The 2025 International Poultry Scientific Forum sponsored by the Southeastern Poultry Science Society, the Southern Conference on Avian Diseases and USPOULTRY, will take place Monday, January 27^th, continuing through Tuesday, January 28^th.

A comprehensive array of posters and platform presentations will be delivered, classified under topics including nutrition, disease, physiology and management.  Additional information, including registration (at $95), is available at <IPPEXPO.org>.

According to the Canadian Food Inspection Agency, as of mid-December 2024, there have been 422 cases of flock infection since the beginning of the 2022 epornitic.  There are 83 farms currently undergoing or have recently completed depopulation or decontamination.  Of the provinces affected, British Columbia ranks first with 158 cases or 37.4 percent of the total followed by neighboring Alberta with 82 cases (19.4 percent).  These two provinces have depopulated 8.3 and 2.0 million birds respectively.  Quebec has recorded 54 cases with 1.4 million commercial poultry depopulated and with four recent outbreaks.

Among the five provinces reporting HPAI since the onset of the epornitic, 13.9 million commercial poultry have been depopulated affecting the supply of poultry products and resulting in an escalation in the price eggs and poultry meat on a regional basis, as in the U.S.  British Columbia is the province most impacted due to its location on the Pacific flyway, in contrast to the Maritime Provinces on the Atlantic flyway with less evidence of shedding by migratory waterfowl and marine birds at this time.

Boar’s Head Provisions has settled with the estate of Gunter Morgenstein who died from listeriosis allegedly acquired from consuming liverwurst manufactured at the Jarrett, VA. facility.  Following traceback to the plant, which has subsequently been closed, the Company was obliged to recall seven million pounds of product covering 71 items produced between May 10 and July 29 under various brands.

Settlement would appear to be an obvious response to lawsuits, given the evidence of long-standing deviations from acceptable industry practices that in large measure were condoned by lack of action on the part of the Food Safety and Inspection Service and the state of Virginia to whom inspections were delegated.

There is no way that Boar’s Head Provisions could effectively defend a civil claim in court given the inspection reports relating to the implicated plant. The company will face additional claims given 61 diagnosed and confirmed illnesses with 10 fatalities in addition to lawsuits from retailers.

Health authorities in the state of Louisiana have confirmed a case of H5N1 infection requiring hospitalization.  The patient is resident in southwestern Louisiana and had contact with unspecified types of birds that were apparently sick and dying. If they were game fowl given the location, dissemination of H5N1 virus among flocks of fighting cocks may result in additional cases.  Currently the patient is hospitalized with severe symptoms presumably affecting the respiratory tract. The Centers for Disease Control and Prevention have characterized the virus as an avian-origin strain conforming to the D1.1genotype that is distinct from the B3.13 genotype affecting dairy herds.

As with all human cases that have been diagnosed, health authorities will implement surveillance on family, residential and workplace contacts to confirm the absence of contagion. This was the case with all 61 previous confirmed cases in eight states with all but one acquired through depopulation of affected flocks or direct contact with infected dairy cattle.

At this time there should be no concern among the general population. Appropriate protective equipment should be worn by workers on affected poultry and dairy farms. Consumption of raw milk is currently a risk factor for contracting H5N1 strain influenza. 

WEEKLY ECONOMY, COMMODITY & ENERGY REPORT: December 19^th 2024.

OVERVIEW

The CME price of corn for March delivery was 1.1 percent lower compared to the quotation last week. Soybeans were down 3.6 percent  and soybean meal down 2.0 percent. Corn and soybean prices were influenced by domestic demand and firmer projections of crop sizes from sequential harvests in Brazil and Argentine. There was minimal response to the December WASDE Report incorporating actual harvest values.  Farmers should now have sold the remainder of the old crop to make room for the completed 2024 harvest and are actively selling the new crop to avoid further decline in price. There was some technical selling arising from geopolitical concerns and in response to revised projections for harvests in South America. Contributory pricing factors included ongoing disruption in shipping in the Red Sea and  Gulf of Aden, carryover from the 2023 U.S. crop, export orders and the predicted ending stocks of corn and soybeans from the 2024 crop. The 2024 harvest, was in advance of the five-year average. Both crops apparently have superior condition as compared to 2023.  The transition from a neutral phase to a La Nina event is underway and will intensify during the remainder of the fourth quarter but has had no effect on the 2024 harvest. The December WASDE, incorporated actual yields and harvest volumes, with USDA updates for anticipated exports, domestic use and carryover for the 2024 crop.

At 12H00 on December 19^th the CME corn quotation for March delivery was down 1.1 percent to 438 cents per bushel. Corn price was influenced by acreage planted, ethanol demand and the ending stock from the 2023 crop. Farm selling continues given declining prices. USDA estimated that 44 percent of old corn stock was held on farms at the beginning of September. Export orders for the current market year have increased in response to lower prices and for some importers to avoid future tariffs.   Volumes and price are indirectly influenced by wheat availability as influenced by weather affecting the Black Sea wheat and corn crops. Orders by China resumed at the end of the 2022-2023 market-year and continued through November despite an increase in the Dollar Index, adding to increased ocean freight. Total exports for the 2024-2025 market year are 29.8 percent above the corresponding weeks of the previous market year.

Soybeans were down 3.6 percent over the week for March delivery, priced at 961 cents per bushel and continuing under the 1,000-cent threshold. Low prices over past weeks are attributed to the projection of ending stock, farm selling and taking into account recent export orders and projections of availability from the 2024 U.S., Brazil and Argentine harvests. Total exports for the 2024-2025 market year are 22.1 percent higher than for the corresponding weeks of the previous market year.

Soybean meal was priced at $289 per ton for March delivery, down  $6 per ton from last week. Price is influenced by demand coupled with reestablished crush volume since September restoring the processing trend to the first half of 2024. Price will fluctuate to reflect the CME price for soybeans and the depressed demand for biodiesel due to oversupply and the consequential adverse financial situation in this sector. The market previously responded to the increased 2023 crop and higher stocks together with projections for 2024 in the December WASDE Report.  

On December 18^th at 16H00 EDT the price for WTI was $70.50, up $0.28, (+0.4 percent) from last week. Current price is not materially affected by uncertainties and tensions in the Middle East. Over the longer term price reflects moderate world demand for crude as economies and especially that of China have retracted, requiring central bank stimulation in late August. It is evident that U.S. production is a moderating influence on World price, attaining a record average of 13.4 million barrels per day over the third quarter with ample reserves. There was only small fluctuation in the price of WTI through December 18^th with the range during the week extending from a low of $70.08 on December 18^th up to $71.28 on December 9^th.

Ample U.S. crude production is constraining domestic and international prices. The recent decline in energy costs during the past three months contributed to deflation influencing the FOMC in their decision to lower the benchmark interest rate 0.5 percent at the September and 0.25 percent at their November meetings with an anticipated 0.25 percent reduction on December 18^th

Economic data released during the past quarter (Q2 GDP; PCE, Confidence, Productivity, Employment) confirm a growing economy but with a downward trajectory in inflation. Third quarter GDP was confirmed to be 2.8 percent consistent with preliminary projections. The FOMC decided on a 25 basis point reduction in the 10-year rate on December 18^th. Federal Reserve Chair Jerome Powell indicated one or possibly two additional reductions would be considered in 2025 with the FOMC exhibiting flexibility given uncertainties with an incoming Administration. The August and September Non-farm Payrolls and labor data clearly indicated the danger of prolonging the high benchmark interest rate that was negatively impacting the U.S. economy.  The Federal Reserve is now addressing employment as a priority over containing inflation supported by higher jobless claims in recent weeks.

Macroeconomic U.S. factors:-

• Most economists in academia and the private sector accept that the U.S. economy has achieved a “soft landing”.  This is despite the release of the Q3 2024 increase in GDP of 2.8 percent, down from 3.0 percent in Q2 but considering trends in recent economic parameters including the ECI, CPI and PPI. Annual inflation as measured by the headline PCE declined from 8.9 percent in June 2022 to 2.1 percent in September 2024. This is in part a response to a series of 11 FOMC rate raises followed by eight pauses that curbed inflation and cooled the labor market but without precipitating evident unemployment. There is obvious stability in the bank sectors in both the U.S. and Europe. Lower energy prices are contributing to deflation.
• The Federal Reserve lowered the benchmark interest rate by 0.25 percent at the December 18^th. FOMC meeting. Previously the benchmark was lowered by 0.5 percent at the FOMC meeting on September 18^th, the first of a series of actions after eighth sequential pauses. The Fed lowered the rate by a further 25 basis points on November 7^th as anticipated. Chairman Powell in Congressional testimony, and at the post-meeting press conference and also documented in FOMC minutes indicated that future decisions would be based on demonstrated progress in reducing inflation and confirmed by a basket of key economic data, towards an annual 2.0 percent target sometime in late 2025 or early 2026.
•  The December 19^th release by the Bureau of Economic Affairs documented Q3 2024 GDP at 3.1 percent upgrading the preliminary figure of 2.8 percent. The Q3 GDP compares to 3.0 percent for Q2 and 2.9 percent for entire 2023. The GDP in Q3 was supported by increased exports and higher consumer spending, especially on non-durable goods.
• The December 11^th release of the Consumer Price Index (CPI) for November showed a 0.3 percent rise over October and an annual increase of 2.7 percent consistent with prior estimates. The annual value is compared to 2.6 percent for the 12 months preceding October. Core CPI (excluding food and fuel) was up 0.3 percent in October with an annual increase of 3.3 percent, unchanged from October. Food at home was up 0.1 percent for October and 1.1 percent over 12 months. In reviewing annual values, the category of Shelter was up 4.7 percent. Food Away from Home was up 3.6 percent, accounting for half of the inflation during the year. Among the Food components, Meat, Fish and Eggs were up 3.8 percent compared to cereals down 0.5 percent and diary up 1.2 percent. Notwithstanding the increase in CPI during November a reduction in benchmark interest rate is anticipated at the December FOMC Meeting.
• On November 27^th the Bureau of Economic Analysis released the Personal Consumption and Expenditure Price Index for October. The core PCE (excluding food and energy) was up 0.3 percent from the previous month, and attained 2.8 percent year-over-year. The Headline PCE was up 0.2 percent from September and 2.3 percent from October 2023, a 42-month low and consistent with projections.  Food was up 0.1 percent from September. The headline PCE is closely followed by the Federal Reserve and confirms that inflation is progressively moderating but still above an annual target of 2.0 percent.
• The November Producer Price Index for Final Demand (PPI) released on December 12^th rose 0.4 percent from October above an expectation of 0.2 percent. This was attributed in part to a 0.7 percent increase in the Goods category. Food was up 3.1 percent due to rises in meat, poultry and eggs collectively amounting to 2.6 percent over the year and a 0.3 percent increase in food. The PPI was up 3.0 percent over the past 12-months ending in November compared with 2.4 percent for the 12-month period through October. This is compared to a 6.4 percent increase in 2022. The core PPI value excluding volatile fuel and food, was up 0.2 percent from October and 3.5 percent over the previous 12 months.  
• A Federal Reserve release on December 17^th confirmed that industrial production was lower by 0.1 percent in November less than the decrease of 0.3 percent in October. Capacity utilization was lower at 76.8 percent compared to 77.1 percent for the previous month and was 2.9 percent below the long run 1972-2020 average.
• The November 27^th report by the Department of Commerce, Census Bureau on Durable Goods Ordered during October 2024, orders increased by 2.5 from the previous month. Shipments were up 1.8 percent. Excluding the Transportation component, new orders in November increased by 0.1 percent. Excluding the Defense category new orders were up by 0.4 percent compared to October.
• In a December 4^th release the Census Bureau confirmed that factory orders for U.S. manufactured goods increased 0.2 percent in October and compared to a revised fall of 0.5percent in September. Shipments of manufactured goods were up 0.2 percent in October.
• The November 15^th U.S. Census Bureau release of the advanced estimate of retail and food sales data for October was up 0.4 percent from the revised September value of a 0.8 percent increase and up 2.8 percent over 12 months. Food service sales were up 0.1 percent from September and up 2.7 percent over 12 months. Grocery store sales were up 0.1 percent from the revised September value ($75,793 million) and up 2.5 percent over the past 12-months. The Federal Reserve FOMC closely monitors retail sales as a measure of the trend in inflation.
• The December 2^nd release by the Institute for Supply Management (ISM®) reported a higher Manufacturing Index for November at 48.4 compared to the October value of value of 46.5. The November value was still below the bifurcation point of 50 percent between contraction and expansion. The November Prices Index rose to 50.3 points in November compared to 54.8 points in October, denoting lower values for goods produced. U.S manufacturing now reflects an improved economy, with manufacturing recovering from prolonged high benchmark interest rates. The November Production Index was 46.8 points compared to 46.2 in October.
• On October 31^st the U.S. Bureau of Labor Statistics reported a 0.8 percent increase in the Employment Cost Index (ECI) over the 3^rd quarter of 2024.  The year-over-year increase in wages and salaries was 3.9 percent and with benefit costs up by 5.8 percent. The ECI is closely followed by the Federal Reserve FOMC and this data justified in part the 50 basis point drop in the benchmark interest rate in September and strengthens the possibility of additional rate cuts.
• The November 26^th Consumer Confidence Report prepared by The Conference Board for November, recorded a substantial increase to 111.7 from the revised October value of 109.6, with all segments up and representing the most optimistic values over the past two years.. The Present Situation Index measuring perceptions of current business conditions rose 4.8 points to 140.9 in November. The Expectations Index increased from a revised October value of 91.9 to 92.3 and was the fifth consecutive month above 80. Values below this threshold over consecutive months and with a downward trajectory are regarded as predicting a recession.
• The November 22^nd University of Michigan Index of Consumer Sentiment for  November rose to 71.8 from the final October value of 70.5 and compared with a value of 61.3 in November 2023. The Current Economic Index was 63.9 in November, down from 64.9 in October. The Index of Consumer Expectations was 76.9 up from 74.9 in October, denoting improvement in consumer sentiment following the September and November rate cuts and lower inflation. Geopolitical factors and uncertainty over the economic policies of the incoming Administration have influenced sentiment in divergent directions depending on political persuasion. In perspective sentiment is 17.7 percent above November 2023 and 40 percent above the low in June 2022.
• Non-farm payrolls added 227,000 positions in November, as documented by the Bureau of Labor Statistics in a December 6^th release. This was up 191,000 from the revised October value of 36,000 impacted by Hurricanes and strikes. The unemployment rate increased to 4.2 with 7.1 million unemployed and with 1.7 million in the long-term category. The real average hourly earnings value for all employees in during November was $30.57.  Average hours worked for all employees was unchanged at 34.3 hours per week. Labor participation was at 62.5 percent, 0.1 percent lower than October. Wage rates increased 4.0 percent over 12-months. Wage rates are closely followed by the Federal Reserve FOMC.
• The Bureau of Labor Statistics Job Openings and Labor Survey report (“JOLTS) released on December 3^rd estimated 7.744 million job openings at the end of October, up by 372,000 from the revised September value of 7.372 and above the forecast of 7.480 million. The October job openings number was up 5.2 percent over 12 months. The peak job openings figure was 12.2 million in March 2022 during COVID. The October hiring rate was 3.3 percent (5.3 million hires); the October total separation rate was 3.3 percent (5.3 million); the quit rate 2.1 percent (3.3 million); and the layoff rate 1.0 percent, down 0.1 percent from September at 1.6 million.
• The seasonally adjusted initial jobless claims figure of 220,000 released on December 19^th for the week ending December 14^th was down by 22,000 from the revised value of 242,000 for the previous week and the lowest value since May. The weekly value was lower than the WSJ estimate of 229,000 possibly due to residual confounding associated with the Thanksgiving holiday. The four-week moving average rose to 225,500. The Bureau of Labor Statistics estimated 1.874 million continuing claims for the week ending December 6^th (down 5,000 from the revised value for last week), and compared to a peak on November 27^th 2021 at 1.93 million.  The November unemployment rate advanced to 4.2 percent. There is clear evidence from data over the past three months that the labor market is cooling as confirmed by Chairman Powell in Congressional testimony and release of downward revised figures for job creation. The jobs market is still tight, but with sporadic weekly fluctuation in new claims due to weather, strikes or scheduled plant shutdowns. The latest value may have been influenced by the Thanksgiving holiday.
• The December 10^th Bureau of Labor Statistics report confirmed the 2.2 percent increase in non-Farm Productivity for Q3 2024. Labor cost increased by 1.9 percent compared to 0.9 percent for Q2 2024. Output was up by 3.5 percent.
• The ADP® reported on December 4^th that private (excluding government data) payrolls decreased to an unexpected 146,000 in November, down 42,000 from the revised 188,000 in October and compared to a consensus estimate of 166,000 jobs. This confirmed a slowing in the labor market withy employers reluctant to hire new workers and staff. The increase in employment was mostly in the service-related sectors with +15,000 positions. Individual categories included the Transportation, Trade and Utilities sector, (+28,000); Construction, (+30,000); Hospitality, (15,000); and Professional and Business Services, (+18,000); Information (+4,000). Manufacturing was down -26,000. Annual pay was up 4.8 percent year-over-year for ‘job-stayers’. The increase as reported by ADP will not directly influence the probability of short-term future changes in interest rate since the number, although based on 25 million positions, excludes the public sector. Monthly ADP data is regarded as less reliable by the FOMC than the Bureau of Labor Statistics Monthly non-farm payroll report.

USDA Weekly Egg Price and Inventory Report, December 18^th 2024.

Market Overview

• The average wholesale unit revenue values for Midwest Extra-large and Large sizes were up a substantial 18.9 percent on average this past week. Medium size was up 6.8 percent. The 5-day rolling National wholesale price for graded loose on December 13^th was $4.01 per dozen up $0.77 per dozen (23.7 percent) from $3.24 last week. This value was approximately $1.51 above the 3-year average of $2.50 per dozen and $2.38 above the corresponding week in 2023 at $1.63 per dozen. This past week shell egg inventory was down 3.0 percent, compared to a fall of 1.9 percent during the previous week. Over the past week the NYC wholesale price in cartons was 24.3 percent higher but with the immediate prospect of an additional increase during the current week based on daily increases. The fall in inventory with a large increase in wholesale price last week denotes a sharp seasonal surge in consumer demand relative to diminished supply. Fluctuation in inventory and price will occur through December based on the frequency and magnitude if orders by chains leading up to and beyond the Christmas surge complicated by incident cases of HPAI. Relatively higher prices compared to 2023 are attributed to previous 2024 losses due to HPAI reducing the national flock by an estimate of 11 to 12 million hens at the present time, concurrent with seasonal demand.
• Although there are predetermined weekly transfers of mature pullet flocks to laying houses, the size of the producing flock is constrained by depopulation due to HPAI. Year-to-date losses have attained approximately 31 million hens with the fall wave in progress.
• This past week, chains apparently widened the spread between delivered cost and shelf price. The reoccurrence of HPAI has probably created concern among chain buyers as they may previously have been reticent to place orders even with moderating prices notwithstanding the need to ensure adequate stock levels to meet demand. Inventory levels will depend on constant re-ordering to fill the pipeline into the Christmas surge. Discounters are raising prices on generics influencing mainstream retail stores. Eggs are now less competitive in price against the comparable costs for other protein foods, and have recently been highlighted as a contributor to the prevailing perception among consumers of ongoing food inflation.
• Total industry inventory was down by 2.5 percent overall this past week at 1.52 million cases including a 0.3 percent decrease in breaking stock, following a 3.3 percent fall during the preceding week.
• It is apparent that the inventory held by chains and other significant distributors may be more important on a weekly basis in establishing wholesale price compared to the USDA regional weekly inventory figures. Changes in stock held by DCs and through the pipeline as determined by orders is probably responsible for up to three percent cyclic fluctuation in weekly industry stock. This is especially evident into or after a holiday weekend as evidenced by fluctuation inventory levels over the past month.
• The U.S. poultry industry has moved from a quiescent period regarding HPAI into a fall upsurge with incident cases in northern Utah, southern Washington State and Oregon in October and the loss of three complexes in the Central Valley of California in November and early December. A large complex holding in excess of 4 million hens was depopulated in northwest Iowa last week. Two cases were diagnosed in non-commercial flocks in Hawaii with the presence of H5 virus in wastewater currently under investigation. California has recorded outbreaks on broiler-growing farms in four counties recently with ongoing losses in broiler and turkey growing farms. Canada has diagnosed numerous cases in The Fraser Valley of British Columbia and outbreaks in Alberta Quebec and Saskatchewan. Over 850 confirmed cases of bovine influenza-H5N1 have been diagnosed in dairy herds in fifteen states since March 2024 with most having recovered. More than 650 herds were diagnosed in California over the past three months with the incidence rate reflecting mandatory surveillance of bulk milk. Bovine influenza-H5N1 is a cause for concern since extension to laying flocks has presumably occurred in Michigan, Colorado, California and Utah. More surveillance information should be released by USDA-APHIS as it becomes available, concerning the prevalence rate of avian carriers of H5N1 among resident domestic and migratory free-living birds. This data should be correlated with a review of molecular and field epidemiology for the past spring outbreaks in order to respond appropriately to the fall wave of HPAI in progress. The USDA has yet to identify and release specific modes of transmission for the 2022-2024 epornitic including an acknowledgement of the likely airborne spread from wild birds and their excreta over short distances as suggested by current research.
• The established relationship between producers and chain buyers based on a single commercial price discovery system constitutes an impediment to a free market. The benchmark price appears to amplify both downward and upward swings as evidenced over the past three years. A CME quotation based on Midwest Large, reflecting demand relative to supply would be more equitable. If feed cost is determined by CME ingredient prices then generic shell eggs should be subject to a Midwest Large quotation.
• On December 18^th the stated total flock of 315.4 million, was up by 0.4 million from last week, including about one million molted hens that will resume lay during coming weeks plus 4.5 to 5.0 million pullets scheduled to attain production before the pre-Christmas surge in demand. Given the latest figures for depopulation in Iowa and California it is estimated that the total egg- producing flock in mid-December is approximately 11 to 12 million hens lower than the 326 million before the onset of HPAI in 2022.
• The ex-farm price for breaking stock (rounded to one cent) was up 6.3 percent to $2.78 per dozen. Checks delivered to Midwest plants were up 11.9 percent to $2.82 per dozen this past week. Prices for breaking stock generally follow the wholesale price for shell eggs but with a lag of one to two weeks that may be reduced as in the present situation with diversion to the shell market.

The Week in Review

Prices

According to the USDA Egg Market News Reports, released on December 16^th 2024, the Midwest wholesale price (rounded to one cent) for Extra-large was up 18.9 percent from last week to $4.49 per dozen. Large size was up 18.9 percent to $4.47 per dozen. Mediums were up 7.7 percent to at  $3.60 per dozen delivered to DCs. Continued increases are expected in the coming week followed by a post-Christmas plateau

The stock of Medium size was down 4.5 percent and the inventory of Small size was up 7.7 percent over the past week suggesting that additional pullets placed in early August for the mid-December surge in demand have commenced their production cycle. This has implications for prices during January 2025. There is increased institutional demand for Medium size and some consumers are opting for smaller eggs based on price sensitivity.

Prices should be compared to the USDA benchmark average 4-Region blended nest-run cost of 74.0 cents per dozen as determined by the Egg Industry Center based on USDA data for November 2024. This value excludes provisions for packing, packaging materials and transport, amounting to 57 cents per dozen as determined in mid-2023 from an EIC survey (with a low response) and now realistically 60 cents per dozen.

Currently producers of generic shell eggs should be operating with strong positive margins irrespective of region and customer-supply agreements. The progression of prices for loose eggs during 2023 and 2024 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

The December 16^th edition of the USDA Egg Market News Report confirmed that the USDA Combined Region value in cartons (rounded to the nearest cent), was down 2.5 percent to $3.85 per dozen delivered to warehouses one week ago. The USDA Combined range for Large in the Midwest was $3.76 per dozen. At the high end of the range, the price in the South Central region attained $3.92 per dozen.

Caption

Flock Size 

The loss of approximately 2.8 million laying hens in Utah, Washington State and Oregon during mid-to late October should be reflected in released USDA estimates of flock size. It is questioned whether the 6.7 million hens among four complexes depopulated in California during November and December to date and the 5.8 million in Iowa have been accounted for. Any delay in posting accurate and updated data, during fall outbreaks, should be avoided given the importance of weekly flock numbers in pricing. Accurate current values for both the producing and total flocks are required by farmers, packers, breakers and buyers.

Following a temporary agreement between the U.S. Maritime Alliance (USMX) and the International Longshoremen’s Association (ILA) to defer a strike called for November, there has been no meaningful progress in negotiations. Although some points in contention have been resolved, the major stumbling block is introduction of automation that threatens job security.

Shippers face the prospect of a strike on January 15^th, an event that would cripple ports from Maine to Galveston and disrupt supply chains and will cost U.S. consumers and the economy.  The potential impact of a strike was evidenced by a three-day demonstration in October. 

A consortium of shippers and potentially affected companies has addressed a letter to the president of the ILA, Harold Daggett and the CEO of USMX, David Adam urging them to resume negotiations and conclude a satisfactory agreement.  Concessions will obviously have to be made and the time for vacillation has passed. 

Contrary to previous Republican administrations that have invoked the Taft-Hartley Act in the face of a strike, President-elect Trump has sided with the Union and is exercising his infinite ability to persuade the USMX to make concessions on automation. He stated “The amount of money saved instead of employing more workers is nowhere near the distress, hurt and harm it causes for American workers”

The USMX believe that automation is required to increase the speed and volume of loading and unloading containers from vessels that will increase job opportunities in the future.

Let us hope that a strike will be averted as it will be disruptive and ultimately costly to all stakeholders.

Dr. Lisa Santora, Public Health Officer for Marin County, California has urged consumers to avoid raw milk products.  This follows a suspected case of H5N1 influenza in a child that consumed milk from raw milk dairy.  The child recovered, but laboratory evaluation of specimens failed to confirm that the provisional diagnosis. This does not necessarily exclude the possibility of H5N1 infection since demonstration of viral RNA by PCR depends on the presence of the virus at a time when samples are obtained.   California has recorded 32 confirmed cases of avian influenza H5N1, mainly in workers involved in depopulation of flocks or milking cows in herds known to be infected with H5N1.  The affected child did not have a history of exposure to either live dairy cattle or poultry.  The Santa Clara County Public Health Agency demonstrated the presence of viable H5N1 virus in raw milk supplied by Raw Farm in late November leading to a recall.

As bovine influenza-H5N1 is prevalent in California dairy herds with more than 640 having been identified mainly through mandatory bulk milk surveillance.  Although infected lactating cows generally recover from transient infection within two weeks, milk yield and quality may be irreversibly affected. In California, cattle in affected herds subjected to heat and other stress showed elevated mortality.

USDA has demonstrated that pasteurization effectively inactivates H5N1 virus.  Pasteurization will also eliminate Salmonella, Listeria, E. coli, Campylobacter, and other bacterial pathogens.

Along with public health experts, Dr. Santora was careful to express the opinion that risk to the public remains low since there is no evidence of contagion (human-to-human spread).

Evaluation of viral isolates from affected poultry and dairy workers has demonstrated a mutation that allows the virus to attached to human respiratory cells.  Additional mutations would be required to create a zoonotic strain that is also contagious among humans. 

Suppression of infection in poultry flocks and dairy herds will limit the probability of mutations.  Biosecurity has proven to be less than totally effective and obviously should be reinforced by vaccination as applied in China, Mexico and France.

Consumption of raw milk is associated with a disproportionate probability of infection with known bacterial pathogens compared to pasteurized fluid milk and derived products including cheese.

Given the “freedom to be infected” principle, adults who are eiter informed or ignorant of risks can make their own choice as to consumption of raw milk.  Supplying raw milk to children is effectively a form of abuse.

The Hong Kong Center for Health Protection reported two cases of H9N2 avian influenza in infants.  The cases were diagnosed in Guizhou and Guangxi Provinces in late October and early November respectively.

According to the ProMED posting H9N2 is prevalent in poultry raised in both provinces and is accepted as a zoonotic infection.  The route of exposure involves sale of chickens and ducks in live bird markets in both urban and rural areas. Authorities have promoted or mandated H9N2 vaccine for poultry in many areas to suppress infection and reduce infection of human contacts.

It is noted that China documents avian influenza in human contacts and in wild birds but apparently by some miraculous mechanism does not encounter avian influenza in commercial flocks. Accordingly there are no reports of either H5 or H7 outbreaks to WOAH.

Japan along with Taiwan, the Korean peninsula and southern China are seasonally impacted by H5N1 avian influenza as a result of northward and southward migration of marine birds and waterfowl.

Asian nations have been affected by avian influenza with H5N1 predominating over the past three years. Japan recently disclosed to WOAH an outbreak involving 1.2 million birds in a large broiler-growing farm that occurred in mid-October.  The reason for the delay in officially reporting the case is unknown.  Since September, Japan has experienced twelve major cases of avian influenza.

If the fall outbreaks continue into winter, Japan will be forced to import both shell eggs and egg liquids.  The U.S. supplies a considerable proportion of the requirements for egg liquids with this nation as our major export customer.  The question regarding shell eggs is less promising given current domestic prices following our inability to control avian influenza and the availability from other exporters including Brazil, Thailand and even China.

Hy-Line North America has installed Cheggy equipment produced by Agri Advanced Technologies of Germany in their hatcheries in Texas and Iowa.  The technology applies hyperspectral imaging to distinguish between male and female embryos based on feather color at 13 days of incubation.

The Cheggy system unveiled on December 10^th in the U.S., joins installations in seven E.U. nations.  An installation with a footprint of approximately 300 square feet operates at 25,000 hatching eggs per hour and is compatible with current U.S. installations and procedures.

The Cheggy installations are infinitely less expensive and technologically simpler than alternatives requiring abstraction and assay of allantoic fluid for estrogen, denoting a female embryo.

In-Ovo sexing is a response to pressure exerted by animal welfare activists against destruction of cockerel chicks.  Humane euthanasia of chicks is possible but misplaced sentiment has driven the initiative.  The underlying motivation for advocates of In-Ovo sexing has less to do with welfare than it is opposition to intensive livestock production.  It is axiomatic that extreme welfare advocates can never be placated and very soon the question of gender discrimination will arise together with the demand that In-Ovo sexing be conducted at an ever earlier stage in incubation.  This could be achieved applying a system developed in Israel but would require insertion of a cassette of genes at the grandparent level. This is obviously resisted by primary breeders on the basis of genetic modification. 

It is noted that the Cheggy system installed in the U.S. does not include the optional unit that euthanizes embryos by electrocution before disposal of embryonated eggs, as required by convention in some E.U. nations.

In-Ovo sexing will have limited application in the U.S. and will be confined to companies marketing eggs with claims for welfare and sustainability. Obviously in-ovo sexing with disposal of male-embryo bearing eggs does not provide any tangible benefits to consumers but will be reflected in a differential in-shelf price.

Iceland reported an outbreak of H5N5 avian influenza in a small meat turkey flock in the southern region of the nation.  Concurrently, a similar isolate was identified in a seagull near Reykjavik and in two other birds in the north and southeast quadrants of the nation.

H5N5 has also been isolated from farms in northern England and Norway, respectively.

It would appear that H5N5 is disseminated by migratory marine birds in their westward movement. In 2022 changes in migratory patterns, possibly associated with global warming allowed migratory birds to transmit H5N1 from Scandinavian nations westward via Iceland and Greenland to the province of Labrador. This established a new route of introduction to the North American continent.  Obviously, surveillance of wild birds and commercial poultry in coming months will indicate whether H5N5 will emerge as a strain of commercial significance.

Costco has a reputation as a benevolent employer paying above-average wages and providing liberal benefits to maintain a stable and productive workforce and to project a favorable image to customers.

The Teamsters Union representing 18,000 workers nationwide is now in active conflict with the Company.  Following allegations that Costco was violating federal law and attempting to undermine the collective bargaining process, the Teamsters filed charges of unfair labor practices against the Company. This is considered to be standard procedure, along with demonization of management and company policies leading up to negotiations. To stimulate involvement among ‘rank-and-file’ union officials organized a rally on December 10^th in Long Beach, CA. The Teamsters maintain that the worker friendly orientation of the company has deteriorated as Management is influenced by concerns over profitability.

The National Master Agreement between the Teamsters Union and Costco will expire on January 31, 2025, and accordingly the Union is establishing a strong base for collective bargaining. The Teamsters contend that Costco has rejected 98 percent of a series of proposed conditions to be considered. These include seniority, paid family and bereavement leave, workplace surveillance and freedom from harassment over union activities.

An 18-year-old man has been hospitalized with H5 influenza causing severe pneumonia.  The patient is from the Mekong Delta region and was in contact with a flock of poultry diagnosed with H5N1 avian influenza following high mortality. The most recent case case of human H5N1 in Vietnam was reported in March. 

Virologists have identified a reassortant H5N1 within the greater Mekong region that infects both poultry and humans.  The isolate combines genes of clade 2.3.2.1c that has circulated for years in Asia with the more recent clade 2.3.4.4b introduced by migratory birds and now endemic in poultry since 2022.

According to Will Coggin at Consumer Freedom, HSUS may be subject to future IRS scrutiny.  During April 2011 Representative Billy Long (R-District 7, MO) together with Congressional colleagues addressed a letter to the then Inspector General of the U.S. Treasury requesting an investigation of the Humane Society of the United States (HSUS).  The request was based on blatant political involvement and lobbying by HSUS in matters relating to legislation in the State of Missouri.

Former Congressman Billy Long who served in the House from 2011 to 2023 is nominated as for the position of Commissioner of the Internal Revenue Service.  If confirmed, as expected, he could renew his concern over the HSUS subjecting the ‘charity’ to a review with respect to its tax-exempt status.

Response to the nomination of Billy Long, a real estate developer and auctioneer to head an agency with 85,000 employees and $12 billion budget has been mixed with support from conservative legislators but with expected criticism from the left.

Novolex a prominent packaging company financed by Apollo Global Management has agreed to purchase Pactiv Evergreen for $3.2 billion plus debt in a transaction valued at $6.7 billion.  The purchase price of $18 per share represents a 23 percent premium to the Friday December 6^th closing price. The transaction should be completed before mid-2025 at which time Pactiv Evergreen will become a privately held company.  Novolex is based in Charlotte, NC. and produces a range of packaging products for the food service, carryout and industrial markets.

A representatives of Apollo Global Management noted, “As the packaging industry continues to evolve bringing together these two talented teams will better position the combined company with enhanced and complementary capabilities, to meet shifting consumer demands and provide the highest quality products and services to customers.

Pactiv manufactures cartons and packaging for the U.S. egg and related food industries.

According to Numerator, a market research company, each U.S. household purchases one or more private label grocery items each week.

Emerging private brands include Better Goods by Walmart and Deal Worthy in Target stores.  Both brands have grown rapidly since their early launch with triple digit annual expansion albeit from a small base. Competing chains with a high proportion of private label items include Aldi with 80 percent of sales volume, Trader Joe’s at 70 percent and Costco with 35 percent.  Walmart and their warehouse subsidiary Sam’s Club have the potential to expand with 31 and 34 respectively of sales volume.

Nearly half of consumers claimed to have purchased private label products in 2024 in response to inflation and the need to remain within budget.  Almost two-thirds of those surveyed considered that private label brands provide above-average value.  A surprising finding was that only one-third of the respondents felt that private label brands were equivalent to their name-brand competitors.  This observation is at variance with alternative surveys in which consumers expressed satisfaction with the quality of private brands and appreciation of lower prices. 

On December 12^th Costco Wholesale Corporation (COST) posted results for Q1 FY 2025 ending November 24^th 2024. The Company exceeded the consensus for earnings and revenue. Increased membership fees boosted revenue for the most recent quarter. COSTCO is the leading club chain serving as a bellwether for omni-channel warehouse in-store and on-line buying. The Company is a barometer of consumer confidence, offering groceries, clothing, household necessities in bulk in addition to discretionary appliances, recreational, luxury and electronic items.

For the most recent quarter, the Company earned $1,798 million on revenue (including fuel and membership fees) of $62,151 million with a diluted EPS of $4.04. For the corresponding Q1 of FY 2024 ending November 26^th, Costco earned $1,889 million on equivalent revenue of $57,799 million with a diluted EPS of $3.58.  Results for Q1 2024 included a tax benefit of $44 million.

For Q1 2025 revenue was 7.5 percent higher than in Q1 FY 2024 and net earnings were up by 13.2 percent. Gross margin for Q1 FY 2025 was 11.3 percent, compared to 11.0 percent for the corresponding quarter in FY 2024. Operating income attained 9.4 percent, up from 9.3 percent in Q1 FY 2024, despite increased freight, transport, wages and utilities.

Comparable global same-store sales for Q1 2025 (excluding fuel and foreign exchange) attained 7.1 percent in Q1 2025. U.S. same store sales were up 7.2 percent; Canada by 6.7 percent and the Other International category, by 7.1 percent. E-Commerce was up by 13.0 percent.

Costco raised membership fees as expected in Q4 2024 with revenue in the most recent quarter reaching $1,166 million. At the end of FY 2024 there were 137 million members with 25.9 percent or 35.4 million at the Executive Level accounting for 74 percent of sales.

On November 24^th Costco posted total assets of $73,386 million. Long-term debt and lease obligations attained $10,646 million. Costco had an intraday market capitalization of $441,600 million on December 12^th. COST trades with a forward P/E of 54.6 and has ranged over the past fifty-two weeks from $630.30 to $1,007.80 with a 50-day moving average of $920.75. Costco closed pre-release at $988.68 on December 12^th but fluctuated in after-hours trading over a one percent range. Twelve-month trailing operating margin was 3.8 percent and profit margin 2.9 percent.  The Company generated a return on assets of 8.4 percent and 30.3 percent on equity. Costo share price is up 50 percent year-to-date

At the end of the recently completed quarter, Costco operated 897 warehouses. There are 617 in the U.S; 109 in Canada; 41 in Mexico; 33 in Japan; 29 in the U.K. and 65 others in seven other nations among the E.U., Asia and Australia. This was a net increase of 7 warehouses during Q4.

Following the second restatement of earnings and adjusted intersegment transactions, Archer Daniel Midland Company (ADM) is facing investigation by both the Department of Justice and the Securities and Exchange Commission.  At issue is the apparent manipulation of costs and revenue among operating units between 2018 and 2023 to the benefit of the Nutrition Segment. It is alleged that the Carbohydrate Solutions and Agricultural Service and Oil Seeds components of the Company transferred products at preferential cost to Nutrition to boost the profitability of this operating segment.  This in itself could be regarded as an internal company matter having bearing on corporate strategy, structure, use of assets, and compensation of managers. A line was crossed by CEO, Juan Luciano, who promoted the future of the Nutrition segment that he characterized as a potential future driver of profitability.  The Nutrition unit was intended to develop specialty ingredients for human nutrition, and animal feed.

Apparently, ADM pegged bonuses to paper profitability of the segment, resulting in predictable distortions of interdivision profit.  The SEC inquiry is intended to determine whether shareholders were misled.  The Department of Justice probe will determine whether there was any evidence of conspiracy to commit fraud or deliberate misrepresentation.

The distortion of intersegment costs boosting Nutrition did not materially affect the company bottom line following a restatement of transactions.  In commenting on the sequence of events, Bruce Dubinsky, a forensic accountant, stated, “If companies make accounting adjustments to boost earnings of a division for any reason, whether for executive compensation or because they have touted the unit as the future of the company, it goes from puffery to fraud.”  According to Reuters, ADM employees confirmed that they were pressured by senior management to favor Nutrition and to meet profit forecasts that were regarded by insiders as unrealistic.

Monish Patolawala, recruited in July as Executive Vice President and CFO, has pledged to “make integrity and accuracy in our internal controls and financial reporting a top priority”.  ADM has been and continues to fully cooperate with the Department of Justice and the U.S. Securities and Exchange Commission.

It is apparent that CEO Luciano placed considerable emphasis on the success of the Nutrition segment that even became a 2022 Harvard Business School case study.  Evidently, Luciano misread the future of plant-based protein and was wrong in regarding the unit as a future major contributor to profit. It is now up to Federal agencies to determine if he and his subordinates contravened laws. At the very least the Board should be questioning his judgment, possible complicity in creative accounting and the culture of the company under his leadership. Canning Vikram Luther as a scapegoat in January would be an inadequate response. Clawback of inappropriately earned bonuses is suggested in part to compensate shareholders for substantial losses sustained when the news of the accounting irregularities surfaced. As the Brits would say “ADM has form,” given their involvement in collusion to fix the price of lysine three decades ago resulting in jail time for some executives and a $100 million fine.  

REVIEW OF NOVEMBER 2024 EGG PRODUCTION COSTS AND STATISTICS.

Commencing in January 2024 the EIC justifiably separated the production costs and unit revenue values for eggs derived from caged and cage-free flocks. Accordingly, EGG-NEWS will continue to summarize data but will consolidate production and export statistics for the U.S. egg industry as a total and compare financial data for the two shell-egg categories.

NOVEMBER HIGHLIGHTS

• November 2024 USDA ex-farm blended USDA nest-run, benchmark price for conventional eggs from caged hens was 364 cents per dozen, up 108 cents per dozen or 42.2 percent from the October 2024 value of 256 cents per dozen. For comparison, average monthly USDA benchmark price over 2023 was 146.0 cents per dozen with a range of 323 cents per dozen in January down to a low of 57 cents in May. Stock levels and prices prior to the onset of flock depletions due to HPAI indicated a relative seasonal balance between supply and demand. Future nest-run and wholesale prices will be largely dependent on consumer demand for shell eggs and products and the rate of replacement of pullets and hens depleted due to HPAI. Other considerations include diversion to shell sales from the egg-breaking sector in an interconnected industry.
• Fluctuation in wholesale price is attributed in part to the amplification of upward and downward swings associated with the commercial benchmark price discovery system in use. Highly pathogenic avian influenza has emerged as a consideration with resumption of migration of waterfowl. Approximately 30 million hens and at least 2.0 million pullets have been depleted year to date.
• November 2024 USDA average nest-run production cost for conventional eggs from caged flocks over four regions (excluding SW and West), applying updated inputs was almost unchanged from October at 74.0 cents per dozen. Approximately 60 cents per dozen should be added to the USDA benchmark nest-run cost to cover processing, packing material and transport to establish a realistic price as delivered to warehouses.
• November 2024 USDA benchmark nest-run margin for conventional eggs attained a positive value of 290.0 cents per dozen compared to a revised positive margin of 181.4 cents per dozen in October 2024. Average nest-run monthly margin over 2023 was 64.2 cents per dozen compared to 155 cents per dozen in 2022. This differential was mainly due to higher prices following HPAI-depletion of flocks. It is emphasized that the U.S. benchmark price reflects nest-run conventional eggs.
• The October 2024 national flock in production (over 30,000 hens per farm) was stated by the USDA to be up 2.7 million hens (rounded) to 296.4 million compared to the revised September 2024 value of 293.7 million. Approximately 3.0 million hens returned to production from molt in October together with projected maturation of 21.5 million pullets, with this number offset by depletion of an unknown number of spent hens.
• October 2024 pullet chick hatch of 27.5 million was up 3.4 percent or 0.9 million chicks from September 2024.
• October 2024 exports of shell eggs and products combined were down 12.9 percent from September 2024 to 404,000 case equivalents representing the theoretical production of 5.4 million hens. Canada and the Caribbean nations represented 95 percent of shell egg exports of 223,000 dozen based on need and price.

TABLES SHOWING KEY PARAMETERS FOR NOVEMBERE 2024.

Summary tables for the latest USDA November 2024 flock statistics, costs and unit prices made available by the EIC on December 9^th 2024 are arranged, summarized, tabulated and compared with values from the previous November 8^th 2024 release reflecting October 2024 costs and production data as applicable. Monthly comparisons of production data and costs are based on revised USDA values.

VOLUMES OF PRODUCTION REFLECTING THE ENTIRE INDUSTRY

*USDA Revised

• Revised USDA/EIC Note 1. Texas excluded to maintain confidentiality

PROPORTION OF U.S. TOTAL HENS BY STATE, 2024¹

Based on a nominal denominator of 290 million hens in flocks over 30,000 covering 95 percent of the U.S complement.

USDA has amended inclusion of specific states in regions and eliminated Texas data to protect confidentiality of Company flock

Sizes

1. Values rounded to 0.1%

Rate of Lay, weighted hen-week (USDA) 81.8% November 2024. 81.3% October 2024

*Revised USDA

*Revised, using data from USDA Livestock, Dairy and Poultry Outlook November 15^th 2024 taking into account demand from the food service sector and presumably including the effect of HPAI depopulation.

The APHIS Website documenting outbreaks of HPAI confirmed a cluster of cases involving 1.7 million hens in Merced County, CA. on December 5^th. This follows previous outbreaks among turkey, broiler growing and egg farms in the state and following outbreaks in Washington State and Oregon and with concurrent cases in British Columbia associated with fall migration of waterfowl in the Pacific Flyway. An added complication in 2024 is possible extension from infected dairy herds in proximity to poultry farms.

The latest reported outbreak on December 9^th involved a complex with 4.5 million hens in Sioux County, IA. The production of this farm was contracted to Michael Foods a subsidiary of Post Holdings. According to an SEC-mandated disclosure the affected complex represented 12 percent of controlled production for Michael Foods. This case suggests dissemination of H5 virus in the Mississippi Flyway. A second complex in Sioux County is awaiting confirmation of the diagnosis

Additional details will be posted when available including:-

• whether pullets were affected,
• the results of whole genome sequencing of the H5N1 isolate,
• duration of  depopulation of the complex supervised by APHIS
• results of zonal surveillance of poultry flocks including trapped wild birds and mammals
• findings from epidemiologic investigations to determine the route of infection.

Export of Shell Eggs and Products, January-October 2024.

The volume of exports of shell eggs is conditioned by the domestic needs of importers, price against competitors and regulatory disease and logistic restraints. The effect of price is demonstrated by the 182 percent drop in volume of shell egg exports from 2021 (198 million dozen) to 2022 (70 million dozen). Due to depletion of flocks in 2023, export prices increased 113 percent from $1.02 per dozen to $2.16 per dozen reflecting domestic prices. Depressed exports persisted in 2023 with 90 million dozen shell eggs exported at an average price of $1.80 per dozen. Losses from HPAI that rose in the last quarter led to a rise in domestic price. This situation persisted through the first half of 2024 but with prospects for improved volume based on prices stabilizing moderately above seasonal levels through the 4^th quarter.

It is probable that lost markets other than in the USMCA and Caribbean could eventually be reclaimed but not over the intermediate term. Sporadic and short-term exports may be made to various nations based on supply disruption caused by HPAI or other factors.

USDA-FAS data collated by USAPEEC, reflecting export volume and values for shell eggs and egg products are shown in the table below comparing 2024 with 2023:-

U.S. EXPORTS OF SHELL EGG AND EGG PRODUCTS DURING JANUARY-OCTOBER 2024 COMPARED WITH 2023

SHELL EGGS

Shell egg exports from the U.S. during the first ten months of 2024 declined by 8.3 percent in volume but was up 15.6 percent in total value compared to the corresponding months in 2023. Unit value increased by 26.4 percent to $2.30 per dozen compared to the corresponding period in 2023.

Shell egg exports from the U.S. during October 2024 declined by 13.2 percent in volume to 7.2 million dozen but were higher by 65.1 percent in total value to $17.5 million compared to the corresponding month in 2023. Unit value increased by 87.5 percent to $2.40 per dozen compared to October 2023.

Canada was the leading importer of shell eggs during the first ten months of 2024, with 50.2 million dozen representing 72.6 percent of volume and 73.2 percent of the total value of U.S. shipments of shell eggs. Unit price over January-October 2024 was $2.32 per dozen compared to $2.14 per dozen for all consignments in January-October 2023. Imports by Canada are driven by consumer demand balanced against availability through the controlled supply situation. This structure inhibits flexibility, necessitating imports from the U.S. to supply shortfalls especially when losses occur due to HPAI or under conditions of high demand. This model assures the Nation’s approximately 1,000 independent producers a stable income but is supported by higher prices to consumers. During October 2024 Canada imported 5.5 million dozen up 37.5 percent over the corresponding month in 2023. Value was up 165 percent to $13.5 million. Unit value was 90.6 percent higher to $2.45 per dozen.

The Caribbean Region (Bahamas, Netherlands Antilles, Cayman Islands, and others) was a distant second in shell egg imports from the U.S. valued at $26.1 million during January-October 2024, with 11.4 million dozen representing 16.5 percent of volume and 16.4 percent of the total value of U.S. shipments of shell eggs. Unit price over January-October 2024 was 13.5 percent higher to $2.29 per dozen.

Mexico was a distant third-ranked importer of shell eggs over January-October 2024 based on a volume of 2.0 million dozen representing 2.9 percent of export volume and 2.3 percent of value. Unit value of $1.80 per dozen is compared to an average value of $2.30 per dozen for all exports. During October 4^th-ranked Mexico imported 0.2 million dozen shell eggs from the U.S. valued at $0.4 million principally as breaking stock.

EGG PRODUCTS

The total volume of exported egg products during the past ten months of 2024 decreased 15.3 percent to 21,193 metric tons compared to January-October 2023. Total value of $95.8 million was lower by 12.8 percent compared to January-October 2023. Unit value increased by 3.0 percent to $4,522 per ton compared to January-October 2023. During 2023 the U.S. exported 29,814 metric tons of egg products valued at $134.3 million with a unit price of $4,505 per metric ton. Fluctuation in unit price reflects the composition of exports and the relationship between World supply and demand. Ukraine is now restrained in production but India continues as a significant exporter.

Japan was the leading importer by volume of U.S. egg products during January-October 2024 receiving 6,196 metric tons from the U.S. valued at $28.2 million representing 29.2 percent of volume and 29.4 percent of value with a unit price of $4,551 per metric ton. Volume for January-October 2024 was down by 31.5 percent and value was lower by 36.2 percent compared to the corresponding months in 2023. During October 2024 Japan imported 633 metric tons, down 9.4 percent over the corresponding month in 2023. Value was down 21.1 percent to $3.0 million and unit value was 12.8 percent lower at $4,739 per metric ton. During 2023 Japan imported 10,352 metric tons of egg products from the U.S., valued at $49.9 million. With the conclusion of a bilateral trade agreement, the U.S. should no longer be at a competitive disadvantage with respect to the E.U.

Mexico was the 2^nd ranked importer from the U.S. during January-October 2024 based on a volume of 4,193 metric tons with a value of $16.7 million, representing 19.8 percent of volume and 17.4 percent of the total value of U.S. exports of egg products. Exports to Mexico were up by 12.3 percent in volume but 9.7 percent lower in value compared to January-October 2023. The unit value of $3,982 per metric ton can be compared with the average unit value for U.S. exports of all egg products at $4,521 per metric ton. During October 2^nd- ranked Mexico imported 340 metric tons valued at $1.9 million. Volume was 153.7 percent higher and value was 137.5 percent above October 2023 achieving a unit value of $5,588 per metric ton.

Canada was the 3^rd-ranked importer over January-October 2024 based on a volume of 3,169 metric tons with a value of $12.7 million. Canada represented 15.0 percent of volume and 13.2 percent of value with a unit price of $4,008 per metric ton. During October Canada was 4^th- ranked as an importer with 253 metric tons representing 15.9 percent of exports of egg products down 25.0 percent from September 2023. Value was $1.8 million or 22.6 percent of the monthly total, down 25.1 percent from October 2023 with unit revenue of $4,743 per metric ton. Volumes shipped reflect restoration of the institutional and food service sectors. The relative availability of domestic product in Canada is currently adequate but with prospects of increased need for imports due to HPAI outbreaks.

The E.U.-27 maintained 4^th-ranked position among importers of U.S. egg products over the past ten months of 2024 with 2,128 metric tons. Value was $16.8 million with a high unit price of $7,895 per metric ton reflecting product mix. During October the E.U. imported 320 metric tons of egg products valued at $2.1 million with a unit price of $6,402 per metric ton, up 124.7 percent in volume but down 8.7 percent in value.

South Korea was ranked 5^th among importers of egg products during January-October 2024 with a volume of 1,358 metric tons. Export value was $5.5 million with a unit value of $4,050 per metric ton. Comparing these values with the corresponding months in 2023, volume was 94.6 percent higher and value was up by 48.7 percent. Most flocks in South Korea have been restored to production after depopulation following 2022-3 outbreaks of HPAI. Import volume will be influenced by the trend in flock depletions. South Korea imported 44 metric tons during September 2024 but no product since. During 2023 South Korea imported 1,141 metric tons valued at $5.3 million. Depending on severity, the return of HPAI may result in a disparity between local availability and demand requiring imports in 2024 as in 2022.

COMMENTS

Exports to Canada and Mexico combined in 2022 amounted to $126.5 million in value equivalent to 47.5 percent of the total value of shell eggs and products shipped. During 2023 exports valued at $150.7 million represented 50.8 percent of shell egg and egg products amounting to $296.5 million. Canada represented 59.0 percent of the $162.2 million for shell eggs and 10.3 percent of egg products valued at $121.2 million, consigned during 2023, emphasizing dependence on this USMCA partner. Over the past ten months of 2024 the USMCA imported shell eggs and products valued at $149.4 million. This represented 58.6 percent of all U.S. egg and product exports valued at $254.8 million.

Aspirational volumes of exports in excess of five percent of domestic production are unrealistic. The E.U., Japan, South Korea and Taiwan will indent according to their needs for undifferentiated shell eggs and products based on landed price in a competitive world market. Purchase decisions for commodities are determined by FOB price, freight, duty and broker margins. Shell eggs and the various categories of egg products are essentially commodities and generally do not respond to promotion. The recent appointment of a manager responsible for promoting exports and trade-related missions (‘junkets’) are inconsistent with prudent use of check-off funds. This opinion is based on an understanding of the factors motivating imports comprising need and price. The reality is that U.S. exports are heavily concentrated among our two USMCA partners in addition to the Caribbean region based on proximity and price.

Exports will be dependent on the willingness of importers to accept the World Organization for Animal Health (WOAH) principle of regionalization (zoning) in the event of outbreaks of exotic Newcastle disease or isolation of either H5 or H7 avian influenza (AI), in commercial flocks, irrespective of pathogenicity. Most importing nations are now applying regionalization and permitting imports on a zonal, county or state-exclusion basis following H5 or H7 AI infection. Canada and the U.S. operate according to a 2018 bilateral agreement to maintain trade in the event of outbreaks of catastrophic exotic diseases including HPAI and END.

Generally pasteurized egg products should not be subject to any embargo imposed following reports of AI or Newcastle disease in a region.

Kroger-Albertsons Merger Cancelled Following Adverse Court Rulings

On December 10^th U.S District Judge Adrienne Nelson issued a temporary injunction at the request of the Federal Trade Commission, blocking the proposed merger of The Kroger Company with competitor Albertsons Companies. King County Washington Superior Court Judge Marshall Fergusson ruled the proposed merger as "unlawful" 

Informed observers previously indicated that in the event of adverse verdicts the transaction would not proceed. Accordingly Albertsons Companies has filed a lawsuit against intended partner Kroger claiming that there was insufficient action to advance the transaction in the face of opposition by state Attorneys General, unions and the SEC.. Apart from  the substantial legal fees expended Kroger is now liable for a $600 million breakup penalty plus damages. The question arises as to the continued tenure of Rodney McMullin as CEO of the Kroger Company given his overreach. It appears that egg producers have dodged a bullet since the merger would have created a poweful buying force to the detriment of the Industry.

Previous postings on the topic can be retrieved by entering “Kroger” in the SEARCH block.

In a December 5^th release, Dollar General, Inc. (DG) announced Q3 FY 2024 results for the period ending November 1^st. The Company exceeded estimates on revenue and earnings and adjusted FY 2024 outlook with an evident impact on share price.

For Q3 Dollar General Inc. posted net income of $197 million on total revenue of $10,183 million with a diluted EPS of $0.89. Comparable values for Q3 FY 2023 ending November 3^rd were net income of $276 million on revenue of $9,694 million with a diluted EPS $1.26.

Revenue was up 2.2 percent in Q3 2024 compared to Q3 2023. During the most recent quarter, Dollar General attained a gross margin of 25.9 percent (29.0  percent in Q3 2023) and an operating margin of 3.2 percent, down from 4.5 percent in Q3 2023.

For Q3 2023, consolidated comparable store sales, increased by 1.3 percent

The classification of revenue by category in Q3 FY 20234 comared to Q3 2023 comprised:-

• Consumables  including food*,   82.9%  up 6.4%
• Seasonal items,                             9.3%   unchanged
• Home products,                            5.1%   down 2.3%
• Apparel,                                        2.7%   down 1.2%

* not separated by category

In commenting on results, Todd Vasos, CEO stated, “ We are pleased with our team’s execution in the third quarter, particularly in light of multiple hurricanes that impacted our business,” He added, “While we continue to operate in an environment where our core customer is financially constrained, we delivered same-store sales near the top end of our expectations for the quarter. We believe our Back to Basics efforts contributed to these results, as we have continued to improve our execution and the customer experience in our stores.”

Vasos concluded, “Looking ahead, we are excited about our robust real estate plans for 2025. We believe our balance of new store growth and a significantly increased number of projects impacting our mature store base will further solidify Dollar General as an essential partner to communities in rural America, while strengthening our foundation to drive long-term sustainable growth and shareholder value.”

Dollar General is conducting a trial same-day delivery service presumably to compete with Walmart in certain areas.

Guidance for FY 2024 was adjusted including net sales growth of 4.7 to 5.3 percent; same-store sales growth of 1.1 to 1.4 percent; and diluted EPS, to a range of $5.50 to $5.90. Capital expenditure will attain $1,350 million for 730 new store openings, and 1,620 remodels.

During Q2 FY 2024 Dollar General opened a net 537 new stores. As of November 1^st the Company operated a total of 20,532 stores representing 166,169 square feet, a 5.1 percent growth for the quarter. Expenditure for property purchases and equipment during FY 2024 to date  attained $1,000 million  including new stores, remodels and upgrades to DCs, transport and technology.

Effective November 1^st 2024, Dollar General posted total assets of $31,461 million including $5,539 as goodwill and intangibles. The Company carried long-term debt and lease obligations of $15,869 million.  Dollar General attained a market capitalization of $1,794 million on December 9^th 2024 compared to $29,000 on January 31^st 2024. The share has traded over the past 52 weeks from $168.07 down to $72.12 with a 50-day moving average of $79.74. DG closed at $81.70 on December 4^th, pre-release, falling sharply on the December 5^th open but recovering at close to $79.16. Dollar General trades with a forward P/E of 12.6.  For the trailing 12-months the company posted an operating margin of 5.4 percent and a profit margin of 3.6 percent, returning 4.3 percent on assets and 20.9 percent on equity.

Ursula von der Leyen, Commission President of the European Union, traveled to Montevideo, Uruguay last week to finalize and sign the Mercosur-E.U. Agreement.  Implementation is, however, subject to approval by all member nations.  There is considerable dissension among the major western members of the E.U. as to the benefits of the trade pact.

Farmers in many nations are concerned over competition from lower-priced commodities including beef and poultry. It is claimed that exporters comprising the Mercosur Nations of Brazil, Argentina, Paraguay and Uruguay benefit from favorable production costs based on allegedly lower standards of environmental and welfare compliance and food safety. Effectively the cost differential is due mainly to lower labor and feed costs for livestock and poultry production although offset by ocean freight.

Farmers in France and the Netherlands are especially concerned over their viability in facing foreign competition with intensified domestic environmental restraints.  Germany, in contrast, has suffered from loss of markets in Russia and China and would benefit from the Mercosur Agreement as a major exporter of manufactured goods.

The Mercosur-E.U. Agreement is subject to approval by the European Parliament, a prospect that places ratification in question.

To offset losses in traffic, McDonald’s Corp. has embarked on a program of “Meal Deals”.  The company hopes that by increasing the ticket volume, albeit at a lower unit price, the increase in total sales will benefit both franchisees and the Company.

The “McValue” campaign in 2025 will extend the $5 “Meal Deal” and will introduce a Buy-one, add-one for an additional $1.

In contrast, Chipotle Mexican Grill has announced price increases amounting to approximately two percent across the board.  Margins have shrunk due to higher cost of beef and other ingredients with food, beverage and packaging costs amounting to 31 percent of sales during the third quarter of 2024. Chipotle has recently experienced consumer resistance to high prices.  The increase in ingredient cost was the subject of a recent exercise in “shrinkflation” documented in national media impacting image.

It remains to be seen whether reducing prices as initiated by McDonald’s and followed by other QSRs is more favorable to the bottom line than the expedient of raising menu prices as consumers are seeking value.

Mark Clouse, CEO of the recently renamed Campbell Company, resigned after a six-year tenure.  He will become President of the Washington Commanders, an NFL franchise.

During his six years at the helm of the company, Clouse restructured production and marketing, attracted new managerial talent, rationalized the product range and increased margins in the face of competition.

Mick Beekhuizen will replace Mark Clouse as CEO, advancing from his position as President of the Meals and Beverage Division.

He will face potentially shrinking margins due to inflation in ingredient costs. Farmers who supply ingredients will be forced to pay more for fertilizer, labor and capital equipment if the incoming Administration imposes tariffs on imported items.  Countervailing tariffs imposed by impacted nations will limit international sales of Campbell Company products.

Previous postings on EGG-NEWS described an outbreak of E. coli O157 in St. Louis County involving 115 cases with 13 hospitalizations. Patients attended events catered by a specific company including two high school band events, two funerals and a veterans’ dinner over the period November 6^th through 9^th, 2024.  To date 25 cases have been linked to the caterer by whole genome sequencing.

Leafy greens are suspected as the vehicle of infection.  Cases with matching genomes have been reported in Kansas, Illinois, the Dakotas, Ohio and Indiana with leafy greens, a consistent epidemiologic factor in outbreaks.

Despite FDA cooperation with associations representing producers of leafy greens in Arizona and California, it is evident that measures taken by producers with respect to decontamination of irrigation water and offsets from concentrated animal feeding operations have not reduced risk.

As previously stated, attempting to decontaminate vast quantities of irrigation water from pathogens in animal feces appears quixotic.  A positive kill step is required during processing, and prior to packaging.  Potential interventions include cold plasma or electron beam treatment or an effective bactericide without a toxic residue.  Pussyfooting around to develop corrective modalities that are “convenient” to producers will only perpetuate the problem of foodborne infection and will result in an ongoing incidence rate among consumers of both home-cooked, institutional and restaurant-prepared meals.  Limiting losses experienced by processors, the restaurant industry and HMOs requires a scientific and logical approach to resolution. The problem of contaminated leafy greens and other vegetables appears to be intensifying in both clinical and financial importance.

To offset flagging sales and declining margins, Conagra Brands is launching new items, extending discounts and reducing prices across brands including Birds Eye, Slim Jim and Healthy Choice.  Following the lead of other major food manufacturers, Conagra Brands is culling low-growth products.  Chef Boyardee is the latest brand to be placed on the block.  The range was acquired by Conagra in a $2.9 billion transaction with International Home Foods. 

Chef Boyardee was launched in 1928 by Chef Hector Boiardi and became an iconic brand.

Conagra Brands claim that there are potential buyers for the Chef Boyardee range of products including packaged food competitors and private equity.

According to the U.S. Fish and Wildlife Service, ‘Wisdom’ a Laysan albatross (Phoebastria immutablis) laid her 60^th egg at the Midway Atoll National Wildlife Refuge.  Her history is well documented having been banded as n mature bird at the refuge. It is estimated that she has flown 3 million miles in her life and outlived her first mate.

The longevity and prolonged egg production should serve as an inspiration for geneticists who are striving for a 100-week production cycle for domestic hens.

Irrespective of the proposed imposition of tariffs on imports from Mexico to the U.S., authorities in that nation are committed to expanding the Port of Manzanillo on the Pacific Coast. The port will have a direct connection to the National Ferromex railroad system with has equity participation by Union Pacific Railroad.

The Port of Manzanillo should be completed by 2030 and will have a capacity of 10 million containers annually, equivalent to the current volume through the Port of Los Angeles.

CPKC formed through a merger between Canadian Pacific and Kansas City Railroads is expanding rail links to Mexico including erecting a new bridge across the Rio Grande at Laredo, TX.

Executives among freight operators including CPKC are optimistic over continued trade between Mexico and the U.S.  This is based on the interconnection of industrial production as a result of ‘nearshoring’ in Mexico and the success of the trilateral USMCA that succeeded NAFTA in 2022.

Establishing efficient Pacific Coast ports in Mexico tied to the tri-national rail link could relieve congestion on West-coast U.S. ports.

According to data compiled by market research company Circana, consumer response to the Listeria outbreak a has reduced both volume and value of sales since the July 26^th announcement of Boar’s Head as the source of the outbreak.  Revelation of improper processing procedures in the Jarratt, VA. plant operated by Boar’s Head reduced confidence in the safety of deli meat notwithstanding the declaration by CDC that the outbreak was over. 

During October, sales volume of 60.8 million lbs. was down 7.7 percent from the corresponding month in 2023.  Value of deli meat sales declined 10.4 percent to $622 million.  Deli service lunchmeat was more impacted than prepackaged products. This category was down 12.9 percent in October 2024 compared to 2023.

When a major producer encounters a food safety related problem resulting in a widespread outbreak especially with fatalities, all producers suffer.  This was evidenced by the outbreak of SE in the fall of 2010 attributed to the gross mismanagement and deviation from the Final Rule on Salmonella attributed to an Iowa farm controlled by Jack Decoster and his family.  A sharp decline in the demand for eggs and a resulting drop in unit revenue resulted in a loss approaching $1 billion for the entire egg industry based on comparisons over corresponding months for the previous year.

Recent research on ferrets confirmed aerogenous spread of H1N1 influenza virus.  The quantum of virus shed by ferrets under controlled experimental conditions is a function of transmission efficacy.  Detection of viral RNA in air indicates the potential for aerogenous transmission of H5N1 infection from wild bird reservoirs congregating in the vicinity of farms. The aerogenous route of introduction of virus onto farms has been the subject of research in Holland and Taiwan and is widely accepted by U.S. poultry health professionals based on anecdotal reports and field observations.

It is reasonable to assume that large egg production complexes may be especially vulnerable to airborne infection due the volume of air entering houses under high rates of powered  ventilation. A three-level aviary house with 300,000 hens operated at 1cfm per lb. biomass would require displacement of 1.2 million cfm. If in practice aerogenous infection is a reality, even the most effective structural and operational biosecurity cannot provide absolute protection notwithstanding “protect the flock” posters and recommendations provided by APHIS speakers at regional and national meetings.

Martin Thompson has been appointed CEO of Nestle USA.  He joined the company in 2018 from Starbucks and was subsequently assigned the Nestle coffee portfolio.  Thompson was CEO of Ghirardelli Chocolate Company for the last six years of this thirteen-year tenure.

Steve Presley, CEO of Nestle Zone North America commented, “Martin was instrumental in doubling the Starbucks at home business globally serving consumers and introducing an innovation and growth mindset.” 

In a December 4^th release, Dollar Tree, Inc. (DLTR) announced Q3 FY 2024 results for the period ending November 2^nd 2024.  The Company exceeded expectations for sales and earnings. The holding company operates Dollar Tree and Family Dollar banners.

Dollar Tree Inc. posted net income of $233 million on total revenue of $7,568 million with a diluted EPS of $1.08. Comparable values for Q3 FY 2023 ending October 28^th were net income of $212 million on revenue of $7,309 million with a diluted EPS of $0.97.

Comparing the respective quarters, revenue was up 3.5 percent in Q3 2024. During the most recent quarter, Dollar Tree attained a gross margin of 30.9 percent (29.7 percent in Q3 FY 2023) and an operating margin of 4.4 percent, compared to 4.1 percent in Q3 2023.

For Q3, consolidated comparable store sales, increased by 1.8 percent, with Dollar Tree achieving 1.8 percent and Family Dollar, +1.9 percent. The Company posted a 1.5 percent increase in traffic and 0.3 percent in ticket.

In commenting on results, Mike Creedon Interim CEO stated “Our Dollar Tree and Family Dollar merchandising efforts produced tangible results, and our third quarter sales came in at the high-end of our expected range,” He added, “As an organization, our top priorities remain accelerating the growth of the Dollar Tree segment, completing the Family Dollar strategic review process, and unlocking value for Dollar Tree shareholders.”

During the investors’ call Creedon expressed concern over imposition of tariffs  noting possible responses including raising prices, dropping certain categories, pressuring suppliers for lower prices and changing product specifications.

Jeff Davis will step down from his role as the Company’s Chief Financial Officer.

Guidance for FY 2024 was upgraded from the Q2 report and included consolidated sales of $30,700 million to $30,900 million; a low-single-digit percent increase in comparable store sales and an EPS ranging from $5.30 to $5.50.

On November 2^nd 2024, Dollar Tree posted total assets of $23,333 million including $3,063 as goodwill and intangibles and carried long-term debt and lease obligations of $8,297 million.  DLTR had a market capitalization of $15,450  million on December 6^\th compared to $28,460 on January 31^st. The share has traded over the past 52 weeks from $151.22 down to $60.49 with a 50-day moving average of $67.49. DLTR closed at $73.05 on December 3^rd, pre-release, opening December 4^th at $76.02, up 4.1 percent but falling in trading to close at $73.81. Dollar Tree trades with a forward P/E of 11.6.  For the trailing-12 months the company posted an operating margin of 2.8 percent and a profit margin of negative 3.4 percent.  The company returned 4.6 percent on assets and negative 13.0 percent on equity over the past twelve months.

Effective December 4^th the company operated 15,500 stores (Dollar Tree, 8.621; Family Dollar 6,874). During Q3 the company continued renovations with 2,300 completed with conversion to multi-pricing strategy. During Q3 the company opened 249 new Dollar Tree and 6 Family Dollar stores. Responding to complaints from civic organizations Dollar Tree continued to add frozen and fresh foods to stores in areas deemed “food deserts”  

Dollar Tree is now evaluating the possible sale of the Family Dollar chain after recently completing a portfolio review. The parent company has closed 670 Family Dollar stores and has scheduled 370 locations for closure on termination of leases. The  Family Dollar banner was acquired in 2015 for $9 billion.

The U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) have jointly issued a Request for Information relating to date labeling of food products.  At issue are the terms “Sell by”, “Use by” and “Best by”.  The objective of the request for information is to gather comments from producers and consumers relating to date labeling in the context of food waste and cost.  Information will be obtained on consumer perceptions concerning the semantics of alternative approaches to date labeling.  This action was taken in accordance with the National Strategy for Reducing Food Loss and Waste.

The FDA Deputy Commissioner for Human Foods, Jim Jones, noted that there is considerable confusion as to home storage resulting in extensive food waste.  He noted, “The FDA is committed to doing all that we can to support informed and sound decisions that are good for U.S. consumers.”

 The USDA Under Secretary for Food Safety, Dr. Emilo Esteban, stated, “Through this Request for Information, we hope to learn more about how date labels are determined and whether they confuse consumers leading to needless food waste.”

USDA estimates that a typical family wastes $1,500 annually on discarded food. It is calculated that 17 million tons of wasted food is consigned to landfills each year by U.S. retail, restaurant and domestic sectors.

The FDA and USDA will allow 60 days for comments on 13 questions that appear in the Federal Register.

On December 5^th The Kroger Company (KR) posted results for Q3, FY 2023 ending November 9^th 2024. Kroger beat on earnings compared to consensus estimates but fell short of sales expectations and also reduced guidance for FY 2024.

 Kroger is the second largest retailer of groceries in the U.S. and is a pure supermarket play subject to the pressures of escalation in food costs, logistics and labor and the impact of inflation in common with all national and regional competitors. Kroger has announced the intention of acquiring competitor Albertsons Cos. This would create a merged enterprise with 5,000 stores. In late February the FTC filed to block the transaction that is opposed by the Attorneys General of seven states and both major national unions representing workers. To comply with anticipated regulatory pressure Kroger and Albertsons have proposed selling 579 stores in 18 states to C&S Wholesale Grocers for $1,900 million. This strategy is in question given the history of the bankruptcy of Hagen that divested stores to facilitate the acquisition of Safeway by Albertsons.  The outcome of the proposed merger will be the subject of rulings by a federal court in Oregon and state courts in Washington and Colorado. The change in Administration will result in different policies by the FTC on M & A and regulation of competition that may alter the prospects for the merger.

 For Q3 Kroger reported earnings of $618 million on sales of $33,634 million with a diluted EPS of $0.84. For the corresponding Q3 of FY 2023, Kroger earned $646 million on sales of $33,953 million with a diluted EPS of $0.88.  Comparing Q3 of 2024 with the corresponding quarter of FY 2023, sales were 1.0 percent lower; Gross margin increased from 22.0 percent for Q3 FY 2023 to 22.9 percent for the most recent quarter. Operating margin fell from 2.7 percent in Q3 2023 to 2.5 percent for the most recent quarter. For Q3 2023 S&G was higher by $252 million compared to Q3 FY 2023. The P&L statement for Q3 FY 2024 noted a $20 million loss on investments compared to a gain of $26 million during the corresponding quarter in FY 2023.

In commenting on quarterly results, Rodney McMullen CEO stated, "Kroger achieved strong sales results in the third quarter led by our pharmacy and digital performance, which reflects the strength and diversity of our model. We continued to grow total households this quarter by delivering exceptional value for customers, with low prices, personalized offers and great quality Our Brands products, all through a seamless shopping experience”.

Referring to the current economic situation McMullin noted “While we expect the macroeconomic environment to remain uncertain near-term, the strength of our model gives us confidence in our ability to deliver value for customers and invest in our associates, while generating attractive and sustainable returns for shareholders."  

Addressing opposition to the proposed merger with Albertsons Cos. he opined  "As we await the courts' rulings in the regulatory challenge to the merger, we remain confident in the facts and the strength of our position. The food industry has always been competitive and will continue to be after this merger. We are committed to closing this merger because bringing Kroger and Albertsons together will provide meaningful and measurable benefits – lower prices, secure jobs and expanded access to fresh, affordable food – for customers, associates, and communities across the country."

Kroger closed the sale of its specialty pharmacy business on October 4, 2024, for $464 million. The sale reduced total company sales in the third quarter by approximately $340 million, compared to the same period last year, and annualized sales will be approximately $3 billion lower going forward. KSP was a low margin business. As a result, the sale of the business increased both Kroger's gross margin and operating, general and administrative costs as a rate of sales. It had no material effect on operating profit.

The Company released adjusted FY 2024 Guidance:- 

• Identical Store Sales growth of 1.2 to 1.5 percent excluding fuel,
• Adjusted EPS of $4.35 to $4.45. Was $4.60 to $4.80 on September 12^th.
• Adjusted FIFO Operating Profit of $4.6 billion to $4.7 billion. Was $4.6 to $4.8 billion on September 12^th.
• Capital expenditure of $3,400 to $3,600 million,

Comparable same-store sales for Q3 advanced by 2.3 percent (excluding fuel) compared to Q3 FY 2022; Digital sales were up by 11.0 percent;

On November 9^th 2024 Kroger posted total assets of $62,418 million of which $3,815 million comprised goodwill and intangibles. Long-term debt and lease obligations amounted to $24,811 million.  

The Kroger Company had an intraday market capitalization of $43,340 million on December 5^th 2024.  The Company has traded over the past fifty-two weeks in a range of $43.51 to $61.37 with a 50-day moving average of $57.66. KR trades with a forward P/E of 13.0. On December 4^th 2024 KR closed at $60.19 pre-release but opened on December 5^th post-release at $55.71. KR recovered to $61.22 by 11H00 EST.

Twelve-month trailing operating margin was 2.0 percent and profit margin 1.9 percent.  The Company generated a return on assets of 5.8 percent and 24.3 percent on equity

At the end of FY 2022 The Kroger Company operated 2,726 stores with 2,252 pharmacies and 1,613 fuel centers, under 25 banners in 35 states and D.C. Kroger operates 34 food plants and 45 distribution centers with five Ocado fully automated fulfillment centers with as many as twenty planned.

Facing the reality of recurring droughts restricting passage of vessels through the Panama Canal, the Government is considering the Rio Indio dam project to supply a regular flow of water. It is projected that the additional flow from the dam would support year-round passage of 14,000 Panamax and Super Panamax vessels each year.  The canal provides 3.1 percent of the gross domestic product of Panama and is responsible for passage of 2.5 percent of world marine traffic.

Impediments to implementation of the project will include displacement of up to 2,500 residents of farmland and villages that would be inundated. This has generated both social and legal opposition to the project.  The proposed dam to be erected by the Panama Canal Authority would be almost ¾ of a mile in length and over 250 feet high.  The waterflow from the dam would allow up to 15 vessels to pass through the various locks in the canal each during the dry season.

According to Hein Schumacher, CEO of Unilever, it is intended to “slim down the rather eclectic portfolio of food brands with a focus on sauces, condiments and products for restaurants.”

Unilever has in excess of 400 brands worldwide and is undertaking a rationalization program to simplify its business model.  Products on the block include ice cream including Magnum and Ben and Jerry’s in the U.S. in addition to Unox soups and Conimex seasoning marketed in Europe.

Schumacher noted, “We are not conducting a fire sale” suggesting that brands would be disposed of at acceptable prices to the Unilever Board.

According to a CBS News investigation, contrary to claims, Starbucks is not consistently recycling plastic cups placed in bins at store locations. CBS News placed electronic trackers on cups at 36 locations. The survey included stores in San Francisco, Los Angeles, Denver, Dallas, Minneapolis, Chicago, Miami, Washington D.C., New York and Boston.

Fourteen cups were transferred to landfills, 13 to waste transfer stations, five to incinerators and four to Material Recovery Facilities.  Twenty-one of the tagged containers did not have reliable location information.  The study revealed that two cups deposited in New Jersey and Boston, respectively, were both transferred to a landfill in Alabama.

Jan Dell, a Chemical Engineer and Founder of The Last Beach Cleanup, a nonprofit, commented, “Starbucks is not telling the truth.”  He added, “When it comes to recycling, companies across the country and the world are lying about all those single-use plastics, claiming they are recyclable.”

In reality, only ten percent of existing Material Recovery Facilities are able to sort the plastic used for the Starbucks cup. Recycled polypropylene (# 5 plastic) has little commercial value with only KW Plastics in Alabama currently recycling the material into new plastic items.

Starbucks needs to address the issue or refrain from ‘Greenwashing’

In 2022, it is alleged that Kroger and Albertsons banners violated state no-poaching laws during a strike by workers at the King Soopers chain.  United Food and Commercial Workers Local 7 has filed the lawsuit on behalf of 18,000 grocery workers in Colorado.

According to the complaint, the Kroger Company and Albertsons Corp. entered into an agreement to reject employees from employment by their respective banners.  This alleged agreement was concluded during a 2022 strike.

Colorado Attorney General Phil Weiser has independently filed an antitrust lawsuit to block the Kroger-Albertsons merger and the State is also demanding $1 million in civil penalties.

The lawsuit filed by United Food and Commercial Workers claims recovery of loss wages and penalties for workers who are harmed “by a hidden and illegal deal between King Soopers, City Market and Safeway.”  In a joint statement by Kroger and Albertsons, the companies claim that litigation by the Colorado Attorney General mischaracterizes facts since there was no agreement between Kroger and Albertson’s subsidiaries.  The companies claim that workers have the right to seek employment at-will including competitors Walmart, Amazon, Costco and other retailers.

A decision on the Colorado filing to block the merger has yet to be handed down by Judge Andrew Luxen of the Denver District Court.  Decisions are outstanding in federal cases heard in Washington and Oregon by the Attorney General of Washington State and the Federal Trade Commission in the Oregon case.

Phylogenetic analysis of H5N1 virus isolates from elephant seals and terns demonstrated a distinct clade sharing similar mutations allowing infection of mammalian hosts.  It is presumed that migratory terns infected elephant seals along the coast of Argentina from 2022 to 2023 creating an epidemic involving marine mammals along the coasts of Brazil, Chile, Peru, Uruguay and Argentina.  The extent of mass mortality among marine mammals suggests contagion. This should serve as a warning in relation to possible emergence of a potentially zoonotic strain from poultry or dairy cows.

The possible introduction of tariffs on goods imported into the U.S. from Canada and Mexico will have implications for railroads operating among the three members of the USMCA.

In 2023, a merger created Canadian Pacific Kansas City Rail that operates 20,000 miles of track linking Atlantic and Pacific Canadian ports through to the Midwest and southward through Texas to industrial locations in Mexico.

Canadian Pacific Kansas City was predicated on the basis of unencumbered flow of commodities and manufactured goods and would capitalize on the respective agricultural and manufacturing potential of all three nations.

Optimists consider that the threat of tariffs by President-elect Donald J. Trump is an opening gambit prior to discussions to stem the northward migration of asylum seekers who are attempting to join the job market.  Investors in the railroad believe that even with some tariffs, traffic will not be diminished.  They cite data relating to 2018 through 2023 during which tariffs were imposed. Over the period freight value increased by 28 percent and volume was17 percent higher.  Prediction that revenue will continue after the inauguration is denoted by recovery of the CPKC share price since the November 5^th election. CPKC closed on election afternoon at $79.33 falling to $73.99 on November 15^th. Since this close the share price recovered to $77.06 on November 25^th. CPKC has demonstrated a 12-month range in price of $72.22 to $91.58 

Senator John Boozman (R-AR) currently the ranking member of the House Agriculture and Forestry Committee has called for “significant economic assistance” for farmers.  This is based on falling prices for commodities with concurrent increases in production costs. In support of economic assistance Senator Boozman stated, “Federal assistance must support agriculture and producers facing market losses and it needs to happen quickly.”

The 2023 Farm Bill has been delayed in both the House and Senate Agricultural Committees due to conflict in a closely divided Congress on the issues of price support, SNAP payments and eligibility.  Republican members of Committees in both chambers urged transfer of funds from social programs and environmental remediation to farm support with strong opposition from their Democratic colleagues leading to gridlock.

With the prospect of increased tariffs, especially on China and even our USMCA partners Canada and Mexico, all segments of agriculture will be at risk for falling prices and hence lower margins. 

Representative Glenn Thompson (R-PA) recently released the House version of the Farm Bill containing provisions for commodity support that according to the non-partisan Congressional Budget Office would sharply increase the national debt.

Ethics statements required in accordance with the Presidential Transition Act have now been completed by representatives of the incoming Administration.  Members of the transition team are required to conform to an agreement pledging avoidance of conflicts of interest.

Completion of this formality should allow transition in the Department of Agriculture. Ms. Brooke Rollins has been nominated as Secretary of Agriculture and should begin discussions with outgoing Secretary Tom Vilsack. 

Urgent issues include:-

• Control of avian influenza in the poultry and dairy industries,
• Trade conflicts, especially with imposition of proposed tariffs,
• Reorganization of responsibilities within the Department,
• Elimination of DEI and giveaway programs
• Assisting legislators in the 119^th Congress to resolve conflicts over the delayed Farm Bill.

In a recent note in Chemical and Engineering News*, Pryanka Runwal reported on a paper presented by Dr. Brian Foy of Colorado State University at the American Society for Tropical Medicine and Infectious Diseases Conference, on November 14^th 2024, in New Orleans

The paper described an innovative approach to suppress  Culex mosquitos that transmit West Nile virus.  Foy and collaborators coated birdseed with ivermectin incorporated in an inert polymer. The seed was made available to wild Passerine birds in garden feeders.  Blood levels of ivermectin measured in captured birds were adequate to kill mosquitos feeding on these reservoirs of arborviruses. Mosquito populations were reduced with detectable levels of ivermectin as determined among insects trapped in the vicinity of the 40 feeders that received treated feed.

*Runwal, P., Coated Seeds May Make Birds Mosquito-Killing Machines. C&EN, November 25, 2024

The Prime Minister of Canada and the Presidenta of Mexico have called for discussions following statements by the President-elect Donald J. Trump that his incoming Administration would impose 25 percent tariffs on goods imported from both nations that are Canada and Mexico, co-signatories to the USMCA.

An informal meeting recently took place between Justin Trudeau of Canada and the President-elect in Florida.  Dr. Claudia Sheinbaum of Mexico has warned of a mutually destructive trade war, inflation and other undesirable outcomes of a unilateral imposition of tariffs by the U.S.  Presidenta Sheinbaum has called for trilateral discussions to resolve trade issues.

Currently the U.S. imports live cattle from Mexico and has exported year to date 173,000 metric tons of beef and 850,000 metric tons of pork, respectively higher by 13 percent and 7 percent over the corresponding ten months of 2023.

The threat of high tariffs is regarded as an opening salvo for subsequent negotiations.  Major issues in contention include illegal entry into the U.S. across the southern border from Mexico by economic refugees from Central America.  The peripheral issue of smuggling of drugs does not directly relate to immigrants but is a function of interaction between cartels in Mexico and their compatriots in the U.S. some of whom are U.S. citizens

It is a reality that the manufacturing, agricultural and economic structures of the USMCA partners are intertwined, and that imposition of broad punitive tariffs would have unexpected and undesirable consequences including inflation with U.S. consumers ultimately footing the bill.

Costco has recalled organic pasture-raised, 24-count egg packs sold under the Kirkland Signature brand from 25 stores in mid-Atlantic and Southeastern states.

Eggs were packed by Handsome Brook Farms and amounted to 10,000 units inadvertently processed from a flock “potentially contaminated with Salmonella” presumably S. Enteritidis (SE).  The recall was posted by the Food and Drug Administration and relates to product packed on Julian Day 327 with a “use by date” of January 6^th 2025.

Presumably the incorrectly packed eggs were destined for breaking and pasteurization.

Decontamination of the soil of pasture suspected or known to have been contaminated with Salmonella is not possible. Subsequent flocks should be housed in decontaminated barns with impervious floors and not allowed access to contaminated pasture.  Product from the affected farm will have to be diverted from shell egg sales even if the flock passes the three sequential 1,000-egg sample assay that is grossly insensitive and colloquially referred to as “Salmonella roulette”.  Consumption of eggs containing SE bacteria introduced by the transovarial or transoviductal route may lead to infection of consumers if eggs are subjected to thermal abuse or are inadequately cooked.

U.S. District Judge Danny Reeves issued an injunction against the U.S. Department of Labor setting aside rules applicable to holders of H-2A visas in Kentucky, Ohio, West Virginia and Alabama.

The proposed rule comprised a modification and extension of the National Labor Relations Act that could potentially have allowed foreign workers under the H-2A program to unionize. Apart from creating an opportunity for collective bargaining rights, the Rule would have protected workers against exploitation, retaliation and unsafe working conditions. The ruling by Judge Reeves conforms to decisions in other federal jurisdictions covering 17 other states.  The injunction was based on the legal requirement for Congress to approve the changes.

In 2022, 370,000 workers were admitted to the U.S. under the H-2A visa program with the majority from Mexico.  It is recognized that foreign workers are required in agriculture given the disinclination of U.S. citizens, many receiving financial aid to undertake manual labor in fields, dairies, processing and packing plants.  Extending the H-2A program would regularize recruitment and employment of foreign workers and reduce the level of illegal entry to the Nation.

It is generally agreed that the H-2A visa system requires an overhaul together with a comprehensive upgrade of immigration legislation.

The Centers for Disease Control and Epidemiology are investigating an outbreak of Salmonella Typhimurium infection associated with cucumbers.  The affected product was grown by Agrotato S.A. de C.V. in Sonora state, Mexico.  As of November 26^th, 68 cases from 19 states are attributed to the source with diagnoses extending from mid-October to mid-November.  Eighteen out of 50 cases investigated required hospitalization.

It is presumed that the cucumbers were either irrigated with contaminated water or the pathogen was present in water used to wash the product before packing and distribution.  Salmonella Typhimurium may have been introduced to irrigation water on human feces in situations where farmers do not provide suitable toilet facilities for field workers.

The USDA has denied a petition from the Iowa Department of Health and Human Services to enforce a ban on purchasing egg substitute and laboratory-cultivated meat by SNAP recipients using federal funds.

The measure is regarded as a politically-inspired, feel-good exercise since there is no laboratory- cultivated meat commercially available. In any event, egg substitute products are far more expensive than shell egg and real egg liquid counterparts. The request was based on the claim that has certain justification that substitute egg products are not as nutritious as the animal derived alternatives.

The waiver sought by Iowa was based on a 2024 law regulating labeling of alternatives to animal- derived products and also banning alternatives to meat served in school lunches.

Bipartisan acceptance of the need to strengthen protection of U.S. producers from exotic pests and disease, the Beagle Brigade Bill will now permanently fund the National Detection Dog Training Center in Newnan, GA. 

EGG-NEWS has commented frequently on the need to expand the Beagle Brigade as it represents the first line of defense against introduction of potentially infected agricultural products at airports and harbors. Smuggling is either deliberate by criminals or inadvertent by travelers.  At present, the risk of introduction of African swine fever from the Caribbean, Africa and Europe is a constant threat.

Senator Joni Ernst (R-IA), co-sponsor of the Bill, stated, “We need all hands and paws on deck to keep our agriculture community safe from foreign animal diseases.”  She added, “The Beagle Brigade is essential to sniffing out items that may harbor threats, stopping them before they can endanger our farms and food supply.

Rodney McMullen, Chairman and CEO of the Kroger Company, has announced that Mary Ellen Adcock will serve as the Chief Merchandising and Marketing Officer from January 1^st, 2025, onwards.  Ms. Adcock is currently Senior Vice President of Operations and will succeed Stuart Aitken who will become President and CEO of Zircans, a data analytics company. 

Ms. Adcock joined Kroger in 1999 and has occupied positions of increasing responsibility including Vice President of Deli, Bakery Manufacturing, Vice President of Natural Foods and Group Vice President of retail operations.  In announcing the promotion, McMullen thanked Aitken for his contributions and innovations over many years.

John Chidsey, Global CEO of Subway, will retire at the end of 2024 after a five-year tenure.  He will be replaced by Carrie Walsh, President of the EMEA Segment and previously, Global Chief Marketing Officer.  Ms. Walsh will serve as the Interim CEO while a search is conducted for a permanent appointee. The “interim” status indicates the absence of a planned transition plan.

John Chidsey joined Subway in 2019 and led the transformation of the business culminating in acquisition of the company by Roark Capital Group. Chidsey will remain in a consulting role to facilitate transition, especially in relation to international growth and master franchisee relationships.

Currently, Subway has 10,000 commitments by aspirant franchisees and anticipates expansion in 2025. 

According to an investigation by the Los Angeles Times, dairy operators in the Central Valley of California are demonstrating gross neglect of worker safety. This follows evidence that bovine influenza-H5N1 is zoonotic albeit only producing conjunctivitis and mild upper respiratory symptoms. Most operators of dairy farms reviewed were not following CDC and state recommendations regarding protection.  Dairy operators should be aware of the need to provide personal protective equipment (PPE) and to instruct workers on their correct use and to ensure that workers are adequately protected.  At issue is the possibility of the virus undergoing mutation after infecting humans, resulting in a strain that is either more pathogenic or possibly becoming contagious.

The Centers for Disease Control and Prevention has demonstrated antibodies to H5N1 among dairy workers with or without symptoms, suggesting that infection may be more widespread among workers than was previously recognized.  Through the last week in November, a total of 689 dairy herds have been diagnosed with bovine influenza-H5N1 with 475 in California mainly in the Central Valley over the past three months.

Western United Dairies, a group representing producers, arranged a worker-safety workshop at the Tulare Expo Center during October to increase awareness of bovine influenza-H5N1 and the need for PPE.  Protection is especially important on farms where the infection has been confirmed by routine sampling of bulk milk. Workers should protect their eyes from contact with contaminated milk.  Dr. Erica Pan, State Epidemiologist for California, recommends correct use of PPE, updating seasonal influenza vaccination and refraining from consumption of raw milk and undercooked ground beef.

Dr. Janette Nesheiwat has been nominated as Surgeon General of the U.S. She is currently the medical director of CityMD, providing urgent care services in New York and New Jersey.  Dr. Nesheiwat is the author of Beyond the Stethoscope: Miracles in Medicine and is a contributor to Fox News.

Dr. Nesheiwat is an advocate for preventive medicine and public health and encouraged vaccination during the COVID pandemic.  She has been active in disaster medicine and is a member of Samaritans Purse having provided medical services in Haiti, Morocco and Poland.

In accepting the nomination, Dr. Nesheiwat thanked the President-elect and pledged to work to promote health, inspire hope and serve the U.S. with dedication and compassion.

The Taiwan Ministry of Agriculture has reported 39 cases of H5N1 isolated from migratory birds in addition to 12 outbreaks on commercial poultry farms this fall. According to ProMED Mail cases were diagnosed in Chiayi, Tainan and Kaohsiung, areas reporting outbreaks in previous seasons.  Cases in Taiwan, South Korea and Japan are attributed to the fall migration of migratory birds with commercial poultry in all three nations at risk.

Wild birds in the Mai Po Nature Reserve in Hong Kong have yielded H5N1 avian influenza. Recent isolates were obtained from a dead wild bird (species not identified) and an environmental sample.

During recent months, authorities on Mainland China reported H5N1isolates from migratory birds.  It is a general observation that migratory birds are

identified as carriers of H5N1 before reports of incident cases occur in commercial and backyard flocks.  In the case of the Peoples Republic of China, there are no reports of commercial outbreaks only in wild birds.  Either submissions to the WOAH are suppressed, or vaccination has proved effective in protecting flocks or then they may just be lucky as with the poultry industry in Brazil.

President-elect Donald J. Trump has nominated Jamieson Greer as U.S. Trade Representative.  In a statement accompanying the nomination the President-elect stated, “Jamieson played a key role during my First Term in imposing tariffs on China and others to combat unfair trade practices and replacing the failed NAFTA deal with USMCA, therefore making it much better for American workers.” 

Greer is an attorney who has practiced international trade law, served as Chief–of-staff to Robert Lighthizer, the USTR, during the first administration of President Trump. His focus will be to reverse the trade deficit and establish new export markets. Daunting objectives with trade policy based on aggressive imposition of tariffs.