Effect of $15.00 per Hour Wage Rates on QSRs

Oct 9, 2015

A commentary by Noah Glass, CEO of OLO a company specializing in digital ordering, comments that QSRs will have to employ more technology rather than additional workers, given the anticipated rise in wage rates.  He cites the low productivity of restaurant workers at $84,000 annual sales for a full-time employee.  The equivalent sales-per-employee value for grocery stores is $304,000 according to the Bureau of Labor Statistics. 

Data collected by the National Restaurant Association shows that productivity expressed as output per labor hour has not improved over the past ten years.  In contrast the non-farm business sector has increased productivity by 1.7 percent annually over the same period.

Glass suggests that restaurant operators maximize revenue per square foot.  He maintains, from his experience that digital ordering can enhance the dollar value of each sale and concurrently optimize labor.  He quotes from a Cornell University study that shows that 300 U.S. restaurant brands are now applying digital ordering and achieving an acceptable return on their investment.

If QSRs wish to enhance return on each square foot of space, they will obviously have to resort to mechanization in food preparation.  Consolidating food preparation in commissaries serving smaller and more efficient QSRs would appear to be a suitable response to increased labor cost, reducing the need for involvement of physical labor and hence operating costs.


Egg Industry News


Egg Industry Statistics and Reports

Oct 9, 2015

Comments supplementing the production summary tables for the latest series reflecting September statistics and prices made available by the EIC on October 9th 2015 are tabulated together with comparison values from the September 3rd posting on EGG-CITE.

EGG-CITE documents USDA data on weekly egg production and prices each week concurrent with the recovery from HPAI outbreaks which impacted flocks in Iowa, Nebraska, Wisconsin and Minnesota, producing mainly for the egg-liquid segment of the Industry. During early September an isolated case of low-pathogenicity H5N2 AI was diagnosed in a backyard multi-species flock with 2,500 mallards.


Results for COSTCO 4th Quarter FY 2015

Oct 9, 2015

In a press release dated October 7th Costco Wholesale Corporation announced results for the  4th Quarter of Fiscal 2015 ending August 30th 2015.           

The following table summarizes the results for the period and compares the values with the corresponding quarter of the previous fiscal year. (Values x1,000 except EPS)

Quarter ending  Aug. 30th                     2015                      2014                       Difference (%)

Sales                                               $35,778                     $35,523                       + 0.7

Gross Profit                                    $  4,682                     $  4,486                       + 4.4

Operating Income                           $ 1,156                      $  1,091                       + 5.9

Net Income                                     $     767                     $     697                       +10.0

Earnings per Share                          $1.73                        $1.58                            + 9.5                                    

Gross Margin                                   13.1%                        12.6%                         + 4.0

Operating Margin                               3.2%                          3.1%                         + 3.1

Profit Margin                                      2.1%                          2.0%                         + 5.0


Kenya Farmers Impacted by Taxes on Ingredients

Oct 7, 2015

According to the Xinhua News Service of China reporting from Nairobi, Kenya, farmers in that nation are squeezed between high feed costs and imports of inexpensive eggs from the Republic of South Africa and Uganda.  According to the report, feed contributes to 70 cents per dozen compared to 57 cents per dozen in neighboring Uganda.  The differential represents taxes imposed by the government of Kenya.  On the other side of the equation, prices for eggs have declined by almost 25 percent to $1.00 per dozen providing little margin for labor, packaging and other variable cost in addition to the fixed costs of production.

If the government of Kenya wishes to encourage small-scale farm production, the tax on ingredients should be rescinded to allow domestic producers to be more competitive.  The alternative is placing a tariff on imported eggs but this is in all probability contrary to regional trade agreements and in any event could not be enforced with respect to the porous border with Uganda.


Wal-Mart Stores Inc. to Reduce Corporate Headquarters Staff

Oct 6, 2015

Following the initiative of CEO Doug McMillon to reduce cost, Wal-Mart Stores Inc. will reduce headquarters staff currently numbering 19,000 employees in Bentonville AR.  The job reduction is expected to include 450 “associates” or 3 percent of the complement and will include both senior managers and workers.

Increasing wages to a minimum of $9.00 per hour introduced in April has impacted earnings reflected in a significant decline in the price of Wal-Mart shares.  The 52-week range extends from $61.50 to a high of $90.97. On October 2nd, following release of the announcement Wal-Mart Stores Inc. closed at 64.98 near the bottom of the 52-week range.  In commenting on the action McMillon stated “While difficult, I believe these changes will help us to become a more nimble organization that serves customers better.”

According to the report in USA Today, affected employees will be paid for sixty days plus benefits and severance pay equal to two weeks for every year of service.


ALDI Modifies Formulations of Private Brands

Oct 6, 2015

ALDI has announced that it has removed all synthetic colors, partially hydrogenated oils and MSG from private-label products and will label accordingly.  With 90 percent of its products under private label, ALDI is “dedicated to the well-being of customers by providing high quality groceries at the lowest possible price” according to Jason Hart, CEO of the U.S. subsidiary of the chain, based in Germany.

ALDI is increasing the number of options for health-conscious consumers including organic and fresh produce and the SimplyNature® line.  ALDI operates more than 1, 400 stores in 32 states and has initiated an ambitious expansion program.


Contaminated Totes Probably Responsible for Introduction of PEDv

Oct 6, 2015

Reuters reported on October 2nd that a USDA-APHIS epidemiologic investigation pointed to contaminated totes recycled from Asia as being responsible for introduction of porcine epidemic diarrhea virus in 2014. 

The conclusion was based on an exhaustive study of alternative routes of introduction although there were no studies demonstrating the presence of PEDv on recycled totes.  Notwithstanding this lack of definitive evidence, the principle of importing ingredients in recycled containers to distribute feed in the U.S. is decidedly dangerous and the practice should cease.

It is suspected that meat products have been introduced illegally and clandestinely from Asia and principally China to supply specific markets. A major Foot and Mouth outbreak in the UK was introduced in 2000 in this way. Deficiencies in biosecurity specifically with respect to persons travelling from areas where the disease is endemic to the U.S. could also be implicated. 

It is possible that there was no single route of introduction but the attribution of PEDv to contaminated recycled totes is credible.  Accordingly appropriate actions should be taken to cease this practice since there is likelihood of introduction of other exotic diseases including HPAI to the U.S.


Poultry Science Association Foundation to Partner with Merck Animal Health

Oct 6, 2015

Merck Animal Health has provided a substantial grant to support postdoctoral students in poultry science with fellowship awards from 2016 onwards.  The Merck Animal Health Fellowships will be administered through the PSA Foundation.  Shannon Kellner of the Poultry Business Unit of Merck Animal Health stated, “we are committed to investing in the future through fellowships and believe this opportunity will help prepare students for their roles within the poultry industry and contribute to advances in poultry health and performance”.

The Capital Campaign of the PSA Foundation was launched in January 2015. Funds are used to support undergraduate internships, scholarships, fellowships and travel grants.


Wenger’s Feed Mill Inc. to Restructure

Oct 6, 2015

According to a September 28th release from Wenger’s Feed Mill Inc., Geoff Finch President and COO announced that the company will be restructured as a holding company and three subsidiary divisions dealing with mixed feed (Wengers Feed Mill), ingredients (Nutrify LLC) and live bird production (Dutchland Farms LLC), all of which will be owned by the Wenger’s group and with the three segments presumably functioning as profit centers.

The Wenger’s Group has entered the ingredient, premix and concentrate market through their designated subsidiary Nutrify LLC.

In commenting on the initiative, Finch noted “after more than 70 years of serving our customers as Wenger’s Feed Mill Inc. our growth and the business environment have led us to decide to evolve into a different structure”.  It is anticipated that the transition will be finalized in the current Quarter of 2015.


Turnkey Biosecurity Modular System

Oct 6, 2015

Functional design with a clear and common sense approach to separating clean and dirty

2015 has turned out to be detrimental in the poultry industry with the introduction and spread of avian influenza. The Midwest was particularly hit hard with an unfathomable amount of birds being lost to a host that was both unbiased and ruthless. As the year progressed bio security became a fundamental and preeminent function to protect the poultry industry. 

Henning Companies being at the forefront in the poultry construction industry listened to what our customers needed with biosecurity shower in/out, truck and vehicle wash facilities, transportation bays, breakrooms, and receiving offices. To meet the increasing high demand and need to get these buildings started and done in a very short order, we were challenged with a time consuming design and estimating process that started to push the limits with getting construction underway.

Read the complete story at http://egg-cite.com/newproducts/single.aspx?contentID=5681


4th  Quarter Results for Costco.  

Oct 6, 2015

In a press release dated September 29th , Costco Wholesale Corp. (COST) announced results for the 4th  Quarter of Fiscal 2015 ending August 30th.


HPAI Danger from Backyard Flocks

Oct 6, 2015

Dr. Joe Baker, Veterinarian for the State of Washington has warned that backyard flocks represent a danger to the commercial poultry industry as potential sources and disseminators of HPAI virus. He also stressed that in the event of outbreaks in highly susceptible backyard and small organic farms, trade embargos will be imposed by importing nations, impacting commercial producers in the entire state or region. It was the opinion of Dr. Baker that owners and operators of hobby flocks are frequently unaware of the dangers of avian influenza and have not implemented appropriate preventive action.

Basically any flock which is not housed in a building designed and equipped to exclude wild birds is in danger during periods of waterfowl migration.  In contrast commercial farms have imposed higher standards of biosecurity involving improvements in both structural installations and operational procedures.

Egg production units which allow hens to access pasture are at considerable risk for infection and should be retained in barns during both spring and fall months to avoid exposure to viruses excreted by migratory waterfowl.

It is noted that the earliest outbreaks of H5N8 avian influenza in 201a5 occurred in backyard flocks in Washington and Oregon.


USDA 2014 Organic Survey

Oct 6, 2015

The USDA National Agriculture Statistic Service has released the results of the 2014 survey on organic production.  Currently there are 14,100 certified organic farms in the U.S. with a total retail sales value of $5.5 billion.

Among the data released is the fact that sales of organic eggs amounted to a retail value of $420 million.  This translates to 105 million dozen during the year assuming an average retail price of $4 per dozen.  Applying realistic U.S. parameters, it is calculated that there are between 4 and 4.5 million hens producing organic eggs out of a total pre-HPAI national flock of 305 million hens or approximately 1.5 percent of the total.


USPOULTRY Soliciting Proposals on Disposal of Poultry Carcasses

Oct 6, 2015

The spring 2015 outbreak of HPAI highlighted problems associated with disposal of carcasses from depleted flocks. Essentially all the approximately 42 million depleted layers and pullets were transferred to landfills while floor-housed turkeys were composted in-house.

USPOULTRY is requesting pre-proposals relating to the development of new methods and improvements to existing methods of disposal of large numbers of layer carcasses and manure with specific reference to inactivation of influenza and presumably other exotic viruses.

The deadline for submission of proposals is November 2nd 2015 and relevant information is available on www.uspoultry.org entering “research” for instructions.

Research programs will be funded by the USPOULTRY Board Research Initiative operating concurrently with the USPOULTRY Research Program but focusing on topics of immediate concern to the industry.


Update on Salmonella Outbreak from Cucumbers

Oct 6, 2015

The Centers for Disease Control have issued an update on the Salmonella Poona outbreak attributed to contaminated cucumbers.  Since September 22nd 113 incident (new) cases have been reported bringing the total to 671 confirmed cases infected with the outbreak strain in 34 states.  The outbreak commenced in early July and 30 percent of 459 affected consumers were hospitalized.  There was one fatality in each of Arizona, California and Texas respectively.

A recall of product marketed under the Fat Boy label was initiated on August 1st by the distributor, Custom Produce Sales which obtained the product from Andrew and Williamson Fresh Produce located in Baja California, Mexico.

This case illustrates the significance of fresh produce in outbreaks of salmonellosis since contaminated product is not cooked and allows cross infection in domestic and institutional kitchens.


Status of Corn and Soybean Crops

Oct 6, 2015

The USDA Crop Progress Report issued on Monday October 5th indicated a continued favorable trend in the progress of corn and soybeans and harvesting of these crops expressed as percentages as tabulated below:-

                                                     Week Ending      

Crop                                   September 28th            October 5th         5-year Average

Corn Mature                          71%                           86%                             83%

Corn Harvested                      18%                           27%                             32%

Soybeans Dropping Leaves   74%                           85%                             83%

Soybeans Harvested               21%                           42%                             32%



USDA Price and Inventory Report, October 5th 2015.

Oct 6, 2015

Midwest wholesale prices for Extra Large and Large sizes were down 9 percent from last week but Mediums were almost unchanged in price. The USDA Combined Region Regular Large value for commodity eggs was down by 2 cents per dozen at $2.06 last week, compared to the high plateau of $2.77 in mid-August.  This suggests moderate changes in wholesale price in the immediate 4-week future consistent with seasonal trends but weighted by the price and volume produced in the Midwest. The price range for the four USDA regions extended from $2.01 per dozen in the Midwest to $2.14 per dozen in the S. Central Region. At present the Combined Regional price is about 82 cents per dozen above the 3-year average. 

The price going forward should be stable to trending lower but increasing in mid-to late October with the onset of colder weather. Both producers and buyers will obviously be monitoring inventories of shell eggs and products closely and will react to any additional outbreaks of HPAI or changes in availability associated with a projected reduction in exports and the reality of limited imports of breaking stock from Mexico and the EU equivalent to the production of approximately 5 million hens.


Shane Commentary


U.S. Agricultural Productivity Dependent on Research and Technology

Oct 2, 2015

A recent publication from the USDA Economic Research Service* summarized an econometric study to quantify growth in productivity.  The publication differentiated between Partial Factor Productivity (PFP) and Total Factor Profitability (TFP) as measures of efficiency.  Partial Factor Productivity considers single inputs such as yield per acre. Total Factor Productivity relates all inputs involved in production. This criterion incorporates land, labor, capital and intermediate goods (consumables such as seed, fuel, fertilizer and pesticides and machinery) in determining the efficiency of output over the long term.


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Industry Prices: Fri Oct 9
 Corn3.83 $/bu
 Soybeans8.86 $/bu
 Soybean Meal307.80 $/ton
 Eggs, Producer131  ¢/doz
 Eggs, Warehouse 182-185 ¢/doz