Editorial


Larry Summers on the Tariff War with China-Relevant Observations

08/12/2019

Adding gravitas to the growing criticism by professional economists concerning the White House trade conflict with China, Prof. Larry Summers, ex-Treasury Secretary and President Emeritus of Harvard University, concurred with those expressing concern over escalation. Speaking on the Fareed Zakaria program Global Public Square aired on CNN on Sunday August 11th Summers characterized the current sequence of retaliatory tariffs as “the riskiest moment since the financial crisis” His rhetorical question is whether the “foolish trade conflict” is advancing U.S. interests, presumably in the intermediate and long term.

 

In responding to a question on whether China is hurting more than the U.S. he noted that our adversary is prepared to endure short-term pain and that the leadership of China does not have to face their electorate in November 2020.

 

Summers opined that our actions have engendered a deep-seated antagonism towards the U.S. in China and the implications of an extensive trade war have raised concern and damaged our credibility with traditional allies.

 

The imposition of protective tariffs to preserve jobs is regarded as an economically fallacious tactic costing in the region of $1 million per position, although generating short-term political capital. Summers noted the high cost of bailing out foundering industries. He was alluding to a recent study that confirmed that steel tariffs had preserved 12,700 domestic jobs in that industry at a cost of $11.5 billion in tariffs ultimately borne by consumers.

 

It is axiomatic that once protective or punitive tariffs are imposed it is extremely difficult to rescind them. Industries become habituated to their “cheese” and use every lobbying tactic to preserve their benefits. In 1964 when Volkswagen planned to market a light truck in the U.S., a 25% tariff was imposed by President Lyndon B. Johnson on imports of this category of vehicles that is still in effect 55 years later.

 

It would be advantageous for the White House to listen to a broader range of economists and strategists and devise a program to resolve issues with China by negotiation. The only bargaining chip left to the White House appears to be to ramp up the tariff from 10 percent to 25 percent on the remaining $300 billion in annual imports from China. Apart from currency manipulation, China has many other arrows in their quiver.

 

Economists are predicting a third quarter GDP growth of 1.2 percent even if there is no further escalation in tariffs. In the event that we go “full Monty” the result will be a global reduction in trade precipitating a recession. The current White House strategy is reminiscent of the Tariff Act if 1930 (“Smoot-Hawley”) In retrospect this law turned a recession into a depression. The extended title of the legislation was “An act to provide revenue, to regulate commerce with foreign countries, to encourage industries of the United States, to protect American labor and for other purposes” Does this sound familiar?

 

If we did not have tariffs and with normal trade the U.S would be pouring chicken and pork into China, given the geographic spread and prevalence of African swine fever. As it is we are excluded from this market.

 

 Let us develop a program devised to achieve stepwise progress with negotiations based on an understanding of the needs of both the U.S and China and the restrictions that limit their acquiescence. We will never have a Grand Bargain negotiated over a steak dinner. We will never achieve our objectives by bluster and inflicting mutual economic pain.

 

The concession of delaying imposition of the September 1st tariffs announced by tweet, on Tuesday morning at 10H00 sent the DOW Index up by over 450 points   within minutes reversing the 400 point decline the previous day. We will now see if China reciprocates by importing corn, soybeans, pork and even chicken. The alternative to accommodation is continued escalation with disruption of trade, the need to support farmers, a rising national debt and an inevitable recession


 

Egg Industry News


UPDATED COMMODITY REPORT August 16th

08/16/2019

Price of corn down 3.6 percent at close of CME trading on August 16 th compared to August 12th following release of the August WASDE. Soybeans and soybean meal relatively unchanged.

Corn responded to the mid-session release of the August WASDE on Monday 12 th with a 5.2 downward turn by close of trading. The WASDE documented an unexpected higher yield and an 8.6 percent increase in ending stocks of corn. Soybeans gained 1.4 percent on a 5.0 percent lower ending stock. The market was indifferent to the August 8th announcement concerning imposition of a 10 percent tariff on the remaining $300 billion in annual imports from China not subject to previous tariffs, since delayed to December.

The absence of any substantial news regarding the latest round of talks in Shanghai and a resumption scheduled only for September in Washington suggests intractability by both the U.S. and China. Current consensus is that there will be no resolution of the trade dispute before the end of 2019. In the interim China has retaliated by banning all imports of agricultural products from the U.S.

The continuous stream of conflicting statements by White House and Government of China spokespersons over the months since the dispute began is disconcerting to the commodities market and has contributed to price fluctuation.

The following quotations were posted by the CME at close of trading on Friday 16th August compared with values for Monday 12 th August (in parentheses).

COMMODITY

 

Corn (cents per bushel)

Sept. 371 (385)

Dec. 381 (393)

Soybeans (cents per bushel)

Sept. 866 (862 Aug.)

Nov. 879 (866 Sept.)

Soybean meal ($ per ton)

Sept. 295 (293)

Dec. 300 (293 Sept.)

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

COMMODITY CHANGE FROM PAST WEEK

Corn: Sept. quotation down 14 cents per Bu                  (-3.6 percent)

Soybeans: Sept. quotation up 4 cents per Bu                 (+0.5 percent)

Soybean Meal: Sept. quotation up $2 per ton from Aug. (+0.7 percent)

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

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

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

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

COMMENTS

Subscribers are referred to the weekly USDA Crop Progress Report and the August 12th WASDE posted under the STATISTICS tab.

In June some concessions were promised by China to reduce coercive trade practices and clarify dispute resolution. Subsequently U.S. negotiators claim that China has backtracked on structural issues hence the threat of more stringent tariffs and embargos on trade with tech. companies in China.

Prices will be determined by the trend in levels of ending stocks as influenced by the 2019 harvest, exports and domestic use.

For comparison the values below are commodity prices posted by the Dalian Mercantile Exchange in $US per short ton* at market open on August 13 th 2019 (local time) with comparable August 12th closing CME values in parentheses:-

Corn $244 ($140)

Soybeans $410 ($287)

Soybean meal $365 ($293)

*(conversion Rmb7.14=$US1 prevailing August 12th)

The August 12th 2019 WASDE Report #591, projected that 82.0 million acres of corn would be harvested in 2019 to produce 13.90 Billion bushels. The WASDE projected a harvest of 3.68 Billion bushels of soybeans from 75.9 million acres. The levels of production and ending stocks for the two commodities are based on completion of planting in June and current data of harvest area and projected yield. The WASDE to be published in mid-September will confirm the projected yields and ending stocks of corn and soybeans respectively.

The corn price was adversely affected by the August 9th decision by the EPA to grant 31 and to deny six waivers to refineries. This action according to the Renewable Fuel Association decreased demand by 1 billion gallons of biofuel. This was reflected in a precipitous decline in the value of a RIN from 20 to 11 cents. Ethanol fell to $1.27 per gallon on August 9th down 25 percent since the beginning of June.

Unless shipments of corn and especially soybeans to China resume in volume, which is highly unlikely, the financial future for row-crop farmers in 2019 appears bleak despite the release of two tranches of support funding in 2018 amounting to $8 billion as "short-term" compensation for disruption in trade. On July 25th the USDA announced a $16 million package to support agriculture with Market Facilitation funds to be distributed in three tranches. The first will take place in August through the Farm Services Agency under authority of the Commodity Credit Corporation. Payments will be based on a value corresponding to the higher of 50 percent of the Producer's calculated payment or $15 per acre, provided a cover crop is planted.

The magnitude of the second (November 2019) and third (January 2020) payments will be decided on according to prevailing conditions. Regulations framed in terms of the Additional Supplementation Appropriations for Disaster Relief Act of 2019 enacted in June will determine eligibility.


 

Updated USDA Projections for 2018 and 2019 U.S. Egg Production

08/16/2019

The USDA Economic Research Service issued an updated forecast of egg production on August 16th, following the previous July 17 th report. The volume of eggs produced and per capita consumption in 2019 were increased by 2.4 and 1.9 percent respectively compared to 2018 data. Consistent with this disparity, the benchmark New York price was reduced by 37.7 percent in unit value. Production data reflecting 2016 and 2017 should be compared to 2015, impacted by the Spring outbreak of HPAI in the upper-Midwest. The price elasticity of eggs is denoted by the disparity in the decline in the New York price benchmark relative to forecast volume of production. The latest data is reflected in the table below:-

 

 

Parameter

2015

(actual)

2016

(actual)

2017

(actual)

2018 2019 Difference % 2020

(actual) (forecast) 2018 to 2019 (projection)

 

 

EGGS

       
 

Production (m. dozen)

6,938*

7,437

7,755

7,952 8,144 +2.4% 8,230

 

Consumption (eggs per capita)

255.8*

272.0

279.9

284.0 289.3 +1.9% 291.0

New York price (c/doz.)

182*

86

101

138 86 -37.7% 97.5

                   

Source: Livestock, Dairy and Poultry Outlook –August 16th 2019

*Impacted by Spring 2015 HPAI outbreaks. Consumption in 2014, 267 eggs per capita

Subscribers to EGG-NEWS are referred to the postings depicting weekly prices, volumes and trends and the monthly review of prices and related industry statistics.


 

Crop Progress

08/19/2019

Status of 2019 Corn and Soybean Crops

The USDA Crop Progress Report released August 19th documented progress in both corn and soybeans after a slow start to planting that is expected to negatively impact yields as documented in the August WASDE Report under the STATISTICS tab. Current crop condition for both soybeans and corn are inferior to the 2018 harvest as tabulated below. High topsoil moisture levels are evident in comparison with the corresponding week in 2018. Long-range forecasts call for dry weather in the Eastern corn-belt in late August.

CHICK-NEWS and EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of the 2019 harvest in October.

WEEK ENDING

Crop

August 11th

August 18th

5-Year Average

Corn Silking %

Corn Dough %

Corn Dented

90

39

7

95

55

15

99

76

30

       

Soybeans Blooming %

Soybeans Setting pods %

82

54

90

68

96

85

       

Crop Condition

V. Poor

Poor

Fair

Good

Excellent

Corn 2019

Corn 2018

3

4

11

8

29

20

47

48

10

20

Soybeans 2019

Soybeans 2018

4

3

10

8

33

24

46

49

8

16

 

Parameter

V. Short

Short

Adequate

Surplus

Topsoil moisture: Past Week

10

26

58

6

Past Year

13

25

56

6

Subsoil moisture: Past Week

8

24

62

6

Past Year

13

27

55

5


 

Egg Exports

08/09/2019

USDA-FAS data collated by USAPEEC, reflecting export volume and values for shell eggs and egg products are shown in the table below comparing the first half of 2019 with the corresponding period in 2018:-

 

 

 

PRODUCT

Jan.-June 2018

Jan.-June 2019

Difference

Shell Eggs

     

Volume (m. dozen)

54.50

64.0

+9.5 (+17.4%)

Value ($ million)

66.40

51.6

-14.8 (-22.3%)

Unit Value ($/dozen)

1.22

0.81

-0.41 (-33.6%)

Egg Products

 

 

 

Volume (metric tons)

16,781

14,919

-1,862 (-11.1%)

Value ($ million)

61.0

46.5

-14.5 (-23.8%)

Unit Value ($/metric ton)

3,635

3,117

-518 (-14.3%)

U.S. SHELL EGG AND EGG PRODUCT EXPORTS DURING

JANUARY-JUNE 2019 COMPARED WITH 2018

Source USDA-FAS/USAPEEC

SHELL EGGS

Shell egg exports from the U.S. during the first half of 2019 increased by 17.4 percent in volume but declined 14.8 percent in total value compared to Jan.-June 2018. Unit value was lower by 33.6 percent or 41 cents per dozen for the six-month comparison between 2018 and 2019. The top two importing nations represented 74.7 percent of volume and 70.3 percent of total value.

Hong Kong was the leading importer of shell eggs for Jan.-June 2019, with 25.6 million dozen representing 40.0 percent of volume and 42.6 percent of the total value of U.S. shipments of shell eggs with an average unit value of $0.81 cents per dozen above the average USDA benchmark price for nest-run during the second quarter.

Canada was the 2nd-ranked importer during Jan.-May 2019 with 22.2 million dozen representing 34.7 percent of volume and 27.7 percent of total value at $14.3 million with a unit value of $0.64 per dozen. Shell eggs shipped to Canada represent the difference between domestic demand and production, limited by their national controlled marketing system

Mexico was a distant third in rank during Jan.-June 2019 with 12.0 percent of volume and 11.2 percent of total value, at a unit value of $0.86 per dozen. Prospects for additional sales will depend on acceptance of washed eggs held under refrigeration for retail sale, expected in September.

The Caribbean Region represented 5.8 percent of export volume for the first six months of 2019. This region was down 14.0 percent in volume and 49.5 percent in total value compared with 2018. The unit value of shell eggs exports to the Caribbean averaged $1.30 per dozen for Jan.-June 2019 ($1.93 over entire 2018) which appears high compared with the average export realization, warranting validation of USDA data or an investigation of the price discrepancy. It is possible that a proportion of shell eggs enumerated may have been fertile hatching eggs.

The Middle East Region imported 2.3 million dozen during the first six months of 2019 valued at $2.2 million with a unit price of $0.96 per dozen. Volume and value were respectively lower by 30.3 percent and 31.3 percent compared with the corresponding period in 2018. Israel emerged as an importer at the end of 2018 attributed to depletion of domestic flocks due to SE. Southern E.U. nations have a transport advantage over the U.S in this market.

EGG PRODUCTS

The total volume of exported egg products during the first half of 2019 decreased by 11.1 percent and total value was lower by 23.8 percent compared to the same period in 2018. Unit value decreased by 14.3 percent to $3,117 per ton from $3,636 obtained during Jan.-June 2018. This decline reflected the relationship between World supply and demand.

During Jan.-June 2019, 1st-ranked Japan represented 27.2 percent of the total U.S. export volume with 4,061 m. tons, a decrease of 34.8 percent compared with the first six months of 2018. Unit value of $4088 per m. ton reflects the product mix including yolks.

Mexico was the second ranked importer during Jan.-June 2019 receiving 3,008 metric tons comprising 20.2 percent of volume and 15.2 percent of value exported with a unit price of $2,360 per metric ton

Canada represented the 3rd rank among importers purchasing 2,839 m. tons representing 19.0 percent of volume and 13.1 percent of value ($6.1 million) exported with a unit price of $2,149 per m. ton. During the six-month period in 2019 Canada increased volume by 25.2 percent and value by 12.9 percent compared to the corresponding period in 2018.

During the first six months of 2019, 4th-ranked E.U-28 imported 550 m. tons of egg products, representing 3.7 percent of volume and 7.3 percent of value shipped during Jan.-June 2019 at an apparently low price of $618 per m. suggesting a high proportion of dried product.

The E.U. and S. Korea reduced volume of egg liquid imports by 52.2 and 37.3 percent respectively for the first half of 2019 compared with 2018.

COMMENTS

Successful conclusion of negotiations to replace NAFTA led to the trilateral USMCA, announced on September 30th 2018. The agreement will have to be ratified by the legislatures of Canada and the U.S. Exports of shell eggs and egg products to our neighbors were valued at $74.7 million for 2017 and $89.7 million for 2018 and $33.3 million over the first six months of 2019.

Prospects for long-term exports of shell eggs will be limited by the willingness of importers to accept the World Or
 


Status of 2019 Corn and Soybean Crops

08/12/2019

The USDA Crop Progress Report released August 12th documented progress in both corn and soybeans after a slow start to planting that is expected to negatively impact yields as documented in the August WASDE Report in this edition. Current crop condition for both soybeans and corn are inferior to the 2018 harvest as tabulated below. High topsoil moisture levels are evident in comparison with the corresponding week in 2018. Long-range forecasts call for dry weather in the Eastern corn-belt in late August.

CHICK-NEWS and EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of the 2019 harvest in October.

WEEK ENDING

Crop

August 4th

August 11th

5-Year Average

Corn Silking %

Corn Dough %

Corn Dented

78

23

-

90

39

7

97

6

16

       

Soybeans Blooming %

Soybeans Setting pods %

72

37

82

54

93

76

       

Crop Condition

V. Poor

Poor

Fair

Good

Excellent

Corn 2019

Corn 2018

3

3

10

7

30

20

47

50

10

20

Soybeans 2019

Soybeans 2018

3

3

10

7

33

24

45

50

9

16

 

Parameter

V. Short

Short

Adequate

Surplus

Topsoil moisture: Past Week

10

27

57

6

Past Year

15

28

53

4

Subsoil moisture: Past Week

7

24

63

6

Past Year

14

29

53

4


 

Egg Week

08/14/2019

USDA Weekly Egg Price and Inventory Report, August 14th 2019.

  • Hen numbers in production up 0.7 million to 323.2 million.
  • Shell inventory down a noteworthy 10.3 percent from the past week
  • USDA Midwest benchmark generic prices for extra large and large up 22.9 and 24.1 percent to 53.5 and 51.5 cents per dozen respectively. Mediums were unchanged at 31.5 cents per dozen.
  • Price of breaking stock up at 29.5 cents per dozen and checks at 14.5 cents per dozen respectively. Both categories substantially below cost of production

OVERVIEW

Prices


 

Forecast Egg Production in Mexico

08/16/2019

The USDA-FAS GAIN Report MX 9025 dated July 31st documents the projected 2020 production of eggs. The estimate is for 3.1 million metric tons corresponding to 4.29 billion dozen for the year. Given a population of 116 million, domestic production corresponds to a 2020 demand for  370 eggs per capita with a growth rate of 1.4 percent from the previous year. Eggs now represent 17 percent of animal protein consumed in Mexico.

Production is predominantly in Jalisco state with 54 percent of output followed by Puebla at 17 percent, Sonora, 5 percent and other states in low single digits. White eggs represent 98 percent of production allowing the U.S. to export caged-egg product for commercial sale subject to the new standard allowing for washing of eggs but with an obligatory cold chain.

During the first half of 2019, Mexico was ranked third in nations importing from the U.S. responsible for 12 percent of shell egg volume and 11.2 percent of total value at a unit price of $0.86 per dozen.

Mexico was the second-ranked importer of egg products during the first half of 2019 receiving 3,008 metric tons comprising 20.2 percent of U.S. export volume and 15.2 percent of value with a unit price of $2,360 per metric ton compared to the U.S. average export unit price of $3,117 per metric ton. Value of shell eggs exported to Mexico for the first half of 2019 amounted to $5.8 million. Egg product exports to Mexico during the same period attained $7.1 million.


 

Seminar on Eggs and Products set for Mexico City

08/16/2019

According to the August 19th edition of the USAPEEC MondayLine, USAPEEC Mexico has scheduled another seminar on the subject of eggs and egg products in Mexico City. This will be part of a series of seminars sponsored by American Egg Board focussing on food processors, food service professionals, and personnel in the food industry using shell eggs as ingredients.

The USAPEEC Mexico Office will hold the seminar during the food service tradeshow ABASTUR, attended by potential buyers. Topics to be covered during the seminars include handling and storage of eggs, manufacture of egg products nutrient qualities, functionality and microbiology

A consulting chef will demonstrate a range of egg products confirming the quality and versatility of U.S. egg liquids. The seminars will be held in Mexico City, September 4th; Aguascalientes, September 17th and Monterrey, November 19th. For additional details and invitations contact Liliana Solis at lsolis@usapeec.org.mx.


 

Animal Welfare, Food Safety Area Briefings

08/17/2019

Schedule of presentations

 


 

Big Dutchman Appoints Agent for Canada

08/13/2019

Steve Walcott, Vice President of Egg Production Sales for Big Dutchman North America, recently announced the addition of J. Dean Williamson Ltd. as a new authorized layer equipment dealer for Canada.

J. Dean Williamson Ltd. (www.jdwpoultry.com) founded in1973, has been efficiently serving customers for over 45 years. Located in London, Ontario, Williamson will primarily focus on selling Big Dutchman rearing, enriched colony, and cage-free systems for laying hens.

Walcott stated “Well positioned as the premier poultry industry equipment provider in Canada, J. Dean Williamson Ltd.’s reputation both in terms of product selection and service were key in our decision to team up with them to sell our layer housing equipment,” Walcott continued, “J. Dean Williamson continuously strives to be the service and support supplier of choice for poultry farmers. We are excited to have them represent us to the Canadian market

On commenting on the association JD Williamson said “Our team is looking forward to offering Big Dutchman’s industry-leading layer housing systems. Their solutions are high quality, matching our other product lines, and they offer an extremely unique advantage with the dedicated support of aviary specialists – a huge selling point”.

Canadian egg producers can contact J. Dean Williamson Ltd. for sales, service and parts needs beginning immediately at +1-519-657-5231 or jd@jdwpoultry.com.


 

Discovery Park of America Will Highlight Innovations in Agriculture

08/14/2019

Discovery Park of America located in Union City, TN will unveil an exhibit entitled “Agri Culture: Innovating for our Survival”. Scott Williams president and CEO of Discovery Park stated, “The absence of firsthand knowledge about farming has led to a population of consumers with a lack of understanding of even basic principles of agriculture today.”  He added, “we are calling this a mind-blowing myth-busting farming exhibit that will change the world and we are certain that after visitors experience our exhibit they will have a much better understanding of how food and fiber get from the farm to the family.”

 

The exhibit was designed by Solid Light a leader in the field.  Cynthia Torp owner and president of the 20-year old company noted, “Discovery Park of America is uniquely positioned to share this story.”  She added, “the project will result in a creative museum experience on the topic of farming unlike anything else in the world.”

 

Subjects to be explored include animal welfare, chemicals, GMOs, organics and sustainability.

 

Discovery Park of America is a 501(c) (3) public charity funded by individuals, corporations and foundations.


 

EGG-NEWS Reverses Stance on Neonicotinoid Insecticides

08/14/2019

EGG-NEWS has supported the continued use of neonicotinoid insecticides but growing evidence that their application is deleterious to insect pollinators is cause for reevaluation.  Although there is no direct proof that neonicotinoids are responsible for bee-colony collapse syndrome, under certain circumstances this class of insecticides can reduce the population of pollinators critical to orchards and insect-pollinated crops.

 

A recent study published in the Proceedings of the National Academy of Sciences demonstrated that uptake of neonicotinoids sprayed on foliage or on soil accumulated in mealy bugs. Their honeydew excretion was toxic to parasitic wasps and hoverflies responsible for pollination.  Hoverflies consuming honeydew from trees sprayed with thiamethoxam died within three days compared to mortality of 10 percent in a control group.  In evaluating application of thiamethoxam to soil, 70 percent of hoverflies consuming honeydew from mealy bugs in the treated group died compared to 14 percent in the control group.  The indirect toxicity of neonicotinoids through consuming honeydew secreted by mealy bugs is yet another example of how toxins can interact in the food chains of beneficial insects.

 

It is necessary therefore to clearly identify mechanisms by which these highly effective insecticides are responsible for adverse effects and to modify application.  Clearly from the perspective of domestic gardeners or other non-commercial agricultural enterprises, the application of neonicotinoids is unacceptable. Integrating this class of insecticides into commercial agriculture requires evaluation with use restrictions short of outright bans as in E.U. nations.


 

Allied Suppliers to the Agribusiness Sector Impacted by China-U.S. Trade Dispute

08/14/2019

Fertilizer manufacturers have been severely affected by both late spring rains with lowered planting in addition to the ongoing trade dispute between the U.S. and China.  Following the announcement that China will suspend imports of all agricultural products from the U.S. Shares in the Mosaic Company fell seven percent on Tuesday August 6th together with Nutrien also a fertilizer manufacturer which fell 3.2 percent.  Implement and equipment manufacturers including Deere and Company are expected to suffer and pesticide and GM seed suppliers Bayer AG and Corteva Inc. have shown significant declines in share price over the past week.

 

There is greater pessimism regarding the outcome of talks between China and the U.S. with a growing realization that there will be no resolution before 2020 if at all before the November election in that year.  It is apparent that China has adopted a waiting game and will do everything in its power to oppose the reelection of the Administration.


 

Incidence Rate of ASF in Bulgaria Increases

08/14/2019

Bulgaria has apparently failed to control African swine fever (ASF) with approximately one-quarter of the 600,000 hog population already culled or dead.  Epidemiologists are projecting that it may be necessary to destroy the entire population to control the infection.  This however will have no effect on the reservoir population of feral hogs.  At least officials in Bulgaria are transparent in relation to problems with the minister of agriculture Yanko Ivanov acknowledging failures by his department.  Imposition of sanitary zones around commercial farms has met with opposition by farmers who are refusing to cull backyard hogs and numerous protests have occurred against control measures.

 

Bulgaria has received $3 million in aid from the E.U. to control ASF although the Commissioner of Health and Food Safety Dr. Vytenis Andriukaitis expressed “deep disappointment” over failure to control of the outbreak.

 

Most recently, Russia reported an outbreak of ASF in a region close to the common border with China. The disease is essentially uncontrolled in China, Vietnam, Cambodia, Mongolia, North Korea and Laos. Pork production in affected nations will be severely curtailed and price rises indicate the disparity between supply and demand.


 

U.S. Soybean Sales to E.U

08/14/2019

The U.S. Soybean Export Council recently announced combined sales of 125 million bushels of soybeans among France, Portugal, Italy and Spain. This quantity represents 6.7 percent of the projected total export of 1,875 million bushels forecast in the July ASDE.

USSEC is to be commended on their activities to replace China as the major soybean importer. The Council has recently organized conventions and promotional activities in Spain, Italy and France. In Portugal, USSEC cooperates with the Portuguese Association of Animal Feed Manufacturers and is using the U.S. Soy Sustainability Assurance Protocol (SSAP) as the means of differentiating the U.S. from major competitors Brazil and Argentina.

The promotional efforts of the USSEC have increased exports to the four major feed producers by 170 percent in 2019 compared to the corresponding period in 2018.


 

Sale of Pig Ear Dog Chews Should End

08/14/2019

Both the U.S. FDA and the CDC are recommending that pig-ear dog chews should be withdrawn from the market due to an extensive outbreak of salmonellosis reported from 33 states involving 127 diagnosed cases. Trace-back studies and sampling performed in plants have revealed extensive contamination of the product. This contributes to intestinal colonization and shedding of Salmonella by dogs with consequential exposure of family members.

On July 3rd, Lennox International of Edison, NJ recalled pig ear pet treats distributed from November 1st 2018 through July 2019.

Dog chews have been implicated in health problems experienced by pets in past months including as yet undiagnosed mortality attributed to dried-meat treats imported from China.


 

Blue Apron Holdings Reports Q2 FY2019

08/14/2019

In an August 6th release, Blue Apron Holdings (APRN) announced results for the 2nd quarter ended June 30th 2019.

Despite the understandably optimistic comments by CEO Linda Kozlowski, a review of the past quarter indicates that the company is probably entering a death spiral. How Ms. Kozlowski can state “Our market opportunity is larger we believe that it is growing, leading to significant unrealized opportunities within our core business” is wishful thinking and rejects the reality of the company’s metrics.

Contrasting June 30th 2018 values with June 30th 2019, orders have declined from 3.1 million to 2.1 million. Customers have declined from 717,000 to 449,000 while average order value, orders per customer and average revenues per customer have remained static. Sales were down 33.6 percent compared to the 2nd quarter of 2018. The company operates with a gross margin of 60 percent admittedly reduced from 64 percent but the P&L documents disproportionate product- technology and general and administrative expenses equivalent to 29.5 percent of revenue. For the most recent quarter, net loss was $7.75 million. Admittedly this was less bad than the $32.84 million loss incurred during the 2nd quarter of 2018. The major reason for the apparent improvement was the fact that the company pared marketing costs from $34.6 million to $9.7 million.

In either an attempt to bolster investor confidence or as an expression of self-delusion, the CEO neglected to comment on the scale of competition. WW International (previously Weight Watchers) is selling meal kits on the Walmart jet.com website. The Kroger Company and Albertson’s have launched rival meal kits and Amazon and Whole Foods have their own brands. It is generally accepted that the market is saturated and that there is little or no brand loyalty among consumers.

Blue Apron is projecting a loss of $55 million to $62 million for the second half of Fiscal 2019 attributed to two new initiatives to increase customer growth and enhance revenue. The company has been impacted by an exodus of executives and in November 2018, laid off five percent of its workforce.

The Blue Apron 52-week range in share price is $6.10 to $35.40 and traded at $8.96 at 14h30 on August 7th. Current market cap is $117.4 million with a forward PE of -2.75. The percentage short of float stands at 28 percent and it is considered significant that only 20.4 percent of the equity is held by institutions. With a negative trailing 12-month operating margin of -13.9 percent and a n profit margin of -15.6 percent and a return on equity of -60.9 percent, this company should be taken over if it has any tangible assets and technology or alternatively should simply be put out of its misery.


 

California Recycling Center Closes

08/14/2019

RePlanet of California has ceased operation and let go 750 employees according to the company president David Lawrence. The termination occurred because of the falling prices for recycled aluminum and PET plastic.

According to the Sacramento Bee the chain that operated 284 sites throughout California will inconvenience grocery and convenience store chains that relied on RePlanet to receive bottles, cans and other recyclables.


 

Dairy Exports Impacted by Trade Dispute with China

08/14/2019

It is not only soybean and cotton farmers adversely affected by the trade dispute with China. For the first half of 2019, U.S. dairy exports were 14 percent lower compared to the first half of 2018. Export of milk powders, cheese, butterfat, and whey products to China were lower by 54 percent compared to 2018. China imported 46 percent less cheese during the first half of 2019 and whey shipments were reduced. In addition to trade conflicts, the U.S. dairy industry is facing competition from New Zealand forcing the U.S. Dairy Export Council to establish new markets including Taiwan, Canada and Mexico.


 

Environmental Benefit of Burning Wood Chips Questioned

08/14/2019

A scientific conflict over the environmental effect of burning wood chips has emerged in the E.U. The group of 28 nations collectively consumed 27.5 million metric tons of wood pellets to generate electricity in 2018. This was up 35 percent from 2016. Power companies can claim subsidies for using wood chips as a fuel since it is regarded as a renewable energy source.

Demand has resulted in the U.S. shipping wood pellets derived from tops, limbs and from trees unsuitable for lumber or furniture according to Enviva Partners, a major processor of timber into pellets. Approximately two percent of standing forests are harvested annually allowing for regrowth which presumably offsets the carbon produced by burning pellets, albeit over a protracted period.

Studies conducted by the Massachusetts Institute of Technology demonstrated that burning wood for power releases more carbon dioxide into the atmosphere per unit of power generated than coal. The difference between wood pellets and natural gas is even more extreme.

A recent lawsuit opposing wood chips to power electric generating plants filed with the European General Court by environmental advocacy organizations was rejected on the basis that the plaintiffs did not have standing. The claim was for the E.U. to rescind subsidies extended to wood chips claiming extensive carbon dioxide release and non-sustainability.

Depending on the acceptance of studies both for and against using pellets as fuel, the viability of the wood chip industry is threatened.


 

Ban on Chlorpyrifos the Subject of Litigation

08/14/2019

According to an August 8th article in The Hill six states including California and New York have filed lawsuits opposing the July 2019 decision by the EPA not to ban chlorpyrifos. A complementary lawsuit was also filed with the Ninth Circuit Court of Appeals by EarthJustice and a group of ten other environmental activist organizations. Chlorpyrifos, marketed as Lorsban™ is applied to corn and cranberries as an effective insecticide. Studies have demonstrated that exposure to chlorpyrifos leads to learning and memory deficits and is neurotoxic especially to children.

Quoted in The Hill article, Tracy Gregoire, Project Coordinator at the Learning Disabilities Association of America stated “A chlorpyrifos ban is long overdue given the overwhelming evidence that this pesticide harms brain development in children”. She added “We are hopeful the courts will side with children who are now being exposed to irreparable, yet preventable harm”.

EPA banned chlorpyrifos for household use in 2001 but has allowed application to continue on farms. The EPA intends reviewing the safety of chlorpyrifos through 2022. The compound is banned outright in the E.U. based on scientific evidence.

The Attorney General OF California commented “The EPA is egregiously sacrificing our children’s health by refusing to make a determination on this dangerous pesticide”. Chlorpyrifos is banned in Hawaii. Other states including California and New York are considering restrictive legislation.

A spokesman for a Latino farm worker’s group based in Oregon stated “A nerve agent pesticide that poisons workers and damages children’s developing brains has no place near our fruits and vegetables”. Ramon Ramirez stated “We look forward to seeing the courts do what EPA refuses to do, to protect workers and children with a ban on chlorpyrifos”.


 

UEP Annual Board Meeting and Executive Conference

08/14/2019

The 2019 Annual Board Meeting and Executive Conference will take place at the Greenbrier resort, WV October 14th to 17th.

Speakers at the program will include Frank Yiannis, FDA Deputy Commissioner for Food Policy and Response, Will Daniels, President ,Produce Division of IEH and Dr. Rudolf  Preisinger, Chief Technical Officer with the EW Group.

The Corporate Social Responsibility Panel will comprise Tim Lambert, CEO of Egg Farmers of Canada, Brett Kaysen of the National Pork Board and Nancy Himmelfarb, a lawyer specializing in sustainability.

The program will include a session on in-ovo gender determination, whole genome sequencing, animal welfare and environmental issues.

For further information, access the UEP website www.unitedegg.com.


 

Amazon Cuts Ties with FedEx

08/14/2019

Dow Jones reports that FedEx Corporation will end its contract with Amazon.com to distribute ground packages and to provide domestic air service. This reality follows a gradual wind-down for the association between Amazon and FedEx to concentrate on the E-Commerce segment working with Target Corp, Walmart and retailers that regard Amazon as a competitor. A FedEx spokesperson noted “the change is consistent with our strategy to focus on the broader E-Commerce market”.

According to industry observers, Amazon has developed its own distribution infrastructure, leasing aircraft, purchasing vehicles and hiring drivers and independent contractors. In July, Amazon was self-sufficient to the extent of 45 percent of orders with the remainder handled by the U.S. Postal Service and United Parcel Service, excluding FedEx from the chain.

Amazon has increased the number of facilities handling orders to more than 400 locations including sorting and delivery centers adjacent to most metropolitan airports.

As with all Amazon endeavors, the Company plans to dominate any selected business space. The company has initiated a “Shipping with Amazon” service to deliver packages from retailers to consumers.


 

Fears of Recession Arising from Trade War with China Intensifying

08/15/2019

According to Reuters, three economists affiliated with Goldman Sachs Group, Jan Hatzius, Alec Phillips and David Mericle issued a statement including an opinion that resolution of the ongoing trade conflict will not occur in 2019 and that the U.S. will in all likelihood impose a 25 percent tariff on the remaining $300 billion of annual U.S. imports from China that are not subject to duty at the present time.

China announced that all imports of agricultural products from the U.S. would cease as a retaliatory response to the announcement that effective September 1st a 10 percent duty would be imposed on the currently non-tariffed $300 billion in imports to the U.S. The most recent announcement of a delay in imposing the duty will probably not elicit any positive response from China.

The Goldman economists have raised the possibility of a recession affecting all industrialized nations if the trade war becomes intensifies. They have also lowered the 4th quarter U.S. GDP growth forecast to 1.8 percent.


 

Commentary


Philippines Suffering from Widespread Dengue Fever Outbreak

08/14/2019

During 2019, close to 150,000 confirmed cases of Dengue fever have been reported in the Philippines with 622 fatalities.  The Health Ministry of the Philippines has declared an emergency and the Nation is concentrating all public health resources to combating the infection.

Dengue is a mosquito-borne disease and in the absence of a safe and effective vaccine, control measures are confined to suppressing mosquito populations.

 Recently EGG-NEWS reported on opposition to deploying genetically modified (GM) mosquitoes to control malaria.  Any activity that unjustly disparages GM on principle or restricts the use of a viable and scientifically proven control method for a serious disease such as malaria or Dengue is strongly deprecated.  Opponents of GM are not taking into account the effect of disease and mortality caused by mosquitoes responsible for numerous widespread infections on four continents.  Given unseasonal rains and increased temperatures, Gulf States are vulnerable to Arborviral encephalitides, Dengue, Zika and Chikunguna fever, all of which are vector borne.


 

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Dr. Simon M. Shane
Simon M. Shane
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