Egg Week

08/28/2019

USDA Weekly Egg Price and Inventory Report, August 28th 2019.

  • Hen numbers in production up 0.3 million to 324.2 million.
  • Shell inventory down 0.7 percent after a 1.9 percent fall last week
  • USDA Midwest benchmark generic prices for Extra large and Large up 21 percent to 102.5 and 100.5 cents per dozen respectively. Mediums were up 44 percent to 62.5 cents per dozen.
  • Price of breaking stock up at 47.0 cents per dozen and checks at 34.0 cents per dozen respectively. Both categories substantially below cost of production

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on August 26 th the Midwest wholesale prices for Extra Large and Large were higher by 21.3 and 21.8 percent respectively to 102.5 and 100.5 cents per dozen respectively. Mediums were up 43.7 percent to 62.5 cents per dozen. Extra Large and Large were above the USDA average 5-Region blended nest-run benchmark of 62.7 cents per dozen in July. The progression of prices during 2019 is depicted in the USDA chart reflecting three years of data, updated weekly.

The August 26th USDA Egg Market News Report (Vol. 66: No. 34) documented a USDA Combined Region value rounded to the nearest cent, of $0.90 per dozen delivered to warehouses for the week ending August 18th. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $0.83 per dozen, above 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 $0.93 per dozen, above the USDA Regional nest-run cost of $0.61 per dozen in July. The USDA Combined Price last week was approximately $0.78 per dozen below the three-year average and $0.28 per dozen below the corresponding week in 2018.

Flock Size

The number of producing hens this week was up 0.3 million to 324.2 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 330.5 million hens including second-cycle birds and those in molt on all farms. The difference of 6.3 million hens in production and total hens is equivalent to 1.9 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 0.7 percent to 1,263,300 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 August 22nd 2019 attained 35.6 million pounds (16,176 metric tons) on July 31st 2019

Dried-egg inventory reported on August 9th increased by 6.0 percent during July 2019 to 21.86 million lbs. (9,934 metric tons) as of July 31st 2019 (was 20.57 million lbs. on June 30th 2019)

INVENTORY

Cold Storage

Cold storage stocks in selected regions on August 26th amounted to 2.814 million pounds (1,279 metric tons) of frozen egg products, 1.1 percent less than the level of 2.845 million lbs. on August 1 st 2019.

The most recent monthly USDA Cold Storage Report released on August 22nd documented a total stock of 35.48 million pounds (16,176 metric tons) of frozen egg products on July 31st 2019. This value was up 19.5 percent from July 31st 2018. A total of 88.2 percent of combined inventory comprised the categories of "Whole and Mixed" (49.9 percent) and "Unclassified" (38.3 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 26th 2019 was down 0.7 percent from the past week, following a decrease of 1.9 percent for the previous week and a decline of 10.3 percent during the preceding week. The market is moving into balance relative to supply mainly due to increased demand since old flocks continue to be molted and are not depleted. Hen numbers are still too high for the "summer doldrums" moving towards the Labor 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 late-January 2019 are now producing a disproportionate number of medium sized eggs as denoted by the low price for this size although demand for the category has increased.

Four of six USDA Regions reported higher stock levels. The Midwest Region was down 4.8 percent compared to the previous week to 389,600 cases. This region was followed in decreasing order of stock level by the Southeast Region, up 0.6 percent to 241,100 cases; the South Central Region down 4.6 percent to 223,500 cases; the Southwest Region up 4.4 percent to 174,300 cases; the Northeast Region up 5.1 percent to 142,500 cases and the Northwest Region up 6.9 percent 92,200 cases.

The total of the USDA six-area stock of commodity eggs comprised 1,582,000 cases, of which 79.9 percent were shell eggs. The inventory of breaking stock was down 4.4 percent to 318,700 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 26th 2019 the inventory of other than generic eggs (with previous week in parentheses) comprised:-

  • Specialty category, down 12.3 percent to 35,500 cases. (was up 1.7% to 40,500 cases)
  • Certified Organic, down 4.1 percent to 109,100 cases. (was down 0.6% to 113,700 cases)
  • Cage-Free, down 3.5 percent to 79,600 cases. (was up 8.4% to 82,000 cases)

There are now firm indications from equipment manufacturers and builders and evidenced by interest at the 2019 IPPE and the Midwest Poultry Federation Convention, that expansion is either planned or is in progress despite low prices from April through July. It is estimated that orders for 7 million to 10 million hen places have been signed, mainly for aviaries, despite the reality that wholesale prices for generic cage-derived eggs were 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 subsequent corresponding legislation by Oregon and Washington States. The Supreme Court declined 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 with a capital cost of $167 million will be completed through February 2002. It is evident that there was recent 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 the 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 15 th 2019, (compared with the previous week in parentheses) were posted by the AMS on August 12th for dozen packs:

  • USDA Certified Organic, Brown, Large: $4.35 ($3.97)
  • Cage-Free Brown, Large: $2.25 ($2.57)
  • Omega-3 Enriched Specialty, White, Large: $2.45 ($2.18)
  • Generic White, Large Grade AA $0.86 ($0.71)
  • Generic White, Large Grade A (Feature price) $0.87 ($0.87)

The retail price as determined by the USDA-AMS for generic white Large AA last week was up $0.15 per dozen to $0.86 per dozen although the increase in demand will be limited by consumer intent to use additional eggs for baking and picnics or substitution for more expensive protein foods.

During the present week the USDA benchmark advertised retail price of brown Cage-Free fell 12.5 percent or $0.32 per dozen to $2.25 per dozen. Certified Organic rose 8.6 percent or $0.38 per dozen to $4.35 per dozen widening the advertised price differential to $2.10 per dozen ($1.40 per dozen last week) suggesting short-term demand for cage-free brown over certified organic. The differential between advertised retail prices for generic white Large and cage-free brown was $0.84 per dozen ($1.86 per dozen last week) suggesting increased demand for 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 24th 2019 eggs processed under FSIS inspection as reported on August 28th was down by 3.3 percent compared to the previous week to a level of 1,575,784 cases. The proportion of eggs broken by in-line complexes was 57.2 percent (was 56.2 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 53.0 percent of eggs broken.

For the report dated August 28th 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 53.85 million cases, 3.8 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 17.5 percent to a range of 45 to 49 cents per dozen. Checks increased by 28.3 percent to a range of 32 to 36 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 62.7 cents per dozen during July 2019.

Shell Eggs

The USDA Egg Market News Report released on August 26th 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

101-104 cents per dozen

83-86 Up 21.3%

Large

99-102 cents per dozen

81--84 Up 21.8%

Medium

61-64 cents per dozen

42-45 Up 43.7%

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

45-49 cents per dozen

39-41 Up 17.5%

Checks

32-36 cents per dozen

24-28 Up 28.3%

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

The August 26th 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. $0.90 ($0.75) estimated by proportion: L. $0.85 ($0.70): M. $0.44 ($0.29)

(See the text, tables and figures and the review of production data and prices comprising the August report on USDA July 2019 costs and the 4 th 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 28th 2019 was numerically higher by 1.1 points from the last weekly report to 14.4 with a 0.7 percent decrease in inventory from the past week as determined by the USDA-ERS as follows:-

Productive flock

324,190,551 million hens

Average hen week production

80.3% (was 80.8%)

Average egg production

260,325,012 million per day

Proportion to shell egg market

68.9% (was 67.9%)

Total for in-shell consumption

498,323 cases per day

USDA Inventory

1,263,300 cases

26-week rolling average inventory

4.76 days

Actual inventory on hand

4.16 days

Shell Egg Demand Indicator

14.4 points (was 13.3 on August 21th 2019)

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective August 9th 2019 were:-

Whole Egg

$2.00-$2.15

Unchanged

Yolk

$1.90-$2.00

Down $0.05 on the low end and down $0.10 on the high end of the range

Spray-Dried White

$4.60-$4.80

Up $0.05 on both ends of the range

Blends

$2.75-$2.80

No new quotation

U.S. dried egg inventory on July 31st 2019, as reported on August 9th 2019 was 57 percent higher than on July 31 st 2018 attaining 21.8 million lbs. (9,934 metric tons), equivalent to approximately 1.7-weeks current production. Inventory was 6.0 percent higher compared to June 30th 2019. During the period June 30th 2019 through July 27th 2019, dried egg processed under USDA inspection amounted to 12.4 million lbs. Lower shell-egg prices during the past three months diverted non-contracted eggs from packing to breaking.

The July 31st total dried egg inventory comprised whole egg (45.0%); albumen (18.5%); yolk (34.6%) and blends (1.8%).

COMMENTS

Newcastle Disease

The incidence rate of Newcastle disease in Southern California declined over the past two months but no cases were diagnosed for eight weeks until a case was reported from a feed store on August 14th. To declare the 2018 to 2019 outbreak to be over requires 13 weeks from depletion of the last diagnosed case for official acceptance. Incident cases may emerge in the late fall from either introduction from Mexico or extension from non-recognized reservoirs in California. The progress of the outbreak was as follows:-

A total of 449 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 August 24th in the Southern California Counties of San Bernardino (142), 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 or 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.






















































































































































































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