected by some integrators. Additional breeder flocks were placed to compensate for reduced fertility and their contribution is reflected in broilers harvested during the third quarter of 2022 onwards.

According to the January 20th 2023 edition of USDA Chickens and Eggs pullet breeder chicks placed during December amounted to 10.5 million down 0.6 percent (65,000 pullet chicks) from December 2021 but 1.45 million chicks or 16.0 percent higher than the previous month of November 2022. Broiler breeder hen complement attained 62.6 million in December 2022, higher than December 2021 by 56,000 hens (<0.1 percent).

Broiler Production

According to the February 24th USDA Broiler Market News Report for the processing week ending February 18th 2023, 167.4 million broilers were processed at 6.36 lbs. live. This was 4.6 percent more than the 160.1 million broilers processed during the corresponding week in the previous month of January 2023 and 0.8 percent more than the 166.0 million processed during the corresponding week in January 2022. Broilers processed in 2023 to date amounted to 1.16 billion, 1.4 percent more than for the corresponding period in 2022.

 

Monthly Turkey Production and Prices, January 24th 2023

Poult Production and Placement:

The February 15th 2023 edition of the USDA Turkey Hatchery Report, issued monthly, documented 26.808 million eggs in incubators on February 1st 2022 compared to 26.675 million eggs on February 1st 2022* The February 2023 set was up 0.5 percent (133,000 eggs) from February 2022 but 476,000 eggs (1.7 percent) lower than the previous month of January 2023.

A total of 23.427 million poults were hatched during January 2023 up 757,000 poults (3.3 percent) compared to 22.670 million in January 2022*. The January 2023 hatch was up 574,000 poults (2.5 percent) from the previous month of December 2022.

A total of 21.562 million poults were placed on farms in the U.S. in January 2023, compared to 20.946 million in January 2022*. The January 2023 placement was 3.0 percent, (617,000 poults) more than the month of January 2022. This data confirms disposal of 1.865 million poults during the month. Approximately 8.0 percent of the January 2023 hatch was not placed.

For the twelve-month period February 2022 through January 2023 inclusive, 273.215 million poults were hatched and 254.335 million were placed. This confirms disposal of 18.88 million poults over the 12-month period, corresponding to 6.9 percent of all poults hatched.

* USDA revision from previous monthly report.

Turkey Production:

The February 24th edition of the Turkey Market News Reports documented the following provisional data for turkeys slaughtered under Federal inspection:-

• For the processing week ending February 18th 2023, 1.762 million hens were processed at 18.0 lbs. live. This was 27.9 percent more than the 1.378 million hens processed during the corresponding week in January 2023 and 5.9 percent less than the 1.848 million processed during the corresponding week in February 2022. Hen slaughter year-to-date has attained 11.63 million, 9.3 percent more than for the corresponding period in 2022.

Ready to cook (RTC) weight for hens over the most recent week was 25.6 million lbs. (11,618 metric tons). This quantity was 27.5 percent more than the corresponding week in January 2023 and 0.2 percent less than the 25.62 million lbs. during the corresponding week in February 2022. Dressing percentage was a nominal 80.5 percent. For 2023 to date hen production attained 168.84 million lbs. (76,745 metric tons). This quantity is 12.9 percent more than for the corresponding period in 2022.

• For the processing week ending February 18th 2023, 1.849 million toms were processed at 44.4 lbs. live. This was 7.6 percent less than the 2.001 million toms processed during the corresponding week in January 2023 and 15.4 percent less than the 2.185 million during the corresponding week in February 2022. Year-to-date 13.7 million toms have been slaughtered, 5.7 percent less than for the corresponding period in 2022.

 

The U. S. Customs and Border Protection Agency (CPB) confiscated 1.2 million pounds of illegally imported pork, chicken, beef and duck products over the period October 1st 2021 through September 30th 2022 at West Coast seaports. 

On apprehension, the CBP issues an Emergency Action Notification resulting in either destruction re-exportation of contraband.  During Fiscal 2022, 1,288 Notifications were issued by the CBP at the Los Angeles and Long Beach ports, a 70 percent increase in three years.

Given that China has endemic avian and porcine diseases, there are considerable risks to U. S. domestic livestock with the pork industry the most vulnerable, placing production and export in jeopardy. It is time that the U.S. regarded deliberate smuggling as a serious offence with mandatory incarceration for importers. We have no doubt as to the response of authorities in China if the position were to be reversed.

In a February 14th release, Chipotle Mexican Grill (CMG) posted financial results for the 4th quarter and FY 2022. This upscale restaurant company competes at the intersection of QSRs and casual dining, offering a menu of Mexican-themed dishes assembled cafeteria style. The Company experiences the same pressures of increased cost of ingredients, labor and packaging as competitors in an environment where consumers are impacted by inflation.

Same-store sales increased by 8.0 percent during FY 2022 compared to 2021. In-restaurant sales were up 26.4 percent. Digital orders comprised 39.4 percent of food and beverage sales.

For the 4th Quarter of FY 2022 ending December 31st, net income was $223.7 million on total revenue of $2,181 million.  Comparable figures for the 4th quarter of fiscal 2021 ending December 31st were net income of $133.5 million on total revenue of $1,961 million. Diluted EPS increased 71.0 percent from $4.69 for the 4th quarter of fiscal 2021 to $8.02 for the most recent quarter.

For FY 2022 net income was $899.1 million on total revenue of $8,634 million.  Comparable figures for fiscal 2021 were net income of $653.0 million on total revenue of $7,547 million. Diluted EPS increased 39.9 percent from $22.90 for fiscal 2021 to $32.04 for FY 2022. Comparing FY 2021 with the most recent year, total sales increased 14.4 percent and operating and profit margins were up by 10.7 and 8.7 percent respectively.

The Company provided guidance for FY 2023 comprising a low double-digit increase in sales growth. Restaurant openings are forecast in a range of 255 to 285 units most with drive-through lanes. Chipotle operates approximately 3,187 stores in the U.S., Canada, U.K., France and Germany with all locations company-owned.

On December 31st CMG posted assets of $6,927 million, against lease obligations of $3,539 million but with no long-term debt. The Company had an intraday market capitalization of $44,788 million on February 17th. CMG trades with a forward P/E of 38.2 and has ranged over a 52-week period from $1,196 to $1,754 with a 50-day moving average of $1,531.  Twelve-month trailing operating margin was 13.7 percent and profit margin 10.4 percent.  Return on assets over the trailing twelve months was 10.9 percent with 38.5 percent on equity.

Following an extensive investigation, the Department of Labor has announced that Packer Sanitation Services, Inc. owned by the Blackstone Group, was assessed a penalty of $1.5 million. This amount was based on $15,100 for each of 102 identified employees aged 13 to 17 years.  According to court documents released, underage workers were employed to clean packing plants, including overnight shifts and were assigned to handle hazardous chemicals.

 The Department of Labor Wage and Hour Division documented attempts at some plants to conceal illegal employment practices.  Minor-aged workers were employed at plants operated by JBS, Cargill, Inc., Tyson Foods, Inc, Maple Leaf Farms, Inc., Turkey Valley Farms, George’s and Great Omaha Packing Company.

When the illegal employment of minors became known, Packer Sanitation Services was issued with a restraining order in November 2022 and the Company complied with updated training manuals and policies relating to recruitment and employment with appropriate safeguards.  The Department of Homeland Security has initiated a review to determine whether human trafficking was involved in recruitment and placement of under-aged workers.

According to data posted in the February 20th edition of the USAPEEC MondayLine China placed restrictions on U.S exports in 2022. Following outbreaks of HPAI, 37 states with 444 out of 577 approved production and cold storage facilities, were ineligible to export to China over various periods in 2022.  This has resulted in a progressive reduction in the volume of feet exported.  During 2022, the U. S. exported 240,301 metric tons of feet compared to 284,649 metric tons in 2021, representing a 15.6 percent reduction. As cases of HPAI in turkey and egg-production flocks increased, the regional restraints on exports of feet during the second half of 2022 intensified. The decline during July through December 2022 resulted in a reduction in volume of 32.1 percent to 106,551 metric tons, compared to the corresponding months of 202. During 2022, the U. S. supplied 36.1 percent of feet imported by China followed by Brazil at 25 percent and Russia, 13 percent as major exporters placing the annual market at 665,000 metric tons.

Before the 2020 Trade Agreement with China, feet were shipped to Hong Kong with most of the volume transshipped to the mainland.  With resumption of trade, the volume of feet shipped directly to China increased sharply.

In the event that HPAI impacts the broiler industry in Brazil, China may be forced to relax import regulations.  There is no justification for discriminating against entire states in the U.S.  as a result of HPAI, given that the infection is endemic in China. Imposition of wide restrictions is contrary to the policy of regionalization applied by the World Organization of Animal Health.

Alessandro Rocchi of the University of Arkansas was awarded the Frank Perdue Scholarship during the USPOULTRY Foundation College Student Career Program at the 2023 IPPE.

The scholarship is named in honor of Frank Perdue for his dedication to education and advancement of students.  Ms. Kasey Young and Ms. Marie Muffoletto of Texas A&M University were awarded second and third place, respectively.

The USPOULTRY Foundation supports the recruitment and training of students for scientific research and promotes careers in the poultry meat and egg industries.

OVERVIEW

Total exports of bone-in broiler parts and feet during 2022 attained 3,792,380 metric tons, 4.6 percent more than in 2021 (3,624,657 metric tons). Total value of broiler exports increased by 17.0 percent to $5.218 million ($4,459 million 2021).

Total exports of turkey products during 2022 attained 184,837 metric tons, 25.6 percent less than 2021 (248,369 metric tons). Total value of turkey exports declined by 3.6 percent to $642 million ($666 million 2021).

Unit price for the broiler industry is constrained by the fact that leg quarters comprise over 97 percent of broiler meat exports by volume (excluding feet). From the first quarter of 2021 to date, unit value of leg quarters has increased consistent with international demand. Despite the recent increase in unit price for exports, leg quarters represent a relatively low-value undifferentiated 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 outbreaks of African swine fever in China and Southeast Asia from early 2019 onwards coupled with disruptions in chicken production and logistics thereafter due to COVID restrictions, increased demand for protein with international repercussions on trade in chicken and pork. The demand for pork imports to China has diminished as hog production is restored and mild overproduction is evident in the white-feathered broiler sector with implications for exports other than feet during 2033.

EXPORT VOLUMES AND PRICES FOR BROILER MEAT

During 2022 the National Chicken Council (NCC), citing USDA-FAS data, documented exports of 3,822,104 metric tons of chicken parts and other forms (whole and prepared) valued at $5,306 million with a weighted average unit value of $1,388 per metric ton, 11.5 percent higher in unit value than 2021 ($1,244 per metric ton).

The NCC breakdown of chicken exports over 2022 by proportion and unit price for each category compared with the corresponding months in 2021 (with the unit price in parentheses) comprised:-

• Chicken parts 2%; Unit value $1,335 per metric ton ($1,186)
• Prepared chicken 0%; Unit value $3,948 per metric ton ($2,941)
• Whole chicken 8%; Unit value $1,478 per metric ton ($1,244) 

The following table prepared from USDA data circulated by the USAPEEC, compares values for poultry meat exports for 2022 compared to 2021:-

COMPARISON OF U.S. CHICKEN EXPORTS FOR 2021 AND 2022

BROILER EXPORTS

Total broiler parts, predominantly leg quarters but including feet, exported during 2022 as compared with 2021 increased by 4.6 percent in volume and 17.0 percent in value. Unit value was 11.9 percent higher at $1,376 per metric ton.

 

On February 14th Seaboard Corporation (SEB) filed SEC Form 10-K reporting results for FY 2022 ending December 31st 2022.  The company is a conglomerate with segments dedicated to pork production, grain milling, commodity trading, marine transport and power generation. Seaboard owned 50 percent of the equity of Butterball LLC at the end of the first quarter of FY 2022 with warrants to purchase an additional five percent of the shares, expiring in 2025.  On April 19th Seaboard exercised rights to purchase additional equity thereby acquiring a controlling interest with 52.5 percent of the equity of the turkey producer.

For FY 2022 SEB earned $580 million on net revenue of $11,243 million with an EPS of $499.60. Comparable values for FY 2021 ending December 31st were net income of $570 million on revenue of $9,229 million with an EPS of $490.36

 On December 31st Seaboard posted total assets of $7,902 million with long-term debt and lease obligations of $1,288 million.  Seaboard had a market capitalization of $4,470 million on February 17th. 2023 with 79 percent of equity held internally. The 12-month trailing operating margin was 5.8 percent with a profit margin of 5.2 percent. Return on assets and equity were 5.3 and 12.3 percent respectively. During the past 52 weeks share price has ranged from $3,295 to $4,394 with a 50-day moving average of $3,669.

Effective April 19th 2022 Seaboard was the majority shareholder of Butterball LLC., ranked as the second largest turkey producer in the U.S. The performance of this now-incorporated subsidiary, that produced 850 million tons of RTC product in 2021 from three complexes, is reflected in the $103 income from the Turkey Segment as listed on the Seaboard Corp.10-K submission. For FY 2022 Butterball posted sales of $2,050 million compared to $1,292 million in FY 2021. Operating margin in FY 2022 was 9.9 percent compared to a negative value in FY 20212.. Net income attained $196 million in FY 2022 generating a profit margin of 9.5 percent compared to a loss of $(38) million during FY 2021. As of December 31st 2022 Butterball LLC posted assets of $1,081 of which the Butterball trade name represented $111 million and goodwill and other intangibles, $61 million. Total liabilities for the Turkey Segment attained $406 million.

The 10-K SEC filing included the following statement:- “The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball. The increase in income from affiliate for 2022 compared to 2021 was primarily the result of higher selling prices, partially offset by lower volumes of turkey products sold and higher feed and plant production costs. The decrease in income from affiliate for 2021 compared to 2020 was primarily the result of lower sales volumes and higher live and plant production costs due to increased feed and labor prices, partially offset by higher sales due to increased prices. Management is unable to predict market prices for turkey products or the cost of feed for future periods; however, management anticipates this segment will be profitable in 2023”. 

AGRI-Search has recognized Bob Pike as the 2022 Recruiter of the Year.  The award is based on an outstanding level of production and exceptional customer service provided to clients and candidates throughout the year.

Dave Allen, president of AGRI-SEARCH stated "We are very proud of Bob.  He is a relentless worker who is exceptional at building and developing relationships.  People enjoy connecting with him. He is an experienced professional totally dedicated to connecting quality candidates with quality companies.

AGRI-SEARCH is an agricultural recruiting company committed to serving leading agribusiness companies in the United States to help build successful teams, and to allow qualified candidates reach their career goals. 

For additional information, contact Dave Allen at AGRI-SEARCH, Inc. at  (217) 543 2505 or E-mail dave@agri-search.com. 

In a press release dated February 9th Pilgrim’s Pride Corp. (PPC) announced results for the 4th Quarter of FY 2022 ending December 25th 2022. The quarterly figures showed a loss for the most recent quarter attributed to lower unit revenue across the entire product mix.

The following table summarizes the results FY 2022 derived from the SEC 10-Q form and values are compared with the corresponding previous fiscal yar (Values expressed as US$ x 1,000 except EPS)

For the 4th quarter of FY 2022 the Company lost $155.0 million on revenue of $4,127 milllion with a negative diluted EPS of $(0.66). For the corresponding 4th quarter of FY 2021 PPC earned $36.7 million on revenue of $4,039 million with a dilluted EPS of $0.15.

Losses posted by the three business segments during the $th quarter were:-

   U.S. 68 percent of company operating loss on 59 percent of total sales

   E.U. and U.K. 2 percent of company operating loss on 30 percent of total sales

   Mexico 30 percent of company operating loss on 11 percent of total sales

52-Week Range in Share Price of PPC :  $20.23 to $34.66     50-day Moving average  $24.70

Market Close: Wednesday February 8th $23.52.  Open Thursday February 9th post-release $24.99 up 6.2 percent.

Trailing P/E  6.2   Beta 1.0

After a four-year postponement, the Expo Carnes y Lacteos took take place in Monterrey, Mexico February 21st to 23rd.

The largest meat processing trade Exhibition for Mexico and Latin America represented an important venue to promote U. S. broiler, turkey and egg products.  The two-level pavilion was sponsored by the United Soybean Board and USAPEEC and accommodated twelve participating exporters.  The U. S. Consul General in Monterrey, Roger C. Rigaud performed the ribbon-cutting ceremony for the pavilion.

For additional information, contact Liliana Solis at <lsolis@usapeec.org.mx>     

A ProMED report dated February 7th confirmed a diagnosis of atypical type-H bovine spongiform encephalopathy in a 28-month old bovine, gender not stated but presumed to be a cow.  The animal did not show any typical signs of BSE before euthanasia.  The diagnosis was based on routine surveillance in accordance with Regulation EC999/2001.  An epidemiologic investigation is in progress.

The last case of classic BSE detected in Spain was diagnosed in 2014 in an elderly cow.  A case of atypical BSE was detected in 2021.  Given the characterization of the prion, the official BSE risk status of Spain has not been changed by the World Organization for Animal Health.

Legislators representing both parties in the House and Senate are supporting the Strengthening Local Processing Act.  This will allow small-scale local livestock and poultry producers to process livestock that at present is restricted to large plants under USDA inspection.  Representative Chellie Pingree (D-ME) stated, “The Strengthening Local Processing Act will increase processing, enhance opportunities for local producers and help small slaughterhouses and butchers grow their businesses, delivering the quality, locally-raised meat and poultry consumers expect at the store.”

Senator Sherod Brown (D-OH), frequently opposed to intensive production stated, “If we are serious about fighting consolidation in the livestock sector, we need to invest in Ohio’s small processors that will help create jobs in their community making our supply chain more resilient and bring down prices.”

The Strengthening Local Processing Act will increase the federal cost share for state facility inspections to 65 percent, encouraging states to implement inspection programs and to participate in the Cooperative Interstate Shipment Program that currently includes eight states.

Activists legislators opposed to intensive livestock production fail to recognize that the current system involving concentration has developed on the basis on efficiencies of scale requiring capital-intensive plants, supply chains and logistics, processing efficiency, marketing and distribution. Size allows packers to acquire fixed and working capital, logistic capability and coordination of supply chains to continue serving markets at prices beneficial to consumers. 

Evaluation of the cost structure of small-scale producers especially in the absence of integration demonstrates the differential in cost of production that must be passed on to consumers.  There is considerable evidence from USDA-FSIS citations that standards of welfare are far lower with small processing establishments due to deficiencies in equipment and training of personnel.

It is strikingly evident that the disruptions associated with the emergence of COVID during the first half of 2020 are now being used as a justification to attempt to dismantle red meat and poultry production without opponents advancing a viable alternative.  If enterprises cannot survive without government financial support and mandates they will be de facto nonviable.

The Wendy’s Company has announced a program to reduce greenhouse gas emissions across their global system.  Improving energy efficiency by implementing U.S. Department of Energy Better Builds Initiative and upgrading equipment is justified.  Purchasing energy through “clean” programs including solar generation will contribute to the goal of a 50 percent reduction in greenhouse gas emissions by 2030. 

There is concern that the company intends “collaborating” with suppliers by imposing “responsible sourcing” in the supply chain.  It is hoped that Wendy’s does not embark on a program of pressuring suppliers to undergo incremental capital investment and higher operating costs to improve sustainability without a corresponding increase in transfer price.  A number of supermarket chains appear to be forcing suppliers to implement programs of sustainability with these retailers burnishing their environmental credentials at the expense of the agriculture sector.

At the end of the day it is seriously questioned whether customers will patronize Wendy’s over other QSR chains on the basis of enhanced sustainability. If operating costs increase and profit margins shrink, both institutional and retail investors will look elsewhere for greater returns. One outstanding sentiment at the 2023 IPPE was that “everyone wants sustainability but no one is willing to pay for it” A lot like welfare!

Five lawsuits have been filed in four federal judicial districts claiming false advertising and labeling.  At the request of Beyond Meat, these cases have been consolidated and will be tried in the Federal Court for the Northern District of Illinois unless settled.

All the actions allege that plant-meat substitutes manufactured and marketed by Beyond Meat "miscalculate and overstate protein content and claim nutritional value equivalent to traditional meat products".

The lawsuit is perhaps the least of problems faced by Beyond Meat given their perilous financial situation as detailed in a companion article in this edition.

On February 10th, the USDA Agricultural Marketing Service announced purchase of 12,000 tons of large chilled chicken in bulk for child nutrition and related food assistance programs.  Product was purchased at an average price of $1.34 per pound with deliveries to be made during March 2023.

A second purchase comprised 6.8 tons of large chilled chicken legs in bulk. Product was at an average price of $0.47 per pound with deliveries to be made during March 2023.

The two purchases amounted to $33.8 million.

A ready-to-eat stuffed chicken-breast product produced by Vanguard Culinary Group in Fayetteville, NC. has been recalled.  This action follows a review of processing temperatures indicating that Park Street Deli brand, broccoli-stuffed chicken, labeled as fully-cooked mat have been under-processed.

For the past three years, public health agencies in Canada and the U.S. have documented outbreaks of foodborne infections attributed to uncooked raw breaded and stuffed chicken products. Despite labels indicating the need for adequate cooking, consumers were not preparing these raw chicken products in an oven to attain an internal temperature of 165F necessary to destroy pathogens.  In this recall, Park Street Deli products were labeled as "fully cooked", and consumers simply reheated items frequently using a microwave oven resulting in the risk of ingesting viable bacterial pathogens.

Plukon Food Group, a Dutch agribusiness consortium with a turnover in excess of $2 billion annually has acquired a majority shareholding of J.A. ter Maten Holdings.  This company processes raw materials into pet food and has collaborated with Plukon since inception in 1978.

Plukon has 30 facilities in Europe among six nations and processes nine million broilers weekly.

Rabobank sponsored the Executive Luncheon held during the 2023 IPPE. The keynote speaker was Nan-Dirk Mulder, Senior Global Specialist for Animal Protein with Rabobank.  His presentation entitled “Investing in Global Poultry Markets” represented a review of opportunities in the U.S. and international poultry sectors.  Mulder commented on the increased production of chicken and eggs in 2023 with the most intense expansion in Asia and Latin America.  He predicted that production will increase in importing nations to satisfy demand with less reliance on trade. 

With respect to the U.S. industry, Mulder projected that integrators would increase margins by marketing additional value-added products.  Worldwide, value chains will be extended and the structure of industries will conform to operating environments and the market demands.

Olymel has informed the United Food and Commercial Workers Union that the Blainville and Laval, Quebec plants will be closed, effective April 28, 2023.  The twelve-week notice period conforms to the Quebec Labor Standards Act.  The plants employ 135 and 35 workers respectively.  Production of hams, deli meats and specialty products will be transferred to other Olymel plants.  The Cooperative will offer employment to displaced workers and establish outplacement counseling.

Yanick Gervais president and CEO of Olymel stated, “The decision to close our two processing plants is part of the reorganization that began more than a year ago and is due to the ability of our facilities to produce the same products and therefore achieve savings and efficiencies.”  He added, “I believe that today’s announcement should enable us to achieve our operational optimization objectives more rapidly. This is in the context of unfavorable economic conditions with higher material costs, labor shortages and weakness in certain markets.”

In anticipation of increased volume and to provide a higher level of service, the Georgia Ports Authority announced expansion of cold storage at the Port of Savannah.  Seven more container racks will be added to accommodate 360 refrigerated containers in addition to the existing 3,500.

Southeast and mid-Atlantic ports are responsible for a high proportion of refrigerated agricultural exports from the U.S. broiler industry. This is in part due to expanded rail and modernized harbor facilities but also attributed to widening of the Panama Canal that has reduced the transit time between the East Coast and destinations in Asia.

The Federal Appeals Court for the 3rd Circuit Court of Appeals has dismissed claims by workers at the Maid-Rite Specialty Foods plant in Dunmore, PA.  Workers sued the U.S. Occupational Safety and Health Administration (OSHA) claiming that the Agency condoned "inadequate COVID-19 prevention measures". 

The OSHA investigated claims but determined that in 2020 that work conditions in the plant did not present a danger to workers based on the knowledge of COVID epidemiology at the time.

In a press release dated February 6th Tyson Foods Inc. (TSN) announced results for the first quarter of FY 2023 ending December 31st 2022. TSN disappointed on revenue and earnings.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS)

52-Week Range in Share Price of TSN: $59.38 to $100.72. 50-day Moving average, $64.33

Market Close: Friday February 3rd $64.20. Open Monday February 6th post-release $60.44 down 5.1 percent.

TSN posted lower revenue against an estimate of $13,500 million and missed on earnings with a consensus GAAP EPS of $1.33.

Forward P/E 9.7 Beta 0.7

The Chicken Segment attained sales of $4,263 million ($3,890 million in Q1 FY 2022) representing 32.1 percent of Company revenue. Operating income was $69 million or 14.8 percent of the Company total. In Q1 of 2022 operating income was $140 million representing 9.6 percent of the Company total.

For comparison among Tyson Foods’ business segments the adjusted operating incomes in Q1 2023 were respectively:- Pork, ($21) million; Beef, $166 million; Prepared Foods $258 million and International ($5 million).

In commenting on results Donnie King, president and CEO stated “We executed our strategy in Q1, growing volume, improving staffing levels, investing in automation and building inventory to meet customer demand, all while maintaining a focus on liquidity and financial health,” He added “The strength of our retail brands, including Tyson®, Jimmy Dean®, Hillshire Farm®, and Ball Park, was demonstrated by the growth in Prepared Foods, most notably with Jimmy Dean ending the quarter at its all-time highest volume share. Our advantaged brands in advantaged categories uniquely position us to win in the marketplace.” King noted “We faced some challenges in the first quarter. Market dynamics and some operational inefficiencies impacted our profitability. We expect to improve our performance through the back half of fiscal 2023 and into the future, as we strive to execute with excellence and work to become best in class in our industry.”

He concluded “We are optimistic about the long-term outlook for Tyson. We have the world’s greatest protein brands, an incredible team, and a sound strategy to serve our customers and delight consumers with high-quality, sustainable, affordable protein.”

Guidance for FY 2023 included Revenue between $55 and $57 billion; Adjusted operating margin of 8 to 10 percent for FY 2023 but 2 to 4 percent for the Chicken Segment ; Capital expenditure of $2.5 billion Company wide. Tyson projects improved results from international operations.

On February 3rd, the USDA Agricultural Marketing Service announced purchase of 440 tons of diced chicken for child nutrition and related food assistance programs.  Product was purchased at an average of $2.89 per pound with deliveries to be made during March and April.

The purchase amounted to $2.5 million.

In a February 1st release, Aviagen has announced that Eddy van Lierde will serve as Global Head of Incubation Services.  He will replace Dinah Nicholson who will transition to retirement. In his new position van Lierde will lead a team of incubation specialists to support customers worldwide and to provide input to Aviagen hatcheries. Aviagen will continue to work closely with major manufacturers of incubation and chick handling equipment.  

Commenting on the appointment, van Lierde stated, “I’m excited to begin this new adventure with a dedicated group of people who are committed to our customers and our birds and I am proud to be part of their team.”  Eddy has completed 30 years in the industry joining Aviagen in 1995 in New Zealand and gaining experience in the U.S., Canada and Latin America.  A native of Belgium he was trained at the Japan Livestock Technology Association School with a specialty in hatchery management and poultry husbandry. 

An ice storm affecting the South Central and Southeast, regions of the broiler industry, resulted in closure of plants on Wednesday, February 1st extending from Texas eastward to Arkansas.  In some cases, first shifts were cancelled with production resuming later in the day. 

With extensive icing, harvesting of broilers is difficult and in mountainous regions, impossible.  Workers have difficulty in accessing plants and decisions to cancel shifts was based on the realities of weather and in the interest of safety.

Impossible Foods has announced a 20 percent staff reduction from their complement of 700 employees.  This is in addition to the six percent cut-back in October 2022.  Competitor Beyond Meat, Inc. will lay off 20 percent of their employees consistent with a reduction in forecast sales.  This company noted decreased demand for refrigerated meat alternatives and is encountering competition in the limited market for plant-based meat substitutes. All plant-based meat substitutes are priced higher than conventional ground beef leading to consumer rejection.

Impossible Foods is privately held but the quarterly reports published by Beyond Meat suggest significant losses with little prospect of attaining breakeven, given declining sales and negative gross margins. Some analysts have even projected bankruptcy for the Company that has been sustained by infusions of working capital by institutions.

The plant-based division of Maple Leaf Foods is unprofitable, but management believes that economies of scale and changes to the product range will reverse the unfavorable situation that has persisted since initiation of plant-based meat production.

Following the retirement of long-term CEO, Rodolfo Ramos Arvizu, the Chairman of the Bachoco Board Directors, Javier Bours announced the appointment of Ernesto Salmon Castelo to the position of CEO.  Salmon joined Industrias Bachoco in 1991 and has held management positions in sales, and operations with his most recent responsibility as Operations Director for Mexico.  He earned degrees in chemical engineering and business administration from the Sonora Technological Institute.

Paying tribute to the retiring CEO Rodolfo Ramos, Bours stated, “Under his leadership the Company achieved not only an image as a international player but also took solid steps to being a leading supplier of protein in Mexico.

Industrias Bachoco owns OK Foods in Arkansas and in Mexico the company is a major producer of broilers, eggs, beef and pork.

Aviagen team members from around the globe, speaking multiple languages and representing diverse areas of expertise, interacted with customers and industry colleagues at the 2023 IPPE.

A major topic of conversation was the innovative Aviagen program of “Breeding for welfare and sustainability.” The company emphasis on a balanced breeding approach, ensures that welfare, sustainability and performance are traits represented in Aviagen products. Aviagen offers a full portfolio comprising Arbor Acres®, Indian River® and Ross® conventional breeds, as well as the Rowan Range aimed at slower-growing, organic and free-range markets. These breeds combine to strengthen customer success by enabling them to offer consumer choice.

Wes Morris will serve as the President of the Tyson Foods poultry business. Donnie King, President and CEO of Tyson Foods stated, “Wes is a recognized leader who will help position us for continued success and the future growth of our chicken segment.”  He added, “We are confident his experience will help us continue to strengthen our chicken operations and meet growing consumer demand for Tyson brand products.”

Morris has held a number of leadership positions within Tyson Foods since 1999, including Group Vice-President of Consumer Products and President of the Prepared Foods operations before his retirement in 2017.  Since this time, he has served as CFO at Simmons Foods and recently provided consulting services to the Tyson poultry business.

Wes Morris earned a BA in Marketing from the University of Arkansas and has over 35 years of experience in major food companies, including Tyson Foods.

The Department of Homeland Security (DHS) is investigating Packers Sanitation Services for possible human trafficking. The issue arises from the use of child labor to clean a JBS plant in Grand Island, NE.  Packers Sanitation Services now operates under a Consent Order and Judgment issued in early December 2022 imposing sanctions on the company and restraining activities including employing workers younger than 18 years of age.  The Department of Labor identified 30 children working at five plants in various states, some of whom were migrants, triggering the investigation.

THE USDA Agricultural Prices Report released December 30th 2022 posted November prices for agricultural commodities and expenditures.

 The USDA ERS detailed prices as follows:-

“The November Prices Received Index (2011 as a base) for Agricultural Production was 133.4, an increase of 4.5 percent from October 2022 and 23 percent from November 2021. At 127.1, the Crop Production Index was up 4.3 percent from last month and 19 percent from the previous year. The Livestock Production Index, at 143.4, increased 3.2 percent from October and 30 percent from November last year. Producers received higher prices during November for lettuce, soybeans, market eggs and cattle but lower prices for hogs, hay, milk, and cotton. In addition to prices, the volume change of commodities marketed also influences the indexes. In November, there was increased monthly movement for corn, milk, cattle, and cotton and decreased marketing of soybeans, grapes, lettuce, and wheat.”

“The November Prices Paid Index for Commodities and Services, Interest, Taxes, and Farm Wage Rates (PPITW), at 137.1, was unchanged from October 2022 but up 11 percent from November 2021. Higher prices for feeder cattle, feeder pigs, concentrates, and nitrogen offset lower prices for other services, hay and forages, complete feeds, and other machinery”.

Corn farmers received $6.49 per bushel in November 2022 compared to $5.26 per bushel in November 2021, up 23.4 percent.

Soybean farmers received $14.00 per bushel in November 2022 compared to $12.10 per bushel in November 2021, up 15.7 percent.

Broiler integrators were assigned a live bird transfer price of 71.4 cents per live lb. in November 2022 compared to 59.2 cents per live lb. in November 2021, up 20.6 percent. Due to integration there are effectively no independent farmers selling live broilers other than a fractional proportion of total production destined for urban wet markets.

Turkey integrators were assigned a live bird transfer price of $1.26 per live lb. in November 2022 compared to $0.84 per live lb. in November 2021, up 20.6 percent. Due to integration there are effectively no independent farmers selling live turkeys other than a fractional proportion of total production destined for specialty “heritage” markets.

According to the January 23 edition of Monday Line, the Bureau of Animal and Plant Health Inspection and Quarantine of the island nation of Taiwan has lifted embargos on twelve U.S. states with a harvest date after January 19th, 2023.  Many of the bans on entire states were announced after outbreaks of HPAI in backyard flocks.  Given that Taiwan has diagnosed cases of H5N1 HPAI, bans on entire states are unjustified and are in any event, contrary to WOAH policy regarding regionalization.

Taiwan and other nations imposing state and national bans as a result of outbreaks of HPAI should relax regulations.  At the end of the day we will probably have to defend Taiwan and they should follow the African adage of “not cursing the crocodile’s grandmother until they’ve crossed the river”.

Documents made available under the Freedom of Information Act and the regular posting by the USDA-Food Safety and Inspection Service, consistent and ongoing deviations from acceptable handling and slaughter practices occur in custom-exempt slaughter facilities.

The Animal Welfare Institute among other activist organizations have demonstrated that the FSIS has neglected to monitor slaughter facilities that are currently exempt from the HMSA.

It is ironic that the USDA is promoting small-scale and custom-slaughter plants with grants while concurrently neglecting to ensure that these facilities are operated in accordance with both acceptable welfare and food safety procedures.  In their attempt to “restructure the red meat and poultry industry”, the current Administration is exacerbating problems that have yet to be resolved.  Obviously, the disparate components of the USDA should attempt some measure of cooperation in their activities that currently are deleterious to both animals and consumers.

The European Union and the U. S. have entered into a tariff rate quota agreement that establishes levels for pork, beef and seafood.  During the first eleven months of 2022, the U. S. exported products valued at $11 billion according to the Office of the U.S. Trade Representative.  Currently, the E.U. is a small destination for U. S. meat products but the agreement may enhance the volume and value of bilateral trade.

Dr. John Luchansky, Lead Scientist at the USDA Agricultural Research Service, Eastern Regional Research Center in Wyndmoor, PA stated, “The confidence in the inherent safety of plant-based products is misplaced.”  He added, “In reality, plant-based meats are ultra-processed and contain numerous food-grade chemicals as ingredients.”  There is little information available on the time and temperature combinations required to prevent the outgrowth of Shiga toxin-producing E. coli, Salmonella and Listeria and how to reduce these pathogens during cooking, according to Dr. Luchansky. 

Consumers have now been conditioned to thoroughly cook meat-burgers but the same cannot be said for plant-based material that is either undercooked or, in some cases, consumed raw.  A microbiologist at the USDA-ARS Food Safety and Intervention Technologies Research Unit stated, “In reality plants are potentially contaminated with high levels of foodborne pathogens and as such, plant-based burgers should be considered and handled just like raw ground beef.

Despite the fact that there are no documented recalls or illnesses as a result of consuming plant-based meat alternatives, risks of infection are evident. The USDA Research Center advises consumers to handle plant-based products as they would raw meat, requiring cooking to 160F and avoiding cross contamination.

In October 2021, JBS announced a project in Ottumwa, IA to house workers.  The company pledged $20 million to create affordable housing for employees.  The residential project was formally opened during the first week of January and will comprise 108 units.

Providing accommodation for workers will become an important component of new or expanded complexes and plants, especially with regard to obtaining approval for projects that will require additional workers.  JBS USA had to be complimented on their vision and contribution to the community in which they operate.

Tyson Foods has donated 50 tons of chicken products to FeedMore of Western New York.  According to the manager of the food pantry, "this will definitely be a wonderful addition to any family's meal.  Hopefully, it means they don’t have to worry that day how they're going to feed their family".  Food insecurity is now 25 percent higher in the four contiguous counties of Western New York State and involves one out of eight residents.  FeedMore WNY has recorded an 11 percent increase in demand for services through the four-county area since the blizzard.

A study presented at the 2023 International Poultry Scientific Forum demonstrated the deleterious effect of beta-conglycinin, an allergenic protein inherent to soybeans and present in soybean meal. Experimental diets comprised a non-supplemented control, and two increments of beta-conglycinin at 25,000 ppm and 50,000 ppm.  Chicks were housed in battery cages from day old to 14 days for the experimental period followed by a pelleted diet fed from 14 to 21 days.  Addition of the beta-conglycinin to feed significantly reduced intake and growth rate in mash feeds.  There were no treatment effects on differential blood cell counts, serum vitamin E levels or mucosal superoxide dismutase activity.

Since the compound is heat labile, the trial included both mash and pelleted feed.  Experimental diets containing beta-conglycinin were heat treated to 38C for 10 seconds and passed through a 3mm die.  Although pelleting using these parameters was effective in degrading beta-conglycinin, under commercial conditions, optimal pelleting conditions are infrequently achieved. 

The trial was sponsored by and included participation by scientists affiliated with Hamlet Protein. The product comprises soybean meal treated by heat and enzymes to produce an ingredient free of anti-nutritional components. When Hamlet Protein is substituted for conventional soybean meal growth rate and feed conversion efficiency are enhanced, providing a beneficial return on the incremental cost of including the product in diets.  Controlled experiments and field trials have demonstrated the benefits of early feeding of Hamlet Protein to chicks and poults since a range of anti-nutritional factors impair optimal performance in avian neonates.

Despite the need for the U.S. Surface Transportation Board to intervene to ensure shipments of corn to Foster Farms, the company has issued an assurance that no flocks were deprived of feed.

A company spokesman stated, “Foster Farms grain inventories are currently at levels that enable us to meet the nutritional requirements of all flocks in our care and bird health is not at risk.”  The statement added, “All Foster Farms facilities are operating and our hope is that more reliable service standards can be maintained and further disruptions minimized.”

Union Pacific stated that it has voluntarily provided the Surface Transportation Board and Foster Farms with service updates since January 3rd.  Union Pacific has blamed delays in delivery to about twenty western states on extreme cold and blizzard conditions.  The U.S. Surface Transportation Board has intervened twice, first on June 17th and then December 30th enjoining Union Pacific to “make all efforts to meet scheduled grain deliveries to Foster Farms, based in Modesto CA.”

Notwithstanding the restoration of services, Foster Farms should evaluate storage capacity for grains in the event of shortages that may occur in the future as a result of natural catastrophe and events beyond the control of their rail provider.

Beth Moskowitz who has served as the chief brand officer for Beyond Meat (BYND) since 2019 has announced her departure from the Company.  Recent executive resignations include Deanna Jurgens, Global Chief Growth officer and President of North America; Phillip Hardin, Chief Financial Officer, Doug Ramsey, briefly Chief Operating Officer and Bernie Adcock, a Tyson Foods veteran with experience in production and marketing.

Paying tribute to Ms. Moskowitz, CEO Ethan Brown noted that Beth was instrumental in building the Beyond brand and establishing celebrity partnerships.  She was central in attempts to promote Beyond products by emphasizing taste, health and sustainability.

Ms. Moskowitz noted that she looked forward to returning to her roots as an investor, advisor and creative partner and to participate in family events.

Beyond Meat has traded over the past 12 months from $68.06 down to $11.03 with a 50-day moving average of $13.85. The trailing twelve-month operating margin is -77 percent and profit margin -88 percent. Shares short of float on December 30th 2022 attained 43 percent.

According to a Department of Homeland Security release, U.S. Customs and Border Protection (CBP) intercepted 221 attempts to introduce prohibited meat products during the first week of 2023 at the Laredo, TX point of entry.  High traffic is experienced after the holiday season as vacationers and foreign workers return to the U.S.  Over a four day period, pork products were the most commonly encountered contraband predominantly in the form of pork bologna.

As with any form of smuggling, the products interdicted represented only a proportion of the total quantity introduced across the Southern border.  Smuggled meat and poultry has the potential to introduce exotic diseases but more of concern to livestock than poultry.  A more serious problem is the commercial shipment of illegal meat and poultry products in containers with fraudulent manifests.  This is especially a risk with importation of illegal specialty oriental items packed in containers with products that are eligible for importation preventing detection at point of entry. The 1999 extensive outbreak of foot and mouth disease in England with extension to France resulted from illegal importation of meat products for an ethnic restaurant in Newcastle-on-Tyne.

USDA-FAS Global Market Analysis projected a 1.7 percent higher World production of broiler meat attaining 102.94 million metric tons (m.mtons)

The top-10 producers are ranked with their respective proportion of World production*:-

Total non-U.S. broiler production will increase by 2.0 percent to 81.66 million metric tons or 79.3 percent of the world total of 102.94 million metric tons.

In 2023, total imports will amount to 11.398 million metric tons. The major importers and their quantities are ranked according to the USDA projection:-

The projected export volume of broiler RTC in 2023 is 13.995 million metric tons. The major exporters are ranked together with the proportion of total world exports as follows:-

*The values projected by USDA exclude chicken feet.

The January 2023 USDA-FAS Global Market Analysis projected a 1.7 percent higher World production of broiler meat attaining 102.94 million metric tons (m.mtons)

The top-10 producers are ranked with their respective proportion of World production*:-

Total non-U.S. broiler production will increase by 2.0 percent to 81.66 million metric tons or 79.3 percent of the world total of 102.94 million metric tons.

In 2023, total imports will amount to 11.398 million metric tons. The major importers and their quantities are ranked according to the USDA projection:-

The projected export volume of broiler RTC in 2023 is 13.995 million metric tons. The major exporters are ranked together with the proportion of total world exports as follows:-

*The values projected by USDA exclude chicken feet.

A class action lawsuit filed by contract growers in the U.S. District Court for the Eastern District of Oklahoma, designated Tyson Foods, Pilgrim's Pride, Perdue Farms and Koch Foods as co-defendants.  The plaintiff's alleged that the integrators colluded using shared information through an industry benchmarking service to depress grower remuneration.

To date, Tyson Foods has settled for $21 million, Perdue Farms for $15 million and Koch Foods for $16 million.  The latest settlement by Wayne-Sanderson Farms for an undisclosed figure places greater pressure on Pilgrim's Pride to either settle or proceed to trial.

The risks of litigation associated with subscription to any industry benchmarking system are self-evident with integrators previously agreeing to substantial settlements with customer categories alleging collusion over volumes of production and hence prices.

On January13th, the USDA Agricultural Marketing Service announced purchase of 774 tons of bulk-packed large chilled chicken over a price range of $1.22 to $1.55 per lb. The second product comprised 504 tons of bulk-packed chilled chicken legs at $0.44 per lb. Product is to be delivered during the second half of February. Chicken purchased by USDA-AMS is destined for child nutrition and related food assistance programs.

The two purchases amounted to $2.4 million.

Health officials in Australia recorded two recent limited outbreaks of salmonellosis in patrons of shawarma and kabob stores.  The first case involved 12 diagnoses of Salmonella Agona.  Five patients required treatment and one was hospitalized.  The second case involved Salmonella Virchow responsible for two diagnosed cases. Generally it is accepted that the actual number of cases of salmonellosis from a given source exceeds the diagnosed cases by a factor of ten.

Investigations disclosed failures in hygiene and irregular and incomplete decontamination of equipment.  Samples yielded Salmonella from the shaving blades of the shawarma cooker, pans and samples of raw chicken.  Recommendations were provided to dismantle and decontaminate equipment on a daily basis and to pre-cook meat including lamb and poultry in a double boiler at 176 F in comparison to the inadequate 140 F and in some cases 130 F at peak serving times.

The bottom line: “make the shawarma warmer!”

During 2022 USDA assigned $223 million in grants and loans to small-scale meat and poultry processors.  This amount was subsequently supplemented with an additional $73 million as 21 grants in 19 states forming the Meat and Poultry Processing Expansion Program.  On January 5th 2023 the USDA announced an additional $9.6 million to “strengthen the nations meat supply”.  In announcing the new tranche, Secretary of Agriculture Tom Vilsack stated, “We are putting the needs of farmers, ranchers and consumers at the forefront in the Administration’s work to strengthen the resiliency of America’s food supply chain while promoting competition”. 

The current program of funding will be spread among 25 independent businesses with two companies each receiving $5.7 million under the Food Supply Chain Guaranteed Loan Program.  Bottomland Prime LLC will receive $5 million to acquire and expand a meat processing and retail facility in Amarillo TX.  Other grants in the $50,000 range will be used to acquire equipment and provide working capital for expansion.

The current Administration and the Secretary of Agriculture appear committed to restructuring meat production, ignoring the realities of scale of operation and the resources required to maintain a constant food supply for the Nation and export. The ‘Big-4” red meat producers and the “Top-10” broiler integrators operate large and efficient packing plants that can apply technology, capital intensive installations and logistics to deliver meat to consumers at an affordable price unmatched by small competitors supplying only local markets.

On December 29th 2022, the USDA Agricultural Marketing Service announced purchase of 536 tons of shelf stable boned chicken in cans for child nutrition and related food assistance programs.  Product was purchased at an average of  $2.57 per lb. with deliveries to be made from February 1st through March 31st 2023.

On January 4th, the USDA Agricultural Marketing Service announced purchase of 429 tons of chicken fajita strips for the National School Lunch Program.  Product was purchased at $2.93 per lb. with deliveries to be made from February 16th 2023 through April 15th 2023.

The two purchases amounted to $5.6 million.

In June 2022, Foster Farms obtained an emergency order from the Federal Service Transportation Board to maintain deliveries of corn to Company feed mills by Union Pacific Railroad.

Following deterioration in frequency of deliveries, Foster Farms filed a petition for emergency service granted by the Service Transportation Board on December 30th.  The Board directed Union Pacific Railroad to satisfy commitments to Foster Farms and to provide status updates.

The need for an integrator to resort to emergency applications to a federal regulatory agency twice within six months suggests the vulnerability of Foster Farms with respect to corn. They may wish to review their long-term needs and invest capital in storage capacity to maintain operations in the event of an interruption in supply. This could occur during a prolonged strike, weather event or other calamity beyond the immediate control of a carrier.

McDonald's Corp. has issued a policy on reducing antibiotic residues in their beef supply chain.  The Company will follow established science-based guidelines established by the World Health Organization and the World Organization for Animal Health.

The primary objective of the policy is to exclude administration of antibiotics critical to human health as stated, “Our policy does not permit the routine use of medically important antibiotics for the purposes of growth promotion or the habitual use of antibiotics for disease prevention.  Reduction, were possible without adverse effects on animal health and welfare remains the intended outcome of our commitment.” 

The policy governing antibiotic use will cover eighty percent of beef purchased by the company.  Catherine McLaughlin, Chair of the Responsible Use of Medicines in Agriculture Alliance commented favorably on the McDonald’s Corp. policy that she characterized as “a solid commitment to protecting and improving the health and welfare of animals and is supportive of industry-wide data collection to continue refining antibiotic use across beef industries.”

The Natural Resources Defense Council generally opposed to all forms of intensive livestock production, was less enthusiastic following the McDonald’s release. The organization noted that the Company has not established a definitive date for implementation of the program to eliminate antibiotics.  Lena Brook, Director of Food Campaigns at the Defense Council stated, “McDonald’s chose optics over substance with its new beef policy update.  This is especially disappointing given that McDonald’s is the largest beef buyer in the world and that the health threat posed by antibiotic-resistant bacteria continues unabated.”

McDonald’s is a bellwether for the QSR segment and other chains will follow their lead. The problem will arise in enforcing compliance in imported beef products. This will require a substantial surveillance program with structured sample collection and assay for antibiotic residues.

A leak in a high-pressure tank holding carbon dioxide resulted in the evacuation of the Foster Farms Belgravia plant in Fresno, CA. on Friday, December 23rd. 

No workers or first responders were injured or affected by the incident.   The plant ceased operation during the afternoon but resumed production the following day.

The prompt response to the incident involving contingency planning and training, stands in stark contrast to the tragedy on January 28th 2021, at the Foundation Food Group plant in Gainesville, GA. when a release of nitrogen in a confined space resulted in the deaths of six workers and hospitalization, albeit temporary, of up to 130 employees exposed to a hypoxic environment.

It is inevitable that leakage of ammonia, nitrogen and carbon dioxide will occur despite high levels of maintenance and installations that conform to engineering codes.  The difference between tragedy and simply a period of down-time relates to preemptive action including planning, preventive maintenance, inspections, training of personnel and incident drills.

Tyson Foods has reached out from their company bench to appoint Brady Stewart as Group President of Tyson Fresh Meats. Stewart will report to Donnie King, President and CEO of Tyson Foods, and will be responsible for expanding the company's red meat business.

Stewart will replace Shane Miller who is retiring after more than 30 years of service.  A smooth transition is anticipated as operations move to the expanded Tyson Foods corporate headquarters in Northwest Arkansas.

 Stewart is currently COO of Smithfield Foods, having worked for the company since 2017 when his employer, Kansas City Sausage was acquired.  In his most recent role at Smithfield, he was responsible for 500 company-owned hog farms and 46 production facilities and the associated supply chain.

In accepting the position Stewart noted, "the reputation of Tyson Foods and its products is world renowned and I am delighted to be joining the team to help drive growth and deliver for its customers and consumers.

The Senate version of the Affordable and Secure Food Act was not considered by the Senate during the lame-duck session, either as a free-standing Bill or as an addendum to the Omnibus Spending Bill.

The U.S. is reliant on foreign workers admitted to the U.S. on H-2A visas.  Producers of fruit and produce, especially in western states, have campaigned for changes in the allocation of H-2A visas, including the need for at least 100,000 additional workers for the crop and livestock sectors.

The Bill introduced by Senator Michael Bennet (D-CO) and Senator Michael Crapo (R-ID) would have reformed the H-2A visa program.  Undocumented agricultural workers would have been allowed to work legally in the U.S. following an application and review of credentials.  The Bill would have provided a path to permanent resident status following 5½ years of legal residency.  The Bill would have established wage standards, have allowed workers to switch employers and improved standards of housing and transportation for field workers.

Senator Bennet stated, “Congress has once again failed to deliver the reforms that the fresh produce industry and its agricultural allies have long fought for.”  He added, “We do not have to accept hundreds of thousands of people living in the shadows when they work every single day to feed the American people.”  In his address to the Senate, Bennet stated, “We should not accept crushing food prices for families because this Congress can’t reform an antiquated H-2A program.”

The agricultural industry is committed to continuing the effort to reform the guest labor system in the 118th Congress.

On December 2nd, Tennessee Tech University unveiled the Poultry Science Research Center, incorporating the Aviagen Poultry Science Laboratory.  The 8,000 square foot facility cost over $ $2 million and comprises research units to house chickens with dedicated areas to process research specimens in addition to offices, biosecurity installations and the Aviagen Laboratory.

Dr. Darron Smith, Dean of the College of Agriculture and Human Ecology, stated, “This is without a doubt the best research center in the state of Tennessee for poultry.”  Referring to the support of Aviagen he added, “Having these relationships builds a pipeline for our students to obtain employment and internships.  This laboratory will help train our students to be more equipped to move into the poultry industry.”  Aviagen supported the Tennessee Tech University project together with the Tennessee Poultry Association and the Tennessee Board of Regions.

Recently completed Project BRU015 funded by the USPOULTRY Foundation demonstrated the efficacy of both a commercial vaccine and an experimental product in suppressing intestinal colonization with Salmonella Reading in turkeys.  Dr. Shawn Pearson of the USDA, ARS National Animal Disease Center in Ames, IA completed a study entitled Vaccination against Salmonella Enterica Serotype Reading: Evaluation of the Cross-Protective Salmonella BBS 866 Vaccine and the Avipro® Megan® Egg Vaccine at Reducing Outbreak-Associated S. Reading Colonization, Dissemination and Persistence in Turkeys.  Both the commercial Avipro® vaccine and USDA-ARS candidate BBS 866 were cross-protective and demonstrated potential as a pre-harvest intervention strategy.

According to a statement by Ricardo Santin, President of the Brazil Association for Animal Protein (ABPA), the Nation will produce 14.750 million metric tons (29,500 million pounds) of RTC broiler product in 2023.  It is anticipated that exports will attain 5.2 million metric tons (11,440 million pounds), representing 35.3 percent of production.  In contrast, the U.S.D.A projects U.S. production of broiler RTC to attain 21.329 million metric tons (46,925 million pounds) and will export 15.7 percent of product, predominantly in the form of leg quarters.

Ricardo Santin predicts that broiler products would average $1,560 per metric ton through 2023.  For the first ten months of 2022, the U.S. exported 3.16 million metric tons with an average unit value of $1,399 per ton.  Direct comparisons in unit value of exports from Brazil and the U.S. are invalid, given the wide diversity in product offered by Brazil including whole chicken and specialized products including NAE and Halal presentations.

The ABPA maintains that freedom from HPAI will represent a marketing advantage for Brazil.  This claim might be premature, given the emergence of H5N1 strain highly pathogenic avian influenza in Peru, Chile and Ecuador.  This should restrain the ABPA from claims that are justified at the present but may not be valid in the future.

According to comments submitted to the USDA-FSIS through December 16th representatives of small-scale broiler producers expressed concern over intended Salmonella standards.

Producers of up to 500 birds per week do not have the resources to deploy both pre- and post-harvest mitigation and do not have access to rapid laboratory assays for pathogens in comparison to integrators.

USDA FSIS is under pressure to decrease the incidence rate of salmonellosis that has remained constant for a number of years according to data collected by the Centers for Disease Control and Prevention.

Sandra Eskin, Deputy Undersecretary for Food Safety stated, "we want to better ensure that poultry products with levels or types of Salmonella contamination that can make people sick are not sold to consumers".

Salmonella reduction in large U.S. chicken plants

Following investigations by the Department of Labor and a court order restraining Packer Sanitation Services (PSS) for employing under-aged workers, JBS-USA has cancelled their contract with respect to the Worthington MN pork plant.  The Department of Labor identified 19 minors under the age of 18 working for Packers Sanitation Services at various plants.  These workers ranged in age from 14- through 17-years, below the statutory 18-year limit to work night shifts cleaning plants.  Packers Sanitation Services employs more than 15,000, predominantly in the meat industry.  In accordance with the court order, Packers Sanitation Services is required to hire a third-party consultant to ensure compliance with labor laws and will review and upgrade company policies and procedures.  The company has agreed to terminate management responsible for violations in the event of future employment of minors

Although the company promised not to take retaliatory action against employees, PSS will lay off 121 workers following the cancellation of the contract effective January 21st. JBS-USA will not be a party to civil enforcement action by the Department of Labor, since the consent order only applies to Packers Sanitation Services.

In response to the court order, Packers Sanitation Services stated, “We have been crystal clear from the start.  We have a zero-tolerance policy against employing anyone under the age of 18 and fully share the Department of Labor objective of ensuring it is followed to the letter at all local plants.”  Reminiscent of Captain Renault in Casablanca, JBS managers in the plants concerned were “shocked, shocked” to learn that underage workers were cleaning their plants.

When the Lincoln Premium Poultry Complex was proposed for the Freemont, NE. region, opponents cited potential environmental pollution as a negative factor.  The Complex established operation in 2019 and is now at the projected output of two million rotisserie-sized broilers per week for Costco.

The Nebraska Farmers Union Foundation (NFUF) commissioned Dr. Mat Sutton, a geologist to monitor nutrients and pathogens in area waters in localities potentially impacted by pollution from broiler houses.  Seven locations in five counties were selected for sampling with nutrient and pathogen levels quantified in surface water.  Assays demonstrated increases in phosphorous and both Salmonella and Campylobacter levels in surveys conducted in 2022, purporting to reflect the effect of farms in operation for over two years. The results were contained in a report entitled Poultry Litter and Stream Health. 

In response, Liberty Premium Poultry commissioned Nutrient Advisors to review the NFUF study. The president of the company commented that the data was not correlated with actual application of broiler litter to crops or pasture and discrepancies were evident in the temporal application of litter through the years 2019 through 2020.

Prior to commencing production, Lincoln Premium Poultry retained Nutrient Advisors to advise contractors on nutrient management practices.  Lincoln Premium Poultry has cast doubt on the validity of data collected on behalf of the NFUF.  The company maintains that the nitrogen produced by the ongoing operation represented 0.5 percent of the volume required to grow corn in the area potentially impacted by broiler production.

The possible impact of broiler production on the nitrogen and phosphorous enrichment of waterways will be a topic of growing concern for this complex as environmentalists have now made common cause with opponents of intensive livestock production.  The Lincoln Premium Poultry Complex is a valuable source of data since, prior to 2020, there was no broiler production in the counties where their growout farms are located.  Unless specific precautions are taken in sampling to avoid confounding, data may be misleading or misinterpreted to falsely demonstrate the impact of broiler production on phosphorous, nitrogen and pathogen levels in streams and groundwater. This has implications for permitting new complexes or expansion of existing centers of production.

Workers at Denver Processing, a JBS USA subsidiary, processing beef and pork have settled a conflict with the Company after a vote to strike to strike. The United Food and Commercial Workers Union, Local claimed that management unilaterally changed workplace policies that are outside the labor agreement resulting in a ‘dangerous workplace’

The grievances were settled following negotiation with the Union over required changes and procedures. The agreement was ratified by workers. Brinkmanship was obviously effective

A comprehensive survey on the use of antibiotics in broiler production was recently concluded by Dr. Randall Singer of the University of Minnesota. The project was funded through a cooperative agreement with the U.S. Food and Drug Administration and USPOULTRY as contributors.

According to a USPOULTRY release, the following changes in use patterns were documented: -

• Post-hatch administration of antibiotics has declined from a 90 percent administration rate in 2013 to complete elimination in 2021.
• Administration of antibiotics in feed has been almost eliminated.  There was no reported use of tetracycline in feed from 2020 onwards and the inclusion of virginiamycin was 97 percent lower as compared to 2013.
• Water-soluble antibiotic use was substantially lower over the survey period.  Administration of penicillin declined by 75 percent from 2015; lincomycin by 82 percent; tetracycline by 92 percent and sulfonamides by 98 percent.

It is estimated that close to half of U.S. broilers are raised antibiotic-free.

The report did not specify the average use of antibiotic compounds per unit weight of live chicken produced as in reports from the U.K. that specify grams of drug per kg live mass. Based on the figures derived from the survey, it is evident that antibiotic use is currently at exceptionally low levels.

It is significant to note that average flock mortality and downgrades on an annual basis have not materially increased as a result of reduced use of antibiotics, contrary to the dire predictions preceding the FDA final rules withdrawing some drugs and requiring veterinary feed directives and prescriptions.  It is evident that education based on scientific evaluation, the inherent professionalism of poultry health professionals have contributed to the decline in antibiotic use and hence the potential for residues and drug resistance.

From the perspective of public health, it would be beneficial for the medical profession to exercise the same restraint in the use of antibiotics in human medicine as adopted for livestock and poultry production.

Danish Crown, a major E.U. pork processor will re-enter the U.K. market following erection of a plant.  The facility extending over 30,000 square feet will begin production during late 2023 producing further-processed pork products including bacon.  Previously, Danish Crown operated Tulip that was sold to JBS SA subsidiary Pilgrim's Pride.

The plant will incur a capital cost of $100 million and will incorporate renewable energy generation contributing to the company program of achieving energy neutrality by 2050.  The plant is designed and configured to avoid wastage of products and packaging material.

The U.S. Court of Appeals for the Fifth Circuit (Eastern Louisiana) has ruled that federal policy embodied in the Presidential Executive Order of April 28th 2020 did not protect employers from claims by workers in meat plants arising from COVID.

The case involved a lawsuit filed by workers at the Swift Beef Subsidiary of JBS USA alleging negligence leading to outbreaks of COVID. Previously a district court held that the Company "acted at the direction of a federal officer to maintain production in a critical infrastructure” and accordingly the case was dismissed.  The decision of the U.S. Court of Appeals refers the case back to the lower court that will now be obliged to proceed with the lawsuit.

Argus Research has downgraded Beyond Meat (BYND) to sell from hold.  This is based on falling demand coupled with high cost of production partly due to using co-manufactures.  Following cancelation of agreements with foodservice and QSR customers, Beyond Meat amended projected sales and increased losses. This Company appears to be in a downward spiral.  The company has laid-off 20 percent of staff and has experienced an exodus of experienced executives.

BYND has traded over the past 52 weeks in a range of $74.00 down to $11.56 with a 50-day moving average of $14.12.  Year to date BYND is down 70 percent compared to the S&P 500 index down 17 percent. As of November 30th 46 percent of shares were short.  The 12-month trailing operating margin was -76.5 percent and profit margin -86.4 percent. The company has generated a return on assets of -16.4 percent and an eye-watering -1,167 percent on equity.

A ProMED posting on December 11th confirmed widespread diagnoses of HPAI in migratory and free-living birds in the U.S.  In Washington State, snow geese and ducks have died in the area of Skagit Bay.  The State Department of Fish and Wildlife characterized the mortality as “a situation that has escalated significantly in the past two weeks”.

Goose hunters have been advised to avoid handling dead birds and to thoroughly cook killed birds before consumption.  Hunters are also advised to clean birds at home to avoid contaminating habitat with potentially infectious offal that could perpetuate infection and spread to susceptible raptors and carrion bird species.

The Louisiana Department of Wildlife and Fisheries has recognized HPAI in Gulf Coast parishes where pelicans, eagles, hawks and vultures have tested positive in addition to migratory waterfowl. Similar recommendations to those issued in Washington have been extended to Louisiana hunters.

On December 8th, Tyson Foods announced the appointment of Melanie Boulden as Executive Vice-President and Chief Growth Officer.  In her position, Ms. Boulden will report to President and CEO, Donnie King and will be responsible for aspects of global brand marketing as a member of the Enterprise Leadership Team. She will manage consumer and corporate branding, innovation, communications, consumer insights and analytics.

Ms. Boulden earned a B.S. in English from Iowa State University and an MBA with a concentration on marketing and finance from the University of Iowa.  Her two decades of experience includes serving as Chief Marketing Officer for Coca-Cola, North America and Global Head of Marketing and Brand Management at Reebok. 

In commenting on the appointment, Ms. Boulden stated, “As Tyson Foods continues on its strong growth trajectory as a global food leader, I am pleased to be in a role where I will help drive the long-term growth of the company’s broad portfolio of products and iconic brands.”

Donnie King, CEO, stated, “The introduction of the new Chief Growth Officer role will develop the world-class center of excellence around brand marketing that will be critical as Tyson Foods continues to focus on future growth.”

With a substantial grant from the Czech Republic, Ministry of Agriculture, the Agrarian Chamber of the Nation initiated an “I Eat Meat” campaign.  The slogan, “I’m a carnivore and I’m not ashamed of it!” was used to promote real meat and to oppose plant-based meat substitutes.

The promotional campaign was initiated as a counter to vegan promotions, emphasizing sustainability and the indirect deleterious effect of production of red meat on the environment.  Publicity pointed to the highly processed nature of plant-based meat substitutes, including a number of additives including salt at a high level.  Although the campaign attempted to brand plant-meat substitutes as “unhealthy food”, there is no epidemiologic evidence to suggest that consumption of newly introduced meat substitutes containing plant proteins may lead to a range of metabolic conditions.

Believer Meats, previously Future Meat Technologies, has announced their intent to erect a production facility in Wilson, NC.  The 200,000 square foot plant will cost $123 million and will have a capacity of 10,000 metric tons of cultivated meat, although the time-period was not stated in the company release. The plant will operate bioreactors to achieve high cell densities and yield of product applying a patented process. The facility is expected to be in production during the first quarter of 2024.

The company received a grant of $500,000 from the One North Carolina Fund subject to meeting  job creation and capital investment targets with matching by local governments.

Hopefully Believer Meats has conducted appropriate marketing studies confirming the long-term acceptance of cell-cultured meat. Their challenge will be to place product on a shelf at a price competitive with natural red meat and demonstrating comparable organoleptic qualities.  The question of approval currently divided between USDA and FSIS has yet to be finalized with the release of appropriate regulations and oversight.

A recent survey conducted by the Centers for Disease Control and Prevention has demonstrated widespread failure to cook frozen breaded products containing raw chicken.  Labels universally warn consumers to cook products to an internal temperature of 165 F using an oven.  The survey conducted by the CDC showed that 54 percent of respondents used other than conventional ovens to prepare these products.  Thirty percent used air fryers, 29 percent microwaves and 14 percent toaster ovens. These appliances offer convenience and speed but will allow survival of Salmonella at the time of consumption.  According to the CDC study, safe cooking instructions are apparently ignored by both the young and elderly, lower income demographics and those residing in mobile homes.

Following extensive and repeated outbreaks of salmonellosis attributed to consuming undercooked frozen breaded chicken products, FSIS has announced that Salmonella in these items would be regarded as an adulterant.

The question arises as to why food manufacturers should continue to market uncooked breaded chicken products irrespective of label instructions.  If ignorance, illiteracy and denial cannot be overcome by labeling, then regulations should mandate cooking all breaded chicken products or have them subjected to a absolute kill-process such as electron beam treatment to eliminate bacterial pathogens.

According to a December 9th posting in FoodSafety magazine, Concordia University has developed an inexpensive, paper-based synthetic sensor to detect putrescine, a toxic biogenic amine elaborated with spoilage of meat.  The sensor system was able to detect progressive spoilage, demonstrating differences between meat held under controlled conditions at either refrigeration or room temperature.

This technology is a potentially practical method of confirming spoilage currently relying on organoleptic examination that is subjective and subject to operator bias. Further development is necessary before the product will become commercially available.

Aviagen successfully shipped day-old chicks from a hatchery in Baekke located in southern Denmark through Copenhagen Airport to Provita Breeders in Bangladesh.  Qatar Airways Cargo transported the shipment from Copenhagen through Doha to the destination. Previously, seasonally cold weather precluded year-round shipments.  Aviagen developed the route and coordinated the shipment following concerns over transport restrictions due to avian influenza. Supplying Bangladesh represents a commitment to meet the United Nations Sustainable Development Goals of Zero Hunger and Good Health and Well-being. 

Participants contributing to the success of the operation included:

• The Agricultural Department of Denmark

• DSV Global Transport and Logistics - a freight-forwarding company.

• Airport authorities at Copenhagen

• Aviagen specialists in logistics and export

• Baekke Hatchery personnel

• Menzies Ground Handlers

• Qatar Airways Cargo Operations Team

Aviagen’s CEO Jan Henriksen stated, “There is great power when people with similar interests join their talents and efforts to meet a common goal.”  He added, “I thank all the dedicated people who have made this shipment a success and paved the way for a new trade route that will help secure the supply of breeding stock to the world’s producers.”

Qatar Airways has installed a climate-controlled handling center in Doha that will accommodate transshipments. Their fleet of freighters and aircraft with belly-hold containers will be able to offer seamless transportation of sensitive cargos.

A recent survey of plant-based meats sold by the Kroger Company demonstrated a sharp decline in demand and a loss of consumers between 2020 and 2021.  Over a single year, new customers decreased from 63 percent to 32 percent. Those abandoning plant-based substitutes increased from 17 percent to 37 percent. Loyal consumers continuing to purchase refrigerated plant-based meat alternatives increased from 13 to 14 percent.  Those reducing purchases represented 15 percent in 2020 compared to 66 percent in 2021.

The year 2020 marked the introduction of numerous meat substitute products from diverse producers, given the relatively low bar to market launch and the availability of funding from venture capital investors.  The sharp decline in consumer demand in 2021 suggests that the high levels of acceptance in 2020 was associated with a “curiosity factor”.  Market growth has been restrained by:-

• Differences in organoleptic properties between plant-based meat alternatives and real meat.
• Differential in price between Plant-based products and real meat.
• A narrow range of products, essentially sausages and ground meat alternatives               

The data derived from the Kroger analysis confirms the low growth rates for plant-based substitutes as reported by Beyond Meat and from the Plant Protein segment of Maple Leaf Foods.  Declining demand reflected in static or decreased sales, and evident high costs of production relative to selling price and more recently, discounting to bolster sales have all combined to increase losses in companies producing alternative meats.

The Animal Legal Defense Fund has agreed with Hormel Foods to dismiss a lawsuit filed in the District of Columbia Superior Court.  The plaintiffs allege that Hormel misled consumers by advertising the Natural Choice brand of lunch meats and bacon.  The Animal Legal Defense Fund claimed that pork was produced using "additives, hormones and antibiotics".

In compliance with the agreement, Hormel will publish additional information on its website to define terms used on labels and will modify text in advertisements.

Approximately two hundred documented cases of Salmonella Mbandaka have been diagnosed over the past year in the E.U and the U.K.  Of those affected, nineteen were hospitalized, five developed septicemia and there was one fatality.

To date, ninety cases have occurred in Finland and eighty in the U.K. with additional reports from the Czech Republic, France, Germany, Ireland, the Netherlands and Israel.

Whole genome sequencing assays suggests there are several sources through different distribution chains, but it is presumed that there is a common origin involving chicken meat.  Most of the patients reported eating ready-to-eat chicken products including sandwiches and wraps before onset of symptoms.

Investigations are continuing with environmental samples from processing plants in an attempt to trace the origin of chicken used to manufacture consumer products.

During late November, Maple Leaf Foods, Inc. was subjected to a ransom demand from hackers who created outages. The company promptly reported the incident to authorities and initiated corrective action using in-company and outside consultant specialists in cybersecurity. The company coordinated response with customers and suppliers and received cooperation during the return to normal operations. Maple Leaf foods provided workers with two years of credit monitoring services.

A recent Company release stated, “Illegal acts have compromised our systems and potentially put information at risk. This is intolerable and our Company will not pay ransom to criminals.”  The statement added, “We are asking responsible people, including those in the media, not to entertain any leads they receive from stolen or compromised data and not to contact anyone based on illegally obtained information.”

Despite the attack, Maple Leaf activities have continued, mostly unaffected, through November.

The attack on Maple Leaf Foods demonstrates the vulnerability of large protein-producing companies to intrusion.  It is understood that detection systems have recorded attempts by criminals to hack databases in many companies.  In 2021, JBS was the subject of a concerted attack, resulting in payment of $11million in ransom in order for the company to restore operations in North America and Australia.

In a release dated November 30th Hormel Foods (HRL) reported on the 4th quarter and fiscal 2022 ending October 30th 2022.  For the quarter the company earned $279.9 million on revenue of $3,283 million with a diluted EPS of $0.51.  Comparable values for the 4th quarter of fiscal 2021 ending October 30th were net income of $281.7 million on revenue of $3,455 million with a diluted EPS also of $0.51. Gross margin increased to 17.3 percent for the most recent quarter compared to 16.7 percent for the 4th quarter of 2021. Operating margin increased from 10.3 percent to 11.3 percent for the 4thquarter of 2022. Profit margin rose from 8.2 percent in the 4th quarter of 2021 to 8.5 percent for the most recent quarter.

For FY 2022 Hormel Foods earned $1,000 million on sales of $12,459 million with a diluted EPS of $1.82. Comparable values for FY 2021 were net earnings of $909 million on sales of $11,386 million with a diluted EPS of $1.66.

For the 4th quarter of 2022 the Jennie-O Turkey Store Segment generated sales of $391.9 million with an operating profit of $75.9 million reflecting an operating margin of 19.4 percent.  For the 4th quarter of 2021, revenue and operating profit were $459.7 million and $30.5 million respectively, yielding an operating margin of 6.6 percent.  Compared to the 4th quarter of 2021 volume for the Jennie-O segment was down 32.0 percent to 163.7 million lbs. as a result of losses due to HPAI. Sales value was down 14.8 percent. Unit revenue increased 25.1 percent from $1.91 per lb. to $2.39 per lb. for the most recent quarter. Segment contribution was however up 149 percent. Growth was derived from increased sales into food service, demand for whole birds and branded products. As in the previous quarter of 2022 increases in feed and logistic costs detracted from earnings.

In commenting on Corporate results Jim Snee, Chairman, president and CEO stated “We achieved all-time record sales and double-digit profit growth in fiscal 2022. In addition to delivering year-over-year growth, our team successfully integrated the Planters® business, made progress on our six strategic priorities, showed tremendous resolve in overcoming a challenging operating environment, and laid the groundwork for the next step in our evolution as a global branded company, the Go Forward (GoFWD) initiative."  

In relation to the turkey business Snee observed “Segment profit growth was due to the Jennie-O Turkey Store segment, as the team effectively managed limited turkey supply and maximized operational performance. We also made progress across our supply chain to increase production capabilities and restore inventories on key product lines." The report included the statement “As anticipated, volume and sales declined as a result of the supply impacts on the company's vertically integrated supply chain from highly pathogenic avian influenza (HPAI). Segment profit growth was primarily due to higher commodity prices and improved value-added mix”.

Hormel Foods posted total assets of $13,307 million on October 30th 2022 of which $6,728 million comprised goodwill and intangibles. Long-term debt was $3,432 million against an intraday market capitalization of $25,670 million. HRL has ranged over the past 52 weeks from $42.46 to $55.11 with a 50-day moving average of $46.68.  HRL trades with a forward P/E of 22.4 and a beta of 0.2.  For the trailing 12-month period, operating margin attained 10.3 percent and profit margin 7.9 percent.  The Company has generated a return on assets of 6.4 percent and on equity, 14.2 percent. HRL closed at $48.16 on November 29th but fell at the open on November 30th following the release to $46.58 but regained value to $47.64 by close of trading on Friday December 2nd.

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

The American Farm Bureau Federation and the National Cattlemen’s Beef Association petitioned the Federal Motor Carrier Safety Administration (FMCSA) to extend driving hours for transport of livestock.  The petition requested sixteen consecutive hours after a ten-hour off-duty period.

The FMCSA determined that the level of safety would be compromised by granting the petition.  The need to restrict stops while transporting livestock especially during warm is self-evident.  The problem of restricting service could be resolved using by team drivers although this would increase cost of transport.  Under agricultural exemptions, livestock haulers are exempt from hours of service restrictions if operating within a 150-mile radius.

Under general conditions, drivers hauling live broilers, turkeys or feed for a complex would operate within the 150-mile radius.  The problem occurs with transportation of day-old breeder chicks and started pullets that may travel over long distances from hatcheries or rearing farms during delivery.

On November 28th, Maple Leaf Foods ran the first shift through the London plant.  The facility, which extends over 660,000 square feet, carries a price tag of $620 million and will ultimately employ 1,600 at full capacity.

Michael H. McCain, CEO, stated, “This is an exciting day for Maple Leaf Foods and an exciting day for Canada.”  He added, “Our London plant is one of the world’s largest and most technologically advanced poultry processing facilities and shows how Maple Leaf Foods can serve growing markets and maintain its strong commitment to sustainability.”

Curtis Frank, President and COO and CEO designate, stated, “We have invested in industry-leading food safety, environmental and animal care technologies to deliver premium, value-added and sustainable poultry products that consumers are demanding.”  He added, “Our next- generation London plant is further proof of our commitment to deliver value for our shareholders, our people, our customers and the planet.”

Uzelac Industries, a leader in rotary drying systems for almost two decades, has announced  the appointment of Michael Hobbs as President of Uzelac Industries. For the past five years, Hobbs has been a core member of the Uzelac Industries leadership team as the Vice President and General manager. Hobbs is preceded by CEO and Founder, Michael Uzelac.

“We’re all very excited to have Mike take on the role of President,” said Michael Uzelac, Chairman of Uzelac Industries. “He has been a pleasure to work with and has played a vital role in the growth of our business. I’m confident he’s the right person for the job.”

During his time at Uzelac Industries, Hobbs has formed and maintained valuable relationships with partners, vendors, customers and employees. He has overseen day-to-day operations and has been an integral part of the company’s expansion in recent years.

Hobbs brings 27 years of diverse management and business experience from companies including, Siemens Building Technologies and Rockwell Automation. He earned his bachelor’s degree from Milwaukee School of Engineering. Outside of work, he enjoys hunting and spending time with family.

Uzelac Industries is a family-owned company based in Greendale, WI that has been a leader in rotary drying systems since 2003. Originally comprised of two operating divisions: Industrial MetalFab Specialties (Poja Sheet Metal) and Duske Drying systems. Together, these companies have over 40 years of experience in rotary drum dryer manufacturing. 

A panel convened by the United Nations Food and Agriculture Organization and the World Health Organization recently met in Singapore to discuss potential food safety hazards associated with cell-cultured meat.

The conclusion of the 24 experts from 15 nations was that "existing preventive measures and safety assurance procedures will be applicable to control hazards".  It is apparent that cultivated meat carries the same risks as conventional meat including microbiological contamination residues of potentially toxic compounds and drugs possibly introduced during fermentation cultivation or subsequent processing.

The experts considered that successful cultivation of product in commercial quantities presumes freedom from microbial contamination.  This is not necessarily absolute and obviously quality control procedures will be required to ensure freedom from known bacterial pathogens both during production and post-harvest.

In the U.S. it is intended that the FDA will have jurisdiction over methodology but with the USDA FSIS controlling production.

As volume of broiler production increases, prices have fallen disproportionately.  According to a leading market-research company, breasts have fallen over 60 percent since mid-year with proportional declines for wings. (see prices and inventory levels in the December Broiler Report posted in this edition)

The trend towards lower prices has benefitted QSRs. Wingstop® recorded a 40 percent decline in its major input category purchased during the third quarter of 2022 as compared to 2021.  Comments by CEOs of chains have provided consistent messages to investors that lower prices of chicken will be reflected in increased sales and margins compared to 2021.

Given the high price of beef and the rejection of plant-based alternatives by consumers, QSRs have featured a variety of chicken sandwiches. These have met with acceptance by consumers as evidenced by the “chicken sandwich wars” among competing chains.

Notwithstanding promotions for wings and demand for sandwiches the USDA Cold Storage Report for November recorded a 35.6 percent increase in the Breast and Breast Meat category and a 24.1 percent increase in Wings between October 31st 2021 and the corresponding date in 2022.

Police in the town of Milford, DE. have arrested four local residents on charges that they operated an internal thief ring targeting a Perdue plant.  According to the indictment, product to the value of $30,000 was stolen over an extended period.

It is evident that the high price of protein has attracted the attention of criminals as evidenced by recent arrests of perpetrators of an organized scheme to steal loaded trailers containing beef and pork from plants in the Midwest with a combined value estimated at $10 million.

In USDA-FAS GAIN report GH2022-0019, dated November 23rd, announced that the Bank of Ghana will restrict foreign exchange required to import products considered “nonessential”.  On October 31st, the president of Ghana announced a six-month restriction on imported items in an attempt to stabilize the Cedi (national currency), that has lost half its value this year.  Currently, inflation is running at over 37 percent in Ghana.

Imports subjected to currency restriction include rice, poultry, vegetable oils, bottled water and a number of consumer items.

Over the first nine months of 2022, Ghana imported 39,974 metric tons of broiler products, presumably leg quarters, valued at $50.1 million.  These values were respectively 33 percent and 31 percent lower than the first nine months of 2021.  According to the FAS, the U.S. held 20 percent of the market share of poultry imports.

It is probable that either Togo or Benin may emerge as “importers” with illegal trans-shipment to Ghana to satisfy demand.

On January 1st, Brian Sikes will assume the titles of president and CEO.  He will replace David MacLennan who will become Executive Chair of the Board.  Sikes has served since 2013 and was involved in a number of strategic acquisitions including the partnership with Continental Grain to acquire Sanderson Farms.

Brian Sikes is a 31-year veteran of the company, and his appointment reflects the longstanding policy of appointing executives from within the company.

In commenting on his successor, MacLennan noted, “As Cargill continues to navigate dynamic global markets, both operational excellence and a clearly articulated vision driven by purpose and values will define the company’s success and there is no better person than Brian to lead Cargill.”

Cooper Farms has donated more than $1 million in cash and products during the past year to local communities.  The company based in Oakwood, OH., is a major producer of turkeys and eggs with a long tradition of generosity. This is exemplified by donations during 2022 including 200,000 lbs. of product to food banks and $550,000 to area first responders and to fund student scholarships.

One-time owner and developer of the KFC brand, John Y. Brown, Jr., an attorney by profession, died on November 22nd in his hometown of Lexington, KY at the age of 88.  In 1964, Brown purchased the technology and rights for Kentucky Fried Chicken from founder, Colonel Harland Sanders for $2 million, representing $20 million in current value.  Over a seven-year period, Brown promoted and franchised KFC, establishing 600 restaurants in the U.S and expanding internationally by 1971.  He sold the enterprise to Heublein, Inc., a liquor company, intending to diversify into food.  The sale that netted $30 million, (equivalent to $225 million in 2022 value) allowed Brown to enter politics. 

Following his marriage in 1979 to Phyllis George, a sportscaster and former Miss America. He won a single term as Governor of the Commonwealth of Kentucky in 1979. He operated the state as a business, reducing expenditure by shrinking the bloated workforce of government employees and actively promoting Kentucky as a favorable business environment.  He withdrew from the 1984 Democratic primary for a U.S. Senate seat due to incapacitation following bypass surgery during the last year of his tenure as Governor.

His later career included investment in a number of enterprises, including a KFC clone, none of which achieved the stellar the success of the original brand under his ownership.

Responding to Congressional pressure and requests by agricultural organizations, the USDA has extended, by six weeks, the comment period for responses to the proposed Packers and Stockyards Act (PSA) regulations.  The initial deadline for comment for the proposed regulations was January 17th.

The “Inclusive Competition and Market Integrity under the Packers and Stockyards Act” initiative would represent a revision to the 1921 Act intended to “prohibit certain prejudices against market-vulnerable individuals that tend to exclude or disadvantage covered producers in those markets”. The intended regulations date from the Obama Administration. The USDA, under then and now current Secretary, Tom Vilsack, function under the misapprehension that contract growers and raisers of beef and pork are disadvantaged by integrators and packers.  Accordingly, he and the USDA intend to restructure the livestock industry to resolve nonexistent problems but with the likely potential of generating disruption through unintended consequences.

The socialistic programs and intentions of USDA will be curtailed by the 118th Congress that, among other activities, will have to frame the Farm Bill that will deprive a number of current and intended USDA programs of funding.

U.S. District Judge, Virginia M. Kendall of the U.S. District Court of the Northern District of Illinois, Eastern Division, has ruled that the class action lawsuit against major turkey producers, filed in 2019, will proceed.  The plaintiffs allege collusion and price fixing through exchange of information on turkey production either overtly or through subscription to the AgriStats benchmarking reports.

Defendants include Butterball, Cargill, Inc., Cooper Farms, Hormel Foods Corp. (owners of Jennie-O), House of Raeford, Farbest Foods, Foster Farms, Perdue Farms, Prestage Farms and Tyson Foods.  AgriStats is a non-producing defendant.

Previous lawsuits alleging price fixing by broiler integrators have been settled, suggesting a similar course for turkey producers.

In the 75th year of a tradition established in 1947 by President Harry Truman, President Biden granted a Presidential Pardon to two turkeys raised by Ronnie Parker, Chairman of the National Turkey Federation, on his farm in Monroe, NC.  The Toms named Chocolate and Chip, weighing in at 47 pounds, were transported to Washington for the White House event.

In his address, President Biden urged Americans to remember to feel and express gratitude during the holiday and to remember the reason for Thanksgiving.

The reprieved Toms will be housed at the North Carolina State University, Prestage Department of Poultry Science Farm where they will live out their remaining lifespan.

The annual turkey pardon reminds Americans of the importance of agriculture and the contribution of poultry to the Nation’s food supply.

USPOULTRY and the USPOULTRY Foundation have distributed $400,000 in research grants for five projects.

The projects approved by the Foundation Research Advisory Committee included:

• Development of a live, attenuated vaccine for reoviral arthritis and hepatitis in turkeys – University of Minnesota with an endowing foundation gift from West Liberty Foods
• Development of vaccines for the control of chicken spotty liver disease – Iowa State University
• Detection and control of processing-tolerant Campylobacter on broiler carcasses – University of Georgia with a foundation gift from Mar-Jac Poultry
• Developing a broad-spectrum bacterial vaccine to protect against chondronecrosis in broilers – University of Arkansas with a foundation gift from George’s, Inc.
• Assessing the physiological stressors due to injection of nitrogen during ventilation shutdown – North Carolina State University

According to the Enid News & Eagle, Tyson Foods donated 21 tons of chicken to the local community.  The event was organized by associates of the 51st Street Plant in Enid, OK. With good planning and the assistance of the City police force, waiting times for distribution to the needy were at a minimum.  Melissa Robrahn, H.R. Manager for the plant, stated, “I think it’s a great feeling to be able to provide back to your community. At Tyson we are really proud to be able to do this for our second year. So after the turnout we had last year, we felt there was a big need for it in our community.”

The Compass Group, a major catering operation supplying 10,000 institutions including colleges, and hospitals confirmed that it will transition to sourcing pork from group-housed sows by the summer of 2023, effectively eliminating suppliers using gestation crates.  The original intent was to purchase only gestation-crate free pork by 2017 but the target date was extended due to supply chain issues.

The Compass Group is only one of many food service providers, retailers and restaurant chains committed to sourcing pork from operations using group-housing of sows.

Irrespective of the outcome of the Supreme Court review of the constitutionality of California Proposition #12, as far as gestational crates are concerned, the train left the station a number of years ago. Packers, that have not followed the lead of competitors who have either converted or are in the process of conversion, will be at a disadvantage in the domestic market as they run out of customers.

Goffle Road Poultry Farm located in Wyckoff, NJ. has received $4.2 million from the USDA Meat and Poultry Processing Expansion Program.  The money will fund renovations and expansion to produce Halal Chicken.

This company is provided as an example of the $223 million in grants and loans to encourage meat and poultry processing by small-scale enterprises. Along with Goffle Road Poultry Farm, 30 plants in 20 states have received funding, including Greater Omaha Packing in Nebraska and Pure Prairie Farms in Charles City, IA.

The USDA intends allocating an additional $375 million to “restructure the meat industry”. The benefits to U.S. consumers of scattering $600 million among numerous small producers is questioned.  The incoming Congress should review the basis on which grants are made and to determine whether appropriate controls are in place to establish that public funds are justifiably expended and that the recipients are able to repay loans.

It is questioned why the recipients of USDA grants and loans were unable in the first instance to be funded by commercial and agricultural banks on the basis of their business plans. It is also questioned whether recipients conform to the traditional banking criteria of character, collateral and capacity that would be required for a business loan. The USDA characterizes these grants as “investments” whereas in the absence of effective evaluation, scrutiny and pay back they should be regarded as giveaways of public funds.

According to USDA-FAS report SF2022-0041 released on November 16th, the International Trade Administration Commission of South Africa (ITAC) has announced a Sunset Review of anti-dumping duties on frozen bone-in portions of chicken imported from the United States.  The ITAC is responding to an application to review anti-dumping duties from the South African Poultry Association.  The producer group in South Africa maintains that absent a dumping duty, frozen bone-in portions would continue to be imported from the U.S.  The South African Poultry Association claims that bone-in leg quarters are sold below cost, based on the U.S. preference for white meat.  The ITAC will consider whether dumping occurred over the period January 1, 2021 through December 31, 2021 to determine whether the anti-dumping duty imposed on imports above 71,290 tons will be either removed or retained.

Currently, ten nations are subject to anti-dumping duties, although in early August 2022 the Ministry of Trade, Industry and Competition suspended anti-dumping duties on product from Brazil, Denmark, Ireland, Poland and Spain for twelve months justified by the increase in the price of food and specifically, protein.  Anti-dumping duties were retained for the United States.

As part of the Sunset Review, ITAC will review data submitted by importers, exporters and industry associations.  Completed questionnaires are required by December 9th, 2022. The subsequent investigation may take six months to conclude.

CHICK-NEWS notes the sad passing of Dr. Peter Woolcock who spent 22 years with the California Laboratory Diagnostic System in both Fresno and Davis before retirement in 2013.

A native of Great Britain, Dr. Woolcock received undergraduate degrees from Birmingham University and a doctorate in microbiology from Leeds University in 1974.  He immigrated to the U.S. in 1986 and assumed the position of Senior Research Associate at the Cornell University Duck Research Laboratory.  He joined CAHFS-Fresno as an avian virologist in 1991 transferring to the Davis laboratory in 2009.

He provided specialist virology services to the West Coast industry applying then current procedures.  Dr. Woolcock was noted for his expertise and willingness to assist poultry health professionals and academics with diagnostic virology and applied research projects. His expertise was in isolating viruses responsible for clinical outbreaks of disease followed by characterization applying classical laboratory techniques. His skills were instrumental in identifying a highly virulent strain of IBDV in the late 1980s facilitating eradication. Some of his isolates from field cases were used as vaccine candidates and for autogenous products.

His enthusiastic cooperation with the profession will be missed.

For the ten months of 2022, Brazil increased the value of chicken meat exports by 29 percent and volume by 5 percent.  According to the Brazilian Association of Animal Protein the value for the first ten months of 2022 attained $8.195 billion and a volume of 4.060 million tons.  Unit value was therefore $2,018 per ton.  For comparison, for the first nine months of 2022 the U.S. exported 2,815 million tons of chicken comprising 96 percent leg quarters valued at $3,960 million with a unit value of $1,407 million.

For the ten-month period, Brazil exported 9.2 percent of product to the UAE, an increase of 23 percent over 2021; 5.2 percent of exports were to the Philippines, a 45 percent increase; 5.0 percent to the European Union, up 24 percent and 3.7 percent of exports to South Korea, an increase of 63 percent.

Average monthly shipments of chicken by Brazil attained 400,000 tons.

Judge M Gerrard of the U.S. District Court of Nebraska has issued an injunction against Packers Sanitation Services Inc. at the request of the Department of Justice. The Company provides cleaning services for 700 plants using 17,000 workers.

The action relates to allegations that the company is employing minors to provide decontamination and cleaning services for plants operated by JBS USA., Tyson Foods and other processors. The injunction also requires Packers Sanitation Services to cooperate with the Federal investigation and illegal hiring. Evidence was presented of false social security numbers, altered records and other evidence of fraud relating to a preliminary review of 40 plants dating from August.

Federal investigators ascertained that approximately 30 minors between the ages of 13 and 18 were cleaning equipment in a Grand Island, NE plant and allegedly one employee suffered injuries from contact with corrosive compounds.

Senators and representatives from agricultural states have addressed a letter to Secretary of Agriculture, Tom Vilsack, requesting a six-month extension of the comment period relating to the suite of proposed Packers and Stockyards Act (P&S) regulations.  The letter noted that the “inclusive competition and market integrity under P&S requires responses to more than 40 technical issues that may not be adequately defined”.  Previously, the USDA-AMS published proposed rules relating to transparency in poultry growing and contracting and also fairness in relation to the tournament system.  Given the complexity of the responses to the proposed rule and its implications in terms of food production, the Congressional signatories to the letter are justified in requesting an extension for comments.

It is noted that many of the provisions of the intended rule were, in fact, developed during the Obama Administration and approved by Secretary Vilsack in his first term as USDA Secretary.  Many of the requirements were, in fact, set aside by his successor, Dr. Sonny Perdue, under the Trump Administration.

Tyson Foods has announced an expansion of the Walnut Grove, MS. hatchery that supplies their Forest and Carthage complexes.

Projected cost of the 16,000 square foot expansion and upgrade will be $18 million and will be completed in stages through the first quarter of 2024.  Last year, Tyson completed a $90 million expansion to the Forest processing plant, creating employment opportunities and adding to the income of the region.

On November 8th, members of the Tyson Foods’ Contract Poultry Farmer Advisory Council met to review issues relating to contract production.  The event held at the Company Headquarters in Springdale, AR brought together contractors from four states to discuss welfare and interaction, including information on the current business environment.

Tyson contracts with 3,600 independent poultry farmers in 18 states.  According to the company release, the average farmer has contracted with Tyson Foods for 17 years and a quarter of growers represent second or third generation farmers affiliated with the company.  Tyson operates in accordance with the Contract Poultry Farmers Bill of Rights and has worked in collaboration with contractors since the late 1940s.

Deena Morrison, a contractor who attended the Advisory Council meeting, noted, “We are proud to be contract growers for Tyson because they actively listen to their growers and support them in solving concerns.” David Bray, Group President of Poultry at Tyson Foods, commented, “The success of Tyson Foods depends on the hard work and dedication of our contract growers.  We appreciate that animal husbandry isn’t simply a job – it’s a way of life.”  He added, “The birds our farmers raise benefit consumers by providing a quality, affordable product from a brand they trust.”

The collaboration and extensive and mutually beneficial relationship between contractors and integrators, including Tyson Foods, is at variance with the claims of exploitation advanced by the USDA. This misperception has motivated the Agricultural Marketing Service to attempt to impose three new rules to resolve nonexistent problems by modifying the Packers and Stockyards Act.

The Government of Saudi Arabia has granted approval for Tyson Foods to purchases 15 percent of the Tanmiah Food Company subsidiary Agriculture Development Company and to purchase   sixty percent of the equity of Supreme Food Processing Company.  With the support of Tyson Foods, Tanmiah intends to expand within Saudi Arabia and to extend operations through the Middle East.

David Fyfe, Global Sales Director of Hubbard, will retire at the end of December 2022.  His tenure with the industry extended over 41 years.

Bruno Briand will assume responsibilities for global commercial activities, assisted by Mark Barnes in the Americas and Thomas Verrey in the AMEA Region.  Bruno joined Hubbard in June 2004 and in 2016 was promoted to Commercial Director of the EMEA Region.

Mark Barnes is responsible for Hubbard, LLC operations in the Americas, based in Walpole, NH. Thomas Verrey has worked in the Middle East since 2008 and will now extend his activities to Africa and Asia.

In commenting on these personnel changes, Olivier Rochard, Managing Director of Hubbard commented, “David Fyfe has dedicated a large part of his life with passion to our company, our customers and our teams.  He has always been able to share his experience and knowledge with professionalism, kindness and humor.” 

The Hubbard breeding enterprise was established in Walpole NH. in 1921 by brothers Ira and Oliver Hubbard.  The company was acquired by Merck in 1974 but was divested in 1997 to the ISA-Group of France.  Groupe Grimaud acquired Hubbard in 2005.  In 2018, Hubbard was integrated into the Aviagen Group but continues to operate as an independent company.  Hubbard has a presence in 100 nations, supported by R&D, production sales and marketing.

American Proteins, Inc., previously a major renderer in the southeastern states, has sued Tyson Foods alleging violation of the Sherman Antitrust Act.  At issue is the alleged monopoly created by Tyson Foods by contracting with Wayne Farms and Koch Foods to acquire raw material to the detriment of API.  Pressure was apparently exerted by Tyson Foods to purchase the four plants owned and operated by API at a discounted value.

Tyson moved to dismiss the complaint by API, but Federal Judge Richard W. Story ruled that there was sufficient substance to the claims by API, allowing the lawsuit to continue.

Joshua Ricken has been appointed to the position of Scientific and Regulatory Affairs Manager for the National Chicken Council.  He will assist Dr. Ashley Peterson with issues related to the environment, workplace safety and welfare.

Ricken graduated from Elon University, NC. majoring in Environmental Science and Political Science.  He interned with the NCC in 2018 and went on to earn his JD from the Elon Law School and concurrently a master's degree in Environmental Law and Policy from Vermont Law School.

In welcoming Joshua, Mike Brown, President of the NCC stated, "his education experience and background in the broiler industry will be an asset to our members and help advance NCC priorities".

A ballot initiative that would have prevented Wholestone Farms from erecting a hog plant in Sioux Falls, SD was rejected by a margin of 52 to 48 percent with 72,000 ballots cast.

Luke Minion, Chair of Wholestone Farms Board, expressed gratitude to the voters in Sioux Falls for support, noting that the proposed plant would employ 1,100 workers and process 6 million hogs annually.  Wholestone Farms is owned by 200 family-farms producing hogs.

The ballot was initiated by a citizens’ group, Smart Growth Sioux Falls, that received over $1 million from POET, a biofuels company. It is difficult to understand why the Company vigorously opposed the project given that POET is a producer of DDGS fed to hogs. Obviously this was not simply a business decision and was motivated by extrinsic factors. 

Approval for the plant has progressed over the past four years, culminating in the ballot initiative.

Following confirmation of a diagnosis of HPAI in a broiler breeder flock in Lawrence County, MS, Mexico has agreed to limit restrictions on exports to the County. China and Taiwan have imposed statewide bans on poultry products from the entire state of Mississippi.

As of November 10th, HPAI has been diagnosed in 262 commercial flocks and 352 backyard flocks.  Close to 45,000,000 birds have been depopulated in 46 states.

In a press release dated November 8th Maple Leaf Foods Inc. (MFI-TO) announced results for the third quarter of FY 2022 ended September 30th.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS (conversion: CAN$1=US$0.79)

1. Restructuring charge of $2.3 million. Charge for impairment of goodwill (Plant Protein Segment) of $150.8 million in Q3

Q3 2022 Meat Protein Segment:

Sales, $943 million, up 3.8% from Q3 2021.

Adjusted operating earnings $42.3 million down 50.2% from Q3 2021.

Q3 2022 Plant Protein Segment:

Sales, $34.4 million, down 9.2% from Q3 2021.

Adjusted operating loss $(29.5) million 2% improvement from Q3 2021.

52-Week Range in Share Price: $14.89 to $25.75 50-day Moving average $16.80

Forward P/E 15.6 Beta 0.5

Market Close pre-release November 7th $15.46

Market Open close post-release November 8th $17.39

Insider shareholding 39.6%. Institutional shareholding 27.7%

In commenting on Q3 results Michael H. McCain, president and CEO of Maple Leaf Foods stated, “We are at an important inflection point in our business, grounded in exceptional underlying strength and opportunity even though this is not immediately obvious in current performance or reflected in our share price.” He added “The post pandemic economy has been challenging, but the headwinds it has created are transitional and short term. Quite simply, if global pork markets and labor constraints normalized, we would be delivering above our 14% Adjusted EBITDA margin target in the third quarter of 2022 and expecting that to continue. The good news is we are seeing strong signs of improvement on these fronts, plus we are on track with our London Poultry and Bacon Centre of Excellence projects which will deliver $130 million annually in Adjusted EBITDA once we get through the normal start-up work and are ramped up to full commercial production."

Addressing the loss-making Plant Protein Segment McCain noted "In our plant protein business we are firmly on track to meet our Adjusted EBITDA neutral target in the latter half of 2023. Our plans are clearly working. We expect to cut our Adjusted EBITDA losses in the fourth quarter this year by half year-over-year, and we are now examining initiatives which have the potential to take us beyond our target on this path to profitability.

McCain concluded, “We do not believe the underlying strength and value of our business, including the significant returns that our major capital investment will soon be delivering, are currently reflected in our share price, yet are optimistic it will in time."

The Company provided the following comments on strategy and guidance:-

• Meat Protein: Expect mid-to-high single digit sales growth in 2022, and Adjusted EBITDA Margin expansion to achieve a target range of 14% - 16% when market conditions normalize.
• Plant Protein: Targeting to deliver neutral or better Adjusted EBITDA in the latter half of 2023.

In late 2021, the Company announced that it was re-evaluating its outlook for the Plant Protein Group and launching a comprehensive review of the overall plant protein category. This decision was driven by a pronounced slowdown in growth rates in the category, particularly in the second half of the year, which fueled the Company’s imperative to identify and thoroughly assess the causes, near and long-term trends, and overall implications. The Company’s analysis confirmed that the very high category growth rates previously predicted by many industry experts are unlikely to be achieved given current customer feedback, experience, buying rates and household penetration. Based on this evaluation, the Company believes that the category will continue to grow at more modest, but still attractive rates. Notwithstanding optimistic predictions in 2021 Maple Leaf Foods took a charge of $150 million on the Plant Protein Segment in Q3

The Company announced in May 2022 that it is moving forward with a planned leadership transition plan for the Board and Management. Michael McCain will serve as the Executive Chair of the Board and will continue as CEO for the next year as part of the management transition plan. Curtis Frank, currently the President and COO, will assume the role of CEO during Q2 of 2023.

In a press release dated November 9th Beyond Meat Inc. (BYND) announced results for the 3rd Quarter of FY 2022 ending October 1st. The Company disappointed on the top line with revenue of $82.5 million against a consensus of $93.6 million. The bottom line miss was a negative EPS of $1.60 against an expectation of a negative $1.15

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS)

Notes for the 3rd Quarter derived from data presented:

SGA ’22 $55 million comprising 64% of sales compared to ’21 $56 million or 53% of sales

R&D ’22 $13 million comprising 16% of sales compared to ’21 at $15 million or 14% of sales

Inventory: In Q3’22 represented 299% of sales compared to 227% in Q3 2021

In Q3 ’22 17.4 million lbs. sold compared to 19.9 million lbs. in Q3 ‘21

In Q3 ’22 Unit revenue attained $4.74/lb. compared to $5.35/lb. in Q3 2021

In Q3 ’22 each of claimed 188,000 outlets received an average of 92.5 lbs. product compared to 128,000 outlets receiving 155lbs. in Q3 ‘21

In Q3 2022 U.S sales represented 75 percent of revenue of which 74 percent was retail, the remainder, food service.

In Q3 2022 International sales represented 25 percent of revenue of which 55 percent was retail, the remainder, food service.

52-Week Range in Share Price: $85.44 down to $11.56. 50-day Moving average $16.24

Forward P/E 666

In commenting on Q2 2022 results, Ethan Brown Founder and CEO stated, “As we shared last month, Beyond Meat is executing a full force pivot to a sustainable growth model, emphasizing the achievement of cash flow positive operations within the second half of 2023. This transition is designed to fortify our business in the near-term as record inflation continues to pose a challenge for our brand and category, positioning Beyond Meat to endure and advance toward our long-term objective of being a major protein provider within the $1.4 trillion meat industry.”

Brown continued, “Though this quarter’s results are disappointing, with a sharp decline in revenues and associated knock-on effects across the income statement including gross margin driven by a challenging macro environment, we are implementing aggressive measures with urgency to positively impact our near-term operations. Our path forward comprises three key actions: significant reduction of our operating expenses; intensified focus on cash flow accretive inventory management activities; and sales and marketing programs that are tightly focused on opportunities and segments that strike the right balance between near-term growth and our most valuable long-term opportunities. We are focusing on the key drivers of our business and are committed to sharing our progress toward delivering them over the coming quarters.”

The report incorporated commentary on the third quarter that included:-

“The decrease in net revenue per pound was primarily attributable to strategic but limited price reductions in the U.S. and broader list price reductions in the EU implemented in the first quarter of 2022, increased trade discounts and unfavorable changes in foreign exchange rates. U.S. retail channel net revenues decreased 11.8% compared to the year-ago period primarily driven by an 11.8% decrease in pounds sold with net revenue per pound staying flat. U.S. foodservice channel net revenues increased 5.6% compared to the year-ago period primarily driven by a 32.2% increase in pounds sold, partially offset by lower net revenue per pound. The decrease in net revenue per pound was primarily due to changes in sales mix and, to a lesser extent, higher trade discounts. International retail channel net revenues decreased 52.3% compared to the year-ago period primarily driven by a 37.0% decrease in pounds sold and a 24.4% decrease in net revenue per pound. The decrease in net revenue per pound was primarily due to list price reductions in the EU implemented in the first quarter of 2022, unfavorable foreign exchange rate impact, changes in sales mix and increased trade discounts. International foodservice channel net revenues decreased 42.2%”

Guidance for 2022 included revenue of $400 to $425 Million

The reality is that the Company record includes:-

• An accumulated deficit of $676.4 million.
• Effective October 30th6 percent of float was short
• News reports of mismanagement, departures from the C-Suite, failure to execute and deliver on products offered to food service prospects
• Announced reduction of 19 percent in workforce.
• Share price off 83.1 percent year-to-date compared to a decline of 21 percent for the S&P Index

BYND closed November 9th post release at $11.63 and closed inexplicably up 18% at $38.26. After Q2 results were released on August 4th David Trainer speaking on CNBC correctly pointed to flagging sales and losses recorded among the diverse manufacturers of vegetable protein with extreme competition in the market. (see Report on Maple Leaf Foods Q3 in this edition). Analysts see Beyond Meat running out of cash with a share price below $5. This will create an opportunity for a Grey or even a Black knight (the White knights have passed it over) to acquire and dismember the Company. Tyson Foods correctly assessed the prospects for Beyond Meat when they disposed of their equity before the IPO.

Peter McGuinness, CEO of Impossible Foods has announced the appointment of Leslie Sims as Chief Marketing and Creative Officer, effective January 1, 2023.  She is currently Chief Creative Officer at Deloitte Digital. 

McGuinness noted, "The plant-based meat category is in its infancy and despite our growth, most of the country still hasn’t heard of us.  We have a real opportunity to create and build not just our own brand but the entire category through greater awareness, approachability and accessibility”.

Ms. Sims has worked with restaurants and food manufacturers and has received awards for creativity and public service.

The USDA has dispersed the first round of $73 million across 21 projects in 19 states, using the vehicle of the Meat and Poultry Processing Expansion Program.  The second phase will comprise $75 million for eight projects through the Meat and Poultry Intermediary Lending Program.  A third component will comprise $75 million for four meat and poultry-related projects through the Food Supply Chain Guaranteed Loan Program.

The United Food and Commercial Workers International Union representing workers in meat packing plants and retail locations, welcomed the USDA attempt to restructure intensive livestock production.  Marc Perrone, President of UFCW International, stated, “As America’s meatpacking and food processing union, UFCW applauds the Biden Administration and the Department of Agriculture for working to improve capacity and create a fairer, more diverse meat and poultry industry.” 

Predictably, the Union called for programs that promote training and advance worker welfare. Perrone noted, “Any attempt to expand or improve this industry moving forward must include specific provisions for fair labor standards that protect workers and safeguard the protections already won at unionized processing facilities around the Nation.”

If the USDA funds small plants the UFCW will not in fact benefit as these facilities will not be unionized.

House of Raeford, based in North Carolina has completed construction of a feed mill to supply their Arcadia, LA. complex.  Built at a cost of $40 million, the facility has a grain storage capacity of 650,000 bushels and finished feed of 5,500 tons.  The new mill replaces a 1950's vintage plant operating seven days per week.  The 12,500-weekly tonnage from the new mill will supply the complex over 5 working days each week and will have sufficient spare capacity for expansion or unexpected events.

Representatives David G. Valado (R-CA), Jim Costa (D-CA), Adrian Smith (R-NE) and other co-sponsors of the Ocean Shipping Reform Act of 2022 have addressed a letter to the Federal Maritime Commission protesting the regulations framed by the Commission.

According to press reports, the regulations provide for undue latitude on the part of ocean freight companies to reject export cargos on the basis of “profitability and compatibility with business development strategy”.

Peter Friedmann, Executive Director of the Agricultural Transport Coalition, is urging the Federal Maritime Commission to revise the proposed rule and address issues that should have been resolved following passage of the Ocean Shipping Reform Act.  During the COVID pandemic, shippers took advantage of U.S. demand to return empty containers to Asia, depriving U.S. agriculture and manufacturers of the opportunity to export goods.

Pork, Chicken paws and fruit are shipped westbound across the Pacific, requiring availability of refrigerated containers that are in short supply.  This reality coupled with the profit motives of ocean shippers has denied many exporters business opportunities and the resulting inflation in transport costs has limited markets in Asia for U.S. products.

USPOULTRY announced on November 8th that a special educational program focusing on biosecurity in feed production will be presented at the IPPE.  The event is hosted by the American Feed Industry Association (AFIA) and will take place 09h30 to noon on Wednesday, January 25th.  Registration fee is $65 before January 6th.

The program entitled "Biosecurity: Preparedness Must Be Perpetual" will include presentations by experts stressing the need for continued biosecurity with reference to African swine fever and highly pathogenic avian influenza.

Dr. Paul Davis, Director of Quality Animal Food Safety and Education for the AFIA stated, "this program will be very valuable to feed manufacturers because we will walk through what steps should be taken in the event of animal disease outbreaks". He added, "the feed industry can play a big role in animal disease prevention and with highly pathogenic avian influenza spreading and African swine fever at our back door, it is important we come together to make biosecurity a priority".