EGG‑NEWS.com

USDA Weekly Egg Price and Inventory Report, July 27^th 2023.

Market Overview

• The average wholesale unit revenue values for Midwest Extra-large, Large and Medium sizes were unchanged this past week but represented a lower than seasonal early summer value. The plateau over six weeks signifies a prolonged market pause, terminating the precipitous decline over the preceding six weeks. This past week shell egg inventory was up 3.9 percent, reversing the fall of 4.1 percent last week and representing an 8.0 percent swing over two weeks with an evident two-week cycle in inventory level. The rise in inventory is consistent with presumably lower demand despite a fall in shelf prices for generics but also the effect of retail restocking. Over the coming month the volume of retail purchases will be influenced by seasonal summer demand. As chains reduce margins consistent with wholesale prices, higher demand should be anticipated. Eggs are now highly competitive in price against the comparable costs for other protein foods despite unrealistic retail margins imposed by some chains.
• Total industry inventory was up by 3.9 percent overall this past week to 1.79 million cases with a concurrent 1.0 percent increase in breaking stock, compared to an increase of 0.6 percent last week. Demand for products is presumably higher during early summer due to travel, the food service and manufacturing sectors and increased exports. Volume this past week was stimulated by lower prices for egg products. Wholesale shell egg prices compare with 2020 and 2021, also characterized by low ex-plant unit revenue. Benchmark prices were approximately $2.00 per dozen lower than for the corresponding week in 2022, inflated by flock depletions following HPAI.
• It is now apparent that the inventory held by chains and other significant distributors may be more important over the short term in establishing wholesale price than the USDA regional inventory figures and is probably the reason for cyclic fluctuation in weekly industry stock.
• Relatively low unit revenue compared to pre-HPAI will persist through August 2023. Sporadic outbreaks of HPAI are now unlikely given that the seasonal Spring migration of waterfowl is complete. The number and extent of future outbreaks during late fall and early winter of 2023 cannot be assessed until more information is available concerning the molecular and field epidemiology of the 2022 spring and fall waves of HPAI. The USDA has yet to identify modes of transmission for the 2022 epornitic including airborne spread.
• The current relationship between producers and chain buyers based on a single commercial price discovery system constitutes an impediment to a free market. The benchmark price appears to amplify both downward and upward swings as evidenced over the past five months. A CME quotation based on Midwest Large, reflecting demand relative to supply would be more equitable. If feed cost is determined by CME ingredient prices then generic shell eggs should be subject to a Midwest Large quotation.
• According to the USDA the U.S. flock in production was up 0.9 percent or 2.7 million hens to 313.8 million during the week ending July 26^th. The flock in production included about 5.0 million molted hens that resumed lay during the past week plus 4.0 to 5.0 million pullets attaining production. Given the latest figures it is estimated that the producing flock is still 5 to 7 million hens lower than before the onset of HPAI.
• The ex-farm price for breaking stock on July 24^th was down 1.2 percent this past week to 86 cents per dozen.Checks delivered to Midwest plants were unchanged at 75 cents per dozen. Prices for breaking stock will remain low until there is a substantial increase in wholesale price for shell eggs.

The Week in Review

Prices

According to the USDA Egg Market News Reports released on July 24^th the Midwest wholesale price (rounded to one cent) for Extra-large was unchanged from last week at $1.13 per dozen. Large size was also unchanged at $1.11 per dozen. The price for Medium size was unchanged at $1.01 per dozen as delivered to DCs. Prices should be compared to the USDA benchmark average 6-Region blended nest-run cost of 87.0 cents per dozen as determined by the EIC for June 2023. This excludes provisions for packing, packaging materials and transport, amounting to 57 cents per dozen in mid-2023, according to an EIC survey. Currently producers of generic shell eggs are operating with negative margins. The progression of prices during 2023 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

The July 24^th 2023 edition of the USDA Egg Market News Report documented an unchanged USDA Combined Region value rounded to the nearest cent, of $1.18 per dozen delivered to warehouses for the week ending July 21^st 2023. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.11 per dozen. At the high end of the range, the price in the South Central region attained $1.25 per dozen. The USDA Combined Price last week was approximately 50 cents per dozen below the 3-year average of $1.70 per dozen. This past week Midwest Large was approximately $2.00 below the corresponding week in 2022 elevated by losses due to HPAI.

Flock Size 

According to the USDA the number of producing hens reflecting July 26^th (rounded to 0.1 million) was up 2.7 million hens (0.9 percent) to 313.8 million. The total U.S. flock includes about 3.0 to 4.0 million molted hens due to return to production with approximately 4.0 to 5.0 million new pullets reaching maturity each week based on USDA monthly chick-hatch data for 20-weeks previously. The increase is offset by routine flock depletion in addition to residual losses during the fall 2022 phase of the 2022 HPAI epornitic. Based on inventory level and prices the hen population producing eggs should now be in relative balance with consumer demand. Industrial and food service off-take although increasing, has not reverted to pre-COVID levels. Prices will continue to fluctuate and are expected to stabilize at a low seasonal level through August 2023.

According to the USDA the total U.S. egg-flock on July 26^th was up 1.1 million hens (0.3 percent) to 319.2 million including second-cycle birds and those in molt. Any difference between hens in production and total hens is an approximate figure but denotes that many molted hens have resumed production after molt. With lower benchmark wholesale prices older flocks have been molted or depleted. At present there are now 5 to 7 million fewer hens in the total flock with the difference equivalent to about 1.8 percent of the pre-HPAI national flock of 325 million hens.

INVENTORY LEVELS

Cold storage stocks of frozen products in selected centers on July 24^th 2023 was apparently unchanged from the previous week at 2.508 million pounds (1,140 metric tons) of frozen egg products, up 4.5 percent from the inventory of 2.612 million lbs. on July 1^st 2023 due to lower production over the holiday period. The monthly USDA Cold Storage Report below quantified a reduction in the actual total stock level at the end of May.

The most recent monthly USDA Cold Storage Report released on June 24^th 2023 documented a total stock of 30.5 million pounds (13,845 metric tons) of frozen egg products on May 31^st 2023. This quantity was up 38.8 percent from the May 31^st 2022 value of 21.9 million pounds. May 31^st 2023 frozen egg inventory was up 22.1 percent from the previous month ending April 30^th 2023 attributed to presumably lower demand. Compared to May 31^st 2022 yolk inventory was up 110 percent to 1,095 million lbs. on May 31^st 2023.

A total of 86.3 percent of combined inventory (30.5 million lbs.) comprised the categories of “Whole and Mixed” (48.6 percent) and “Unclassified” (37.7 percent). The lack of specificity in classification requires a more diligent approach to enumerating and reporting inventory by the USDA

Shell Inventory

The USDA reported that the national stock of generic shell eggs effective July 24^th 2023 was up 3.9 percent. The relative movement of stock over the past five weeks suggests decreased consumer demand with retail prices reflecting the sharp seasonal fall in wholesale price commencing eleven weeks ago. Combined with breaking stock, the total inventory of shell eggs in the industry is now at 1.79 million cases (1.74 million last week; now 57,800 cases higher). The U.S. population of laying hens at this time is influenced by the number of older birds previously culled during the fall phase of the 2022 HPAI epornitic and includes the population unaffected by HPAI, flocks retained after molting (with an anticipated decrease in this category based on prevailing egg prices) and started pullets from chick placements in late-January and early February 2023. Going forward, younger hens will assume a larger proportion of the national flock as more flocks are placed compensating for the flocks depleted due to HPAI.

Five of six USDA Regions reported lower stock levels this past week. The regions are listed in descending order of stock: -

• The Midwest Region was up 5.6 percent, a sharp reversal from the previous week to 508,700 cases.
• The Southeast Region was up 3.3 percent to 281,000 cases
• The South Central Region was up 1.3 percent to 256,900 cases
• The Northeast Region was up 5.9 percent to 188,900 cases
• The Southwest Region was up 6.0 percent to 150,400 cases.
• The Northwest Region was down 4.8 percent to 70,90000 cases

The total USDA six-area stock of commodity eggs comprised 1,793,100 cases (1,735,300 cases last week), up 3.3 percent, of which 81.2 percent were shell eggs (80.8 percent last week). The inventory of breaking stock was up 1.0 percent to 336,200 cases. Shell egg inventory was up 3.9 percent attaining 1,456,900 cases (1,402,500 cases last week). This denotes increased shell egg demand and a renewal in placing orders by retailers to restock compared to the past post-holiday week.

The level of breaking stock over the past week is attributed to resumed processing volume after the holiday week with increased conversion to egg powder and liquids for storage and export and also to higher demand for liquids by industry, food service and consumers. The average price for Midwest checks and breaking stock combined was 73.0 percent of the average value of Midwest Extra-large and Large shell eggs (72.0 percent last two weeks) consistent with disproportionately lower prices for breaking stock and checks compared to shell eggs although with a relatively narrow spread this past week. The differential can be compared to 80.0 percent in April 2022 reflecting the initial period of high demand for both shell eggs and breaking stock after the onset of HPAI. This past week the wholesale Midwest Extra-large and Large shell egg prices were unchanged compared to the combination of breaking stock and checks that were almost unchanged from the previous week. This demonstrates the respective demands for shell eggs and egg products. There is interconnectivity of the packing and breaking segments of the egg industry under circumstances of extreme disturbances in either supply (lower due to HPAI in 2022) or demand (higher during COVID in 2020). The price for breaking stock and for checks is influenced by the relative demand for generic shell eggs and contract obligations with breakers.

On July 24^th 2023 the inventory of other than generic eggs amounting to 467,900 cases (up 4.0 percent from last week at 449,600 cases) among three categories (with the previous week in parentheses) comprised: -

• Specialty category, up 8.7 percent to 37,700 cases. (Was down 18.6% to 34,700 cases)
• Certified Organic, down 0.7 percent to 108,500 cases. (Was down 2.8% to 109,300 cases)
• Cage-Free category, up 5.3 percent to 321,700 cases. (Was down 6.5% to 305,600 cases)

Demand for cage-free product will not increase materially over the long term while generic eggs from caged flocks and some surplus down-classified cage-free eggs are on the shelf at $2.20 to $2.50 per dozen during normal supply and demand conditions. Currently there is a wide differential in shelf price between generics compared to the considerably higher priced omega-3 enriched, cage-free and pasture-housed products. That the higher priced egg categories will lose demand is supported by the findings of the comprehensive review relating to the transition from cages to alternative systems.*

Existing and proposed individual state legislation mandating sale of only cage-free eggs will support most of the completed and anticipated transition from cages but total re-housing will not be completed by the beginning of 2025, less than 16 months away and ultimately never as considered by most observers. The constitutional status of Proposition #12 was confirmed by SCOTUS in a May 11^th 2023 decision with specific reference to the dormant Commerce Clause relating to interstate trade. A legislative initiative (the EATS Act) to limit the impact of Proposition #12 on hog production is in progress. Many retail chains are renEGGing on or extending their time commitments to achieve an acceptable transition to cage-free eggs. With the current proportion of non-caged flocks and lower prices for generic cage-derived eggs, cage-free eggs are surplus to demand in some areas. Cage-free eggs are becoming a commodity in many markets subjected to the same price pressures as generic eggs from caged hens. Growth in demand for organic product has been static for months and stock levels are rising. Over the past three weeks, stock in this category exceeded 100,000 cases. Long-term 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. Inventory of this category exceeded 300,000 cases for the second consecutive week, disproportionate to the size of the cage-free flock. 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 under normal balance between supply and demand. Similarly, consumers will traditionally purchase white-shelled generic eggs in preference to brown-shelled cage-free with a differential of over $1.20 per dozen.

*Caputo,V. et al The Transition to Cage-Free Eggs. February 2023

A comprehensive structured market research project on cage-free eggs has provided an indication of consumer willingness to pay for this attribute. The industry requires a study on other aspects including shell color, GM status and nutritional enrichment. Above all, agricultural economists should evaluate the impact of disruption in supply and demand arising from large-scale depopulation following HPAI in 2015 and for the 2022 HPAI epornitic extending through partial restoration of hen numbers but a disproportionate decline in wholesale price during the first quarter of 2023.

RELATIVE PRICES OF SHELL-EGG CATEGORIES

USDA-AMS posted the following national shell egg prices as available, for July 21^st 2023 in the Egg Markets Overview report for dozen cartons with comparable prices in parentheses for the previous week: -

Retail

Large, in cartons generic white: $1.38 up 2.2 percent ($1.35)

Large, in cartons cage-free brown: $3.28 up 17.6 percent ($2.79)

Large C-F, California in Cartons: $2.01 down 4.7 percent ($2.11)

Wholesale

National loose, (FOB dock): $0.90 unchanged ($0.90)

NYC in cartons to retailer: $1.25 unchanged ($1.25)

Regional in cartons to warehouse July 24^th:

Midwest $1.11 down 1.8 percent ($1.13)

Northeast $1.16 down 2.5 percent ($1.19)

Southeast $1.21 up 0.8 percent ($1.20)

South Central $1.25 unchanged ($1.25)

Combined $1.18 unchanged ($1.18)

WEEKLY ADVERTISED PRICES OF SHELL-EGG CATEGORIES JULY 24^th

USDA Certified Organic, Brown, Large: $4.20 ($4.10)

Cage-Free Brown, Large: $3.32 ($2.79)

Omega-3 Enriched Specialty, White, Large: $3.33 ($2.51)

Generic White, Large Grade A $1.27 ($1.47)

Generic White, Large Grade A featured $1.38 ($1.35)

The advertised price for Large white grade A over 975 stores posted for the week ending July 24^th was $1.27 per dozen, down $0.20 per dozen or 13.6 percent from the previous week at $1.27per dozen. Shelf prices will influence demand for generic categories given their availability and the comparison with higher advertised and actual shelf prices for specialty and cage-free brown eggs. Current supply was probably in balance with demand this past week as independent producers continue to divert shell eggs from breaking to market. Large integrated companies and packers continued to deliver to DCs as chains that appear to have now placed orders to restock after the holiday period.

The USDA posted a benchmark-advertised retail price for certified organic of $4.20 this past week (875 stores), up $0.10 per dozen or 2.4 percent. The USDA advertised price of $3.32 per dozen was posted for cage-free brown during the past week (1,907 stores), up $0.53 per dozen or 19.0 percent, representing a differential of $0.88 cents per dozen from certified organic favoring this category. Although week-to-week fluctuations can be expected in the stock of specialty and organic eggs based on the small base of these categories, there was a downward trend in inventory of the cage free and organic categories this past week despite price-conscious consumers buying generic caged eggs at lower prices. The fall in inventory of specialty eggs reflects reordering in response to the buying power of affluent consumers.

The price of cage-free brown at $3.32 per dozen was $0.52 per dozen higher (18.6 percent) than cage-free white (156 stores) at $2.80 per dozen.

USDA data on advertised promotional retail prices this week indicated a shelf price of $1.47 per dozen for generic Large white compared to a composite wholesale price of $1.18 per dozen delivered to DCs. This represented a theoretical U.S. retail margin of 24.5 percent on average (last week 42.0 percent) with a wide differential between deep discounters and mainstream chains. Demand will increase as chains pass on any reduction in wholesale price for generic eggs.

Certified organic were promoted this past week at a slightly lower level representing 16.6 percent of the total compared to 17.3 percent of features last week reflecting high stock. Omega-3 enriched comprised 7.3 percent of features (27.7 percent last week) with cage-free at 39.1 percent reflecting high stocks (12.3 percent last week). Large at 34.1 percent (40.3 percent last week) comprised the predominant generic size featured with Mediums at 2.3 percent of features. This confirms that retailers promote any category if available in excess of demand.

USDA Cage-Free Data

According to the latest monthly USDA Cage-free Hen Report released on July 3^rd 2023, the number of certified organic hens during June 2023 was unchanged from May 2023 at 18.2 million, (rounded to 0.1 million).

The USDA reported that the cage-free (non-organic) flock in June 2023 was unchanged from May 2023 to 103.4 million, (rounded to 0.1 million).

According to the USDA the population of hens producing cage-free and certified organic eggs in June 2023 comprised: -

Total U.S. flock held for USDA Certified Organic production = 18.2 million (17.3 million in Q1 2023).

Total U.S. flock held for cage-free production = 103.4 million (98.1 million in Q1 2023).

Total U.S. non-caged flock =121.6 million (115.4 million in Q1 2023).

This total value represents 37.4 percent (April, 36.9 percent) of a nominal 325 million total U.S. flock pre-HPAI (but 38.4 percent of the national flock after HPAI mortality to a late June complement of 316 million). Hens certified under the USDA Organic program have decreased in proportion to cage-free flocks since Q1 of 2021.

The accuracy of individual monthly values is questioned given a history of either sharp changes or no change in successive months as documented over the past two years. Precise quarterly reports would be more suitable for the industry in planning expansion and allocation of capital.

Processed Eggs

For the processing week ending July 22^nd 2023 the quantity of eggs processed under FSIS inspection during the week as reported on July 26^th 2023 was up 2.3 percent compared to the previous processing week to a level of 1,607,178 cases, (1,570,625 cases last short week). The proportion of eggs broken by in-line complexes was 52.5 percent (53.5 percent in-line for the previous week). The differential in price for shell sales and breaking will determine the movement of uncommitted eggs. This past week 68.0 percent of egg production was directed to the shell market, (68.5 percent for the previous week) responding to the differential in prices paid by breakers and packers. Breaking stock inventory was up 1.0 percent this past week to 336,200 cases with continued diversion to shell-egg markets. Apparent demand from QSRs and casual dining is at stable to slightly lower levels. There is continued demand from baking and eat-at-home despite the transitory increase in the inventory of breaking stock. During the corresponding processing week in 2022 in-line breakers processed 48.1 percent of eggs broken.

For the most recent monthly report, revised data for week ending June 15^th 2022, yield from 6,101,761 cases (8,173,152 cases last month) denoted an increase in demand for liquid over the period June 4^th through July 1^st 2023. Edible yield was 38.9 percent, distributed in the following proportions expressed as percentages: - liquid whole, 60.9; white, 23.4; yolk, 11.7; dried, 4.0.

All eggs broken during 2022 attained 76.22 million cases, 2.0 percent less than 2021. Eggs broken in 2023 to date amounted to 42,961,312 cases, 1.1 percent less than the corresponding period in 2022. This is attributed to stable demand for egg liquids from retail, food service and QSRs and casual dining restaurants. The market is constrained by economic uncertainty with the ending of COVID supports, inflation, high credit card interest rates and purchasing of only essentials by consumers

PRODUCTION AND PRICES

Breaking Stock

The average rounded price for breaking stock was 1.2 percent lower this past week to an average of $0.86 per dozen with a range of $0.82 to $0.90 per dozen delivered to Central States plants on July 17^th. Checks were unchanged this past week to an average of $0.75 per dozen over the most frequent range of $0.74 to $0.76 per dozen suggesting that the market for breaking stock is paralleling shell eggs.

Shell Eggs

The USDA Egg Market News Report dated July 24^th 2022 confirmed that Midwest wholesale prices for Extra-large, Large and Medium sizes were unchanged over the past four weeks. The trend of consecutive sharply lower prices transitioning to a five-week plateau coupled with fluctuating stock for over five weeks suggests that the market has bottomed. The following table lists the “most frequent” ranges of values as delivered to warehouses*: -

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

The July 24^th 2023 Midwest Regional (IA, WI, MN.) average FOB producer price, for nest-run, grade-quality white shelled Large size eggs, with prices in rounded cents per dozen was unchanged from last week, (with the previous week in parentheses): -

1. $0.96 ($0.96), (estimated by proportion): L. $0.93 ($0.93): M. $0.82 ($0.81)

The July 24^th 2023 California price per dozen for cage-free, certified Proposition #12 compliant Large size in cartons delivered to a DC, (with the previous week in parentheses) was unchanged from last week.

1. $2.13 ($2.13); L. $2.01 ($2.01); M. $1.53 ($1.53)

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for July 26^thwas down 3.1 points from the last weekly report to -1.1 with a 3.3 percent increase in total inventory and a 3.9 percent higher shell inventory from the past week as determined by the USDA-ERS as follows: -

See the text, tables and figures and the review of production data and prices comprising the USDA Report for June 2023 under the STATISTICS tab.

The 4^th Quarter and FY 2023 results for Cal-Maine Foods are posted in this edition.

Dried Egg Products

The USDA extreme range in prices for dried albumen and yolk products in $ per lb. was released on July 21^st 2023. Data posted by the USDA is incomplete but available values are depicted for the past week and in parentheses for the previous week and also past months to illustrate the trend in prices influenced by HPAI depopulation and subsequent repopulation:

Frozen Egg Products

The USDA range in prices for frozen egg products in cents per lb. on July 21^st compared to the previous week were generally down in price:-; Whole egg down 13.0 percent; Whites, unchanged; Yolks, unchanged; This indicated a balance between available products and demand from the manufacturing and food service sectors: -

1. extreme range

June averages (May): Whole. $0.96, ($1.02); Whites, $1.23, ($1.40); Yolks, $2.05, ($2.48).

Liquid Egg Products

The June 2023 averages for certified truckload quantities are tabulated (per lb.) with May2023 values in parentheses are: -

Whole, $0.60, ($0.73); Whites, $0.82 ($1.40); Yolks, $2.05, ($2.48).

The USDA has not released a report on dried egg inventory since March 13^th 2020 due to inability to obtain data from producers, and will not issue reports for the immediate future.

COMMENTS

There have been no reports of commercial egg-producing or broiler flocks affected by HPAI outbreaks since December 2022. Cases expected during the first quarter of 2023 fortunately did not materialize, possibly relating to the absence of actively shedding migratory birds in areas with commercial poultry. Only a few outbreaks have been recorded among turkeys and backyard farms year-to-date in addition to free-living carnivorous predatory and scavenging mammals. Given the risks and consequences of infection it will be necessary to continue to maintain high levels of structural and operational biosecurity through summer with intensification into fall months.

To date approximate losses in commercial flocks with confirmed HPAI and updates include:-

• 2,900,000 broilers on 18 farms in 7 states For 2023 to date losses are 450,000
• 330,000 broiler breeders on 11 farms in 6 states.
• 9,900,000 turkeys including a few breeder flocks on 231 farms in 7 states. For 2023 to date losses are approximately 250,000 with two incident cases in the Dakotas during mid-May.
• 44,000,000 egg-production hens in total with 95 percent on 22 large complexes above 0.5 million in addition to 1,070,000 pullets with a total of 41 locations in 11 states. Pullet mortality does not include “at risk” replacements depleted on affected complexes with contiguous pullet rearing.

Backyard flocks that are allowed outside access will continue to be at risk of infection in the U.S. These small clusters of birds in suburban areas are of minimal significance to the epidemiology of avian influenza as it affects the commercial industry. Backyard flocks serve as indicators of the presence of virus among free-living birds as evidenced by ongoing outbreaks in commercial poultry flocks across the U.S.

It would have been of practical and financial benefit for APHIS epidemiologists to have reported on their findings from the questionnaires completed following outbreaks on commercial farms during the first quarter of 2022.

An interim report was released during the first week of March 2023, inexplicably backdated to July 2022. This document, lacking either conclusions or recommendations was critiqued in a special edition of EGG-NEWS on March 8^th.

The USDA-APHIS presented a webinar to review the results of epidemiologic studies on May 31^st. The data presented failed to provide any practical or applicable recommendations to reduce the probability of infection. This report was based on limited numbers of flocks incorporated into a case-control study applying a dated and presumably inappropriate questionnaire administered by telephone survey.

It is hoped that APHIS recognises the need to provide the industry with science-based recommendations. This presumes diligent analysis of whatever field and molecular epidemiology that has been collected. The Agency is also advised to plan epidemiologic field studies and allocate personnel and other resources in anticipation of a fall resurgence in HPAI.