Editorial

 

Mercy for Animals Releases Video

Jun 24, 2016

    

On June 22nd, Mercy for Animals (MFA) posted a video alleging deviation from acceptable production practices and welfare at an egg production complex in Washington State. In this instance, MFA unjustifiably implicated a nationally distributed brand since the owners of the complex are franchisees of the marketing cooperative.

  

The producer confirmed that no eggs destined for the brand were in fact derived from the flocks depicted in their clandestine video. The release of the video was accompanied on Wednesday morning June 22nd by a telephonic media event comprising a reading of a prepared statement by Matt Rice, Director of Investigations for Mercy for Animals.

The MFA allegations closely follow the claims relating to a similar intrusion using an agent on an egg production complex in Maine as reported in a June 17th posting on EGG-CITE. The principal thrust of the MFA complaint involved housing of flocks in cages. This is a standard objection by MFA despite the fact that hens were held in accordance with the 67 square inch stocking density as accepted by the U.S. industry. 

Alleged deviations from acceptable practices included birds entrapped in cages by loose wire, decomposing dead hens in cages and individual birds showing prolapse or visible external lesions. As with all intrusion videos the MFA allegations are not supported by any quantitative data regarding the prevalence rate of alleged abnormalities. Based on performing audits and providing consulting services to the U.S egg industry for over 30 years as a board- certified poultry veterinarian, individual hens are encountered with tumors, injuries and cutaneous lesions. These birds should be culled and humanely euthanized. It must be accepted that age-related feather loss, injuries to hens and mortality are not specific to cage housing but will be observed in non-confined flocks including barns and free-range systems.  In fact mortality due to aggression and predation are higher in flocks housed in alternatives to conventional cages.

The management of the farm in question has requested an evaluation by a UEP auditor and the farm will be visited by a poultry extension specialist affiliated to Oregon State University.

If determined to be valid and representative of the producer the allegations are clearly an aberration and not representative of the U.S. industry

The recent actions by MFA represent an intensification of their efforts to generate support for the cage-free initiative similar to California Proposition#2, which may be placed before voters of Massachusetts in a ballot in November, subject to ongoing litigation. It must be expected that press releases relating to alleged deviations from acceptable welfare and housing will be announced over the next few months instituted by the HSUS and its surrogates.

Producers would be well advised to review training and supervision of workers and above all concentrate on removing injured, sick or dead birds from cages.  Procedures associated with handling birds during transfer, placement in cages or depletion should be supervised.  Greater care should be exercised in vetting potential employees to identify and exclude agents of animal rights organizations responsible for deceptive video images which may reflect adversely on housing and management.  At the end of the day it is always possible to obtain an image of a sick or dead bird in any house containing upwards of 25,000 hens with the intention of creating the perception that a rare or occasional observation is reflective of the entire flock, farm or producer.

Based on websites maintained by so-called animal welfare organizations it is evident that they are pursuing a vegan agenda and their ultimate goal is to abolish all intensive livestock production.  The intent of animal rights activists and their ilk is to satisfy their own motivations and desires, without concern for the impact on production of food required by consumers, many of whom depend on low-cost protein from eggs and poultry.

The poultry industry and its customers represented by the National Restaurant Association, the National Association of Chain Restaurants and the Food Marketing Institute have committed to an orderly and extremely expensive transition to cage-free housing or enriched colony modules over the proximate ten years.  Manipulation of the mainstream media and posting of contrived, spurious or edited videos by animal rights organizations does a disservice to the responsible industry, their customers and consumers.

   

Egg Industry News

 

USDA Weekly Egg Price and Inventory Report, June 27th 2016

Jun 29, 2016

    

Midwest-wholesale prices for Extra Large and Large sizes soared 36 percent and 40 percent respectively, this past week although off a low base. During the previous week prices increased by approximately 25 percent after declines of 3 percent, 13 percent and 20 percent respectively over the preceding three weeks.

  

The USDA Combined Region value for Large commodity eggs delivered to warehouses which lags the Midwest quotation by one week, rose 10 cents to $0.53 per dozen, compared to the 12-month trailing peak price of $2.77 per dozen in mid-August 2015.  The USDA Combined range for Large, rose 10 cents to $0.58 per dozen in the Midwest. In the South Central Region, price also rose 10 cents to $0.54 per dozen. The current USDA Combined Range Price is $0.75 per dozen below the three-year average which is inflated by the rise in price during 2015, attributed to the HPAI epornitic.

 The four-week trend suggests higher prices into the last week of June preceding the Independence weekend. This is based on two sharply decreased weekly stock levels preceding the past week. The National productive flock which excludes pre-lay pullets and hens in molt, is still down by 5 million hens prior to HPAI at approximately 294 million. Older flocks were depleted following extremely low post- Easter prices and hens not required to supply contracts are being either depleted or molted.

The market will respond to changes in availability of both shell eggs and breaking stock attributed to re-stocking, projected exports and cessation of imports of breaking stock from the EU.  

 Cold storage stocks in selected regions on June 20th amounted to 2.605 million pounds, 1.8 percent below the stock of 2.654 million pounds during the week of June1st representing a slight decline in frozen stock this past week.

The most recent monthly USDA Cold Storage Report issued on June 24th documented a 35.96 million pound total stock of frozen egg products on May 31st 2016. This was up 27.4 percent from May 31st 2015. Approximately 88 percent of inventory comprised the categories of “Whole and Mixed” (35.2 percent) and “Unclassified” (52.8 percent).

   
 

CME Prices

Jun 29, 2016

    

At the close of trading on June 24th CME quotations for corn, soybeans and soybean meal with values for June 17rd in parentheses were:-

COMMODITY
Corn (cents per bushel)                       July   385      (438)       Sept    390       (443)     
Soybeans (cents per bushel)              July 1,110  (1,159)      Sept  1,092   (1,155)  
Soybean meal ($ per ton)                    July    378     (409)        Sept     378      (407)   

 NOTE:

  • July corn down 53 cents per bushel (12.1 percent) in past week
  • July soybean meal down  $28 per ton (5.7 percent) in past week
  

For each 10 cent per bushel change in corn :-

  • The cost of egg production would change by 0.45 cent per dozen
  • The cost of broiler production would change by 0.25 cent per pound live weight

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

  • The cost of egg production would change by 0.40 cent per dozen
  • The cost of broiler production would change by 0.25 cent per pound live weight

See posting on the June USDA-WASDE Report #554 for an update on quantities and price projections for commodities

   
 

Whole Foods Market Reports on First 365 Store

Jun 29, 2016

    

Addressing the 16th Annual Oppenheimer Consumer Conference in Boston, John Mackey, Co-CEO of Whole Foods Market commented favorably on the first 365 store opened in the Silver Lake area of Los Angeles during the last week of May.

The store carries approximately 7,000 SKUs, approximately a quarter of the complement in a legacy Whole Foods Market.  Mackey noted that the individual purchase by a customer was surprisingly larger than a traditional Whole Foods Market.  Mackey also noted the considerable markdown in the price of items at the first 365 store opened.

  

John Mackey

Apparently the company is drawing lessons from the initial store which is located in a relatively affluent area and is probably benefiting from a “curiosity factor” with shoppers taking advantage of promotional prices and novelty.

It is far too early for either Whole Foods Market or financial analysts to draw any conclusions on the new concept from the store which has been open for a month.  It remains to be seen whether the initial attraction of 365 stores persists in the face of competition from ALDI, Trader Joe’s and clones and also whether the 365 concept adds to the bottom line of Whole Foods Market given lower margins and the possibility of cannibalization of legacy stores.

   
 

McDonald’s Emphasizes Speed in Implementing Innovations

Jun 29, 2016

    

In a June 23rd Chicago Tribune article, Leslie Patton highlights the change in culture at McDonald’s Corporation with respect to innovations, evolution of menus and improvements in product quality.  This can be attributed directly to the influence of CEO Steve Easterbrook who has turned McDonald’s around within a year and made it competitive against Burger King, Taco Bell and Dunkin’ Donuts in the breakfast space.

  

Changes in both menu offerings and recipes have contributed to a 6.2 percent global same-store sales increase and gaining 23 million more customers in the U.S. during the first quarter of 2016.

What would appear to be simple changes which previously took years to implement now take only weeks.  Examples quoted in the article include substituting butter for margarine on Egg McMuffins, replacing bleached flour with unbleached flour in muffins and using pancakes in place of bread for McGriddles.  McDonald’s is actively questioning all processes used previously and in the words of Jessica Foust, Director of Culinary Innovation “We're rethinking the way we approach innovation and are really questioning some of the processes we've used in the past.”

   
 

Steve Monroe Elected Chairman of USAPEEC

Jun 29, 2016

    

Steve Monroe, Manager of Export Sales at Sanderson Farms was elected Chairman of the Board of USAPEEC for the 2016-17 term. He succeeds outgoing Chairman Jim Wayt of Intervision Foods in Atlanta.

The 30-member USAPEEC Board of Directors will include Marc Killebrew of Tyson Foods who was elected First Vice Chairman; Butch Johnson of Globex International, Second Vice Chairman; Joel Coleman of Butterball was re-elected Secretary-Treasurer with Jim Wayt remaining as Immediate Past Chairman.

 

 

   
 

Surveillance Yields H5 Avian Influenza from Wild Birds in Russia

Jun 29, 2016

    

Dr. Evegny Nepoklonov, Deputy Head, Federal Service for Veterinary Surveillance, of the Russian Ministry of Agriculture, reported the isolation of H5strain avian influenza characterized as highly pathogenic from wild birds collected in a surveillance program.  The isolates were obtained on June 9th from the Ubsu-Nur Lake in the Republic of Tyva, bordering Mongolia.

  

This extensive wetland area lies in the Central Asian flyway over which birds migrate from the Arctic Ocean to the Indian Ocean over extensive distances.

The ProMed report on the statutory declaration to the OIE listed the following species from which H5 isolates were obtained:-

  • Black-headed gull
  • Common tern
  • Great Cormorant
  • Great crested grebe
  • Grey Heron
  • Unidentified duck

All isolates were identified using RTT PCR

   
 

Status of 2016 Corn and Soybean Crops

Jun 29, 2016

    

The USDA Crop Progress Report for Monday June 27th indicated a continued favorable trend in corn and soybean crops in 18 states, expressed in the percentages depicted in the table below:-

                                                                            WEEK ENDING

Crop

June 19th

June 27th

5-Year Average

Corn emerged

98

100

100

Corn silking

 -

                 6

                5

Soybeans emerged

       89

  95

  91

Soybeans blooming

-

   9

   7

 

Crop Condition:

Crop

V. Poor

Poor

Fair

Good

Excellent

Corn

1

4

20

59

16

Soybeans

1

4

23

60

12


The prospects for corn and soybean early growth depend on adequate soil moisture. USDA reported data for 48 contiguous states which shows a slight deterioration from the previous week,  as shown in the table below:-


Moisture Classification (%) for Week Ending June 26th.  

 

V. Short

Short

Adequate

Surplus

Topsoil

7

24

62

 7

Subsoil

5

21

68

 6

                             

                                                        

  

   
 

Post Graduate International Poultry Veterinary Training

Jun 29, 2016

    

A training program has been introduced for practicing Poultry Veterinarians under the auspices of the World’s Veterinary Education in Production Animal Health project in collaboration with the World Organization for Animal Health and the University of Luxembourg.  The program is supported by the World Poultry Science Association. 

  

The program which leads to a Masters degree from the University of Luxembourg comprises three modules.  The first involves regulatory issues with instructors from the World Organization for Animal Health (OIE) followed by a specialized module dealing with chickens, turkeys or egg production and a third advanced module also requiring submission of case reports.  Courses are between three and six days in duration and are held in designated centers with instruction in either English, Spanish or French.  Modules I and II were presented in 2015 and early in 2016.

Prerequisites include a university degree in veterinary medicine.

Details of the program can be downloaded from www.wvepah.org.

   
 

Dr. Zavala Upbeat on AI Prevention in the U.S.

Jun 29, 2016

    

Speaking at the USAPEEC Annual Meeting, Dr. Guillermo Zavala, a consultant to the organization notes that the “likelihood of another HPAI event like the one in 2015 is very low”. He added “I think we are much better prepared today than we were a few months ago although there are no guarantees.”

Zavala pointed to the surveillance systems and the prompt response to two “pop-up” outbreaks of avian influenza in turkey flocks in Indiana in January and in Missouri in March which were rapidly eradicated without lateral dissemination of virus.

 

Dr. Guillermo Zavala

Zavala contrasted the AI status in the U.S. where the infection has been eradicated to the situation in nations where AI is endemic, requiring a reliance on vaccination.

   
 

Laboratory Workers in Minnesota Win Award

Jun 29, 2016

    

The Midwest Poultry Federation honored Christian Figueroa and Jennette Aguayo affiliated to the University of Minnesota MCROC Laboratory for their avian influenza detection procedure.

At the Conference held June 15th through 17th, Brad Kelley of Animal Health International received the Allied Lifetime Achievement Award.

   
   
 

Fusarium Impacting Russian Wheat Crop

Jun 29, 2016

    

According to a ProMED mail posting on June 20th, agricultural officials in Russia reported severe Fusarium infection in the 2016 wheat crop affecting southern regions.  The fungal infection is attributed to heavy and unseasonal rains, a typical scenario.  Fusarium is responsible for “head blight” which results in contamination of seed with Fusarium mycotoxin.  In addition Fusarium is also responsible for “foot rot” which affects roots.

  

In the event of extensive contamination of wheat with mycotoxins, both routine assays to quantify contamination and addition of mycotoxin binders to feed are required.

   
 

USDA Weekly Egg Price and Inventory Report, June 20th 2016

Jun 24, 2016

    

Midwest-wholesale prices for Extra Large and Large sizes soared 24 percent and 27 percent respectively, this past week although off a low base. During the previous week prices stabilized after declines of 3 percent, 13 percent and 20 percent respectively over the preceding three weeks.

The USDA Combined Region value for Large commodity eggs delivered to warehouses which lags the Midwest quotation by one week, held at $0.43 per dozen, compared to the 12-month trailing peak price of $2.77 in mid-August 2015.  The USDA Combined range for Large, remained at $0.38 per dozen in the Midwest.

  

In the South Central and South Eastern Regions, price also held at $0.44 per dozen. The current USDA Combined Range Price is $1.30 per dozen below the three-year average which is inflated by the rise in price during 2015, attributed to the HPAI epornitic.

The four-week trend suggests higher prices into the last week of June and early July preceding the Independence weekend. This is based on two sharply decreased weekly stock level. The National productive flock which excludes hens in molt, is still down by 5 million hens at approximately 294 million.

Older flocks were depleted following extremely low post-Easter prices and hens not required to supply contracts are being either depleted or molted. Young flocks commencing production have resulted in a disproportionately lower (8 percent) increase in the price of Mediums.

The market will respond to changes in availability of both shell eggs and breaking stock attributed to re-stocking, projected exports and cessation of imports of breaking stock from the EU.  

Cold storage stocks in selected regions on June 13th amounted to 2.679 million pounds, 0.9 percent below the stock of 2.654 million pounds during the week of June1st representing a slight increase in frozen stock.

The most recent monthly USDA Cold Storage Report issued May 23rd documented a 33.64 million pound total stock of frozen egg products on April 30th 2016. This was up 7.6 percent from April 30th 2015. Approximately 90.0 percent of inventory comprised the categories of “Whole and Mixed” and “Unclassified” in almost equal proportions. The June Cold Storage Report reflecting May 2016 will be released on Friday June 24th.

   
 

SHAREHOLDERS SUE CHIPOTLE MANAGEMENT

Jun 23, 2016


    

MarketWatch reported on June 21st that a shareholders’ suit has been filed against the management of Chipotle Mexican Grill claiming insider trading and enrichment at the expense of shareholders.  The suit claims that buyback programs valued at $1.9 billion inflated the price of Chipotle stock.

The suit also alleges that “the company misrepresented its adherence to industry standards and that a majority of the Board of Directors and the super majority of the individual defendants engaged in lucrative insider sales reaping millions of dollars in net proceeds”. 

A review of insider share transactions shows that from February 19th 2015 through May 31st 2016, Steve Ells Founder and Chairman sold shares to the value of $85 million. 

  

Steve Ells

Most of the transactions involved sale of shares acquired through a stock option program at approximately $300 and sold at prices ranging from $700 down to $440. The lower prices followed negative publicity relating to multiple food borne disease outbreaks.

Montgomery Moran co-CEO sold shares to the value of $109 million from May through July 2015.  Again share allocations at approximately $270 were sold at prices in the region of $600 generating a significant profit.  On May 20th 2015 Moran sold $95 million of Chipotle stock and Ells $19 million followed by a $27 million transaction by Ells on April 21st 2015 prior to the public revelations of food borne infections.

The transactions are apparently both legal and consistent with the charter of the company but the magnitude, frequency and concentration of sales among officers and directors raises questions as to ethics and fiduciary responsibility.”Food with Integrity”-questionable but never “Management with Integrity!” based on public records.

   
 

KROGER EVALUATING HOME DELIVERY PROGRAMS

Jun 23, 2016

    

According to comments made by J. Michael Schlotman, CFO of the Kroger Company, designated stores are evaluating alternative home delivery programs. Speaking at the Jefferies Consumer Conference, Schlotman noted that a store in Chicago is using Instacart and in Washington DC, a Harris Teeter store is making use of Uber.  Company vehicles are used in Denver. In addition Kroger offers ClickLis® a store pick-up program which is now available in 60 locations.

  

The major question facing the supermarket industry is whether consumers are willing to pay an additional fee for convenience and if so whether a flat amount or a percentage would be appropriate. At the present time Kroger charges $4.95 per ClickList® order and there does not appear to be any resistance to the extra charge.

   

Shane Commentary

 

Hampton Creek Seeks Investment Capital

Jun 24, 2016

    

According to a May 24th 2016 article by Olivia Zaleski in Bloomberg Technology, Hampton Creek is negotiating with potential investors to raise $200 million. If successful this would value the company at $1.1 billion. The tone of the article suggest that this is highly speculative given the limited range of Hampton Creek products on the market coupled with as yet non-quantified demand for vegan meat and egg substitutes. 

  

Industry observers question whether Hampton Creek is in reality an innovator with the ability to develop new products or simply an opportunistic marketer relying on existing technology and manufacturers to provide products.  Hampton Creek has announced intentions to increase product offerings to more than 600 items and has aspirations to compete with major food producers. 

Although the investment community has favored food start-ups, Bloomberg notes that the food-tech sector attracted only $680 million during the first quarter of 2016 constituting the lowest level of funding since 2014.

Hampton Creek has stated that it wishes to erect a 95,000 square foot research and development laboratory. Why? Are there not adequate laboratories staffed by distinguished faculty and competent technicians at Land-Grant Universities?  Are there not any commercial contract facilities in operation? The comment that the “scientists will analyze over 960 plant samples per week” taken with previous statements relating to extensive databases on plants appear to be at variance with established industry practice.  In fact the comments by entrepreneurial founder of Hampton Creek and its previous iterations, Josh Tetrick raises images of an infinite number of monkeys sitting at an infinite number of typewriters in the hope that the exercise will produce a sonnet.

Hampton Creek has made use of existing technology, apparently supplied by a contract laboratory to produce an egg-free mayonnaise substitute now competing with a nationally branded product.  Hampton Creek also produces a range of plant-based substitutes for eggs in cookies and baking dough.

There has been little in the way of innovation and product development to date to justify previously claimed tranches of capital.  The disconnect between publicity relating to supplanting eggs and animal products and the reality to date is eerily reminiscent of Theranos which promised to be a “disruptor” of the industry providing clinical-pathology assays. The parallels include

  • A heavy emphasis on publicity featuring the founder,
  • The extravagant claims for innovative products unsupported by established publications in peer-reviewed food science journals,
  • The absence of endorsement of Hampton Creek technology by respected academics or industry figures
  • A high burn rate of funding with operating losses.

These should be warning signs to the investment community. 

   
 

UEP Commitment on Gender Separation

Jun 17, 2016

    

The Board of the United Egg Producers released a statement on disposal of cockerels following the May 2016 meeting.  The statement released on June 9th reads:-

“United Egg Producers and our egg farmer members support the elimination of day-old male chick culling after hatch for the laying industry.  We are aware that there are a number of international research initiatives underway in this area, and we encourage the development of an alternative with the goal of eliminating the culling of day old male chicks by 2020 or as soon as it is commercially available and economically feasible.  The U.S. egg industry is committed to continuing our proud history of advancing excellent welfare practices throughout the supply chain, and a breakthrough in this area will be a welcome development.” 

  

The question of embryonic gender determination was reviewed in postings on September 30, 2015, December 24, 2015, March 25, 2016 and April 22, 2016.

Various avenues of research are currently underway which include:-

  • Ramen spectroscopy on three-day old embryonated eggs in Germany but requiring removal of a quadrant of the shell
  • Transgenic modification of male chicks in Australia to introduce a fluorescent protein to allow removal of eggs containing male embryos at the time of transfer
  • Technology developed on an experimental basis by a start-up, inOVO located in the Netherlands This company has indicated that additional research and proof of concept will take at least a year.  

It is evident that to be successful a system which will differentiate between eggs bearing male or female embryos will have to be effective with at least 95 percent accuracy by no later than the 9th day of incubation.  Speed of operation should be consistent with current rates of chick service and capital and operating costs should be acceptable to the industry.

The UEP has committed to an implementation date of approximately four years in the future.  This may be optimistic given the state of development of alternative technology.

In the interim, the industry could project a welfare-oriented image by instituting carbon dioxide anesthesia before maceration or grinding as practiced in the EU in some hatcheries and currently under experimental evaluation in the U.S. This inexpensive and practical expedient could diffuse some of the opposition to intensive egg production since the image of grinding conscious day-old cockerels is unacceptable to reasonable consumers.

   

Visit our Companion Website
www.Chick-Cite.com


Dr. Simon M. Shane
Simon M. Shane
Contact     C. V.

Industry Prices: Wed Jun 29
 Corn3.83 $/bu
 Soybeans11.13 $/bu
 Soybean Meal390.10 $/ton
 Eggs, Producer56  ¢/doz
 Eggs, Warehouse 65-68  ¢/doz