A recently published study* conducted by epidemiologists and molecular biologists affiliated with Utrecht University and Wageningen Bioveterinary Research confirmed that DNA from waterfowl could be detected in the incoming air stream of poultry houses.

The study involved two broiler houses and a layer house that were depopulated and decontaminated after confirmed cases of H5N1 HPAI. The area in which the study was conducted was known to have a noteworthy population of waterfowl. The houses selected for assay were devoid of flocks with the exception of a few sentinel chickens in the layer house. Ventilation systems were operated consistent to the respective requirements of flocks that would have been housed. Air sampling equipment was placed directly at the air inlets. In addition parallel samples were obtained from the exterior of the sampled houses. DNA was extracted and isolated from sample filters and was assayed by applying eukaryote DNA metabarcoding followed by deep sequencing.

In the case of the two broiler houses on the respective farms, 1 out of 5 and 1 out of 21 air inlet samples respectively yielded DNA derived from waterfowl. For the layer house, 2 out of 21 samples were positive.  One out of 21 exterior samples was positive for waterfowl DNA from only one of the two broiler farms and 2 out of 21 samples yielded waterfowl DNA in the vicinity of the layer farm.

The positive control comprised samples obtained from a waterfowl rehabilitation center.  All twelve out indoor samples and all 8 outdoor samples yielded waterfowl DNA. This was not unexpected, but confirmed the sensitivity of detection of waterfowl DNA using the sampling and assay technique.

Demonstration of HPAI virus in air samples is exceptionally difficult but has been demonstrated using spike-in experiments. In addition HPAI H5N1 was isolated from air samples obtained in the vicinity of wild waterfowl in a study conducted in Taiwan coincident with outbreaks in commercial poultry.  This study demonstrated that DNA from the plumage of waterfowl or their feces may be entrained in air streams with introduction into poultry houses operated with exhaust ventilation.  It is noted that air samples were obtained over distances ranging from 12 to 25m from each of the houses sampled over a period of four days.

The study demonstrated that commercial poultry confined to power-ventilated buildings may potentially be exposed to avian influenza virus since DNA from waterfowl was detected in the airflow at the air inlets to houses.  In the context of units holding 100,000 laying hens, air flow would correspond to 600,000 cfm assuming 1.5 cfm per pound live weight. Air inlet velocities would approach 600 ft/minute at the inlets depending on their collective area and the rating and number of fans in operation.  The introduction of HPAI virus into a large complex is obviously facilitated by the quantum of air introduced into houses under normal operation, environmental variables promoting survival of virus and proximity to concentrations of migratory waterfowl shedding virus.

HPAI virus can persist on moist soil for periods extending beyond a week.  The presence of waterfowl in vicinity of large egg-production complexes along the Mississippi Flyway is well established.  Effluent retention ponds in the vicinity of houses, and the presence of wetlands attract waterfowl.  In a recent evaluation of biosecurity of a complex in a Midwest state, gulls, were perching on the ridges of houses and Canada geese ranged to within yards of the perimeter of houses feeding on grass between houses.

The implications of the University of Utrecht/Wageningen study are self-evident.  Even with the highest standards of biosecurity, introduction of avian influenza virus cannot be absolutely prevented. This is consistent with anecdotal reports of exposure on complexes with high levels of structural and operational biosecurity in Colorado and other states.

Filtration of incoming air to exclude virus is currently impractical but the use of laser installations to deter congregation of wild waterfowl and other birds in the vicinity of farms should be beneficial.

With the recognition that HPAI is at least seasonally and regionally endemic in the U.S. and given the population of migratory waterfowl and resident birds potentially shedding avian influenza virus, eradication of the infection can only be regarded as a futile aspiration. With new evidence highly suggestive of aerogenous transmission of the virus, protection of both large and medium sized complexes and even individual houses would be enhanced by immunization. The World Organization for Animal Health has endorsed preventive vaccination in conjunction with high levels of structural and operational biosecurity to offer a more solid prospect of preventing large-scale outbreaks.

*Bossers, A., et al.  Detection of Airborne Wild Waterbird-Derived DNA Demonstrates Potential for Transmission of Avian Influenza Virus via Inlets into Poultry Houses, the Netherlands, 2021-2022. Euro Surveill. 2024:29 Doi.org/10.2807/1560-7917.ES.2024.29.40.2400350.

USDA Weekly Egg Price and Inventory Report, October 9^th 2024.

Market Overview

• The average wholesale unit revenue values for Midwest Extra-large and Large sizes were unchanged on average this past week. Medium size was up 0.5 percent. The 5-day rolling National wholesale price for graded loose on October 7^th was $1.65 per dozen up 8.5 percent from last week. This value was approximately $0.40 below the 3-year average of $1.25 per dozen and up $0.80 from the corresponding week in 2023 at $0.85 per dozen. This past week shell egg inventory was down 1.9 percent, following a drop of 0.9 percent during the previous week. During the past week the NYC wholesale price stabilized indicating a market plateau with the immediate prospect of an increase through the weekend. Small fluctuations in inventory with a stable price following successive weekly decreases in price entering fall suggests lower margins for producers through the 4^th quarter as depleted flocks are replaced. Relatively higher prices compared to 2023 are attributed to losses due to HPAI depletion in 2024 reducing the national flock by 17 million hens despite reduced seasonal demand.
• Although there are 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 a current deficit of 17 million hens compared to the 2022 flock of 326 million at the onset of HPAI.
• This past week, chains apparently widened the spread between delivered cost and shelf price. The cessation of incident cases of HPAI has probably provided buyers with the confidence to hold orders and run down stock to attempt to “bend” the benchmark price discovery index. Inventory levels will depend on constant re-ordering to fill the pipeline through mid-October. Discounters are holding prices on generics influencing mainstream retail stores. Eggs are still highly competitive in price against the comparable costs for other protein foods, but highlighted as a factor in food price inflation.
• Total industry inventory was down by 1.6 percent overall this past week at 1.55 million cases with a concurrent 0.5 percent decrease in breaking stock, following a 10.6 percent fall during the preceding week attributed to increased demand.
• 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 number and extent of possible HPAI outbreaks during coming months cannot be projected but the industry has moved into a quiescent period. Over 240 confirmed cases of bovine influenza-H5N1 in dairy herds in fourteen states and spreading in California is a cause for concern. 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 free-living birds together with a review of molecular and field epidemiology for the past spring outbreaks in anticipation of a predicted fall wave of HPAI. 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 current 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 2^nd the stated total flock of 308.5 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. Given the latest figures for depopulation it is estimated that the total flock is approximately 17 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 an insignificant 0.4 percent to $1.29 per dozen.Checks delivered to Midwest plants were up 4.4 percent to $1.18 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 with a wide swing in price in either direction.

REVIEW OF SEPTEMBER 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.

SEPTEMBER HIGHLIGHTS

• September 2024 USDA ex-farm blended USDA nest-run, benchmark price for conventional eggs from caged hens was 240 cents per dozen, down 93 cents per dozen or 27.9 percent from the August 2024 value of 333 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 will not be a consideration until the fall 2024 migration of waterfowl resumes. Close to 13 million hens and 2.5 million pullets were depopulated during the fourth quarter of 2023 among five states with heavy losses in California. Approximately 17 million hens and 1.5 million pullets have been depleted year to date.
• September 2024 USDA average nest-run production cost for conventional eggs from caged flocks over four regions (excluding SW and West), applying updated inputs was up 1.2 cents per dozen to 74.6 cents per dozen compared to the USDA revised August 2024 value of 73.4 cents per dozen, mainly attributable to a 6.6 percent higher average feed cost 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.
• September 2024 USDA benchmark nest-run margin for conventional eggs attained a positive value of 165.4 cents per dozen compared to a revised positive margin of 258.0 cents per dozen in August 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 August 2024 national flock in production (over 30,000 hens per farm) was stated by the USDA to be down 0.6 million hens (rounded) to 289.3 compared to the revised July 2024 value of 288.4 million. Approximately 3.0 million hens returned to production from molt in August together with projected maturation of 21.5 million pullets, with this number offset by depletion of an unknown number of spent hens.
• August 2024 pullet chick hatch of 28.7 million was up 0.7 percent or 0.2 million chicks from July 2024.
• August 2024 exports of shell eggs and products combined were up 2.5 percent from July 2024 to 445,500 case equivalents representing the theoretical production of 5.9 million hens. The moderate increase was due to higher imports of shell eggs by Canada and egg products by Caribbean, South American and E.U nations based on need and price.

TABLES SHOWING KEY PARAMETERS FOR SEPTEMBER 2024.

Summary tables for the latest USDA September 2024 flock statistics, costs and unit prices made available by the EIC on October 9^th 2024 are arranged, summarized, tabulated and compared with values from the previous August 9^th 2024 release reflecting September 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

 WEEKLY ECONOMY, COMMODITY & ENERGY REPORT: October 10^th 2024.

 OVERVIEW

The price for corn was moderately higher over the past week continuing the trajectory from the previous week. Soybeans were down 3.4. Corn and soybean prices were influenced by uncertainty over yields in Brazil and Argentine; anticipation for the October WASDE Report; the August Pro Farmer Crop Tour and by farmers selling to avoid further declines and to make room for the approaching 2024 harvest continuing in strength this week. Recent warmer weather suggests lower corn and soybean yields and proportionally higher prices deviating from the September WASDE. 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. Thirty percent of the 2024 corn crop is “in the bin”. Concurrently 47 percent of the soybean crop has been harvested, in advance of the five-year average and apparently with superior crop condition 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 should provide updated projections of yields, with USDA updates for anticipated exports and adjusted prices for the 2024 crop.

At 12H00 EDT on October 10^th the CME corn quotation for December delivery was up 1.0 percent to 420 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 28.2 percent above the first five weeks of the 2023-2024 year.

Soybeans were priced at 1,015 cents per bushel for November 2024 delivery, remaining above the 1,000-cent psychological threshold. Price was down 3.4 percent compared to 1,051 cents per bushel last week for November delivery. Lower prices were attributed to the projection of ending stock, despite 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 4.7 percent higher than for the corresponding first five weeks of market year 2023-2024.

Soybean meal was priced at $319 per ton for December delivery, down $8 per ton (-2.4 percent) from last week. Price is influenced by demand coupled with an unexpectedly low crush volume in August reversing 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 September WASDE Reports updated from August.

On October 10^th at 10H00 EDT the price for WTI was $74.40 up $2.87 (+4.0 percent) from last week. The current price does not reflect the aftermath of Hurricane Milton. It is estimated that 3.5 percent of Gulf crude production and one percent of natural gas recovery were “shut in” (negatively impacted) from the previous Hurricane Helene although production was restored by last week. Current price is not materially affected by uncertainties and tensions in the Middle East including possible retaliatory action by Israel on 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 an upward trend in the price of WTI through October 10^th with the range during the week extending from $74.40 to $77.76, the high on October 7^th.

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 18^th. 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.

Macroeconomic U.S. factors:-

Status of 2024 Corn and Soybean Crops

The USDA Crop Progress Report released on October 7^th recorded 90 percent of the soybean crop dropping leaves and 47 percent harvested, a major advance of 21 percent this past week. Eighty seven percent of the corn crop is now mature and 30 percent has been harvested, only three percent more than last week. Both crops were ahead of the 5-year averages for the corresponding week.

Days suitable for field-work attained 5.9 per week for the nine states with the highest corn and soybean production (range 4.0 days for PA. up to 6.8 days for KS.), allowing faster harvest in some states or areas. This compares with 4.7 days for last week.

Consistent with seasonal temperatures and previous rainfall across the Midwest and Plains states, crop condition was almost unchanged during the past week. Corn and soybeans attained 64 and 63 percent each for the two highest categories of “Good” and “Excellent.” The October 6^th values for corn and soybean quality were considerably higher than the 53 and 51 percent recorded for corn and soybean crops respectively for the two highest categories during the corresponding week in 2023. Prospects for high yields were reflected in lower price projections in the September WASDE despite a more recent rise in CME future prices for November and December (‘new crop’) delivery, subsequent to the release of the report and uncertainty over the size of crops in South America due to drought.

It is unlikely that the transition to a La Nina event will have any impact on U.S. crop condition through harvest. Prolonged dry and hot weather apparent at this time interspersed with rain will not depress corn and soy yields depending on timing and severity.

Heat stress that occurred previously during silking predisposes corn to fungal infection leading to mycotoxin contamination of kernels. Unseasonal rain during the pre-harvest period for corn will also result in elaboration of mycotoxins. The status of the 2024 crop will require monitoring at harvest in affected areas and especially if unseasonal precipitation occurs during the pre-harvest period.

Reference is made to the September 13^th WASDE Report #652 and the weekly Commodity, Economy and Energy Report, both in this edition, documenting acreage to be harvested, yields, weekly prices and ending stocks.

During October the USDA-NASS intends to report on the annual remote survey to estimate yields and final production, in all probability incorporated in WASDE #653 to be reviewed in the October 18^th Edition of EGG-NEWS. Pro Farmer completed their annual crop tour in mid-August. The August 23^rd report estimated a corn yield of 181.1 bushels per acre with a projected crop of 14.98 billion bushels. The corresponding values for soybeans were yield of 54.9 bushels per acre contributing to a 2024 crop of 4.74 billion bushels.

EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of the 2024 harvest in November.

The International Egg Commission (IEC) has declared October 11^th as World Egg Day.  The IEC intends for World Egg Day to provide a greater awareness of the nutritional value of eggs especially for children.  Publicity associated with 2023 events reached 130 million across the globe with benefits to producers.

The 2024 promotional, “tool kit” emphasizes the “United by Eggs” theme and provides key messages, social media graphics and creative suggestions to plan events and press releases.

World Egg Day activities have been arranged in many member nations:- 

• In the U.S., Rose Acre Farms, Versova and Center Fresh will serve omelets and IEC material will posted on message boards and social media.
• In Australia, a campaign will feature recipes across print and digital platforms. 

• Egg farmers of Canada have arranged the Earthwise Egg Quest: Canadian Egg Farming trivia challenge. 
• In France Fans d’ Oeufs will present Egg Shark an online game on Facebook and Instagram.  Promotional material has been distributed to schools to emphasize nutritional value. 
• The Union Nacional de Avacultores in Mexico will arrange an international egg fair and will attempt to break the Guinness World Record for the largest egg and spoon race.
•  In the Netherlands, the Poultry Expertise Center will host a celebration coinciding with Dutch Food Week.  Over thirty poultry farmers will open their facilities to the public to acquaint consumers with welfare and hygienic production.

The Board of Directors of Cal-Maine Foods Inc. has approved $40 million in capital projects to expand cage-free production.  Complexes in Florida, Georgia, Utah and Texas will be converted to cage-free housing by replacing obsolete cages. 

Contract housing in Missouri will be converted to floor housing for commercial layers along with installation of packing and breaking equipment in the broiler processing plant acquired from Tyson Foods in March 2024.  Following remodeling Cal-Maine Foods will add 1.2 million free-range hens by late 2025 with prospects for additional capacity.

In commenting on the capital commitment, Sherman Miller, president and CEO noted, “We are pleased to announce these new expansion projects which support our strategy to increase our free-range production in line with customer demand and expanding state requirements for cage-free eggs.”  He added, “We have made considerable progress with the conversion of the Dexter, MO. facilities and look forward to the additional production and distribution capabilities from this location.”

As a seasonal precursor to outbreaks of HPAI in commercial flocks, many nations including Japan report isolation of H5 avian influenza from both migratory and domestic wild birds based on the intensity of surveillance.

In their quarterly annual report to the World Organization for Animal Health, Japan documented isolation of H5 avian influenza isolates from wild birds from December 2023 through April 30, 2024.  Forty individual birds were identified as infected, predominately large-billed crows and a peregrine falcon. 

Japan encounters seasonal introduction of HPAI by migratory birds moving either southward in fall or northward in spring migrating to and from Eurasia.  Most of these isolates were characterized as a H5N5 highly pathogenic strain.  This virus circulated in crows that are ubiquitous and due to their feeding habits are likely to transmit infection to commercial poultry if allowed either direct or indirect contact with flocks.

Raptors become infected through consuming prey carrying H5 avian influenza virus. Mortality in falcons suggests the presence of infection in diverse species representing a high risk to poultry flocks.

David Boucher, Director of Infectious Disease in the Administration for Strategic Preparedness and Response (ASPR) has announced an order for ten million doses of human H5 influenza vaccine.

Although less than twenty cases of zoonotic H5N1v infection with the B3.13 genotype have been recorded, and risks to human populations appears low, the ASPR has placed orders in accordance with their “mission to be ready” in the event of possible mutations in the virus to become contagious among humans. 

The order will be filled by three U.S. companies. One will provide a conventional egg-propagated vaccine.  The other suppliers are producing vaccine using cell culture.  Concurrently the U.S. Public Health Service has funded development of a mRNA platform for human influenza vaccines.

In an October 2^nd 2024 release, Conagra Brands (CAG) posted financial results for Q1 FY 2025 ending August 25^th 2024. The Company can be regarded as representative of the manufacturing and packaged food sector with competitors including Post Holdings, Campbell Soup Company and Kraft-Heinz, all currently under pressure to reduce prices to the major food service providers and supermarket chains. Despite moderate inflation consumers are turning to less expensive private brands although the trend to eat-at-home may benefit Conagra marketing frozen dinners.

For Q1 FY 2025, net income was $467 million on net sales of $2,795 million with a diluted EPS of $0.97.  Comparable figures for Q1 FY 2024 were net income of $320 million on net revenue of $2,904 million with a diluted EPS of $0.67

The release included results for the four operating segments:-

• Foodservice: Operating profit of $35 million down 20.4 percent from FY 2024, on revenue of $267 million down 7.8 percent attributed in part to plant-related problems reducing production of branded hot dogs.
• Refrigerated and Frozen: Operating profit of $176 million, down 11.6 percent, on revenue of $1,100 million down 5.7 percent.
• International: Operating profit of $34 million, up 42.1 percent on revenue of $259 million, down 0.4 percent.
• Groceries and Snacks: Operating profit of $249 million, down 3.7 percent on revenue of $1,200 million, down 1.7 percent.

For Q1 FY 2025 (with the values for corresponding Q1 2023 in parentheses) Conagra achieved a gross margin of 26.4 percent (28.4) and an operating margin of 14.3 percent (16.8). Revenue was down 3.8 percent.

In commenting on Q1 results Sean Connolly, president and CEO stated, "Our team executed well to deliver on key priorities across the business during the first quarter in what continued to be a challenging environment. Our domestic retail volume progressed in-line with expectations, we increased share across the portfolio and advanced our portfolio reshaping initiatives. Overall, we are reaffirming our guidance for fiscal 2025, reflecting confidence in the underlying momentum of our business."

Guidance for FY 2025 included net sales flat to a decline of 1.5 percent; an adjusted increase in operating margin of 15.6 to 15.8 percent and an EPS of $2.60 to $2.65.

Conagra Brands listed assets of $21,248 million, including a disproportionate  $13,514 million as goodwill and intangibles, against long-term debt and other obligations of $8,915 million. The Company had an intraday market capitalization of $14,360 million on October 3^rd. CAG trades with a forward P/E of 11.5 and has ranged over a 52-week period from $25.16 to $33.24 with a 50-day moving average of $31.25. CAG closed at $32.65 on October 12^th pre-release, falling 8.7 percent at the open post-release on October 2^nd to close at $29.99. Twelve-month trailing operating and profit margins were 14.0 percent and 4.1 percent respectively. The Company generated a twelve-month trailing return of 5.3 percent on assets and 5.6 percent on equity.

Marfrig a leading beef producer in Brazil and ADM have established a joint venture company PlantPlus Foods to develop a range of plant-based food products for Latin America.  Marfrig will own 70 percent of the enterprise and will undertake production and distribution through existing and to be expanded facilities in South America.  ADM will provide technical expertise and assist in developing plant-based ingredients from a facility in Campo Grande in Mato Grosso de Sul State.

In commenting on the joint venture, Juan Luciano chairman of ADM noted, “Over the last several years we have invested strategically to build strong leadership positions in fast growing trend areas.  Now, by expanding our relationship with Marfrig we are taking the next step in meeting expanding consumer demand for alternative proteins. 

Following an investigation by the Hyde Square Task Force in June 2023, a volunteer youth organization on pricing of food, Senator Elizabeth Warren (D-MA) has seized on the issue of disproportionate shelf pricing. She has addressed a letter to Frans Muller, CEO of holding company Ahold Delhaize requesting specific pricing and policy information relating to The Stop & Shop chain.

The Hyde Square Task Force demonstrated a noteworthy difference in prices on identical items purchased in Jamaica Plan, a working-class neighborhood store and the more affluent suburban Dedham location.  Senator Warren requested specific information on pricing algorithms, the used of neighborhood demographics or census tracked information, justification of costs and competitive factors.

In response, Stop & Shop denied setting prices based on socio-economic and neighborhood factors, noting the differences in rent, and operating costs that influence pricing.

The controversy comes at a difficult time for Stop & Shop that claims to have recently lowered prices on many items in stores including the approximately 125 locations in Massachusetts.

The issue of ‘price gouging’ including allegations of ‘surge pricing’ are now on the national pre-election agenda. Unfortunately high prices for eggs have dominated mainstream and social media reports despite more recent declines from unseasonal retail values.

From October 10^th, McDonald’s Corp. added the Chicken Big Mac® to U.S. menu offerings.  Tempura-battered chicken patties have replaced beef used in the traditional Big Mac.

The innovation is consistent with recent comments at analysts’ meetings concerning the increasing demand for chicken and an escalation in the price of beef.

Concurrently with the U.S. Big Mac® introduction McDonald’s will offer McCrisp® and McSpic® chicken sandwiches in international venues providing a choice between original and spicy flavors.

Sodexo, a multinational food service company based in France, is apparently evaluating the acquisition Aramark their major of U.S. competitor.  Although there has been no confirmation of discussions to bring about a deal, synergy would be beneficial to Sodexo.

It is questioned whether the FTC would condone the transaction given the prominent position of both companies in the same field, serving hospitals, educational institutions and sports arenas.  If the acquisition were to occur, the buying power exerted by a combination of Sodexo and Aramark could be prejudicial to suppliers of a wide range of products including eggs.

Sodexo has been aggressive in promoting flock and herd welfare by aligning with animal rights organizations and promoting plant-based protein with implications for the intensive livestock industry.

Disinclination by many U.K. supermarket chains during 2023 to adequately pay producers of free-range eggs resulted in shortages in this category.  U.K. consumers have a preference for eggs produced in their nation and express a preference for free-range product.

Lidl, the 7^th largest grocery retailer, has entered into long-term supply agreements with groups of farmers based on production cost, margins and with adjustments for increases in feed, labor and utilities. Approximately, $1.5 billion will be budgeted by Lidl to support sourcing of eggs over a five-year period.

The action by Lidl will be followed by other chains, some of which have developed their own programs to ensure supply.  The outgoing Conservative government was instrumental in highlighting the plight of egg producers by establishing a Commission of Inquiry into the relationship between producers and retailers.

Since the debacle of Brexit, U.K. livestock and poultry producers have been at a disadvantage with respect to the E.U. over the cost of ingredients and labor.  In recent years, many expatriate agricultural workers have returned to their homelands depriving farmers of available labor.  Fallout from Brexit resulted in inflation adversely affecting egg farmers disproportionately to other sectors of agriculture.  Retail chains inappropriately attempted to maintain margins while offering low prices by failing to pay a fair price to packers and indirectly, to farmers.  There is an obvious learning lesson in the U.K. situation that is applicable to the U.S.

As part of an ongoing program of upgrading automation and mechanization, Walmart has announced new installations for their Buckeye, AZ and Searcy, AR locations to be followed ultimately by all 42 regional distribution centers.  The combination of robotics and technology will double the throughput of the regional distribution centers that serve local distribution centers of which there are three in Arizona and eight in Arkansas. 

Walmart noted, “The addition of robotics, automation and AI-powered software systems represents a significant investment in our associates and our community.”  The statement continued, “It will enable us to offer new career opportunities while revolutionizing operation and fundamentally changing the way we distribute products to stores.”

It would appear that Walmart has developed in-house systems to upgrade existing regional distribution centers.  It is possible that Walmart has managed to achieve a similar level of efficiency as Kroger that committed vast amounts of capital to their Ocada automated warehouses.  The efficiency obtained by Walmart may well prove to be a competitive factor in gaining markets to the disadvantage of Kroger, irrespective of whether the merger with Albertsons occurs and now considered an unlikely prospect.

Tom Vilsack, Secretary of Agriculture, has announced $11 million in grants to support small-scale dairy operations.  Speaking at the World Dairy Expo in Madison, WI. Vilsack stated, “USDA is committed to helping America’s dairy industry remain competitive as they work hard to provide necessary, nutritious dairy products to communities nationwide.”  He added, “The Dairy Business Innovation Initiative has invested over $64 million in more than 600 projects that are increasing dairy supply chain resiliency and creating new markets.” To date there has not been any report on the evaluation of return on this expenditure of public funds?

Grants will be awarded on a noncompetitive basis to three dairy organizations and a university to be distributed among milk producers: -

• The Pacific Coast Coalition will use $700,000 to allow farmers to establish high-value uses for milk including cheese and organic dairy products. 
• The University of Tennessee will distribute $3.5 million to support farmers to introduce sustainability and innovation.
• The Vermont Dairy Business Innovation Center will use $3.5 million to assist farmers to improve energy efficiency.
• The Dairy Business Innovation Alliance in Wisconsin will apply $3.5 million to technical assistance with an emphasis on expanding market opportunities.

The support of dairy farmers is evident given their inability to thrive in a market characterized by declining demand for fluid milk and dairy products and in the face of increasing costs.  Again, it is questioned why USDA is using funds to prop up farming entities that lack financial viability and have limited prospects of attaining profitability.  The expedient of using intermediaries to distribute funds is also questioned.  Given the practices of the USDA under the current Administration, questions relating to accountability and return on the euphemistically termed ‘investments’ should receive scrutiny.  Secretary Vilsack apparently ended up with a fat checkbook and is distributing his largesse to a limited range of farmers in one subsector of livestock production. These producers are apparently unable to acquire financing from regular banking institutions based on their inability to demonstrate collateral and capacity despite character in the form of sweat equity.

There has been no support for the egg-production sector over many years despite periods when producers were under water for extended periods. Innovation, product development, market promotion have been funded by check-off remittances to the AEB.  Many small-scale producers have ceased production since 2010 because they could not raise capital for conversion to cage free production or ceased supplying packers. Low prices over extended periods depleted working capital and prevented these producers from incorporating depreciation in pricing to fund replacement of obsolete equipment. 

On October 4^th the United Nations Food and Agricultural Organization released the Index of Food Commodities for September 2024.  A sequential monthly reduction in food prices over a year was reversed by the 3.0 point increase in the Index from August 2024 to the most recent value of 124.4, for the past month.

Components of the Index included:-

• The Meat index was up 0.4 points from August to 119.6 points with higher demand for chicken products exported from Brazil following expiry of embargos after an alleged ‘Newcastle disease’ break.  Prices for beef and pork were stable and mutton was down.
• The Cereal Index was up 3.0 points from August to 113.5 points due to higher wheat prices affected by delayed and lower harvests in Canada, the E.U. and the drought-affected Baltic region.
• The Vegetable Oil Index in September was up 6.2 points from August to 142.4 points with  higher prices for soy, sunflower and palm oils. This was due to increased world demand and diversion of soybean oil to biodiesel in the U.S. Asian palm oil production was down.
• The Dairy Index was up 5.0 points from August to 136.3 in September and up  from 112.0 points in September 2023 on increased demand.

There is concern over projected lower yields for crops in Brazil and Argentina due to drought coincident with transition to a La Nina event. Restoration of Black Sea shipping using the ‘Humanitarian Corridor’ along the eastern seaboard of Ukraine and Bulgaria has increased availability of grains and oilseeds and contributed to a moderation in prices to dependent nations. 

In a striking example of the right hand not knowing what the left is doing, eleven Republican lawmakers are concerned over advances in agricultural biotechnology by China.  In a letter dated September 26^th, Andrew Garbarino (R-NY) and Dan Newhouse (R-WA) led nine colleagues to request that the Office of Homeland Security and the Director of National Intelligence conduct an analysis and provide Congress with recommendations.

The issue of concern is that China might secure a dominant position in the global protein supply.  They raise the issue of “recent Chinese activity in the innovative protein market most notably by the inclusion of cultivated meat research and development in a 5-year agricultural plan”.

Aren’t these the same legislators who are passing laws banning the sale of cultivated meat in predominantly “beef-producing states”? The same group that torpedoed Department of Defense funding for research on cultivated meat?

It seems that on the one hand cultured meat is taboo and yet these lawmakers are concerned over China, a commercial adversary, (except where Walmart and Target shelves are concerned), developing cultivated meat and “ceding American leadership in the global innovative protein market and forfeiting food security for the United States and its allies”.

Hospitals in major centers in states affected by Hurricane Helene are slowly returning to normal.  Metropolitan facilities have power and water available, but staff are hard pressed to serve local communities and those transferred from rural areas functioning without utilities.  A recent report in Becker’s Hospital Review confirmed that 22 hospitals in western North Carolina now have power.

In contrast to urban medical facilities, rural outpatient clinics are still closed due to storm damage or inadequate services. Routine scheduled appointments and elective procedures have been cancelled to allow staff to attend to urgent cases.

Many hospital systems have introduced support programs for staff who have lost accommodation or are caring for dependents and relatives displaced by the storm.

On September 27^th, Judge Adrienne Nelson received submissions following the conclusion of testimony in the case filed by the Federal Trade Commission requesting a preliminary injunction to block the proposed merger of the Kroger Company with Albertson’s Corporation.

The FTC supplementary brief expanded on testimony maintaining that the merger would be anti-competitive and would “incentivize Kroger to raise prices in hundreds of communities across the country.”  Dr. Nicholas Hill an agricultural economist reviewed the U.S. Department of Justice Horizontal Merger Guidelines to establish that the proposed transaction would impact 1,922 individual markets.  The FTC brief also emphasized that Albertson’s represents the first or second major competitor to Kroger in 14 of 17 markets where both companies operate.  The analysis conducted by Dr. Hill demonstrated that despite the competition represented by dollar stores and online retailers, the merger would still result in higher prices ultimately in hundreds of markets.

The FTC maintains that consumers shop across multiple store formats and that as an Agency it is not necessary to prove “that there is a subset of customers who only desire one-stop shopping for groceries or who are committed to only one store.”

The FTC rejected the promise to reduce prices since this is unenforceable along with expressed intentions to improve salaries and conditions for workers and not to close stores.  The FTC correctly states that “promises can be broken” since the primary responsibility of Kroger management and directors is to its shareholders.  In support of this contention, the FTC discovered internal documents in which an Albertson’s executive stated, “We all know prices will not go down” discounting the promise to devote $1 Billion to reducing prices as a “sweetener” to approve the deal.

The plan to divest 579 stores was also questioned since C&S Wholesalers has minimal experience in operating a large number of supermarkets.  Haggen’s ghost haunted the courtroom and was cited as a valid reason to oppose the merger as structured. Albertsons divestiture of 146 stores to Haggen in 2015 resulted in sixty percent being closed within a year with the remainder reacquired by Albertsons. If the divested stores were to be purchased by an established retailer such as Ahold-Delhaize or even a deep discounter such as Aldi or Lidl, the transaction might appear more feasible.  Opponents of the merger have pointed to the fact that Kroger and Albertsons picked a weak competitor that would not represent competition. Based on this size of C&S Wholesalers, and their history with the Price Chopper acquisition, the FTC regards the C&S Wholesale strategy to support the transaction as “implausible at best”.

Given the evidence presented in the form of witness testimony and the supporting brief it is the opinion of informed observers that Judge Nelson will grant the preliminary injunction, effectively killing the merger unless the ruling is overturned on appeal.

The Food and Drug Administration has granted marketing authorization for the Healgen Rapid Check™ immunodiffusion procedure that can simultaneously identify antigens to SARS-CoV-2, the virus responsible for COVID-19 and both influenza A and B viruses from nasal swabs.  The test can be self-administered by an adult and from children 2-years and older. 

As with all diffusion tests, sensitivity is slightly inferior to molecular (PCR) assays that requires submission of swabs to a laboratory with suitable equipment and trained personnel.  Notwithstanding the lower sensitivity attaining 92 percent for COVID and 91 percent for influenza A and B, the test has high specificity and will correctly report 99 percent of negative samples.  In the event of a negative test, there is reasonable assurance that the patient is not shedding either SARS-CoV-2 or influenza A or B virus as denoted by the result.  Unfortunately, the test will yield a small proportion of false negatives.

The combined test will be useful in differentiating between influenza and COVID allowing correct antiviral therapy especially for individuals with predisposing conditions or at risk based on age.

Dr. Michelle Tarver, Acting Director of the FDA Center for Devices and Radiologic Health noted, “As we enter this year’s annual flu season with respiratory illnesses such as COVID-19 on many of our minds, our ability to detect these pathogens effectively and efficiently can be impactful on our daily lives”.  The Rapid Check™ test kit will be valuable to screen workers and supervisors complaining of respiratory signs establishing an early diagnosis to initiate treatment and to implement quarantine especially in individuals that have not received seasonal vaccinations.

Senator Cory Booker (D-NJ), an avid vegan and promoter of organic foods, has introduced the Safe School Meals Act.  Provisions of this legislation would include: -

• Banning PFAS, phthalates and bisphenols in food packaging for school meals.
• Directing the FDA to establish safe limits for heavy metals in school meals based on risk analysis.
• Banning of ingredients with glyphosate, paraquat, organophosphates and designated pesticide residues.
• Expanding the National Organic Cost Shares Certification program to cover up to $3,000 in expenses.

It is imprudent to establish zero tolerance residue standards for inorganic and organic compounds in foods since current and future technology is capable of detecting contamination far below biological effect levels even with bioaccumulation.  This would specifically apply to glyphosate, a herbicide used on over 90 percent of U.S. soybeans and corn.  Establishing acceptable levels for paraquat and organophosphates is justified based on their known neurologic effects.  Likewise, safe limits on heavy metals including lead, arsenic and cadmium are required. This said these are ubiquitous elements detectable in all soil and plants in therefore in foods. 

It is interesting to note that the proposed Bill exempts organic farms that should by definition meet the requirement for freedom from glyphosate and pesticides.  In this respect the exemption is self-serving. What is sauce for the goose is sauce for the gander. Certified organic ingredients should be subjected to the same intensity of assay as conventional products intended for food.  The National Organic Program is based on a review of a paper trail and lacks the assurance of structured laboratory assay.   There have been sufficient cases of fraudulent use of the organic seal, especially for imported ingredients, to justify surveillance for proscribed contaminants. 

The provision in the Bill that provides remuneration for organic cost share certification has little to do with school feeding but is obviously an incentive favoring organic production. Both near and dear to Senator Booker’s heart and his digestive tract.

In supporting the proposed Bill, Senator Booker stated, “Kids in America consume far too many harmful substances in their food.”  This sentiment that forms the basis of the proposed law should, however, be quantified and verified.  Senator Booker continued, “School meals should be a child’s safest source of nourishment, not another source of toxic exposure”.  He concluded “The Safe School Meals Act would protect our children by getting dangerous chemical food additives, heavy metals and pesticide and chemical residues out of school meals.” Then comes the commercial, “While creating a significant new market opportunity for organic and regenerative farmers.”

It is fairly obvious that the “Safe School Meals Act” is really a pro-organic bill in disguise.  Nobody in their right mind would countenance inclusion of known toxic compounds in school feeding.  What is important is to establish what may be toxic and what might be inconsequential.  Some aspects of the Safe School Meals Act are potentially protective but the disruption and added cost of compliance should be taken into account.  As presented, the Bill is designed to promote organic production and an attempt to demonize conventional food.

The Meggline TP200 compact palletizer operates at 72,000 eggs (200 cph) per hour.  The unit is designed with a small footprint of 15.1 x 6.6 feet. Depending on configuration, the unit can stack either five or six layers high.  The TP200 can accommodate 12 pallets and 60 dividers in the six-layer version.

The installation is completed powered by electricity and does not require compressed air.

The TP200 is programmed to scan pallets.  If empty they are placed in internal storage.  Eggs are transferred from trays to pallets with precise positioning and placement of dividers until a completed pallet is assembled.

Meggson has developed a series of options to improve efficiency depending on the needs of a plant.  These include

• An automatic pallet outfeed that facilitates continuous operation. 
• Control is achieved using the HMI touchscreen.
• The TP200 can receive eggs from two supply belts simultaneously. 
• Safety is assured with an invisible infrared fence system incorporating an emergency stop and a safety light curtain complying with European standards for health, safety and environmental compliance.

For further information access the Meggson website by clicking onto the Company logo on the right side of the welcome page.