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USDA Weekly Egg Price and Inventory Report, May 9th 2019.

05/09/2019
  • Hen Numbers in Production Down 0.2 Million to 335.9 million .
  • Increase in Shell Inventory by 9.1 Percent from Past Week.
  • USDA Midwest Benchmark Generic Prices for Extra Large and Large on Average Down 7 Percent Compared to Past Week. Mediums Down 4 Percent.
  • Breaking Stock Price Down 23 Percent and Checks by 36 percent. Both Categories Substantially Below Cost of Production

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on May 6 th the Midwest wholesale prices for Extra Large and Large were down 7.5 and 7.8 percent respectively compared to the past week. Mediums were down 4.2 percent. The progression of prices during 2019 is depicted in the USDA chart reflecting three years of data, updated weekly.

The May 6th USDA Egg Market News Report (Vol. 66: No. 18) documented a USDA Combined Region value rounded to the nearest cent, of $0.59 per dozen delivered to warehouses for the week ending April 29 th and reflects the sharply lower post-Easter prices during that week despite a reduction in stock level. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $0.48 per dozen, below the cost of production. At the high end of the range, price in the South Central Region attained $0.63 per dozen. The USDA Combined Price last week was $0.58 per dozen below the three-year average and $0.55 per dozen below the corresponding week in 2018 which was exceptionally high but falling sharply after Easter.

Flock Size

The number of producing hens this week was down 0.2 million to 359.1 million. The hen population is more than adequate to meet seasonal consumer and industrial demand in early summer but any number above 330 million in production over the short term portends lower prices and increased inventory unless matched by proportional demand. The total U.S. egg-flock comprised 340.0 million hens including 2nd Cycle birds and those in molt on all farms. The lower level of 4.1 million hens is the difference between hens in production and total hens representing 1.2 percent of the national flock for the third successive week. This suggests that there are fewer pullets and molting flocks soon to come back into production after Easter with implications for price given current supply, stock level and seasonally moderate demand.

STOCK LEVELS

Generic shell-egg stock rose 9.1 percent to 1,614,200 cases following a 3.6 percent increase during the previous week. To maintain prices the market, will have to find a balance between supply and demand as the Industry moves into mid-second quarter of 2019, Seasonally the fifth month of the year is characterized by stable or decreasing flock size but low prices.

The National stock of frozen egg products as reported by the USDA on April 22nd 2019 attained 37.6 million pounds (17,092 metric tons) on March 31st 2019

Dried-egg inventory reported on April 12th increased by 3.0 percent during March 2019 to 17.8 million lbs. (8,101 metric tons) as of March 31st 2019 (was 17.3 million lbs. on February 28 th 2019)

INVENTORY

Cold Storage

Cold storage stocks in selected regions on May 6th 2019 amounted to 2.900 million pounds (1,318 metric tons), unchanged from the stock of 2.903 million pounds during the week of May 1st. 2019.

The most recent monthly USDA Cold Storage Report released on April 22nd documented a total stock of 37.6 million pounds (17,092 metric tons) of frozen egg products on March 31st 2019. This value was up 33.5 percent from March 31st 2018. A total of 90.2 percent of combined inventory comprised the categories of "Whole and Mixed" (49.1 percent) and "Unclassified" (41.1 percent). The lack of specificity in classification suggests a more diligent approach is required to enumerate and report inventory by the USDA.

Shell Inventory

The national stock of generic shell eggs reflecting May 6th 2019 was up by 9.1 percent, following a weekly increase of 3.6 percent and a 3.7 percent decline in inventory the previous week. The increase this past week suggests lower post-Easter demand relative to supply. Buyers filled the pipeline before Easter at low prevailing prices. The market will only move into balance relative to supply if old flocks are now depleted. Hen numbers increased prematurely in anticipation of Easter and the national flock is too high for the "summer doldrums" Availability of shell eggs increased over the past month from the contribution of molted hens coming back into production. In addition pullet chicks placed during early December 2018 in anticipation of Easter are now producing fewer Mediums hence stabilization of this category albeit at a low price.

Five of six USDA Regions reported higher stock levels. The Midwest Region was up 5.2 percent compared to the previous week to 460,200 cases. This region was followed in decreasing order of stock level by the South Central Region, up 16.5 percent to 235,10000 cases; the Southeast Region unchanged at 286,000 cases; the Southwest Region up 25.0 percent to 234,500 cases; the Northeast Region up 0.4 percent to 188,800 cases; and the Northwest Region up 17.1 percent 109,600 cases.

The total USDA Six-Area reported stock of commodity eggs comprised 1,959,000 cases, of which 82.4 percent were shell eggs. The inventory of breaking stock was up 0.3 percent to 334,800 cases consistent with the trend in shell-egg price in recent weeks. The value of breaking stock and hence availability from both mature and young flocks will be influenced by the demand for generic shell eggs and contract obligations with breakers.

As of Monday May 6th 2019 the inventory of other than generic eggs, compared to the previous week in parentheses, comprised:-

  • Specialty category, down 1.2 percent to 46,300 cases. (up 0.6% to 46,800)
  • Certified Organic, up 7.4 percent to 100,300 cases. (down 1.4% to 93,400)
  • Cage-Free, up 5.8 percent to 112,800 cases. (up 8.9% to 106,700)

Recent data suggests a weekly fluctuation in demand for cage free products. This is attributed to an increase in production of this category starting in 2017, motivated by commitments by members of the FMI, NCCR and NRA. In mid-2018 announcements by major egg producers indicated a pause in conversion of existing facilities and a moratorium on erecting new complexes and houses until sale of eggs from non-caged flocks rose in competition with generic white. There are now firm indications from equipment manufacturers and builders and evidenced by interest at the IPPE and especially the Midwest Poultry Federation Convention, that expansion is either planned or is in progress despite low prices. It is estimated that orders for 7 million to 9 million hen places have been signed, mainly for aviaries. This projected increase is supported by quarterly USDA statistics, the November 6th 2018 passage of California Proposition #12 and the failure of the Supreme Court to consider the multi-state challenge to California Proposition #2 and Massachusetts ballot outcomes. The Third quarter financial report from Cal-Maine released on April 1st indicated that the company would house 4.4 million hens in cage-free systems representing replacement of existing flocks and new facilities, requiring conversions and erection of housing and packing plants to the value of $185 million.

Demand for cage-free eggs is influenced by the relative shelf prices of the category in comparison with generic white-shelled eggs from caged flocks. At the other end of the price range, consumers will purchase less-expensive brown cage-free product over organic eggs when there is a differential in price greater than about $1.20 per dozen. Similarly, consumers purchase white-shelled generic eggs in preference to brown-shelled cage-free with a differential of over $1.20 per dozen. The need for structured statistically relevant market research on willingness to pay for attributes such as housing, GM status and nutritional enrichment is self-evident.

RELATIVE PRICES OF SHELL-EGG CATEGORIES

The following advertised retail prices for the week ending May 2 nd 2019, (compared with the previous week in parentheses) were posted by the AMS for dozen packs:

        • USDA Certified Organic, Brown, Large: $3.72 ($3.75)
        • Cage-Free Brown, Large: $2.52 ($3.00)
        • Omega-3 Enriched Specialty, White, Large: $2.04 ($3.07)
        • Generic White, Large Grade AA $1.09 ($1.09)
        • Generic White, Large Grade A (Feature price) $1.04 ($1.28)

The retail price as determined by the USDA-AMS for generic white Large AA last week was unchanged at $1.09 per dozen, inconsequential with respect to demand for this category. The price for generics is following seasonal trends.

During the past week the USDA benchmark advertised retail price of Cage-Free brown fell by 16.0 percent corresponding to 48 cents per dozen to $2.52 per dozen, continuing the downward move of the previous week. Certified Organic fell by 0.8 percent or $0.03 per dozen to $3.73 per dozen widening the price differential to $1.20 per dozen ($0.75 per dozen last week) suggesting short-term demand for cage-free brown over certified organic during the current week. The differential between generic white Large and cage-free brown was $1.43 per dozen ($1.72 per dozen last week) continuing to favor generic white over cage-free brown. Preference for generic white over cage-free brown is evident with a price differential greater than $1.20 per dozen. Large week-to-week percentage fluctuations can be expected in the stock of specialty and organic eggs based on the small base of these categories.

USDA Cage-Free Data

According to the latest monthly USDA Cage-free Hen Report released May 6 th 2019 the number of hens held in other than conventional cages in April 2019 was higher by a substantial 4.5 million hens (corresponding to 7.2 percent) as follows:-

Total U.S. flock held for USDA Certified Organic production = 15.7 million (15.0 million March)

Total U.S. flock held for cage-free production = 50.7* million (was 46.9 million.)

Total U.S. non-caged flock = 66.4 million *In all probability the number of hens housed in aviaries and floor systems has been steadily increasing since December 2018 but not recorded by USDA during the Federal shutdown and thereafter.

This value represents 20.1 percent of a nominal 330 million U.S. flock in production but 29.5 percent of a presumed flock of 225 million held for shell-egg production

Processed Eggs

For the processing week ending May 4th 2019 eggs processed under FSIS inspection increased by 5.7 percent compared to the previous week to a level of 1,647,099 cases. The proportion of eggs broken by in-line complexes was 53.5 percent (was 56.3 percent). With lower prices for shell eggs there is a trend to divert non-contracted eggs from packing to breaking as evidenced by data this past week. During the corresponding processing week in 2018 in-line breakers processed 52.8 percent of eggs broken.

Eggs broken YTD 2019 attained 28.0 million cases, 6.1 percent more than the corresponding period during 2018. The difference is in part due to significantly higher prevailing shell-egg prices in 2018.

PRODUCTION AND PRICES

Breaking Stock

The price range for breaking stock delivered to Central States plants on May 6th was down 23.0 percent compared to the previous week to 23 to 27 cents per dozen. Checks were 36 percent lower at a 'throw away' range of 8 to 13 cents per dozen. The revenue for both breaking stock and checks was far lower than the benchmark production cost for nest-run, estimated by the USDA at 60.7 cents per dozen during March 2019.

Shell Eggs

The USDA Egg Market News Report released on May 6th 2019 documented the changes in price for the major grades from the Midwest, for Central States Breaking Stock and Certified USDA Organic. The following table lists the "most frequent" ranges of values as delivered to warehouses*:-

Size/Type

Current Week

Previous Week

Extra Large

48-51 cents per dozen

52-55 down 7.5%

Large

46-49 cents per dozen

50-53 down 7.8%

Medium

44-47 cents per dozen

50-53 down 4.2%

Certified Organic EL

275-310 cents per dozen

unchanged long term

Breaking stock

23-27 cents per dozen

29-36 down 23%

Checks

8-13 cents per dozen

14-19 down 36%

*Store Delivery approximately 5 cents per dozen more than warehouse price

The May 6th 2018 Regional (IA, WI, MN.) average FOB producer prices, for nest-run grade-quality white shelled eggs, with prices in rounded cents per dozen (last week in parentheses) were unchanged:-

EL. $0.35 ($0.40) estimated by proportion: L. $0.29 ($0.34): M. $0.25 ($0.28)

(See the text, tables and figures in the review of production and prices comprising the report on USDA February 2019 cost data, posted under the STATISTICS TAB. A report on the financial results attained by Cal-Maine Foods for the 3rd. Quarter of Fiscal 2019, is posted under the STATISTICS TAB.

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for May 8th 2019 was numerically lower by 10.2 points from the last weekly report to -12.6 with a 9.1 percent increase in inventory as determined by the USDA-ERS as follows:-

Productive flock

335,929,639 million hens

Average hen week production

80.2% (was 80.1%)

Average egg production

269,415,571 million per day

Proportion to shell egg market

68.6 % (was 70.3%)

Total for in-shell consumption

513,386 cases per day

USDA Inventory

1,614,200 cases

26-week rolling average inventory

4.50 days

Actual inventory on hand

5.15 days (was 4.61 days)

Shell Egg Demand Indicator

-12.6 points (was -2.4 on May 1st 2019)

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective April 19th 2018 were:-

Whole Egg

$2.30-$2.45

Unchanged

Yolk

$2.30-$2.45

Unchanged

Spray-Dried White

$4.80-$5.00

Up $0.05 on both ends of the range

Blends

$2.75-$2.80

No new quotation

U.S. dried egg inventory on March 31st 2019, as reported on April 12th 2019 was 21 percent lower than on March 31 st 2018 attaining 17.8 million lbs. (8,101 metric tons), equivalent to slightly less than 2-weeks current production. Inventory was 3 percent higher compared to February 28th 2019. During the period March 3rd 2019 through March 30th 2019, dried egg processed under USDA inspection amounted to 9.7 million lbs. Lower shell-egg prices over the past few weeks diverted non-contracted eggs from packing to breaking.

COMMENTS

Newcastle Disease

A total of 428 exotic velogenic viscerotropic Newcastle disease (vvND = END) cases in small multi-species backyard flocks mainly comprising gamefowl (fighting cocks) were confirmed between May 18th and April 26th in the Southern California Counties of San Bernardino (136), Riverside (248), Los Angeles (42), Ventura (1) and Alameda (1). This case was confirmed in northern California during the week of March 8 th. Pre-emptive slaughter of all "birds" (presumed to be domestic galliformes and some anseriforms) in four communities in Los Angeles, Riverside and San Bernardino Counties was conducted under the direction of the State Veterinarian for California in November. This probably resulted in dissemination of infection by owners moving birds. A case of vvND was diagnosed in a flock of non-commercial chickens, presumed to be fighting cocks in Utah County, Utah on January 18th. An investigation was initiated to ascertain whether there was any direct or indirect contact with similar flocks in Southern California but no results have been released.

The incidence rate for END fell sharply after mid-October 2018 with only 17 new cases in November. A surge of incident cases was detected in Riverside County during mid-December 2018 with 43 incident cases diagnosed during the month. There were 86 new cases in January, 48 in February, 22 during March and 17 in April. In late March the USDA released funds from the 2015 HPAI outbreak but this may be characterized as too-little and too-late after 11 months. The outbreak is declining in incidence rate. This is less attributed to the "control procedures" carried out by APHIS/CDFA than to immunity developing in flocks from vaccination and exposure of vaccinated flocks which will remain non-clinically affected shedders of virus and reservoirs. Clearly many flocks were not identified or diagnosed given the nature of owners of fighting cocks to federal and state agencies.

A flock of 103,000 pullets aged 6 weeks located near Perris in Riverside County was depleted following PCR-diagnosis of vvND during the third week of December 2018. A second commercial flock comprising 180,000 egg-producing hens in Riverside County was diagnosed with vvND during the first week of January 2019 followed by two other laying flocks located about 5 miles from the previous case.

As yet the END situation has not disrupted exports of raw poultry, breeding stock, hatching or table eggs and egg products to Mexico. Following negotiations after the index case of END was diagnosed in Los Angeles County during mid-May, authorities in Mexico accepted regionalization and on May 23rd restored importation of raw poultry from other than the restricted Counties in California. There is absolutely no reason to embargo pasteurized egg products derived from a USDA-FSIS inspected plant.

Avian Influenza

As in the U.S. and the E.U. reassortant strains of avian influenza virus are introduced into regions beneath flyways by migratory birds and then transmitted to backyard and commercial free-range flocks or to confined flocks by deficiencies in biosecurity. Incident cases in the E.U., Asia and North Africa during 2018 should be a warning to U.S. producers during the early winter of 2019 since the risk of infection necessitates enhanced biosecurity and effective containment.

Four cases of LPAI H7N3 were diagnosed in organic turkey growing farms in Stanislaus County, California in early September 2018. Cases of H5N2 LPAI were diagnosed in flocks of commercial turkeys in Kandiyohi (4) and Stearns Counties (4) in Minnesota, during late-October through mid-November with an additional case in Chippewa County in February 2019. The earlier affected flocks have since been depleted following application of "controlled marketing". There is a presumption that migratory waterfowl cease shedding AI virus by the first week of April, re-commencing in December. Accordingly, enhanced biosecurity is required under the Pacific, Central and Mississippi flyways. Flocks allowed outside access during periods when migratory birds are shedding virus are vulnerable to infection.