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Review of March 2019 Production Costs and Statistics.

04/10/2019
  • March 2019 USDA Ex-Farm Benchmark Price Down 13.0 Percent from February 2019, Consistent with Seasonal Trends and Moderate Oversupply.

  • March 2019 USDA Average Nest-run Production Cost 1.1 Percent Higher than February 2019 at 60.7 cents per dozen.

  • March 2019 USDA Benchmark Nest-run Margin Decreased from February 2019 to Breakeven.

INTRODUCTION.

Summary tables for the latest USDA March 2019 prices made available by the EIC on April 9th 2019 are arranged, summarized, tabulated and reviewed in comparison with values from the previous March 12th 2019 posting reflecting February 2019 cost data.

 

COSTS & REVENUE

From January 2019 onwards EIC has used USDA-AMS data for regional corn, soybean and standard feed prices. The basis for corn will be cash payment except for California (10-day delivery) and Louisiana and Oregon (30-day delivery). For soybean meal a similar approach is applied with 20-days for Minnesota. It is noted that January 2019 prices are not directly comparable with December 2018. Month-to-month comparisons in 2019 will be valid.

 

 

Parameter

MARCH 2019

FEBRUARY 2019

5-Region Cost of Production ex farm (1st Cycle)

60.69 c/doz

60.03 c/doz

Low

56.03 c/doz (MW)

57.33c/doz (MW)

High

79.11 c/doz (CA)

77.73 c/doz (CA)

Components of 6-Region 1stCycle Cost of Production:-

 

MARCH 2019

FEBRUARY 2019

Feed

31.72 c/doz

31.14c/doz

Pullet depreciation

11.01 c/doz

10.93 c/doz

Labor (estimate)

4.00 c/doz

4.00 c/doz

Housing (estimate)*

5.00 c/doz

5.30 c/doz

Miscellaneous and other*

8.97 c/doz

8.66 c/doz


* Adjusted February 2019

Ex Farm Margin according to USDA values reflecting MARCH 2019:-

60.7 cents per dozen1- 60.7 cents per dozen = breakeven

(FEBRUARY 2019 comparison 69.8 1 cents per dozen - 60.7 cents per dozen = +9.8 cents per dozen.)

Note 1: USDA Blended egg price

   

MARCH 2019

FEBRUARY 2019

USDA

Ex-farm Price (Large, White)

60.7 c/doz

69.8 c/doz

 

Cage-free to packing plant

150.0 c/doz

156.0 c/doz

 

Warehouse/Dist. Center

91 c/doz (Feb.)

114.0 c/doz (Jan.)

 

Store delivered (estimate)

96 c/doz (Feb.)

119.0 c/doz (Jan.)

 

Dept. Commerce Retail

155.4 c/doz (Feb.)

155.4 c/doz (Jan.)

Layer Feed Cost

MARCH 2019

FEBRUARY 2019

See note on source of data: now USDA

U.S. Average

$202.03/ton

 

$198.35/ton

High

$231.66/ton (West)

$223.91/ton (West)

Low

$175.95/ton (MW)

$183.25/ton (MW)

Differential

$ 55.71/ton

$ 40.66/ton

Pullet Cost (19 Weeks) $3.80 MARCH 2019 $3.77 FEBRUARY 2019

 

VOLUMES OF PRODUCTION

PARAMETER

MARCH 2019

FEBRUARY 2019

Table-egg strain eggs in incubators

53.4 million

56.9 million

Pullet chicks hatched

26.6 million (Feb.)

27.1 million (Jan.)

Pullets to be housed in 5 months

26.5 million (July)

23.7 million (June)

     

National Flock in farms over 30,000

319.3million (Feb.)

320.7 million (Jan.)

National egg-producing flock

334.9 million (Feb.)

330.6 million (Jan.)

     

Proportion flock in molt or post-molt

15.3% (Feb.)

15.6% (Jan.)

Total of hens in flocks over 30,000, 1st cycle (estimate)

270.5 million (Feb.)

279.0 million (Jan.)

* No December data

Total U.S. Eggs produced

7.48 billion (March.)

8.23 billion (Feb.)

Cage-Free hens in production

61.9 million (March)

24.2% Organic

57.3 million (Feb.)

27.4% Organic

"Top-6" States hen population (USDA)

180 million (estimate*.)

Not released (Jan.)

* Texas excluded to maintain confidentiality

PROPORTION OF U.S. TOTAL HENS BY STATE, 2018

Based on a denominator of 320.7 million hens in flocks over 30,000.

USDA has amended inclusion of specific states in regions to protect confidentiality of Company flock sizes

 

STATE

FEB . 2018

JAN. 20181

Proportion by region (FEB. 2019)

Iowa

17.4%

%

MW 53.7%

Indiana

10.7%

%

NE 10.4%

Ohio

10.1%

%

SE 6.7%

Pennsylvania

8.0%

%

SC 5.2% (exc. TX)

Texas (estimate)

5.8%

%

CA 4.1%

California

4.1%

%

NW 2.9%

1. No January data (Values rounded to 0.1%)

Rate of Lay, weighted hen-week (USDA) 79.4% ( MARCH) 80.1% (FEBRUARY)

Actual USDA-ERS 2015 U.S. per capita annual egg consumption revised due to HPAI:- 255.8 eggs (-11.7 from 2014)

Actual USDA-ERS 2016 U.S. per capita annual egg consumption:- 271.6 eggs (+15.8 from 2015)

Actual USDA-ERS 2017 U.S. per capita annual egg consumption:- 276.3 eggs (+4.7 from 2016)

Estimated USDA-ERS 2018 U.S. per capita annual egg consumption to be:- 278.8 eggs (+2.5 from 2017)

Projected USDA-ERS 2019 U.S. per capita annual egg consumption to be:- 279.8 eggs (+1.0 from 2018)

Egg Inventories at beginning of March:

Shell Eggs: 2.01 million cases up 17.8 percent from February.

Egg Products: 2.88 million case-equivalents up 8.8 percent from February.

Eggs broken under FSIS inspection (million cases) FEBRUARY 6.365 JANUARY 7.018

Cumulative 2019: number of cases produced 43.764 million, FEBRUARY

Cumulative 2019: proportion of total eggs broken 30.6%

 

EXPORTS: FEBRUARY 2019 Data.

 

Parameter

Quantity Exported

Exports:

 

Shell Eggs (thousand cases)

JAN . 245 DEC. 353

Products (thousand case equivalents)

JAN . 298 DEC. 289

TOTAL (thousand case equivalents)

JAN. 543 DEC. 642

*Representing 2.4 percent of National production in January 2019.

 

 

COMMENTARY ON MARCH 2019 COSTS AND STATISTICS

The following comments and comparisons are provided on March 2019 USDA values:-

MARCH 2019 COST AND REVENUE DATA

The USDA reports data for six regions, respectively comprising the Northeast, South East (Mid-Atlantic), South Central, Midwest, Northwest and California (NW and California combined in some tables).

From March 2019 onward some state data is not released to maintain confidentiality where Companies predominate in a specific state.

  • The USDA ex farm benchmark blended egg price in March 2019 decreased by 13.0 percent or 9.1 cents per dozen from February 2019 to 60.7 cents per dozen, contributing to a breakeven situation based on 'nest-run' (delivered from the laying house). The March 2019 price of 60.7 cents per dozen should be compared to 184.2 cents per dozen for the corresponding month in 2018 and 46.6 cents per dozen in February 2017 post-recovery following HPAI.

  • During March 2019 the feed component of production cost averaged 31.7 cents per dozen higher by 0.6 percent from February 2019. The 2018 average feed cost was 33.3 cents per dozen compared with an average feed cost of 32.0 cents per dozen in 2017.
  • Combining data from the USDA and the EIC, producers did not record a margin at farm- level for flocks in March 2019 compared to a positive margin of 9.8 cents per dozen in February and 18.1 cents per dozen in January 2019. The average monthly margin for the 1 st Quarter of 2019 was 9.3 cents per dozen or an aggregate of 27.9 cents per dozen.

    The cumulative margin for entire 2018 was 424.0 cents per dozen or a monthly average of 35.3 cents per dozen. The algebraic margin for entire 2017 was a positive 39.2 cents per dozen, with the first eight months negative comparing production cost against USDA benchmark 'nest run' values. The algebraic average margin for entire 2016 was a loss of 9.6 cents per dozen with negative values recorded for eight consecutive months.

  • The simple average price of feed for March 2019 over 5-regions was $202.03 per ton, 1.8 percent higher using USDA-AMS data by $3.68 per ton compared to February 2019. Southwest data was not disclosed for March to avoid compromising one company that dominates Texas. The highest cost among five regions was in the West at $231.66 per ton compared to the lowest region, the Midwest at $175.95 per ton. The average figure includes ingredients plus milling and delivery at approximately $10 per ton. The benchmark price of corn was $147.27 per ton in March 2019, up 1.6 percent from February taking into account the difference in basis. An increase of 7.7 percent in the price of soybean meal from $312.12 per ton in February to $336.09 per ton in March contributed to a higher feed cost. There was a $60.61 per ton differential in corn price between the Midwest and the West in March 2019.

  • Feed price will continue to be a major factor driving production cost and hence margin. Unknown factors influencing feed cost during the second quarter of 2019 will include disruption of international trade due to tariffs imposed by China and a possible settlement of the ongoing dispute. Each $10 per ton difference in feed cost represents 1.75 cents per dozen.

  • The EIC-calculated the 6-Region total nest-run production cost in March 2019 to be 60.7 cents per dozen, 0.7 cent per dozen more than in February. Production costs during March 2019 ranged from 56.0 cents per dozen in the Midwest up to 79.1 cents per dozen in California which was higher than the Midwest region by 23.1 cents per dozen.

  • Retail egg prices as determined by the Department of Commerce for February 2019 averaged 155.7 cents per dozen, 0.3 cents per dozen more than in January 2019. During February 2017 and 2018 retail prices were respectively 146.4 and 175.5 cents per dozen. During entire 2016 and extending through mid-2018, retail prices did not decline in proportion to ex-farm prices allowing higher margins at retail thereby depressing demand.

     

    MARCH 2019 PRODUCTION DATA

     

  • According to USDA data, the estimated average complement of U.S. hens in flocks over 30,000 during February 2019 amounted to 319.3 million, reflecting a seasonal adjustment in flock size. The average total U.S. flock including hens in molt on all farms counted by the USDA amounted to 333.6 million in February. The average end-of-year flock sizes over the past five years respectively were, 2012 (299 million); 2013 (308 million); 2014 (311 million); 2015 (291 million post HPAI losses) and in 2016 (319 million). The EIC predicts the December 2019 total flock will attain 341.4 million.

  • Pullet chick hatch was down 5.5 percent in February 2019 to 26.6 million compared to the previous month at 28.1 million. The high October 2018 value of 27.4 million was in anticipation of the Easter 2019 market. It is evident that if lower prices prevail during early summer flock placements will be constrained by some producers cancelling pullet-chick orders.

  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA attained 15.3 percent of the national flock in March 2018, compared to 15.6 percent in February. The annual averages were 17.4 percent for 2018 and 18.0 percent in 2017. The high value of 23.8 percent in 2016 was due to the loss of hens in the 2015 HPAI epornitic.

  • Average monthly pullet transfer to laying houses during the third and fourth quarters of 2018 amounted to 26.0 and 24.7 million respectively. The monthly projection for pullets to be transferred to laying houses during the second quarter of 2019 is 22.0 million.

  • The projected hatchery supply flock increased from 2.08 million in February to 2.12 million in March 2019. Peak parent-flock placements attained 3.1 million hens in production in June 2015, coinciding with the end of the HPAI epornitic, to a low of 2.5 million hens during the 4th Quarter of 2016. Projections show monthly averages of 2.2 and 2.3 million breeder hens in production during the third and fourth quarters of 2019. The October 2018 breeder flock was 2.4 million in anticipation of progeny reaching maturity for Easter 2019.

  • Average production of 79.4 percent in March 2019 is reflected in the number of young pullets approaching and attaining peak production. This is evidenced by the volume and hence price of mediums Average rate of lay attained 78.7 percent during 2016 and increased to 79.8 percent in 2017. The average rate of lay during any period is a function of the proportion of pullets placed, the rate of depletion of flocks and retention of molted hens for a second cycle. Average flock production will fall as weighted flock age increases or will rise due to early depletion and restricting production to the first cycle.

  • Slaughter of spent light hens in plants under FSIS inspection during February 2019 was down 4.3 percent from January 2019 attaining 3.6 million unchanged from February 2018. Spent-hens are shipped live to Canada from Northern-tier U.S. states or are rendered or composted in other regions. Approximately 14 million spent hens are disposed of each month.

JANUARY 2019 EXPORT DATA.

 

  • According to USDA-FAS data, 244,800 cases of shell eggs were exported in January 2019, compared to 352,600 in December 2018, representing 1.1 percent of total production. This value should be compared to the high value of 409,700 cases in March 2016 prior to the onset of HPAI. During January 2019 the following regions were the leading importers:- North America, comprising the two neighboring NAFTA/USMCA nations (44.4 percent, was 60.4 percent), East Asia (42.0 percent, was 30.4 percent.). Shipments in January 2019 to the Middle East increased to 5.9 percent of monthly volume with 14,500 cases, up from 3,100 cases in December 2018. Neither the E.U. Central America nor Southeast Asia imported shell eggs during 2018 extending into January 2019.
  • Exports of egg products in January 2019 were down 4.3 percent from December 2018 to 297,500 case-equivalents representing 1.3 percent of U.S. output.

    The following regions were the leading importers of egg products by proportion of volume shipped in January:- North America or our NAFTA/USMCA neighbors (received 45.6 percent was 40.7 percent in December), East Asia (35.5 percent), the EU-28 (3.7 percent) and the Caribbean (3.6 percent).

  • Collectively, exports of shell eggs and products in January 2019 represented the equivalent of approximately 8.7 million hens in production during the month, attaining 542,300 case-equivalents (was 641,600 in December 2018). This was a 33.3 percent decrease compared to monthly average shipments of 960,000 case-equivalents exported over the first four months of 2015 prior to the advent of HPAI, indicating the need to re-build markets.

    Efforts in this respect are in progress attributed to cooperation between the AEB and USAPEEC both in existing and new markets. Specific attention is directed to nations with the potential to import U.S. product based on landed price against competition. Exports of both egg-products and shell eggs in January 2019 corresponded to 2.4 percent of a nominal national flock of approximately 320 million hens in production on commercial farms holding more than 30,000 hens.

  • There is no scientific reason why any nation should embargo pasteurized egg products from an approved plant, based on a diagnoses of avian influenza or END in a state or country.