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Despite Scare Headlines, Egg Prices Are Already Cracking

Despite Scare Headlines, Egg Prices Are Already Cracking

When I worked on Reuters' business desk, we weren't allowed to parrot press releases reporting that earnings soared 100 percent from the year before. Why? Because here's the reality behind some such claims: Acme Pebble's income last year may have grown from a miserable $100 to only $200. That's a 100 percent gain but hardly a reason to party.

And so it is with some skepticism that one encounters headlines about the price of a consumer item jumping 10 percent, 40 percent or 80 percent from last year. Relevant to the economic pain involved is the base from which the price rose, plus how much of the item an ordinary American actually uses. (Truffles, anyone?)

Eggs offer one such recent example. The price of eggs, we read, rose 60 percent last year. The number is not wrong. It's that eggs remain a relatively cheap food. At a high of $6 for a dozen, a two-egg dinner could still be had for $1.

We understand that eggs are an important food source, particularly for low-income people — and that any increase in their price can be meaningful to some. But a hamburger at McDonald's costs $2.49.

Now, news on the tab for common consumer staples like eggs, gasoline, and Thanksgiving turkeys draws attention and allows the creation of easy-to-make visuals. But so many of the headlines on the cost of eggs bang on the percentage rise in price while not mentioning the actual price.

Remember the turkey "crisis" of two Thanksgivings ago? The price of turkey hit a record $1.36 a pound for a 16-pound turkey. But you could still feed a family of 18 for a mere $1.22 a serving. Contrary to scary reports, there was no turkey shortage.

One other thing about panicky reports of price increases is that they generally fail to note that prices can also go down as market conditions change. As they say, the cure for high prices is high prices.

The price of eggs has already started to moderate as their stiffer cost has softened demand. Midwest large eggs, the commodity's benchmark, have already fallen to $4.63 a dozen, down from $5.46 last month. That's despite the persistence of the main cause of egg price inflation, an avian flu that has led to the deaths of millions of egg-laying chickens.

Some Americans tried to work around higher egg prices by obtaining their own chickens. A friend in rural Rehoboth, Massachusetts, keeps three chickens that produce about 90 eggs a month. They cost about $21 a month for a 50-pound bag of pellets. Left out, of course, is the expense of coops, fencing and the chickens themselves.

"I'll have to calculate how much it actually cost per egg," Mario Morais told me, "but I think I'm ahead of the game, and they're fresh."

It's worth noting that the sparked interest in maintaining one's own chickens started during the COVID pandemic and before egg prices shot up. People who suddenly found themselves working from home found it easier, as well as interesting, to keep chickens. That included people living in urban areas.

Feed stores in the Houston area report a strong demand for chickens and their food. And a growing number of businesses are renting out chickens. Driftwood Meadow Farms north of Houston rents chickens for four to five months at a price of $665 for two birds plus the coop, feed and water dishes. Also, the all-important instructions.

Bear in mind that cost pressures on eggs include Russia's war on Ukraine and the drought across much of the U.S. They and the avian flu all continue but the price for eggs has nonetheless started coming down. Thus, and another obsession should start to crack.

Reprinted with permission from Creators.

Companies Win Federal Contracts While Flouting Labor Law

Companies Win Federal Contracts While Flouting Labor Law

By Mandy Locke and Franco Ordonez, McClatchy Washington Bureau

RALEIGH, N.C. — Robert Malick has weathered plenty of uncertainty in the 22 years he’s run a multimillion-dollar heating and air conditioning firm.

His secret to success: Follow the money and the people who can get it.

To do it, his company, Southern Mechanical, landed government-backed housing projects and used a hiring strategy that federal officials have been trying to combat for years. On payroll forms he filed on jobs around the Southeast, his Nashville, Tennessee company left blank a space for tax withholding and explained: “1099 employees pay their own taxes.”

“It puts the monkey on their back to produce instead of being an hourly employee that just hangs out on the job,” Malick said in an interview.

Treating his workers as independent contractors saves Malick on payroll taxes and unemployment insurance, nearly 10 percent of wages. It also may run afoul of numerous state and federal laws and regulations, and it undercuts his competitors.

Southern Mechanical was one of hundreds of companies cashing in on U.S. government-funded projects while likely disregarding the law, a McClatchy investigation reveals.

Roofers, painters, and bricklayers paid meager hourly wages are required to file taxes as if they were self-employed, which means paying their share and their companies’ share to Social Security and Medicare. But many live in the underground economy, paying no taxes or less than they owe.

In North Carolina, nearly 45 percent of the 826 companies taking part in construction of federally funded or backed affordable apartments during the recession deducted no taxes from laborers and mechanics. In Texas, as many as one-third of the companies on federally funded projects appear to have misclassified workers.

The problem persisted in Florida, too, where 20 percent of companies on these projects treated manual laborers as independent contractors. The issue isn’t isolated to the South: A random sampling of construction projects across the country shows that 14 percent of 235 companies filing payroll reports withheld no taxes from workers generally considered employees.

Some of those companies had a history of other problems:

— South East Construction Corp. of Wilmington, North Carolina, had its certificate to do business revoked by the North Carolina secretary of state in 2010 for failure to file taxes with the state Department of Revenue. Two years later, it landed a job doing carpentry work on an affordable housing development in Wilmington. The revocation is still in place, according to records with the secretary of state. The company owner, James Haverly, could not be reached.

— Just a week before VR Enterprises Group of Miami started work on a low-income housing project in Key West, one of its employees filed a lawsuit accusing the company of failing to pay overtime wages. A judge awarded the employee $3,180. Company owner Victor Lavastida now runs a construction company called Brave Builders, which is owned by Sandra Morales. That company is being sued by six former employees, who say wages weren’t paid.

Morales defended her practice of treating workers as independent contractors, saying the general contractor advised her to do that. The general contracting firm didn’t return calls requesting comment.

Southern Mechanical has been treating hourly workers as independent contractors for years in plain sight of the government with no pushback, federal payroll records show.

Although revenue collectors from Washington, D.C., to Indiana and Mississippi have pursued Southern Mechanical for various unpaid tax debts, the company hasn’t been blocked from taking part in government contracts. While the federal government sought $260,000 in unpaid corporate taxes from the company in 2013, Malick’s workers were busy installing units in more than20 housing projects backed by the government throughout the Southeast.

The government has a history of doing business with companies that have tax or other legal problems. Inspectors at the Government Accountability Office found that at least $24 billion in stimulus funds went to businesses owing more than $750 million in unpaid federal taxes, according to a 2011 report. The year before, GAO investigators found that half of the 50 companies with the most egregious federal labor-standards violations had government contracts.

Even when the proof is volunteered — through the company owners’ admissions in payroll records — regulators rarely take action.
___
Southern Mechanical was industrious during the construction slump as many competitors limped along. Malick said his firm landed work on more than 50 federally funded or backed projects.

The company more than doubled its operating revenue during the slump, from $6.7 million in 2008 to $15 million in 2012, according to Dun & Bradstreet, a business information company that collects data from lenders.

The general contractors who hired Southern Mechanical to take part in federal contracts either disregarded or missed red flags. Indiana state regulators filed more than 30 tax warrants against Southern Mechanical between 1998 and 2009; in 2001, the state revoked its license to do business there.

The liens involve unpaid sales taxes and haven’t been settled, according to Robert Dittmer, spokesman for the Indiana Department of Revenue. Malick said the issues dealt with a beef he had with a general contractor and that the company was still doing business in the state.

Since 2006, Southern Mechanical’s certificate to do business in North Carolina had been suspended for failure to file annual tax returns, yet the company continued to do business in the state. In July, after being asked by McClatchy about the suspension, the company contacted the Revenue Department and was reinstated by the secretary of state.

The company has another problem in North Carolina: Allowing unlicensed HVAC mechanics to be subcontractors is against the state licensing board’s regulations. While Southern Mechanical itself is licensed, its workers are not. That would be OK if they were treated as employees, but it’s not if they’re independent contractors.

After speaking with a reporter this summer, company officials reported their use of 1099s to the North Carolina licensing board. The board is investigating.

Layers of construction managers, developers, and government officials could have stopped Southern Mechanical from treating workers as subcontractors but didn’t.

The U.S. Department of Housing and Urban Development is ultimately responsible for employees being paid correctly on these projects, but it pushes the task of collecting and reviewing payrolls onto local officials.

HUD doesn’t train the locals to spot the problem of misclassifying workers as contractors, however. Even when HUD labor-compliance officials at the regional office in Atlanta reviewed Southern Mechanical’s records on projects insured by the Federal Housing Administration, they didn’t raise any issues.

Southern Mechanical’s controller said she took the lack of reprimands as a sign the company was doing things properly.

“I’m sure if there was an issue, especially with a HUD job, somebody would have caught it before now,” Shannon Wilkins said.

Photo: AgriLife Today via Flickr

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Dairy Queen Joins List Of Retailers Hit By Hacker Attack

Dairy Queen Joins List Of Retailers Hit By Hacker Attack

By Mike Hughlett, Star Tribune (Minneapolis)

Dairy Queen has become the latest victim of computer hackers bent on pilfering customers’ credit and debit card information.

The Edina, Minn.-based ice cream and fast-food chain confirmed Wednesday that “customer data at a limited number of stores may be at risk.”

The company didn’t disclose how many customers or how many stores were affected.

“We are gathering information from a number of sources, including law enforcement, credit card companies, and processors,” Dairy Queen said in a statement.

Dairy Queen’s acknowledgment came after the website Krebs on Security, which is run by cybersleuth Brian Krebs, reported a possible breach at DQ. Citing unnamed sources, Krebs wrote that a pattern of fraud suggests some DQ stores were compromised as early as June.

Dairy Queen has several thousand stores in North America, and is owned by Warren Buffett’s Berkshire Hathaway.

In a statement, Dairy Queen said “the protection of customer data is a top priority for us and our franchisees, and we take it seriously.” The company said that it had been notified recently along with many other companies of a data breach due to the spread of “Backoff” malware.

On Friday, the U.S. Department of Homeland Security said that more than 1,000 U.S. retailers could be stricken with Backoff, malware — short for malicious software — discovered last October. Both United Parcel Service and Supervalu appear to have also been hit by the bug, which burrows into retail point-of-sale systems.

Eden Prairie-based Supervalu warned on Aug. 16 that hackers had breached its computer systems, which contained customer information from 1,016 grocery and liquor stores around the country, including 60 outlets in Minnesota. Supervalu, which owns the Cub Foods chain, said its computers were hacked between June 22 and July 17.

Minneapolis-based Target Corp. fell prey to a huge data breach during the 2013 holiday shopping period. It exposed the financial and personal data of 70 million customers, costing the retailer around $150 million so far.

Michaels Stores, Neiman Marcus, and P.F. Chang’s are among other large national retailers hit by cyberthieves in recent months.

Photo: StormKat via Flickr

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FAA Under Pressure To Allow Commercial Drones

FAA Under Pressure To Allow Commercial Drones

By Daniel Rothberg, Tribune Washington Bureau

WASHINGTON — It seems like a perfect time to get into the drone business.

With easy access to technology and patchy regulation, small commercial drones already have been used to film box-office hits and market expensive real estate.

Internet retailer Amazon is testing its sixth generation of an unmanned aircraft system that could one day whisk packages to customers within hours. With big corporations like FedEx and Domino’s Pizza flirting with the technology, law firms, trade groups and insurers are lining up to capitalize on an expected economic gold mine.

There’s only one catch: Commercial drones are illegal.

In a 2007 policy statement, the Federal Aviation Administration essentially declared a ban on operating drones for commercial purposes. The agency doubled down on that position in early April, appealing an administrative order that tossed out the legal foundation for its policy. The ruling came after a commercial drone user challenged an FAA fine levied against him.

The ongoing case and mounting pressure to tap into the potentially lucrative industry puts the FAA in a tough spot. The regulatory body, responsible for keeping U.S. airspace safe, plans to propose a rule for commercial drones by the end of the year. But regulations aren’t likely to be final until 2015 at the earliest, leaving some wondering whether the FAA can catch up to an industry already half past go.

“I don’t think there’s any question that market pressure is intense and the FAA is struggling on the regulatory side to keep up,” said James H. Burnley, a former U.S. transportation secretary and a Washington attorney.

Much of the commercial interest is focused on small drones — those that weigh less than 55 pounds, fly less than 400 feet high and often remain within the operator’s line of sight. Many look no different from toy helicopters.

But from a regulatory standpoint, integrating these drones into the national airspace is a complicated challenge that must reconcile changing technology with safety concerns, including how to keep the drones from crashing into manned aircraft or causing damage or injury as they land.

“We really want to get it right the first time,” said FAA spokesman Les Dorr.

The FAA has certified more than 600 public-sector entities to fly drones, mostly law enforcement agencies and universities. It announced last month that the first of six national sites for commercial drone testing was ready in North Dakota.

But to date, the agency says it has made only one exception to its commercial ban, allowing oil company ConocoPhillips to survey marine mammals and ice in the Arctic.

Commercial drone advocates say the agency is taking too long. Thirty-three industry groups, including the National Ski Areas Association and National Sunflower Association, are urging FAA Administrator Michael Huerta to expedite the approval process, citing a nearly four-year delay on its small-drone rule.

“The current regulatory void has left American entrepreneurs and others either sitting on the sidelines or operating in the absence of appropriate safety guidelines,” they wrote in an April 8 letter.

Some businesses aren’t waiting for the FAA rules to be completed. A Minnesota-based beer company made an online commercial that featured a drone transporting its “frosty winter lager” to some expectant ice fishermen.

Weeks later, a Detroit flower company announced plans to drone-deliver roses on Valentine’s Day. In March, the Washington Nationals sent up a drone to catch the baseball team’s spring training on tape.

Several large law firms have launched drone practices, and there’s even a fledgling insurance market. Nationwide Insurance’s agricultural subsidiary is offering liability coverage to a handful of customers who use small drones in their farm operations, an underwriting director confirmed.

Amazon told shareholders in April that it’s continuing to test the “octocopter” that it unveiled in December, saying it will be ready to roll out drone delivery service as soon as the FAA gives its OK.

Although even unauthorized testing of commercial drones is prohibited under the FAA policy and the agency regularly notifies operators when it discovers a violation, weak enforcement has often left businesses flying in an air of uncertainty. For many, the crime outweighs the punishment.

“If you wait until the FAA passes its rule, you will be too far behind,” said Jerry LeMieux, a retired Air Force colonel who serves as president of the Unmanned Vehicle University, an Arizona-based academy for unmanned systems engineering. “The time to get in is now.”

To date, the FAA has issued only one fine for an unauthorized commercial drone flight. It wrote a letter ordering the Minnesota beer company and the Detroit florist to cease their activities. But the agency learns about most violations only from reports in the media, tips from rival businesses or when companies film their drone flights and post them on YouTube.

“There is a perception, largely correct, that (operators) are unlikely to get caught, and if they do get caught, there aren’t going to be significant consequences,” said Timothy Reuter, a drone enthusiast in Washington who created a network of local groups to highlight the benefits of civilian use.

Hollywood has an especially rich history of using unmanned aircraft. In 1995, the company Flying-Cam won an Oscar for developing an unmanned helicopter system equipped with a camera. Before the FAA ban, Flying-Cam shot more than 80 films in the U.S., according to its director of operations, Haik Gazarian.

Now it shoots advertisements and films (recent titles include Skyfall and The Hangover) on sets overseas, where commercial drone flight is often permitted. Likewise, Domino’s tested its drone in Britain.

AFP Photo/Saul Loeb