Editorial


Egg Industry Center to Fund Research on Air Quality in Aviaries

07/10/2019

The Egg Industry Center will offer challenge grant awards to develop proposals to investigate air quality in a aviaries. The issue arises from 2016 data collected by scientists conducting a research project comparing conventional cages, enriched colonies and aviaries under the auspices of the Coalition of Sustainable Egg Supply. In the event, the study was seriously flawed by high mortality in the pullets transferred from rearing to the laying aviary. This was a function of mismanagement, incompetence and a disinclination to follow the advice of specialists. Early mortality as a result of dehydration, persecution obviously impacted the financial return from the aviary group.

EGG-NEWS commented adversely on the results obtained by the scientists concerned and advised that the calculated financial return should have been adjusted to account for mortality. The only conclusion that could have been derived from the study was that dead hens do not lay eggs.

The selection of air quality which the EIC Advisory Board considered “a challenge” is in all probability spurious. Effective ventilation in houses or compartments containing upwards of 100,000 hens, if adequate in terms of fan capacity and with effective control systems is not responsible for either particulate contamination or ammonia levels which are injurious to flocks or caretakers.

There are far more important aspects of aviary housing which should be evaluated. Based on experience, shell damage is an important consideration with some operations experiencing in excess of 15 percent downgrades. Investigation shows interactions between strain, equipment design, lighting, management of the flocks and operation of egg collection and rate of grading.

Each one percent increase in shell downgrades on a complex of one million hens represents a loss of $250,000 annually given an average of 80 percent hen-week production and a nominal nest-run value for cage-free eggs of $1 per dozen.

Shell damage in aviary housing is a complicated issue and may involve defects in the design and installation of curtained nesting areas; transport of eggs on belts over distances exceeding 400 feet; damage on elevators which may move eggs among four levels and the design and operation of graders extending from accumulator tables through to crack detection.

Soiling of eggs may be a substantial cause of downgrading. This is in part due to floor laying. Surely research should be extended to causes and prevention of the source of loss through downgrades. The intensity and spectrum of light, positon of lamps in aisles, strip lighting on tiers  and under-module illumination should be evaluated to provide appropriate recommendations to producers as they transition from conventional cage housing in high-rise units to modern aviaries.

There is little work on the welfare and production aspects of multi-tier aviary installations. It appears that the industry is moving from three-tier to two-tier configurations, that with limited experience reduce the tendency of flocks to concentrate on the highest level where there is imperfect visualization of flocks and imbalanced stocking density within the house.

 If the Egg Industry Center assigns a considerable sum of money to a consortium to evaluate air quality, which may in fact not be a problem, other more pressing and financially significant problems associated with aviary housing will be neglected. In any event, the time required to plan and execute a field trial on the atmosphere of aviary houses and the prolonged period for scientific groups to analyze and publish their results will be of little immediate benefit to the industry. The proposed study will not contribute to the mission of the EIC, which is to acquire and disseminate science-based information for the benefit of producers.


 

Egg Industry News


Crop Progress

07/22/2019

Status of 2019 Corn and Soybean Crops

The USDA Crop Progress Report released July 22nd documented progress in both corn and soybeans after a slow start to planting that is expected to negatively impact yields as documented in the July WASDE Report posted under the Statistics Tab. Current crop condition for both soybeans are corn inferior to the 2018 harvest as tabulated below and in the accompanying images. High topsoil moisture levels are evident in comparison with the corresponding week in 2018.

CHICK-NEWS and EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of the 2019 harvest in October.

WEEK ENDING

Crop

July 14th

July 21st

5-Year Average

Corn Silking %

Corn Dough %

17

-

35

5

66

10

       

Soybeans Emerged %

Soybeans Blooming%

Soybeans Setting pods %

100

22

-

100

40

7

100

66

28

       

Crop Condition

V. Poor

Poor

Fair

Good

Excellent

Corn 2019

Corn 2018

3

3

10

6

30

19

47

50

10

22

Soybeans 2019

Soybeans 2018

3

2

9

6

34

22

46

52

8

18

 

Parameter

V. Short

Short

Adequate

Surplus

Topsoil moisture: Past Week

5

19

64

12

Past Year

13

25

57

5

Subsoil moisture: Past Week

3

15

70

12

Past Year

12

25

58

5


 

Egg Week

07/17/2019

USDA Weekly Egg Price and Inventory Report, July 17th 2019.

  • Hen Numbers in Production stable at 325.3 million.
  • Shell Inventory Up a Concerning 5.6 percent from the Past Week.
  • USDA Midwest Benchmark Generic Prices for Extra Large and Large Down 13.7 and 14.2 Percent Respectively from Past Week. Mediums Unchanged.
  • Price of Breaking Stock Down 21.7 Percent to 18 cents per dozen and Checks Down 13.3 percent to 7 cents per dozen. Both Categories Substantially Below Cost of Production

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on July 15 th the Midwest wholesale prices for Extra Large, and Large were down 13.7 and 14.2 percent respectively to averages of 50.5 and 48.5 cents per dozen. Mediums were unchanged at 32.5 cents per dozen, all below the USDA average 5-Region nest-run benchmark of 63 cents per dozen in June. The progression of prices during 2019 is depicted in the USDA chart reflecting three years of data, updated weekly.


 

July Egg Projection

07/17/2019

Updated USDA Projections for 2018 and 2019 U.S. Egg Production

 

The USDA Economic Research Service issued an updated forecast of egg production on July 17th, following the previous June 17 th report. The volume of eggs produced and per capita consumption in 2019 were increased by 2.9 and 2.5 percent respectively compared to 2018 data. Consistent with this disparity, the benchmark New York price was reduced by 38.4 percent in unit value. Production data reflecting 2016 and 2017 should be compared to 2015, impacted by the Spring outbreak of HPAI in the upper-Midwest. The price elasticity of eggs is denoted by the disparity in the decline in the New York price benchmark relative to forecast volume of production. The latest data is reflected in the table below:-

 

 

Parameter

2015

(actual)

2016

(actual)

2017

(actual)

2018 2019 Difference % 2020

(actual) (forecast) 2018 to 2019 (projection)

 

 

EGGS

       
 

Production (m. dozen)

6,938*

7,437

7,755

7,952 8,183 +2.9% 8,230

 

Consumption (eggs per capita)

255.8*

272.0

279.9

284.0 291.1 +2.5% 291.7

New York price (c/doz.)

182*

86

101

138 85 -38.4% 100

                   

Source: Livestock, Dairy and Poultry Outlook -July 17th 2019

*Impacted by Spring 2015 HPAI outbreaks. Consumption in 2014, 267 eggs per capita

Subscribers to EGG-NEWS are referred to the postings depicting weekly prices, volumes and trends and the monthly review of prices and related industry statistics.


 

Cal-Maine Foods Reports on Q4 and FY 2019

07/22/2019

In a press release dated July 22nd Cal-Maine Foods (CALM) announced results for the 4th Quarter and Fiscal 2019 ending June 1st.

Results for CALM, a bellwether for U.S. shell-egg production and sales, reflect low unit revenue experienced by the entire industry resulting in unfavorable comparisons with Q4 of 2019.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as $ x 1,000 except EPS)

Quarter Ending

June 1st 2019

June 2nd 2018

Difference (%)

Sales:

$280,573

$443,095

-36.6

Gross profit:

$12,755

$141,216

-91.0

Operating income:

$(30,420)

$90,768

neg

Net Income

$(19,761)

$71,767

neg

Diluted earnings per share:

$(0.41)

$1.48

neg

Gross Margin (%)

4.5

31.8

-85.9

Operating Margin (%)

-10.8

20.5

-53.2

Profit Margin (%)

-7.0

16.2

-43.2

Long-term Debt:

$641

$2,544

-74.9

12 Months Trailing:

     

Return on Assets (%)

9.0

   

Return on Equity (%)

15.4

   

Operating Margin (%)

11.1

   

Profit Margin (%)

9.6

   

Total Assets

$1,156,278

$1,150,447

+0.5

Market Capitalization

$1,840,000

   

52-Week Range in Share Price: $36.65 to $51.55

Market Close July 19th $39.37 Post release July 22nd 10H00 $37.90

Forward P/E 63.1 Beta 0.5

For FY 2019 CALM earned $54.2 million on revenue of $1.36 billion generating an EPS of $1.12

Comparable values for FY 2018 were net profit, $125.9 million, revenue $1.50 billion and EPS $2.60.

In reviewing the CALM quarterly report the following calculated values* represent key data for the most recent Quarter. (Q4 Fiscal 2018 and difference in parentheses):-

  • Dozen shell eggs sold: 254,772,000 (251,955,000 +1.1)

  • Average selling price of all shell eggs: $1.08 per dozen; ($1.72 per dozen; -37.2%).

  • Average selling price of specialty eggs calculated from data released: $1.94 cents per dozen; ($1.95 per dozen; -0.5%).

  • Average selling price of generic eggs calculated from data released: $0.80 cents per dozen; ($1.64 cents per dozen; -50.0%).

  • Differential between generic and specialty eggs: $0.50 cents per dozen; ($0.31 per dozen; -61.3%)

  • Specialty eggs as a proportion of volume sold: 23.3%; (25.5%; -8.6%)

  • Specialty eggs as a proportion of sales value: 41.9%; (29.0%; +44.5%)

  • Proportion of eggs sold actually produced by Cal-Maine flocks: 87.3%; (85.6%; -2.0%).

  • Feed cost per dozen 41.1cents (41.6 cents)

*Assumes that 98 percent of sales value derived from shell eggs.

In commenting on results Dolph Baker, chairman and CEO of Cal-Maine Foods, Inc., stated, "our disappointing results for the fourth quarter reflect more challenging market conditions. The average market price in the Southeast for conventional eggs dropped 52.0 percent for the fourth quarter of 2019 compared to the fourth quarter of 2018 and was down 17.1 percent for the year.

He added "the unfavorable supply and demand balance and anticipated future egg supply growth trends have continued to affect market prices and our business. Over the past five quarters, we have noted our concern about the growing hatch rate pointing to a potential significant increase in laying hens and an oversupply of eggs. The USDA reported a near record high of 341.5 million hens as of April 1, 2019. While the hen numbers as of the June 2019 USDA report were down seasonally to 331.5 million, that level still represents approximately 2.9 million more hens than a year ago.
 


AEB Promotes "REAL" Eggs

07/10/2019

The American Egg Board has announced a promotion for the REAL Eggs™ seal to be applied to packaging by manufacturers indicating that prepared foods contain real eggs.  The seal will also be available for restaurants to use on menus or in advertising.  In order to apply the REAL Eggs seal users must comply with certifications standards:

 

  • Egg products must be prepared using U.S.-produced eggs processed in a U.S. facility conforming to quality and identity standards specified by USDA.
     
  • The REAL Eggs™ seal cannot be used on products that use vegetable or legume proteins or their combinations to replace an egg component.
     

There is no cost associated with using the seal but products must be registered annually following submission of an ingredient list.
 

The REAL Eggs™ certification seal was introduced in response to the fact that more than 70 percent of consumers want to know what ingredients are in their food purchases and a significant proportion are influenced positively by a “Real” designation of ingredients.


 

UK Technology Facilitates Elimination of Checkout Lines

07/12/2019

Tesco a leading supermarket chain in the UK is testing in-store tracking technology developed by Trigo Vision of Israel.  Consumers scan a store-issued card at the entrance and select their purchases from shelves and displays.  These are tracked by ceiling-mounted cameras and are charged to the customer.  On leaving the store with purchases, the account is automatically debited completing the transaction without interacting with a cashier or employee.

 

Variation on the UK system is under test by Carrefour applying Qopius Technology equipment requiring installation of store cameras and scanners.  Other EU initiatives include Sensei Technology developed in Portugal to be tested by various chains in the EU through 2020.

 

U.S. technology has been introduced for the Amazon Go stores and Walmart is testing product recognition cameras and software.  Kroger is experimenting with scanning barcodes to eliminate checkout lines.


 

ROTA Technologies Introduces Debris Detection Module

07/12/2019

ROTA Technologies of Birmingham, MI has introduced a machine vision module to detect and respond to the presence of debris on the in-feed conveyor to the grader.  Multiple digital camera images are captured and are processed using patented software.  If debris or foreign material is detected on the egg belt, a signal is sent to the operator to manually remove debris and cancel the hold.  If an operator does not react to the audible and visual alarms, the conveyor belt is stopped to prevent debris entering the grader. 

 

For further information access the company website www.rotatechnologies.com or Roberto Taormina at Roberto@rotatechnologies.com


 

Brazil Corn Crop Quantified

07/12/2019

According to USDA GAIN Report BR1920 released June 25th, corn production in Brazil during market year 2018/2019 will exceed 2017/2018 by 25 percent.  This is due to more favorable growing conditions compared with the previous season impacted by drought especially affecting the safrinha (second) crop. 

 

Corn will be harvested from 45 million acres with a yield of 82 bushels per acre (166 in the U.S.).  Production during the 2019/2020 year will be 3.7 billion bushels.  With carryover stocks, total supply will be 3.99 billion bushels.  Of this quantity 31 percent will be exported, 52 percent retained for feed and residual and 12 percent diverted to ethanol production.  In the southern regions of Brazil, some corn production has been displaced by soybeans that generate a higher return than corn, given the trade conflict between the U.S. and China.


 

QSRs Facing Opposition Over Plastic Toys in Kids Meals

07/17/2019

McDonald’s Corporation is faced with a petition which has gathered over 325,000 signatures opposing inclusion of plastic toys in kid’s meals. Burger King has experienced similar complaints and censure from Government agencies in the U.K. including from Environment Minister Therese Coffey.

There is no question that toys in Happy Meals™ have improved sales. The play-value of the toys and figurines, usually following a current movie are however short-lived. In addition to the environmental issue there is a danger of choking and the younger siblings of recipients may ingest small plastic toys that are rapidly discarded after a restaurant visit.

The evident problem relates to recycling. If plastic toys were made of a single material, recycling might be practical as demonstrated in Japan where receptacles placed in stores facilitated collection and recycling of 1.3 million used plastic toys in 2,900 restaurants over a 10-week trial, according to an article in the July 9th edition of The Wall Street Journal.

In 2011, Jack in the Box and Taco Bell in 2013 eliminated toys from kid’s meals although it is evident that a “give-away” is beneficial to sales in a highly-competitive market. Substitution of plastic toys for a more environmentally acceptable alternative such as a coloring-in booklet should be considered.


 

Enjoyment of San Diego County Fair Marred by STEC Cases

07/18/2019

In common with recent county fairs, San Diego reported a cluster of ten cases of E.coli infection with a strain producing a Shigella-like toxin (STEC). Based on previous outbreaks associated with county fairs, it is presumed that infection was acquired at the petting zoo. The San Diego County Fair ran from early June through July 4th and attracted 1.5 million attendees.

Investigations are in progress to ascertain the source of STEC and to define the epidemiologic factors contributing to infection of children. Most county fairs take place in the fall and appropriate preventive measures including hand washing or the use of alcohol wipes and possibly avoiding direct contact between children and ruminant livestock are under consideration. The National Association of State Public Health Veterinarians and the CDC have posted recommendations on their respective websites. It would indeed be unfortunate if petting zoos, a feature of county fairs, were to be eliminated. Intensified preventive measures are obviously indicated if petting zoos are included in programs.


 

FMI and FI Urging Exemption for Youth Training Wage

07/18/2019

The Food Marketing Institute representing the Nation’s grocery stores and the Food Institute advocating for the food industry, have jointly urged the House of Representatives to consider the consequences of eliminating the youth training wage.

 

Leslie Sarasin, president and CEO of the FMI and Brian Todd, president of the Food Institute reminded legislators that the proposal would reduce opportunities for teenagers to gain employment in their first jobs, traditionally at QSRs and supermarkets. According to the Bureau of Labor Statistics approximately 1.7 million workers or two percent of the hourly-paid workforce are paid at or below the federal minimum wage

 

It is estimated that a third of teenagers of both genders currently work compared to approximately 40 percent in 2005.  According to representations made by the FMI and the FI, youth training is an important means of acquiring interpersonal skills, reliability and commitment required in later life.  The hours worked and the duties performed are rigorously constrained by federal and state regulations contributing to a valuable learning experience in a safe setting.

 

On Thursday June 18th, the House passed a Bill to raise the Federal minimum wage by a vote of 231 to 199, mainly along party lines. The Raise the Wage Act would progressively raise the Federal minimum wage from $7.25 to $15.00 per hour by 2025.  In reality there is little chance that the measure will be taken up in the Senate.


 

USDA Under Secretary Questions Restraint on Gene Editing for Organic Certification

07/18/2019

According to a USDA release, Greg Ibach USDA Under Secretary for Marketing and Regulatory Programs has questioned whether gene-editing, applying new technology including CRISPR-cas9 should be considered for products marketed under the USDA Certified Organic Seal. As a previous Director of Agriculture for the State of Nebraska, Ibach is an advocate for technological innovation to increase productivity. This proposal was advanced during the 95th Annual Agricultural Outlook Forum in February in the Innovation in Agriculture session.

 

Gene deletion can rapidly produce cultivars resistant to drought, pests and virus infections. Gene deletion does not introduce DNA from other species. Regrettably rules relating to organic products are determined by the Organic Standards Board.  Many of the members of this statutory body developing regulations, adhere to a concept of “returning to nature,” eschewing modern technology.  The Organic Standards Board has even attempted to ban vaccines derived by gene deletion but approved by USDA.  These products protect flocks and herds from foodborne diseases including Salmonella infection which is a significant component of consumer acceptability.

 

EGG-NEWS is an advocate of proven, beneficial but safe technology in order to enhance productivity to feed burgeoning populations.  Under Secretary Ibach is to be complemented on his forward thinking and leadership.


 

Domino’s Pizza Posts Q2 Results

07/18/2019

Domino’s Pizza Inc. (DPZ) posted resulted for the second quarter of FY 2019 on July 16th.  For the quarter, the company generated a net profit of $92.4 million on total revenue of $811.6 million.  EPS was $2.19.  Comparative figures for second quarter of FY 2018 were net income of $77.4 million on total revenue of $779.4 million with an EPS of $1.78.  It is noted that the company has a disparity between long-term debt at $3.42 billion and total assets of $1.18 billion.  In the U.S. the company operates 333 stores with an additional 5,612 franchise units.  There are approximately 10,400 international stores.

 

Following release of the results, share price fell from $270.58 at close of trading on Monday, July 15th to open at $259.23 post-release on the morning of July 16th rising to $246.28 at close of trading.  Domino’s Pizza has a market cap of $10.5 billion and traded over a 52-week range of from $231.28 to $305.34.  The company generated a 12-month trailing operating margin of 16.9 percent and a profit margin of 10.8 percent.


 

Business Interests Press for Bilateral Japan-U.S. Trade Deal

07/18/2019

It is anticipated that negotiations in progress will lead to a trade deal between Japan and the U.S. when President Trump and Prime Minister Abe meet in New York during September.  At issue is a tariff on auto parts from Japan imposed by the U.S. and restrictions placed by Japan on U.S. agricultural imports. No appreciable progress in resolving issues will be made until after the July 21st elections for the upper house of the Diet. 

 

It is unfortunate that the U.S. finds itself in the position of competing with members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership from which the U.S. unilaterally withdrew within days of the new Administration in 2017. 

 

There appears to be conflict within officialdom in Japan with some elements of the Government considering that a mini-trade deal would be “interesting and reasonable” according to Reuters.  In contrast other officials maintain that any agreement must cover a wide range of items and should not be confined to auto parts and agricultural products. Although discussions took place between the leaders of the U.S. and Japan during the G-20 Summit in June, the U.S. has threatened to impose a 25 percent tariff on Japanese automobiles and parts which currently carry an approximately 5 percent rate. The White House is concerned over the annual $50 billion to $70 billion negative trade surplus with Japan. 

 

From January through May 2019, Japan was the first-ranked importer of egg products representing 27 percent of all U.S. exports, attaining 3,362 metric tons valued at $13.7 million.  Comparing the first five months of 2019 with the previous period in 2018, volume of egg products exported to Japan declined by 36 percent and value by 41 percent.

 


 

Alltech Appoints Poultry Manager for Mineral Nutrition

07/18/2019

Alltech has announced that Laura Shadwick has been appointed as the North America Poultry Manager for Mineral Nutrition.  Steve Elliott, Global Director of the Alltech Mineral Management Program stated “With Laura’s experience in the North American poultry industry, she will be an excellent addition to the team”.

Laura spent over a decade with a major micro-ingredient supplier in addition to positions of responsibility in egg marketing. 

Laura earned a baccalaureate degree in business administration from Pittsburgh State University and a Master’s degree in business administration from DeVry University. She can be contacted at laura.shadwick@alltech.com.


 

Supermarket Chains Installing Mechanization in new Distribution Centers

07/18/2019

The Kroger Company has announced that the second of a series of up to 20 proposed mechanized distribution centers will be located in Forest Park, GA near Atlanta.  The facility will be designed and erected by Ocado of the UK.  This center will be followed by installations in Monroe, OH and Groveland, FL. 

 

Ahold Delhaize, based in Holland, owners of Food Lion, Stop and Go and other U.S. banners is cooperating with Alert Innovations to mechanize DCs.  Albertsons and Walmart have similar programs to install robotic fulfillment centers.

 

Common Sense Robotics is responsible for a project located in an underground parking garage in downtown Tel Aviv, Israel.  The installation extending over 18,000 square feet represents a micro-fulfillment concept to provide customers with groceries.

 

Mechanized distribution and collection centers reduce labor, enhance service and are now practical through advances in robotics and machine learning.  It remains to seen whether capital invested provides an acceptable quantifiable return commensurate with alternative initiatives.  Given the relative over-supply of supermarkets, and alternatives including deep discount stores, convenience stores and urban cashless and no-checkout locations, automation represents the potential to enhance profitability through labor saving and enhanced customer service.


 

Salmonellosis Attributed to Produce

07/18/2019

The Food and Drug Administration is investigating an outbreak of Salmonella Infantis in Wisconsin and Minnesota.  At the present time five illnesses have been confirmed by laboratory examination since mid-May.  Epidemiologic studies implicated a specific Del Monte packing plant in Kankakee, IL., as the most probable source of infection. The reported outbreak confirms the sensitivity of the FoodNet database to identify limited multistate outbreaks of foodborne infection.


 

IFIF to Offer Feed Safety Training Program

07/18/2019

According to a July 12th announcement, the International Feed Industry Federation (IFIF) has released a remote-learning program “Good Production Practices in the Feed Industry”. This will be available for government officials administering feed production, feed millers in emerging markets and other stakeholders.  The program will comprise an online module and candidates will have to complete an examination to receive a certificate.

 

Alexandra de Athayde, executive director of the IFIF noted “providing the training program on Good Production Practices is part of the IFIF’s mission to support feed safety and capacity development.”  She added, “IFIF members represent over 80% of animal feed production worldwide, and the capacity to develop feed safety is one of the key priorities for IFIF.”  Further information on the program can be obtained by accessing info@ifif.org


 

Insect Farming Could Produce Novel Ingredients

07/19/2019

An article in The Economist on July 6th considered the potential of commercial insect culture to produce ingredients. The article clearly stated that insect protein would not be incorporated into human food, but has potential as an ingredient for livestock production. Currently three companies are in pilot stage or limited commercial production. These include Agri-Protein of South Africa, Ynsect of France and Beta Hatch in the U.S.

The two species most likely to provide commercial product are the larva of flour beetles (“meal worms”) and the larva of black soldier-flies.

Culture on large scale requires capital investment in facilities and larva must be fed using vegetable-based ingredients. The possibility of using waste as a substrate offers potential to reduce cost and at the same time, may contribute to sustainability.

Before insect-derived protein can be regarded as a commercial reality, regulatory hurdles must be addressed. Although the E.U. has approved insect-derived protein to be used in aqua feed, regulations have yet to be framed in the U.S. The possibility of using human waste in feed for larva is fraught with complications including vertical transmission of potential pathogens to both livestock and then to consumers. It is evident that considerable research will be required to refine both selection of insect species, formulation of diets for larva and production system which optimize return on investment. At the end of the day insect-derived ingredients will have to compete with soybean meal and animal by-products for inclusion in poultry diets. This will be a function of cost per unit of energy and essential amino acids.


 

Put an Egg on It

07/10/2019

The AEB suggests topping salads with hard-boiled, sunny-side up, or scrambled eggs.  The AEB recommends eggs for breakfast and brunch but also as a late night snack.


 

Walmart Invests in Logistics in China

07/10/2019

According to a Walmart press release on July 5th, the company intends investing an additional $1.2 billion in upgrading distribution centers and transport over the next ten years.  The South China Fresh Food Distribution Center opened in March at a cost of $100 million is 350,000 square feet in extent and services more than 100 stores in Guangdong and Guangxi.  The distribution center received global standard certification through compliance in warehousing and distribution.

 

Walmart has operated in China since 1996 with the first store opened in Shenzhen.  Walmart operates stores in shopping malls, free standing Sam’s Club stores and Huisafe supermarkets.


 

Commentary


Easter Sales and Future Prospects. Are we Flying Blind?

07/11/2019

Anne L. Alonzo, president and CEO of the American Egg Board recently commented on sales volume and prices of eggs in an article published in the Summer 2019 edition of the Urner Barry Report. Ms. Alonzo emphasized the importance of Easter as the egg holiday with demand increased by home baking and entertaining. The importance of eggs during the Easter holiday is highlighted by the annual White House Egg Roll, which generates favorable publicity for the egg- producing industry.

Ms. Alonzo contrasted sales volume and prices for Easter periods from 2015 through 2019. Over the Easter period March 11th through April 7th in 2018, 242.5 dozen equivalent shell eggs were sold generating a revenue at retail of $511.4 million with a unit price of $2.10 per dozen. For Easter 2019 extending from March 31st through April 27th, 242.0 dozen equivalents were sold at a combined retail value of $424 million corresponding to a unit price of  $1.75 per dozen, a reduction of 17 percent.

Nielsen data suggests that including eggs in a shopping basket contributes to a tab of $33 per trip if generic eggs are included. This is compared to $49 per basket if cage-free, organic or other specialty eggs are purchased. This denotes that the demographic purchasing more expensive specialty, cage-free or organic eggs tend to purchase either more items per trip or tolerate higher unit prices due to perceived value of attributes. Eggs are obviously inelastic with regard to demand. Reducing the price of eggs may increase purchases slightly, but there is a limit to the quantity a consumer will purchase given perishability and a fairly constant use pattern.

Retail prices do not directly correlate with wholesale values. Prices paid to packers and integrators are a function of supply which in turn is influenced by flock size. Injudiciously high placement of pullet chicks reflects in lower wholesale prices 24 weeks later. The impact of the 2015 HPAI epornitic which occurred after the Easter period of that year resulted in a sharp increase in wholesale price following depletion of 40 million hens or 12 percent of the laying flock with replacement pullets although disproportionately affecting in-line breaking complexes. The effect of reduced flock size continued through 2016 in proportion to the level of rebuilding the hen population.

From the perspective of producers of shell eggs, supply is the important determinant of wholesale price. A comprehensive economic analysis is required to relate volume of production to wholesale and retail prices and the interaction of the shell and liquid segments of the industry. The impact of the 2015 HPAI epornitic, overproduction in 2019 and other factors influencing the egg industry represents a real-world exercise for agricultural economists. Determining the price elasticity for shell eggs and liquid and their interaction would be a valuable contribution to the industry with respect to forward planning and placement.

EGG-NEWS has advocated for such a study since 2015, and it is hoped that an industry initiative could fund a comprehensive study. This is especially important given the transition of the industry from caged housing to alternative systems including aviaries and floor-barns. Given the immense capital required to erect a complex of one to two million hens comprising pullet and layer housing, a feed mill and packing plant with appropriate biosecurity and other infrastructure demonstrates the need for quantifiable data to guide the industry going forward to 2025.


 

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Dr. Simon M. Shane
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