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Egg Week

08/07/2019

USDA Weekly Egg Price and Inventory Report, August 7th 2019.

  • Hen numbers in production up 0.7 million to 322.5 million.
  • Shell inventory down 2.2 percent from the past week
  • USDA Midwest benchmark generic prices for extra large and large unchanged at 43.5 and 41.5 cents per dozen respectively. Mediums down 3.1 percent to 31.5 cents per dozen. Hopefully prices reflect a market bottom.
  • Price of breaking stock at 22 cents per dozen and checks unchanged at 7 cents per dozen respectively. Both categories substantially below cost of production

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on August 5 th the Midwest wholesale prices for Extra Large and Large were unchanged at 43.5 and 41.5 cents per dozen respectively. Mediums fell 3.1 percent to 31.5 cents per dozen. All sizes were below the USDA average 5-Region blended nest-run benchmark of 62.7 cents per dozen in June. The progression of prices during 2019 is depicted in the USDA chart reflecting three years of data, updated weekly.

The August 5th USDA Egg Market News Report (Vol. 66: No. 31) documented a USDA Combined Region value rounded to the nearest cent, of $0.48 per dozen delivered to warehouses for the week ending July 29th. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $0.42 per dozen, below the USDA Regional Benchmark nest-run cost of $0.60 per dozen in July. At the high end of the range, price in the South Central Region attained $0.51 per dozen below the USDA Regional nest-run cost of $0.61 per dozen in July. The USDA Combined Price last week was $1.08 per dozen below the three-year average and $0.70 per dozen below the corresponding week in 2018.

Flock Size

The number of producing hens this week was up 0.7 million to 322.5 million. The hen population is more than adequate to meet seasonal consumer and industrial demand in early summer but any number above 320 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 328.4 million hens including second-cycle birds and those in molt on all farms. The difference of 5.9 million hens in production and total hens is equivalent to 1.8 percent of the national flock, down from a YTD high of 2.4 percent in mid-June. This suggests some depletion has occurred with fewer flocks scheduled to come back into production with implications for price, given current supply, stock level and seasonally moderate to depressed demand.

STOCK LEVELS

Generic shell-egg stock was down 2.2 percent to 1,446,100 cases. To maintain prices the market, will have to find a balance between supply and demand as the Industry moves through the third quarter of 2019, Seasonally the eighth 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 July 22nd 2019 attained 37.4 million pounds (16,985 metric tons) on June 30th 2019

Dried-egg inventory reported on July 12th increased by 4.0 percent during June 2019 to 20.57 million lbs. (9,348 metric tons) as of June 30th 2019 (was 19.7 million lbs. on May 31st 2019)

INVENTORY

Cold Storage

Cold storage stocks in selected regions on August 5th amounted to 2.828 million pounds (1,285 metric tons), 0.6 percent lower than the level of 2.845 million lbs. on August 1st 2019.

The most recent monthly USDA Cold Storage Report released on July 22nd documented a total stock of 37.4 million pounds (16,985 metric tons) of frozen egg products on June 30th 2019. This value was up 21.7 percent from June 30th 2018. A total of 87.8 percent of combined inventory comprised the categories of "Whole and Mixed" (46.8 percent) and "Unclassified" (41.0 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 August 5th 2019 was down 2.2 percent from the past week, following a decrease of 3.6 percent for the previous week and a rise of 5.6 percent during the preceding week. The market will only move into balance relative to supply if old caged flocks are depleted and not simply molted. Hen numbers are still too high for the "summer doldrums" past the Independence Day weekend. Availability of shell eggs has increased over the past month from the contribution of newly transferred pullets and molted hens coming back into production. In addition pullet chicks placed during mid-January 2019 are now producing a disproportionate number of medium sized eggs.

Five of six USDA Regions reported lower stock levels. The Midwest Region was down 2.6 percent compared to the previous week to 449,100 cases. This region was followed in decreasing order of stock level by the South Central Region, down 3.3 percent to 273,900 cases; the Southeast Region down 1.1 percent to 268,200 cases; the Southwest Region down 2.7 percent to 183,600 cases; the Northeast Region down 4.0 percent to 176,700 cases and the Northwest Region up 4.4 percent 94,600 cases.

The total of the USDA six-area stock of commodity eggs comprised 1,782,700 cases, of which 81.1 percent were shell eggs. The inventory of breaking stock was down 1.4 percent to 336,600 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 August 5th 2019 the inventory of other than generic eggs (with previous week in parentheses) comprised:-

  • Specialty category, up 14.8 percent to 42,000 cases. (was down 22.4% to 36,600 cases)
  • Certified Organic, down 2.4 percent to 118,100 cases. (was unchanged at 121,000 cases)
  • Cage-Free, down 17.9 percent to 73,300 cases. (was down 2.1% to 89,300 cases)

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 2019 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 10 million hen places have been signed, mainly for aviaries, despite wholesale prices for generic cage-derived eggs below production cost for five successive months.

The projected increase in cage-free flocks 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 the Massachusetts ballot outcomes. The Fourth Quarter financial report from Cal-Maine released on July 22nd indicated that the company would house an additional 6.0 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 $187 million. Projects to the value of $167 million will be completed through February 2002. It is evident that there is overproduction based on the differences between Nielsen sales data and the average weekly production posted by the USDA in the Monthly Cage Free Report indicating that a proportion of cage-free and organic eggs are currently either downgraded or sent to breakers

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 August 8 th 2019, (compared with the previous week in parentheses) were posted by the AMS on August 5th for dozen packs:

  • USDA Certified Organic, Brown, Large: $3.32 ($3.42)
  • Cage-Free Brown, Large: $3.00 ($3.01)
  • Omega-3 Enriched Specialty, White, Large: $2.38 ($2.41)
  • Generic White, Large Grade AA $0.76 ($0.83)
  • Generic White, Large Grade A (Feature price) $0.86 ($0.87)

The retail price as determined by the USDA-AMS for generic white Large AA last week was down $0.07 per dozen to $0.76 per dozen but this will not materially alter demand for this category. The price for generics is at a 5-year low moving down beyond seasonal trends due to overproduction.

During the present week the USDA benchmark advertised retail price of brown Cage-Free fell 0.3 percent or $0.01 per dozen to $3.00 per dozen. Certified Organic fell 2.9 percent or $0.10 per dozen to $3.32 per dozen narrowing the advertised price differential to $0.32 per dozen ($0.41 per dozen last week) suggesting short-term demand for certified organic over cage-free brown hence the relative stability in organic stock compared to cage-free last week. The differential between advertised retail prices for generic white Large and cage-free brown is $1.62 per dozen ($2.18 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 August 5 th 2019 the number of hens held in other than conventional cages in July 2019 was unchanged from June as follows:-

Total U.S. flock held for USDA Certified Organic production = 15.8 million (15.8 million May & June).

Total U.S. flock held for cage-free production = 51.3 million (50.9 million May).

Total U.S. non-caged flock = 67.1 million (66.7 million May).

This value represents 20.3 percent of a nominal 330 million U.S. flock in production but 30.1 percent of a presumed flock of 223 million producing for the shell-egg market.

Processed Eggs

For the processing week ending August 3rd 2019 eggs processed under FSIS inspection as reported on August 7th increased by 1.3 percent compared to the previous week to a level of 1,676,891 cases. The proportion of eggs broken by in-line complexes was 56.1 percent (was 55.2 percent last week). With lower prices for shell eggs there is a trend to divert non-contracted eggs from packing to breaking. During the corresponding processing week in 2018 in-line breakers processed 52.1 percent of eggs broken. In-line breaking increased 8.3 percent year-to-date compared to an increase in total volume of 4.1 percent.

For the report dated August 7th edible yield for the period June 30th through July 27th from 6,369,443 cases was 37.9 percent distributed in the following proportions expressed as percentages:- liquid whole, 57.0; white, 25.2; yolk 12.9; dried, 4.9.

Eggs broken YTD 2019 attained 47.96 million cases, 4.1 percent more than the corresponding period during 2018. The difference is in part due to significantly higher prevailing shell-egg prices in 2018 favoring shell sales.

PRODUCTION AND PRICES

Breaking Stock

The price range for breaking stock delivered to Central States plants was up 15.7 percent to a range of 21 to 23 cents per dozen. Checks were unchanged to a 'throw away' range of 5 to 8 cents per dozen, below the cost of transport. The revenue for both breaking stock and checks was far lower than the benchmark production cost for nest-run, estimated by the USDA at 63 cents per dozen during July 2019.

Shell Eggs

The USDA Egg Market News Report released on August 5th documented changes in prices 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

42-45 cents per dozen

Unchanged

Large

40-43 cents per dozen

Unchanged

Medium

30-33 cents per dozen

31-34 down 3.1%

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

21-23 cents per dozen

15-23 Up 15.7%

Checks

5-8 cents per dozen

Unchanged

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

The August 5th 2019 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:-

EL. $0.27 ($0.27) estimated by proportion: L. $0.24 ($0.24): M. $0.11 ($0.13)

(See the text, tables and figures and the review of production data and prices comprising the August report on USDA July 2019 costs as a posting on the WELCOME page this edition and the 4th Quarter financial results posted by Cal-Maine Foods under the STATISTICS tab.

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for August 7th 2019 was numerically higher by 2.8 points from the last weekly report to -2.0 with a 2.2 percent decrease in inventory from the past week as determined by the USDA-ERS as follows:-

Productive flock

322,452,254 million hens

Average hen week production

81.0% (was 81.0%)

Average egg production

261,186,306 million per day

Proportion to shell egg market

67.0% (was 68.2%)

Total for in-shell consumption

486,097 cases per day

USDA Inventory

1,446,100 cases

26-week rolling average inventory

4.78 days

Actual inventory on hand

4.88 days

Shell Egg Demand Indicator

-2.0 points (was -4.8 on July 31st 2019)

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective July 12th 2019 were:-

Whole Egg

$2.00-$2.15

Unchanged

Yolk

$1.95-$2.10

Unchanged.

Spray-Dried White

$4.60-$4.80

Unchanged

Blends

$2.75-$2.80

No new quotation

U.S. dried egg inventory on June 30th 2019, as reported on July 12th 2019 was 54 percent lower than on June 30th 2018 attaining 20.6 million lbs. (9,348 metric tons), equivalent to approximately 1.7-weeks current production. Inventory was 4.0 percent higher compared to May 31st 2019. During the period June 2 nd 2019 through June 29th 2019, dried egg processed under USDA inspection amounted to 11.9 million lbs. Lower shell-egg prices during the past three months diverted non-contracted eggs from packing to breaking.

The June 30th total dried egg inventory comprised whole egg (45.0%); albumen (17.8%); yolk (35.4%) and blends (1.8%).

COMMENTS

Newcastle Disease

The incidence rate of Newcastle disease in Southern California has declined with no cases diagnosed for eight weeks. A total of 448 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 July 12th in the Southern California Counties of San Bernardino (141), Riverside (260), Los Angeles (45), Ventura (1) and Alameda (1). 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 2018. 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, UT on January 18th.

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 2019, 48 in February, 22 during March, 17 in April, 20 in May and 1 in early June. In late March the USDA released funds from the 2015 HPAI outbreak but this may be characterized as too-little and too-late after 13 months. The decline in incidence rate 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 that will remain non-clinically affected reservoirs shedding virus in a cycle of exposure. Clearly many flocks are not identified or diagnosed given the relationship of owners of fighting cocks to federal and state agencies.

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 2018, authorities in Mexico accepted regionalization and on May 23 rd 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

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 fall and early winter of 2019 since the risk of infection necessitates enhanced biosecurity and effective containment.

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.