Egg-News

Editorial


U.S. Prosperity Should Dominate Electoral Decisions

As the U.S. faces a pivotal national election, the future economic well-being of the U.S. should be the overriding decision in assigning votes, overriding political rhetoric.  The economy of the U.S. is sound by any economic measure.  The GDP of our Nation comprises 50 percent of the other G7 nations combined, up from 40 percent in 1990. Per capita GDP contribution is 30 percent higher than for the E.U. and 60 percent higher than Japan, according to a review of the U.S. economy in the October 19th edition of The Economist.

 

This article noted the inherent advantages enjoyed by the U.S. including energy resources, a vast consumer market and relative to the E.U., fewer restrictive regulation leading to the rise of companies applying high technology.  The U.S. dollar remains the world’s reserve currency. According to the International Monetary Fund the U.S. dollar comprises sixty percent of the reserves held by central banks.  Given the strength of agriculture and industry coupled with adoption of innovative technology and sound management, the average American worker generates $171,000 in economic output compared to $120,000 in the E.U.  Our productivity has increased 70 percent since 1990 compared to 30 percent in Europe and 25 percent in Japan.

 

We weathered the global fiscal crisis of 2008 avoiding a fiscal meltdown . We responded to the COVID pandemic with massive spending that cushioned the economy and prevented extensive social hardship.  The resulting inflation was however “tamed” by successively increasing the benchmark interest rate without generating unemployment and achieving a “soft landing” without creating a recession as has occurred in previous cycles.  The fiscal stimulus packages resulted in the U.S. recovering from the pandemic more quickly than other industrialized nations. The balanced recovery has placed the U.S. in a more favorable situation than its peers and competitors.

 

Ironically, factors that have contributed to the strength of the U.S. economy including immigration have been demonized in the pre-election period. A regulated flow of immigrants is necessary to offset a decline in population growth.  Qualified entrants have most certainly contributed to economic well-being in a variety of sectors including high technology, health and manufacturing.  Unskilled workers have supported agriculture and are necessary to perform work that U.S. citizens are disinclined to do. 

 

On the negative side, life expectancy in the U.S. has declined due to health issues centering on obesity, gun violence, opioid addiction and an unacceptable rate of child mortality.  Older Americans have a lower life expectancy after 65 than their peers in the E.U.

 

Despite the remarkable progress over the past three decades, there are clouds on the horizon and the U.S. may suffer from injudicious politically inspired economic decisions.  The debt-to-GDP ratio has nearly tripled since the outbreak of the global financial crisis of 2008 attaining 103 percent at present.  Economists forecast deterioration in this parameter with the debt-to- GDP ratio peaking at 160 percent within three decades unless spending is curtailed.  In 2016, the national debt stood at $25.6 trillion, rising to $32.6 trillion in 2020 and now stands at $35.8 trillion. Interest on the national debt represents seven percent of GDP at present but could soar to 12 percent in 2035.

 

Economic platforms proposed by the two competing presidential candidates promise little to reduce debt.  One candidate intends to reduce taxes on overtime earnings and tips representing $118 billion over ten years in addition to providing tax breaks on car loans. Proposed SALT deductions could boost national debt by $1 trillion over 10 years. These pre-election promises are intended to attract support from voters in pivotal states.  The other candidate is promising $25,000 to aspirant homeowners coupled with a program to erect three million dwellings togetherwith substantial tax breaks directed to the “middle class”. Many of the proposals from both candidates will probably never eventuate given that they must receive Congressional approval.

 

 

Economists have condemned the intention to place high tariffs on imported goods in an attempt to replace taxes with tariffs.  In addition, punitive tariffs applied as a surrogate for diplomacy will reduce agricultural exports and will severely impact rural communities that support an essentially isolationist policy without realizing the implications.

 

Pre-election rhetoric promising high tariffs and massive deportations and considerations such as interference by the White House in the Federal Reserve will create self-inflicted wounds.  Unrestricted spending on social programs and a continuation of antitrust activities including opposition to large and efficient meat and poultry production will be detrimental to specific sectors of the economy and to the nation at large. 

 

Irrespective of the outcome of the election, the winner must address the growing budget deficit that is now equivalent to seven percent of GDP.  Ultimately, our well-being will be dependent on productivity and population growth. Fiscal programs presented by both candidates for the Presidency are unworkable and unrealistic.  Let us hope that these are merely empty political gestures to win votes. Irrespective of the outcome of the election the incoming Administration in 2025 will have to adopt sound fiscal policies. Congress will have to be more accommodative, less partisan and willing to pass legislation through compromise in order to advance the economic well-being of the Nation and its citizenry.


 

Egg Industry News


Egg Week

USDA Weekly Egg Price and Inventory Report, October 30th 2024.

 

Market Overview

  • The average wholesale unit revenue values for Midwest Extra-large and Large sizes were up 36.0 percent on average this past week. Medium size was up 26.8 percent. The 5-day rolling National wholesale price for graded loose on October 28th was $3.66 per dozen up 37.6 percent from $2.66 last week. This value was approximately $2.16 above the 3-year average of $1.50 per dozen and up $2.66 from the corresponding week in 2023 at $1.00 per dozen. This past week shell egg inventory was up 1.9 percent, almost reversing the rise of 5.9 percent during the previous week. During the past week the NYC wholesale price increased sharply after a market plateau with the immediate prospect of increases in coming weeks. The rise in inventory with an escalation in wholesale price denotes higher demand relative to supply predicting higher margins for producers through the 4th quarter despite replacement of depleted flocks. Relatively higher prices compared to 2023 are attributed to previous losses due to HPAI in 2024 reducing the national flock by 17 to 19 million hens with increased 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. During April 2024 almost 8.4 million hens were depopulated with an additional 5.7 million during May and 3.0 million in July. With 2.8 million hens depopulated in October, as the first incident cases of the fall 2024 wave there is currently a deficit of approximately 18 to 19 million hens compared to the 2022 flock of 326 million at the onset of HPAI.
  • This past week, chains apparently narrowed the spread between delivered cost and shelf price. The reoccurrence of HPAI has probably created concern among chain buyers resulting in orders to ensure adequate stock levels to meet demand. Inventory levels will depend on constant re-ordering to fill the pipeline into early November. 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 up by 0.7 percent overall this past week at 1.59 million cases with a concurrent 4.4 percent decrease in breaking stock, following a 4.2 percent fall during the preceding week attributed to diversion to the shell-egg market.
  • 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 inventory figures. Changes in stock held by DCs and in the pipeline as determined by weekly orders are probably responsible for up to three percent cyclic fluctuation in weekly industry stock, especially into and after a holiday weekend.
  • The U.S. poultry industry has moved from a quiescent period regarding HPAI over the past two weeks with incident cases in northern Utah, southern Washington State and Oregon. Two weeks ago Tulare County California recorded an outbreak on a broiler-growing farm with 900,000 birds followed by an additional case on a small farm. Canada has diagnosed cases in The Fraser Valley of British Columbia and an outbreak in Saskatchewan. Over 388 confirmed cases of bovine influenza-H5N1 have been diagnosed in dairy herds in fourteen states with more than 186 herds California. This is a cause for concern since spill-over to laying flocks have occurred in Michigan, Colorado 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 that appears to be in progress. The USDA has yet to identify and release specific modes of transmission for the 2022-2024 epornitic including 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 October 30th the stated total flock of 314.0 million, was up by 0.6 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 Utah, Washington State and Oregon it is estimated that the total flock is approximately 17 to 19 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 a substantial 26.6 percent to $2.57 per dozen.Checks delivered to Midwest plants were up a noteworthy 30.3 percent to $2.41 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 shorter as in the present situation with an upward trend in price.

The Week in Review

 

Prices

According to the USDA Egg Market News Reports, released on October 28th 2024, the Midwest wholesale price (rounded to one cent) for Extra-large was up 35.9 percent from last week to $4.02 per dozen. Large size was up 36.1 percent to $4.00 per dozen. Mediums were up 26.8 percent to $3.41 per dozen delivered to DCs.

 

The stock of Medium size was down 5.0 percent and the inventory of Small size was 2.9 percent lower over the past week suggesting pullet flocks placed for the November-December surge in demand have matured but with fewer younger pullets entering production. This has implications for prices during early November.

 

Prices should be compared to the USDA benchmark average 4-Region blended nest-run cost of 74.6 cents per dozen as determined by the Egg Industry Center based on USDA data for September 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.


 

Commodity Report

WEEKLY ECONOMY, COMMODITY & ENERGY REPORT: October 31st 2024.

 

OVERVIEW

 

The prices for corn and soybeans were appreciably lower over the past week reversing the trend over the previous week. Soybeans were down 2.0 percent and corn down 2.5 percent. Corn and soybean prices were influenced by uncertainty over yields in Brazil and Argentine. There was minimal response to the October WASDE Report. Farmers are selling both old and new crop to avoid further declines and to make room for the approaching 2024 harvest continuing in strength this week. There was some technical selling arising from geopolitical concerns and in response to revised projections for harvests in Brazil and Argentine. Contributory pricing factors included ongoing disruption in shipping in the Red Sea and Panama Canal, carryover from the 2023 U.S. crop, export orders and the predicted ending stocks of corn and soybeans from the 2024 crop. More than 80 percent of the 2024 corn crop is “in the bin”. Concurrently 90 percent of the soybean crop has been harvested, in advance of the five-year average and apparently with superior crop condition as compared to 2023. The transition from a neutral phase to a La Nina event has commenced and will intensify during the fourth quarter but will not affect the 2024 harvest. The October WASDE, incorporating the September remote USDA Survey together with the Pro Farmer August field evaluations provided updated projections of yields, with USDA updates for anticipated exports and adjusted prices for the 2024 crop.

 

At 11H00 EDT on October 31st the CME corn quotation for December delivery was down 2.5 percent to 411 cents per bushel. Corn price was influenced by acreage planted, ethanol demand and the ending stock from the 2023 crop. Farm selling has increased, given the need to make room for the new crop. 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. Volumes and price are indirectly influenced by wheat availability as influenced by weather affecting the Black Sea wheat and corn crops and events in the Red Sea. Orders by China resumed at the end of the 2022-2023 market-year and continued through August, despite an increase in the Dollar Index, adding to increased ocean freight. Total exports for the new 2024-2025 market year are 35.3 percent above the first seven weeks of the 2023-2024 market year.

 

Soybeans were priced at 983 cents per bushel for November 2024 delivery, again falling below the 1,000-cent psychological threshold. Price was sown 2.0 percent compared to 1,003 cents per bushel last week for November delivery. Lower prices were 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 5.8 percent higher than for the corresponding first seven weeks of market year 2023-2024.

 

Soybean meal was priced at $302 per ton for December delivery, down $10 per ton (-3.5 percent) from last week. Price is influenced by demand coupled with a reestablished crush volume in September restoring the processing trend during 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 revised October WASDE Reports updated from September.

 

On October 30th at 21H00 EDT the price for WTI was $68.93 down $2.09, (-2.9 percent) from last week. The current price now reflects recovery from Hurricane Milton. Current price is not materially affected by uncertainties and tensions in the Middle East but reassured that retaliatory action as announced by Israel would not include Iranian oil installations. 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 in July with ample reserves. There was fluctuation in the price of WTI through October 30th with the range during the week extending from $71.02 on October 23rd down to $68.93 on October 30th.

Ample U.S. crude production is constraining domestic and international prices. The recent decline in energy costs during the past two months contributed to deflation influencing the FOMC in their decision to lower the benchmark interest rate at the September meeting.

 

Economic data released during the past quarter (Q2 GDP; PCE, Confidence, Productivity, Employment) confirm a growing economy but with a downward trajectory in inflation. Second Quarter GDP was revised upward to 3.0 percent from the previous projection of 2.8 percent. The data-driven Federal Reserve FOMC lowered the benchmark interest rate by 50 basis points on September 18th. Federal Reserve Chair Jerome Powell and Reserve Bank Governors indicated one or two additional reductions in the 10-year rate during 2024. 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.


 

Onions Confirmed as Source of E coli in McDonald’s Quarter Pounder Recall

According to a CDC release, the multi-state outbreak of O157:H7 E. coli can be attributed to contaminated shredded onion incorporated in Quarter Pounder hamburgers.  McDonald’s has recalled Quarter Pounders in a number of states and all onions from Taylor Farms, the implicated supplier, have been recalled.  As a precaution, other QSRs have removed onions from servings until additional investigations demonstrate the extent of contamination.  As of October 24th, 75 cases have been diagnosed with 22 hospitalizations, two with hemolytic uremic syndrome and one fatality other than the two cases with renal complications.  It is evident that far more cases occurred than were diagnosed and recorded since these were sufficiently mild as to not require medical intervention.

 

This case illustrates the ability of the Centers for Disease Control and Prevention to detect the emergence of a foodborne infection using databases. Collaboration among public health and regulatory officials in a number of states enables gathering of data, identifying the source of an infection in order to implement corrective action.  Obviously, the cooperation of patients, food manufacturers and restaurants is necessary to implement investigations.

 

As of October 28th McDonalds has reintroduced the Quarter Pounder without the onions.


 

McDonald’s Corporation Reports on Q3 FY 2024

In a release before market open on July 29th 2024, McDonald’s Corporation, a bellwether for the QSR segment of the restaurant industry, reported results for the 3rd quarter of FY 2024 ending September 30th 2024.The Company beat estimates on earnings and sales growth.

 

For the period, the Company earned $2,255 million on total revenue of $6,872 million with a diluted EPS of $3.13.  Comparable figures for the 3rd quarter of fiscal 2023 were net income of $2,317 million on total revenue of $6,692 million with a diluted EPS of $3.17.

 

Revenue for Q3 was 2.7 percent higher than Q3 FY 2023. Operating margin fell from 47.9 percent to 46.3 percent for the most recent quarter. Gross margin for Company-operated stores declined from 16.5 percent for Q3 FY 2023 to 15.4 percent suggesting acceptable control of costs for ingredients, packaging and rationalization of menus to offset increased labor cost. The Accelerating the Arches efficiency initiative, was unable to maintain traffic despite promotions. The Company may be benefitting from trade-down from restaurant dining in the demographic with an annual income of over $100,000. In contrast management are concerned over loss of traffic and check value among lower income customers  

 

In commenting on results, Chris Kempczinski, president and CEO stated, “We will stay laser-focused on providing an unparalleled experience with simple, everyday value and affordability that our consumers can count on as they continue to be mindful about their spending,” Her added “McDonald’s will continue to follow our Accelerating the Arches playbook to drive long-term growth globally and win in this environment.” On the investors’ call Kempczinski apologized for the recent STEC outbreak and expressed hope for recovery among the 90 cases confirmed with the foodborne infection. He confirmed that the outbreak reduced customer count in the days following the announcement of the source of infection.

 

Kempczinski affirmed that the recent E.coli outbreak was over and the Company was moving forward to reestablish customer goodwill after a fall in foot traffic. The CEO also commented on the benefit of the $5 meal deal on sales especially to the low-income demographic

 

For Q3 FY 2024, McDonald’s posted an increase in comparable store sales in the U.S. of 0.3 percent with comparable store sales for the international operated markets segment down by 2.1 percent contributing to a global comparable store sales reduction of 1.5 percent.  The International Developmental Licensed Market Segment posted a 3.5 percent decline in comparable sales due to turbulence in the Middle East although partly offset by gains in Latin America and Japan.

 

Projections for 2024 in the SEC 8-K report included net restaurant expansion contributing 2.0 percent to system-wide sales with an operating margin attaining a mid-to high 40 percent. Capital expenditure  will range from $2.5 to $2.7 billion for 2,100 new stores with 500 in the U.S.

 

On September 30th 2024 there were 42,819 McDonald’s stores. Restaurant breakdown included 13,498, in the U.S.; 10,378 International-operated and 18,943, International Developmental Licensed locations. During 2024 the Company intends to open 1,600 new restaurants globally. According to the report most will be traditional in design but the Company will consider alternatives including a test of a small free-standing ‘CosMC’ format.

 

McDonald’s Corporation posted a market capitalization of $209,120 million on July 29th 2024. Total assets on December 31st 2023 amounted to $56,146 million of which 24.0 percent comprised lease right-of-use assets.  Long-term debt and lease obligation were $50,211 million.

 

MCD has ranged over the past 52-weeks from $243.53 to $317.90 with a 50-day moving average of $298.21. MCD trades with a forward P/E ratio of 23.1. The 12-month trailing operating margin was 44.2 percent and profit margin, 31.8 percent. Prior to release MCD closed on Tuesday 29th at $297.02 but traded post-release on Wednesday 30th at $299.


 

SE Outbreak Attributed to Milo’s Poultry Farm Now Over

CDC has declared that the 12-state outbreak of Salmonella Enteritidis is now over with 93 confirmed cases requiring 34 hospitalizations. EGG-NEWS reported previously on the outbreak associated with the farm located in Bonduel, WI.

 

Following traceback to the farm and an extensive recall of eggs, the incidence rate declined sharply.  Whole genome sequencing of isolates of SE from the farm and patients were homologous confirming the source of the infection.

 

Neither CDC nor FDA has released details concerning vaccination of the flock or the pattern of obligatory SE testing prior to the outbreak.


 

Hurricane Milton Damage Evaluated

Hurricane Milton impacted 51 counties in Florida on October 9th. Damage required 34 disaster declarations. The citrus, pecan and cotton crops were seriously affected and peanuts, rice, fruit. Were destroyed. Torrential flooding disrupted ongoing agricultural operations including dairy and resulted in widespread and disruptive power outages.

 

The Florida Department of Agriculture and Consumer Services estimates damage at between $1.5 and $2.5 billion, although not all impacts has been documented requiring subsequent assessment.  In contrast to row crop farmers, the poultry industry was largely spared from catastrophic damage.


 


 

Target to Reduce Prices

In an October 22nd announcement, Target will reduce prices on a wide range of items to attract foot traffic and boost revenue, hopefully with a contribution to the bottom line.  Target has embarked on a program of progressively lowering prices on consumer items with a target of 10,000 SKUs by the end of December.  Reductions will include both Target private and national brands. The action by Target matches the Walmart initiative in progress.


 

TreeHouse Foods Recalls Frozen Waffles

On October 18th, TreeHouse Foods announced a recall of frozen waffles based on contamination with Listeria monocytogenes.  The presence of the pathogen was detected on routine monitoring at the Brantford, Ont. plant.

 

The recall was subsequently expanded on October 22nd to cover all products made at the facility still within the  “used by” date.  The incriminated frozen waffles were distributed to almost all grocery chains in the U.S. under both TreeHouse and private label brands.

 

Following the CDC release and concerning the recall, TreeHouse stock declined 8.9 percent following the October 18th release.  Analysts anticipate that the recall and interruption in manufacture of waffles would lower EPS by 4 percent in 2024 given that annual sales of private label frozen waffles attained $117 million through October 5th.


 

Happy Egg Company Acquires Egg Innovations

In yet further consolidation in the egg industry, specialty egg producer, Egg Innovations was acquired by the Happy Egg Company.  Both enterprises are packers of eggs produced by contractors and are able to supply a wide range including organic, pasture-raised and free-range.

 

In commenting on the transaction Alex Worley CEO of Happy Egg stated, “With Egg Innovations we will continue to push the boundaries of what consumers expect in egg farming-delivering innovations such as pasture-raised and regenerative practices.” 

 

The Happy Egg Company was established in the U.S. as a subsidiary of Noble Foods, the largest egg producer and packer in the U.K.  The Happy Egg Company is now independent of the founder and is completely U.S.-owned.  The company headquarters is in Rogers, AR. and receives product from contract farms and supplies a wide range of retailers including most of the national and large regional chains.

 

Egg Innovations was founded by Dr. John Brunnquell in 1999, based on his knowledge gained from applied research in poultry science and flock behavior. Egg Innovations relies on supply from over 50 family farms collectively using 1,000 acres of pastureland for flocks.

 

The combined total of hens under contract to the two packers is estimated at 1.5 to 2.0 million. Since both companies are privately held there is no information on the value of the transaction or the financial performance of the two companies


 

H5N1 HPAI Update for British Columbia

The Canadian Food Inspection Agency has updated the World Organization of Animal Health of three cases of HPAI in British Columbia through April 2024 representing the spring wave of outbreaks.  One hundred fifty-eight (158) cases were diagnosed requiring depopulation of 6.0 million birds representing 37.4 percent of the total outbreaks in Canada and 54.4 percent of the 11.0 million birds depopulated as a result of avian influenza.



 

Hungary Reports Four HPAI Outbreaks

Between September 30th and October 14th, veterinary officials in Hungary confirmed four significant outbreaks of HPAI with characterization as strain H5N1.

 

All the commercial farms affected housed either geese or ducks, presumably with outside access.  In one case involving 17,000 birds, a secondary infection was detected close to other operations.  HPAI was isolated from migratory waterfowl during the weeks preceding the series of commercial cases.  Outbreaks occurred along an arc of approximately 200 miles involving six counties with cases in proximity to rivers representing major north to south flyways including the Danube and tributaries.

 

Authorities have imposed WOAH quarantines in the 1.8-mile radius protection zones and have initiated surveillance in the more extensive regions surrounding the primary outbreaks.

 

As reported in EGG-NEWS, a number of E.U. nations have detected H5N1 in migratory birds, preceding outbreaks in non-confined commercial poultry. Since non-confined waterfowl are susceptible to infection by direct and indirect contact with free-living and migratory birds it would appear that vaccination, as in France, is a justifiable protective measure given the inability to prevent infection of flocks allowed access to pasture.


 

United Natural Foods Tightens the Belt

United Natural Foods has implemented a restructuring strategy to reduce costs.  Over the past six months, there have been two rounds of layoffs including elimination of positions at their Harrisburg, PA and Phoenix, AZ distribution centers.  A number of positions stated to be less than 300 were eliminated in the Providence, RI headquarters through the expedient of  outsourcing invoicing and payroll.

 

Charles Davis, a spokesman for the company, noted, “At UNFI we are executing a new strategy focused on creating shared value and more efficiently serving our retail and supplier partners”.

 

CEO, Sandy Douglas, noted, “We are confident that our new strategy and multiyear financial objectives will continue to drive performance and create sustainable value for our customers, suppliers and shareholders.

 

For the recently concluded FY 2024 the Company posted a loss of $(112) million on sales of $30,980 million with a negative diluted EPS of $(1.89). Total assets were $7,528 million with $35,100 million in long-term liabilities. UNFI posted a market capitalization of $1,240 million on October 29th. The twelve-month trailing operating margin was -0.4 percent and profit margin was +0.6 percent. The return on assets attained 1.2 percent with a negative return on equity of      -6.5 percent


 

Day Old GA/08 IB Vaccination Protects Against Variants

Dr. Mark Jackson of CEVA reported on the benefits of administering GA/08 vaccine to protect against four IB variants currently circulating in the U.S.  Specific pathogen-free chicks were vaccinated at five days of age with a bivalent GA/08 and Massachusetts combination.  Swabbing the choanal clefts post vaccination demonstrated successful administration.  Immunization was confirmed by demonstrating antibodies at 26 days of age.  At 28 days, birds housed in isolators were challenged with NC/dark, D/23, CA/1737/04, PA/1220/98 or DNV/1639/23.  Statistically significant reduction was noted in clinical response confirming the protective ability of the GA/08 vaccine.


 

Egg Sales Benefit from Seasonal Baking

The seasonal increase in demand for shell eggs is now evident, supported by depopulation of flocks due to HPAI.  The major industry price discovery system and the USDA are posting substantial daily increases after the September plateau.

 

During the past week, Mid-west large was approximately $2.66 per dozen above the corresponding week in 2023 and $2.16 per dozen above the three-year average.  In addition to home baking and increased demand for baked goods, consumers are serving hot breakfasts and purchasing egg-containing menu items from QSRs.


 

Collaboration Between Meat Industry and FBI on Welfare Activism

According to an article by Grey Moran in The Intercept, cited by Will Coggin of Activist Watch, U.S. meat and poultry associations have liaised with the FBI regarding farm intrusions.  Since 2017, the FBI has tracked activist organizations including Direct Action Everywhere (DxE) and Meat the Victims and kindred organizations that conduct illegal entry onto farms to generate publicity and funding.

 

The tenor of the article is that the FBI may use legislation relating to agro-bio terrorism against welfare extremists.  Farm intrusions do not rise to the level of an act of terrorism although the FBI believes that “minor criminal actions associated with animal rights activist extremism have a tendency to escalate towards substantial direct actions to include the unintentional introduction of biological materials, toxic chemicals or other hazards into a herd or flock”. The FBI is justified in monitoring the activities of any organization or group that breaks the law.

 

There is no evidence to date that there has been any attempt to deliberately introduce pathogens or toxins into farms, although there was some suspicion that illegal entry to a duck farm in California may have introduced HPAI. This is unfounded speculation and there are sufficient influenza outbreaks without having the involvement of DxE.  It is doubtful whether any state or federal Attorney would apply bioterrorism legislation in charging a perpetrator of farm intrusion as demonstrated by recent action with prosecution as a misdemeanor.

 

Zoe Rosenberg, affiliated with Direct Action Everywhere, was arrested as a result of a farm intrusion.  Evidence presented showed her holding what appeared to be a healthy duck obviously a staged photograph. In the photograph she was wearing a T-shirt over her hazmat suit. For your information Zoe, we wear our T-shirts under Tyvek coveralls and we do shower before entering a farm if facilities are available.


 

Soy Exports from Northern Brazil Impeded

The Tapajos Waterway that receives grains from Mato Grosso and adjoining northern states is temporarily closed.  The Waterway is expected to be functional by mid-November subject to seasonal rains that will lift the level in the Madeira River and tributaries by at least 10 inches.  Despite the temporary cessation of barge transport, grain traders had assembled reserves in northern export ports in anticipation of transport delays. Consignments from southern export terminals will not be affected.


 

Litigation Over 2022 HPAI Outbreaks

Interruption in supply of eggs and egg products as result of HPAI depopulation is the subject of a series of lawsuits.  Grand Prairie Foods of South Dakota is suing Echo Lake Foods Wisconsin for breach of contract and unjust enrichment because of imposition of higher prices and an interruption in the supply of breakfast sandwiches.  This case will be before the U.S. District Court for South Dakota. 

 

A second case in the U.S. District Court for Southern Iowa involves Oskaloosa Food Products attempting to resist a subpoena for company records establishing costs of production.  Echo Lake, the Defendant in the South Dakota case, claimed that avian influenza reduced supplies of eggs to their plant resulting in an initial increase in price and eventual cancellation of orders.

 

It is a consistent observation that catastrophic diseases including avian influenza tend to bring out the worst in decision makers responsible for trading and pricing.


 

Sweden Investigating Outbreaks of SE

In 2023 consumers in Sweden were infected with Salmonella Enteritidis (SE) traced back to CA Cedergren. This domestic producer, was responsible for over 80 diagnosed cases.  Since July 2024, the Public Health Agency of Sweden has been tracking outbreaks of SE with two identified strains suggesting either regional infection or importation.  Outbreaks appear to be associated with eggs purchased from small stores and restaurants that can be attributed to distribution from infected local flocks.  Epidemiologic evidence also implicates eggs imported from Ukraine, along with Poland, a major exporter to western E.U. nations.

 

The introduction of contaminated eggs into the supply chain in the E.U. is complicated by the absence of a cold chain from packing to point-of-sale. Consumers also favor soft-boiled or even raw eggs and incorporate egg yolk in homemade mayonnaise and sauces with egg white as glazes.  The preference for soft eggs intensifies risk of infection despite recommendations by health authorities to thoroughly cook eggs.


 

CDC Releases Information on Genome Sequencing of H5N1 from Missouri Patient

CDC has released results of the partial genome assay of the isolate obtained from the index patient in the Missouri hospital outbreak.  Due to limited availability of material from the patient, only the hemagglutinin, matrix and non-structural genes were sequenced.

 

 To date, assays confirm the isolate as an H5N1 influenza virus of the 2.3.4.4b clade.  Two amino acids substitutions were identified in the HA sequence considered to be unique to the specific patient but would not be associated with contagion.  There was no evidence that the virus would be refractory to antiviral drugs.  Molecular virologists are now evaluating the significance of the A156T mutation in the hemagglutinin gene.


 

Secretary Vilsack Urges Congress to Enact Delayed Farm Bill

The 2018 Farm Bill expired in 2023 but was extended until September 30th.  The nation is now operating without a Farm Bill.  USDA Secretary Tom Vilsack recently commented, “We are quickly running out of time this fall for this Congress to come together to address the Farm Bill in a bipartisan way.  Either we have a real bipartisan deal on a new Farm Bill or at a minimum, an extension of the existing Farm Bill.

 

Some observers believe that a Farm Bill will be passed by both Chambers during the “lame duck” session following the election.  Opposition to SNAP benefits and the magnitude of SNAP benefits and eligibility are questioned by members of the respective House and Senate Committees.  Democratic members of both committees are opposed to funds being transferred from social benefits to price support.  According to the non-partisan Congressional Budget Office, the proposal emanating from the House Committee underestimates cost and will add materially to the national deficit.

 

It is noted that in the event of punitive tariffs being imposed on China, farmers would lose export markets, reducing the price of commodities. This will intensify financial stress on farmers who will require Federal support since market prices will be lower than production cost.


 

Holding Company of 7-Eleven Plans to Build 500 stores

While embroiled in an aggressive and unsolicited takeover attempt, 7&i Holdings of Japan has announced a project to build 500 additional convenience stores in the U.S. under the 7-Eleven banner. According to the company standard, the new “evolution” stores will be larger than current convenience stores and will offer seating space.  The plan calls for 125 units in 2025 with a total of 500 by 2027.

 

This announcement may have been issued as a deterrent to Couche-Tard of Canada that has already made two offers for the chain with a history of lackluster performance.



 

Kathy Brodhagen Appointed CEO of Echo Lake Foods

Kathy Brodhagen has been appointed as CEO of Echo Lake Foods. Kathy has extensive experience in the egg processing sector having served as VP for the Michael Foods Subsidiary of Post Holdings and as the founder of an egg products company inassociation with Cal-Maine Foods.

 

Echo Lake Foods manufactures frozen egg products including breakfast items for food service and retail.


 

USDA-NIFA Awards Grants for Extension, Education and Training

Six universities received USDA National Institute of Food and Agriculture grants for education, extension and training to develop specialized training and educational programs for veterinarians. The emphasis was on food animal medicine to increase the knowledge base and experience of veterinary graduates.

 

The University of California-Davis received a grant for a project to encourage high school students to consider poultry veterinary medicine as a career option.  Grants to Tuskegee University, College of Veterinary Medicine, the University of Missouri, Texas Tech University, Texas A&M Agri Life Extension Service and Mississippi State University were more general in content involving training and welfare, reproduction and food animal practice with specific reference to rural communities.

 

It is noted that there are a number of functional residency and post-graduate programs in operation with UGA preeminent, with completion of these programs leading to specialty recognition by the American College of Poultry Veterinarians (dip. ACPV)


 

Commentary


USDA Announces Isolation of H5N1 From Hog

According to a Wednesday, October 30th release, USDA personnel isolated H5N1 virus from an asymptomatic hog on a backyard farm in Crook County, OR.  Poultry on this mixed livestock operation were diagnosed with H5N1 on October 25th . The farm has been quarantined.

 

 Five hogs on the farm housed in close proximity to chickens and with a common water source were sampled.  Only one hog was regarded as psitive to H5N1, presumably from a nasal swab assayed with PCR while two of the hogs yielded negative samples. Results from the other two are pending completion of diagnostic procedures suggesting that the initial results were other than an absolute negative. The significance of demonstrating H5N1 from thee nasal swab of one hog could be questioned as an environmental contaminant. The situation would be different if H5N1 virus were to be demonstrated or cultured from pulmonary tissue or other organs obtained from the hogs that were reportedly euthanized.

 

USDA NVSL will conduct genomic sequencing of viruses isolated from both poultry and the hog to detect any changes that would suggest infectivity to humans.

 

The isolation of H5N1 from a hog is regarded as significant since this species has receptors for both avian and mammalian strains and can serve as a “mixing vessel” for strains of influenza viruses creating the prospect of a reassortment event. Viruses undergoing exchange of genes could be infectious to humans and even become contagious as in the 1917 pandemic.

 

If the whole genome sequencing of the virus does not disclose mutations associated with human infection, it may be assumed that this case is a spontaneous event restricted to the specific, noncommercial operation.  The important issue will be to ascertain whether the virus is transmissible among hogs and to evaluate pathogenicity in ferrets and mice.  It is presumed that Oregon health officials in cooperation with the CDC will sample residents on the farm that have had contact with both poultry and hogs to determine whether virus can be detected from the upper respiratory tract over the next week and whether these individuals subsequently demonstrate H5 influenza antibody irrespective of the absence of clinical signs.

 

Given the circumstances of the case thus far, it does not appear to increase risk to either humans or other livestock unless additional cases emerge or if laboratory evaluation of the isolate suggests possible infectivity for humans. 

 

It is hoped that sequences of the chicken and hog isolates will be shared with the scientific community and that USDA and CDC will be transparent and forthcoming in reporting on this case.


 
Dr. Simon M. Shane
Simon M. Shane
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