Egg-News

Editorial


Governor Jim Pillen of Nebraska Reverses Position on Summer Feeding

Governor Jim Pillen of Nebraska has reversed his previous decision and will now accept federal funds to assist families in need to feed children during the summer school vacation.  His recent decision to accept $18 million in federal funds represents a reversal from his previous position.  Governor Pillen stated previously that he did not believe in “welfare” which is somewhat hypocritical since according to news reports he accepted federal funding during the COVID pandemic for his hog plant.

His acceptance of federal funding for supplemental feeding was in part attributed to a campaign in the Nebraska Legislature led by Senator Jen Day to override the decision by the Governor. In addition he was confronted by a petition signed by over 6,000 citizens of the state, protest vigils outside his residence and scathing criticism on social media.

 

Nebraska now becomes the 37th state in the Nation to accept funding that will benefit 150,000 children who qualify for reduced cost and free meals when school is in session.

 

Governor Pillen has apparently turned the situation to his advantage by announcing his flip-flop at a press conference joined by 21 state senators representing his party affiliation.

It is difficult to reconcile his statement that “children are the future of Nebraska” with a politically inspired refusal to accept Federal funds to alleviate hunger in a needy population. The question remains as to what motivated the original decision that appeared firm at the end of 2023?  A disinclination to accept that there were needy children in Nebraska?  A reluctance to accept funds from the Federal government perceived as politically inappropriate in a politically polarized environment?  A realization that recipients would be from families denying him political support and therefore inconsequential?

Irrespective of motivation, it is evident that Gov. Pillen has now made the correct decision having consulted with a range of advisors and visited with constituents. He may have been influenced by a recent poll showing state Senator Tony Vargas (D) runing neck-and-neck with incumbent Representative Don Bacon (R)  who was previously considered to be a winner for reelection the right-leaning 2nd Congressional District. Whatever the influences on Gov. Pillen his reversal on supplemental feeding  of children is correct and pragmatic. More power to him.

 

It is a primary responsibility of governors, mayors and other elected officials to use the powers of their office to benefit all of their citizenry and to pay special attention to the less fortunate. Children need adequate food to grow and learn. Stunting physical and mental development through deprivation will in the long term be more expensive to communities than providing adequate nutrition.


 

Egg Industry News


Egg Week

USDA Weekly Egg Price and Inventory Report, February 21st 2024.

Market Overview

  • The average wholesale unit revenue values for Midwest Extra-large, Large and Medium sizes were unchanged on average this past week. Prices were approximately $1.30 per dozen above the 3-year average for mid-February. This past week shell egg inventory was up by a substantial 7.3 percent, following a rise of 2.0 percent the previous week. Supply is lower despite routine and progressive weekly increases in pullet flocks placed. Hen numbers are offset by the loss of close to thirteen million hens due to HPAI on twelve complexes holding from 250,000 to 2.6 million hens during the 4th Quarter of 2023. Flocks are gradually being replaced although pullets are in short supply with losses of 2.5 million in this level of stock. This past week, chains widened the spread between delivered cost and shelf price. This could result in a potential decrease in generic stock unless compensated by a proportional rise in demand and constant re-ordering to fill the pipeline through mid -month. Discounters are holding prices on generics influencing mainstream retail stores. Eggs are still highly competitive in price against the comparable costs for other protein foods.
  • Total industry inventory was up by 6.3 percent overall this past week to 1.61 million cases with a concurrent 2.6 percent increase in breaking stock, following a 5.3 percent fall during the preceding processing week. Demand for egg products will presumably increase in the weeks preceding Easter (March 29th Good Friday) with more home baking and entertaining. Egg products are required for the food service and manufacturing sectors although exports are at a moderate to low level attributed to domestic price. USDA Benchmark prices were approximately $0.60 per dozen higher than the previously exceptional but rapidly falling prices during the corresponding week in 2023, influenced by HPAI flock depletions and accompanied by high demand.
  • 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 compared to the USDA regional inventory figures. Changes in stock held by DCs and in the pipeline as determined by weekly orders are probably responsible for cyclic fluctuation in weekly industry stock, especially after a holiday weekend.
  • Cases of HPAI in the commercial poultry industry and backyard (non-commercial WOAH) flocks have tapered, coincident with the end of the Fall migration of waterfowl that was extended in late 2023 by mild weather. The number and extent of future possible outbreaks during the early winter of 2024 cannot be projected but the epornitic appears to be over with migratory birds moving southward following colder weather. More surveillance information should be released by USDA-APHIS concerning the prevalence rate of carriers among resident domestic free-living birds and a review of molecular and field epidemiology for the 2022 spring and fall waves of HPAI. The USDA has yet to identify specific modes of transmission for the 2022-2023 epornitic including likely airborne spread from wild birds and their excreta over short distances.
  • 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 two years. 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 down by 0.7 million hens (0.23 percent) to a new level of 304.2 million for the week ending February 21st The stated total flock of 309.1 million included about two million molted hens that will resume lay during coming weeks plus 5.0 million pullets scheduled to attain production. Given the latest figures it is estimated that the producing flock is at least 13 to 15 million hens lower than before the onset of HPAI in 2022. It is evident that USDA has now provided a more realistic figure of flock size having adjusted figures to account for depopulation of 13 million hens spread over the last quarter of 2023. There were evident discrepancies between published figures and the theoretical number of hens taking into account known losses and predetermined pullet replacements.
  • The ex-farm price for breaking stock was down 3.7 percent to $1.61 per dozen.Checks delivered to Midwest plants were unchanged at $1.51 per dozen over the past week. Prices for breaking stock should follow the wholesale price for shell eggs usually with a lag of about one to three weeks.

 

The Week in Review

 

Prices

According to the USDA Egg Market News Reports released on February 20th 2024, the Midwest wholesale price (rounded to one cent) for Extra-large was unchanged from last week at $3.22 per dozen. Large was unchanged at $3.20 cents per dozen. Mediums were unchanged at $2.15 per dozen delivered to DCs. Prices should be compared to the USDA benchmark average 4-Region blended nest-run cost of 76.8 cents per dozen as determined by the Egg Industry Center based on USDA data for January 2024. This value excludes provisions for packing, packaging materials and transport, amounting to 57 cents per dozen as determined in mid-2023 from an EIC survey (with low response) and now realistically 60 cents per dozen. The January release by the EIC is delayed for adjustment of values.

 

Currently producers of generic shell eggs should be operating with positive margins irrespective of region and customer-supply agreements. The progression of prices during 2023 and 2024 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

 

The February 20th edition of the USDA Egg Market News Report confirmed that the USDA Combined Region value (rounded to the nearest cent), was up 9.3 percent to $3.29 per dozen delivered to warehouses for the week ending February 14th 2024. This average price lags current benchmark Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $3.20 per dozen. At the high end of the range, the price in the South Central region attained $3.36 per dozen. The USDA Combined Price last week was approximately $1.30 per dozen above the 3-year average of $1.90 per dozen. This past week Midwest Large was approximately $0.60 per dozen above the corresponding week in 2023 that was sharply lower at $2.70 per dozen as production recovered from HPAI depletion and with declining market demand.

 

Flock Size 

Previously EGG-NEWS questioned the accuracy of the weekly values for total and producing flocks. The number of replacement pullets based on actual hatch figures 20 to 22 weeks previously and the number of hens depleted as a result of HPAI are firm. Since the difference between the total and producing flocks was uniformly constant until five weeks ago the loss of approximately 13 million hens due to HPAI during the fourth quarter was not reflected in weekly USDA figures. The USDA has now adjusted data to reflect losses due to HPAI depopulation in recent weekly reports.

 

Given the importance of weekly flock numbers to pricing accurate values of flock size devoid of obvious discrepancies are required by producers.

 

According to the USDA the number of producing hens reflecting February 21st 2024 (rounded to 0.1 million) was apparently down 0.7 million as an adjustment from last week to 303.5 million. The total U.S. flock includes about one to two million molted hens due to return to production Approximately 5.0 million new pullets on average reach 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 phase of the 2022 HPAI epornitic and an additional loss of approximately 13 million hens during the last quarter of 2023. To date some flocks have been replaced. Based on inventory level and prices, the population of hens producing table eggs and breaking stock should now be producing below seasonal demand by consumers. Industrial and food service off-take although increasing, is approaching pre-COVID levels. Prices will continue to fluctuate but commenced a seasonal albeit late rise in price two weeks ago.

 

According to the USDA the total U.S. egg-flock on February 21st 2024 was stated to be down by 0.7 million hens to 309.1 million including second-cycle birds and those in molt. The weekly difference of 5.6 million hens between flocks in production and total hens is an approximate value but the repetitive figure (that raises questions) denotes that molted hens are resuming production consistent with current demand. Given the season and the trajectory in benchmark wholesale prices, only a few older flocks were molted or depleted before mid-January 2024. At present it is estimated that there are 13 to 15 million fewer hens in the total flock now reflected in weekly USDA figures. The apparent difference is equivalent to about 4.5 percent of the pre-HPAI 2022 national flock of 326 million hens.

 

INVENTORY LEVELS

 

Cold storage stock of frozen products in selected centers on February 20th 2024 was unchanged at 2.389 million pounds (1,086 metric tons), down 1.4 percent from last week compared to 2.424 million lbs. on February 1st 2024. The monthly USDA Cold Storage Report below quantified an increase in the actual total stock level at the end of December.

 

The most recent monthly USDA Cold Storage Report released on January 24th 2024 documented a total stock of 29.8 million pounds (13,562 metric tons) of frozen egg products on December 31st 2023. This quantity was up 23.1 percent from the December 31st 2022 value of 24.2 million pounds. December 31st 2023 frozen egg inventory was up 1.6 percent from the previous month ending November 30th 2023 attributed to presumably slightly lower domestic or export demand or their combination. Compared to December 31st 2022 inventory of whites was down 18.5 percent to 2,783 million lbs. on December 31st 2023. Compared to December 31st 2022 yolk inventory was up 5.2 percent to 958 million lbs. on December 31st 2023.

 

A total of 87.5 percent (26.1 million lbs.) of combined inventory comprised the categories of “Whole and Mixed” (41.7 percent) and “Unclassified” (45.8 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 February 19th 2024 was up 6.3 percent over the previous week. Inventory over the past week followed a rise of 2.0 percent the previous week reflecting seasonal consumer demand and orders placed by buyers of the major chains. Combined with breaking stock, the total inventory of shell eggs in industry cold rooms is now at a rounded level of 1.61 million cases (1.52 million last week; 96,300 cases higher this week). The U.S. population of laying hens at this time is influenced by:-

 

  • A small number of older birds previously culled during the fall phase of the 2022 HPAI epornitic now approaching the end of their first cycle.
  • Recent outbreaks of HPAI with the loss of over 13.0 million hens during the fourth quarter of 2023.
  • The population unaffected by HPAI.
  • Flocks retained after molting with an anticipated increase in this category as influenced by prevailing wholesale egg prices, and indirectly responding to fourth Quarter 2013 flock depopulation from HPAI.
  • Started pullets from chick placements during late August 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.

 

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

  • The Midwest Region was up 8.4 percent from the previous week to 439,800 cases.
  • The Southeast Region was up 13.2 percent to 247,100 cases
  • The South Central Region was up 5.5 percent to 227,400 cases
  • The Northeast Region was up 3.1 percent to 168,600 cases
  • The Southwest Region was up 4.0 percent to 121,700 cases.
  • The Northwest Region was up 1.2 percent to 77,200 cases

 

The total USDA six-area stock of commodity eggs comprised 1,613,300 cases (1,517,000 cases last week), up 6.3 percent, of which 81.1 percent were shell eggs (80.4 percent last week). The inventory of breaking stock was up 2.6 percent to 304,500 cases. Shell-egg inventory was up 7.3 percent attaining 1,308,800 cases. These changes are a function of regional shell-egg demand coupled with a response to erratic re-stocking as buyers manipulate the industry benchmark price discovery system. A reduction in the incidence rate of HPAI may influence buyers who are now less concerned over short-term availability.

 

A rise in breaking stock was recorded over the past week despite some diversion to the shell egg market. Subsequent weekly stock levels of shell eggs will indicate the extent of industrial and consumer demand. Breaking is stimulated by conversion to egg powder and liquids for export and by higher demand for liquids by industry and food service. The average price for Midwest checks and breaking stock combined was 48.7 percent of the average value of Midwest Extra-large and Large shell eggs (54.3 percent for previous week) consistent with unchanged prices for shell eggs this past week compared to breaking stock that was down 1.9 percent. The narrower differential of 48.7 percent can be compared to 80.0 percent in April 2022 reflecting the initial period of high demand for both shell eggs and products. This demonstrates the respective demands for shell eggs and egg products and the 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 early 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 February19th 2023 the inventory of other than generic eggs amounting to 429,000 cases (up 6.1 percent from last week at 404,300 cases) among three categories (with the previous week in parentheses) comprised: -

 

  • Specialty category, down 0.5 percent to 31,900 cases on promotion. (was down 2.3% to 32,100 cases)
  • Certified Organic, up 7.1 percent to 86,800 cases. (was down 0.4% to 81,000 cases)
  • Cage-Free category, up 6.6 percent to 310,300 cases. (was down 4.6% to 291,200 cases)

 

Demand for cage-free product will not increase materially over the intermediate term while generic eggs from caged flocks and some surplus down-classified cage-free eggs are on the shelf at $2.20 to $2.40 per dozen during normal supply and demand conditions. Currently there is a small differential in shelf price between conventional caged eggs compared to cage-free white but a wider difference between higher priced omega-3 enriched, cage-free, free-range and pasture-housed products. That the higher priced egg categories will experience an erosion in demand as generic prices fall is supported by the findings of a 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 significant additional re-housing will not be completed by the beginning of 2025, less than 10 months away and ultimately never, as projected by most industry observers. The constitutional status of Proposition #12 was confirmed by SCOTUS in a May 11th 2023 decision with specific reference to the dormant Commerce Clause relating to interstate trade. It is unlikely that a legislative initiative (the EATS Act) will be incorporated into the 2023 Farm Bill (that will be delayed beyond February 2024), to limit the impact of Proposition #12 on sows housed for pork production. Many retail chains are ‘renEGGing’ on or extending their time commitments to achieve an acceptable transition to cage-free eggs despite coercion by animal welfare groups. The State of Utah is extending the deadline by five years. 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. Inventory of this category is holding solidly below 100,000 cases although this quantity represents the approximate production of three days of lay. Long-term demand for cage-free eggs will be influenced by the relative shelf prices of the category in comparison with generic white-shelled eggs from caged flocks. Inventory of this category is now slightly above the 300,000-case benchmark, but effectively is working stock given weekly production of 1.7 million cases per week. 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 conditions of supply and demand. Similarly, consumers will traditionally purchase white-shelled generic eggs in preference to white or 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 using conjoint analysis. Above all, agricultural economists should evaluate the impact of disruption in supply and demand arising from large-scale depopulation following the 2015 and 2022-2023 HPAI epornitics and the current wave of outbreaks extending through partial restoration of hen numbers but with 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 February 16th 2024 for the preceding week in the Egg Markets Overview report for dozen cartons with comparable prices in parentheses for the previous week: -

 

Retail Prices

Large, in cartons generic white: $2.57 Up 53.9 percent ($1.67)

Large, in cartons cage-free brown: $2.88 Down 11.3 percent ($3.25)

 

Wholesale

Midwest in cartons $3.21 Up 9.5 percent ($2.93)

Large C-F, California in Cartons: $5.39 Down 3.6 percent ($5.59)

National loose, (FOB dock): $2.38 Up 3.5 percent ($2.30)

NYC in cartons to retailer: $3.34 Unchanged ($3.34)

 

Regional in cartons to warehouse reported February 20th for previous week.

Midwest $3.20 Up 9.6 percent ($2.92)

Northeast $3.25 Up 9.4 percent ($2.97)

Southeast $3.34 Up 9.2 percent ($3.06)

South Central $3.36 Up 7.7 percent ($3.12)

Combined $3.29 Up 9.3 percent ($3.01)

 

WEEKLY ADVERTISED PRICES OF SHELL-EGG CATEGORIES W/E FEBRUARY 22nd.

USDA Certified Organic, Brown, Large: $4.25 ($4.53)

Cage-Free Brown, Large: $3.07 ($3.40)

Omega-3 Enriched Specialty, White, Large: $2.79 ($2.31)

Generic White, Large Grade AA $2.66 ($1.65)

Generic White, Large Grade A featured $2.57 ($1.67)

 

The advertised price for Large white grade AA as featured for the week ending February 22nd was $2.66 per dozen, (109 stores) up $1.01 or 61.2 percent above $1.65 per dozen last week. Current supply was probably in balance with retail demand this past week given the small rise in inventory held by the industry as reported by the USDA. Independent producers continue to divert shell eggs from breaking to the retail market. Large integrated companies and packers continued to deliver to DCs and this week chains increased orders to stock shelves for Christmas demand.

 

The USDA benchmark-advertised retail price for certified organic for the week was $4.25 per dozen, (97 stores), up $0.28 per dozen or 6.2 percent from the USDA price of $4.53 per dozen posted last week. A USDA advertised price of $3.07 per dozen was posted for cage-free brown during the past week (74 stores), up $0.33 per dozen or 9.7 percent up from last week at $3.40 per dozen. The price differential between USDA organic and cage-free brown of $1.18 per dozen will favor of certified organic attracting purchasers at the expense of cage-free brown eggs. Week-to-week single digit fluctuations expressed as a percentage can be expected in the stock of specialty and organic eggs based on the small base of these categories. There was a small downward movement in the inventory of certified organic this past week consistent with increased demand for this category based on price and promotion.

 

USDA cage-free brown was priced retail at $3.07 per dozen, higher by $0.29 per dozen (10.4 percent) compared to the cage-free white price of $2.78 per dozen (148 stores)

 

Certified organic was promoted this past week at 17.5 percent of the total, despite a slightly lower inventory, (last week 31.0 percent of features). Omega-3 enriched comprised 45.9 percent of features with higher inventory (29.8 percent last week). Cage-free was at 10.3 percent with higher stock (23.3 percent last week). This past week Large represented 16.7 percent and mediums were 9.6 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 February 1st 2024, the number of certified organic hens in January was down 0.5 percent from December 2023 at 18.4 million, (rounded to 0.1 million).

 

The USDA reported that the cage-free (non-organic) flock in January 2024 was down 1.4 percent from December 2023 to 103.9 million, (rounded to 0.1 million).

 

According to the USDA the population of hens producing cage-free and certified organic eggs in January 2024 comprised: -

Total U.S. flock held for USDA Certified Organic production = 18.4 million (18.7 million in Q4 2023).

Total U.S. flock held for cage-free production = 103.9 million (106.4 million in Q4 2023).

Total U.S. non-caged flock =122.3 million (125.1 million in Q4 2023).

 

This total value represents 37.5 percent (December, 38.0 percent) of a nominal 326 million total U.S. flock pre-HPAI in 2022 (but 40.0 percent of the national flock after HPAI mortality to a presumed January complement of 306 million in production). 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 constant numbers or a sharp change in successive months as documented over the past two years. It is currently not possible to reconcile the USDA values for the number of cage free hens with known HPAI depopulation and projected replacement and assumed routine depletion. USDA adjusted the total and producing flocks this past week to account for depopulation due to HPAI. It is anticipated that the March release will reflect a realistic number of producing hens housed cage-free. Precise quarterly reports would be more suitable for the industry in planning expansion and allocation of capital than inaccurate monthly values.

 

Processed Eggs

 

For the processing week ending February 17th 2024 the quantity of eggs processed under FSIS inspection during the short week as reported on February 21st 2024 was down 4.7 percent compared to the previous processing week to a level of 1,321,337 cases, (1,386,649 cases last week). The proportion of eggs broken by in-line complexes was 53.6 percent with less diversion to higher-priced shell markets by uncommitted producers, (51.7 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 68.6 percent of egg production was directed to the shell market, (71.5 percent for the previous week), responding to the differential in prices paid by breakers and packers. Breaking stock inventory was up 2.6 percent this past week to 304,500 cases. Apparent demand from QSRs and casual dining is at stable to slightly lower levels. There is ongoing demand from baking and eat-at-home despite the weekly fluctuation in the inventory of breaking stock. During the corresponding processing week in 2022 in-line breakers processed 51.3 percent of eggs broken.

 

For the most recent monthly report reflecting January 2024, yield from 7,053,212 cases (5,697,623 cases in December) denoted a decrease in demand for liquid and diversion to shell egg sales over the period December 31st 2023 through February 3rd 2024. Edible yield was 38.4 percent, distributed in the following proportions expressed as percentages: - liquid whole, 60.7; white, 24.0; yolk, 12.2; dried, 3.1.

 

All eggs broken during 2023 attained 69.78 million cases, 8.4 percent less than 2022. Eggs broken in 2024 to date amounted to 9.76 million cases, 2.8 percent less than the corresponding period in 2023. This is attributed to moderately increased demand for egg liquids from retail, food service and QSRs and casual dining restaurants. Consumers are constrained by economic uncertainty following the ending of COVID support, moderate inflation, high credit card interest rates and a tendency to purchase only essentials.

 

PRODUCTION AND PRICES

 

Breaking Stock

 

The average rounded price for breaking stock was down 3.7 percent this past week to $1.61 per dozen with a range of $1.58 to $1.64 per dozen delivered to Central States plants on February 20th 2024. Checks were unchanged this past week at an average of $1.51 per dozen over the most frequent range of $1.50 to $1.52 per dozen suggesting that the market for breaking stock follows prices for shell eggs following pronounced up or down swings.

 

Shell Eggs

 

The USDA Egg Market News Report dated February 20th 2024 confirmed that Midwest wholesale prices for Extra-large, Large and Medium sizes were unchanged over the previous week. A higher inventory combined with a static price, suggests that the market is probably operating with increased demand. The following table lists the “most frequent” ranges of values as delivered to warehouses*:-

 

Size/Type

Current Week

Previous Week

Extra Large

320-323 cents per dozen

Unchanged

Large

318-321 cents per dozen

Unchanged

Medium

213-216 cents per dozen

Unchanged

Processing:-

   

Breaking stock

158-164 cents per dozen

164-170 down 3.7%

Checks

150-152 cents per dozen

Unchanged

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

 

The February 20th 2024 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. $2.94 ($2.94), (estimated by proportion): L. $3.02 ($3.02): M. $1.95 ($1.95)

 

The February 20th 2024 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 down 18.6 percent from last week, despite depopulation of a third of the laying hens in the state but offset by introduction from Midwest and Southwest supplying states.

  1. $4.46 ($5.46); L. $4.39 ($5.39); M. $3.65 ($4.15)

 

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator reported on February 21st 2024 was down 12.1 points from the last weekly report to 0.5 with a 6.3 percent increase in total inventory and a 2.6 percent higher shell inventory from the past week as determined by the USDA-ERS as follows: -

 

Productive flock

303,459,817 million hens (down 0.2%)

Average hen week production

82.2%(was 82.3%)

Average egg production

249,442,178 per day

Proportion to shell egg market

68.6% (was 71.5%)

Total for in-shell consumption

475,533 cases per day (down 4.3%)

USDA Table-egg inventory

1,308,800 cases (up 7.5%)

26-week rolling average inventory

4.39 days

Actual inventory on hand

4.37 days

Shell Egg Demand Indicator

 0.5 points (was 12.6 on February 14th 2024)

*USDA adjustment for HPAI depopulations

 

The USDA Monthly Report covering January 2024 production including text, tables, data and prices and the 2nd Quarter results for Cal-Maine Foods can be accessed under the STATISTICS tab.

 

Dried Egg Products

 

The USDA extreme range in prices for dried albumen and yolk products in $ per lb. was released on February 16th 2024. 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:-

 

Whole Egg

$5.00 to $6.70

($4.80 to $6.70)

Average Aug. $ 7.08

Sept. $ 6.51

Oct. $ 5.75

Nov. $ 5.75

Dec. $ 5.63

Jan. $ 5.40

Yolk

$4.00 to $5.70

(Unchanged)

 

Average Aug. $ 5.16

Sept. $ 5.03

Oct. $ 4.75

Nov. $ 4.63

Dec. $ 4.55

Jan. $ 4.49

Spray-dried white

No quotation, past week

Average Dec ‘22. $14.18

Jan. $14.18

Feb. to Dec. ’23 No release

Blends

No quotation, past week

 

 

Frozen Egg Products

 

The USDA range in prices for frozen egg products in cents per lb. based on the extreme range on February 16th 2024 compared to the previous week showed fluctuation in price:-

 

Whole Egg

$1.39 - $1.42

$1.28 - $1.37

White1

$1.21 - $1.29

$1.20 - $1.401

Average for Yolks

$1.98 - $2.031

$1.99 - $2.04

  1. extreme range

 

Whole egg: Up 6.0%: Whites: Down 3.1%:; Yolks: Up 0.5%

This indicated a relative increase in demand for whole egg from the manufacturing and food service sectors and for export:

January averages (December): Whole. $1.11, ($1.10); Whites, $1.08, ($1.03); Yolks, $1.87, ($1.87).

 

Liquid Egg Products

 

Values for Whites and Yolks covering non-certified truckload quantities have not been released for many weeks. Whole egg values attained on average 91 cents per lb. last week. January averages (cents per lb.) are compared with November values (in parentheses): -

Whole, $1.01, ($0.91); Whites, $0.76 ($0.72); Yolks, $1.72, (none).

 

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

 

COMMENTS

 

During the 4th quarter of 2023 and extending into January 2024, outbreaks of HPAI have required depopulation of close to 13 million egg-producing hens. In contrast to 2022, broiler flocks were affected with cases in California and Arkansas during fall of 2023 and during the past week in Nebraska. Incident outbreaks of HPAI appear to have abated among growing flocks (except NC) and breeder turkeys in six affected states. There are still incident cases recorded in wild birds and backyard flocks in addition to free-living predatory and presumably in scavenging carnivorous mammals. Given the risks and consequences of infection it will be necessary to continue to maintain high levels of structural and operational biosecurity with intensification persisting through the remainder of February. HPAI is now diagnosed seasonally in breeding colonies of marine birds in costal areas of Europe and sporadically in commercial flocks. This resulted in trans-Atlantic dissemination following the pattern during the 4th quarter of 2021 extending into 2022. Outbreaks in commercial flocks appear to be correlated with shedding of AI virus by migratory birds that have now moved southward with sharply colder weather. The downward trajectory in incident cases suggests a decline in future outbreaks consistent with the pattern at the end of 2022.

Approximate losses in commercial flocks confirmed with HPAI and updates during the 2022/4 phases of the ongoing epornitic included:-

  • 6,900,000 broilers on 28 farms in 8 states during 2002 - 2023
  • 330,000 broiler breeders on 11 farms in 6 states.
  • 360,000 upland game birds October through December 2023.
  • 14,100,000 turkeys including breeder flocks in 8 states during 2022 and through 2023 year-to-date. During the past nine weeks losses have approximated 2.9 million growing turkeys with 63 incident cases confirmed in seven states (SD; ND; UT; MN; IA; WI, MI.).
  • 52,300,000 egg-production hens in total with 95 percent on 37 large complexes above 0.5 million in addition to 3,500,000 pullets with a total of 54 locations in 12 states. Pullet mortality does not include “at risk” replacements depleted on affected complexes with contiguous pullet rearing. Since October 2023 more than 13.0 million hens have been depopulated in 13 outbreaks.

 

Losses reported by USDA during the past week ending February 20th comprised 21,000 growing turkeys in NC; and onev WOAH non-poultry flock (WV.). There were no cases of HPAI reported in either egg-producing or replacement pullet flocks.

 

Depopulation of hens (rounded to 0.1 million) as a result of HPAI in the states most affected during the fourth Quarter of 2023 comprised: OH., (4.5 m.); CA., (3.2 m); IA., (2.7 m); KS., (1.5 m) and MN. (1.0m).

 

Backyard flocks (non-WOAH) allowed outside access will continue to be at risk of infection in the U.S. These small clusters of birds in both suburban and rural 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. The late 2023-early 2024 epornitic evidently has a long tail. Recent outbreaks in backyard flocks especially in northern tier states suggest shedding by resident, non-migratory free-living birds that may have become reservoirs. This has implications for seasonality

 

The USDA-APHIS published a report on the results of epidemiologic studies* on farms in early 2022 and made available on July 25th. Results for 18 egg-production case farms and 22 control farms suggested higher risk of infection associated with the presence of a farm in a control zone, proximity of wild birds, mowing or bush hogging of vegetation adjacent to the farm, and off-site disposal of routine mortality. These factors suggest possible aerogenous introduction of virus shed by wild birds onto farms over short distances. This presumption is based on anacdotal observations and recent research from Taiwan demonstrating avian influenza virus in air in proximity to migratory birds. The USDA study predictably suggested that protection was enhanced by effective structural and operational biosecurity. The validity of findings was limited by the confounding inherent to the diversity in size of flocks incorporated into the case-control study and deriving data from a 26 page questionnaire by telephone survey, months after outbreaks, introducing recollection bias and responder fatigue.

*Green, A. et al Investigation of risk factors for introduction of highly pathogenic avian influenza H5N1 virus onto table egg farms in the United States, 2022: a case-control study. Frontiers in Veterinary Science. Doi: 10.3389/vets.2023.1229008

 

It is hoped that APHIS recognises the need to provide the industry with science-based recommendations to prevent additional incident HPAI outbreaks. This presumes prompt analysis and reporting of whatever field and molecular epidemiology is collected. The Agency is also presumed to have planned epidemiologic field studies and allocated personnel and other resources in anticipation of a spring 2024 resurgence in HPAI. Given that large complexes in six states were infected during November and December, appropriate guidance from USDA-APHIS is anticipated by the Industry in advance of any spring or fall 2024 reoccurence.


 

Egg Month

REVIEW OF JANUARY 2024 EGG PRODUCTION COSTS AND STATISTICS.

 

The EIC has justifiably separated the production costs and unit revenue values for eggs derived from caged and cage-free flocks for the current year. Accordingly EGG-NEWS will summarize data accordingly but will consolidate production and export statistics for the U.S. egg industry comprising the two shell-egg categories and the breaking-products sector

 

JANUARY HIGHLIGHTS

  • January 2023 USDA ex-farm blended USDA nest-run conventional benchmark price was 172.0 cents per dozen, up 0.9 percent from the December 2023 value of 170.4 cents per dozen. For comparison, average monthly USDA benchmark price over 2023 was 146.0 cents per dozen with a range of 323 cents per dozen in January down to a low of 57 cents in May. Stock levels and prices prior to the onset of flock depletions due to HPAI indicated a relative seasonal balance between supply and demand. Future nest-run and wholesale prices will be largely dependent on consumer demand for eggs and liquid and the rate of replacement of pullets and hens depleted due to HPAI. Other considerations include diversion to shell sales from the egg-breaking sector in an interconnected industry.
  • Fluctuation in wholesale price is attributed in part to the amplification of upward and downward swings associated with the commercial benchmark price discovery system in use. Restoration of seasonal prices commenced midway through the fourth quarter of 2023 with a plateau after Christmas followed by a seasonal decline into January 2024. From mid-January through to the present prices have been high for the period. An unknown factor in future pricing will be the incidence rate and severity of highly pathogenic avian influenza in spring months. Close to 13 million hens and 2.5 million pullets were depopulated during the fourth quarter of 2023 among five states with heavy losses in California.
  • January 2023 USDA average nest-run production cost for generic eggs from caged flocks, applying updated inputs was down 4.1 cents per dozen to 76.8 cents per dozen compared to the December 2023 value of 80.9 cents per dozen, mainly attributable to an 11.7 percent lower average feed cost per dozen. Approximately 60 cents per dozen should be added to the USDA benchmark nest-run cost to cover processing, packing material and transport to establish a realistic price as delivered to warehouses.
  • January 2024 USDA benchmark nest-run margin attained a positive value of 95.2 cents per dozen for generic eggs from caged flocks compared to a positive margin of 89.5 cents per dozen for December 2023. Average nest-run monthly margin over 2023 was 64.2 cents per dozen compared to 155 cents per dozen in 2022. This differential was mainly due to higher prices following HPAI-depletion of flocks. It is emphasized that the U.S. benchmark price reflects nest-run conventional eggs.
  • The January 2024 national flock in production (over 30,000 hens per farm) was stated by the USDA to be down 2.0 percent or 6.1 million hens (rounded) to 299.7 compared to the revised December 2023 value of 305.8 million. This figure apparently takes into account depletion of 4.2million hens during December 2023 that were not recorded in the month. Approximately 3.5 million hens returned to production from molt in January together with projected maturation of 22.0 million pullets, with this number offset by depletion of spent flocks. During the fourth quarter of 2023 approximately 13 million hens were depopulated due to HPAI in five states.
  • December 2023 pullet chick hatch of 24.2 million was up 0.8 percent or 0.2 million chicks from November 2023.
  • December 2023 exports of shell eggs and products combined was up 38.8 percent from November 2023 to 604,100 case equivalents representing the theoretical production of 8.0 million hens. The increase was attributed to elevated demand especially in products following flock depopulations in importing countries due to HPAI

 

TABLES SHOWING KEY PARAMETERS FOR JANUARY 2024.

Summary tables for the latest USDA January 2024 flock statistics, costs and unit prices made available by the EIC on February 16th 2024 are arranged, summarized, tabulated and compared with values from the previous January 10th 2023 posting reflecting December 2023 costs and production data as applicable. Monthly comparisons of production data and costs are based on revised USDA values.

 

VOLUMES OF PRODUCTION REFECTING THE ENTIRE INDUSTRY

 

PARAMETER

January 2024

 DECEMBER 2023

Table-strain eggs in incubators

49.0 million (Jan.)

 49.0 million (Dec.)

Pullet chicks hatched

24.2 million (Dec.)

 24.0 million (Nov.)

Pullets to be housed 5 months after hatch

21.8 million (May.)

 21.7 million (Apr.)

EIC 2023 December 1st Flock Projection (estimate)

328.9 (Jan.)

321.6 million (Dec.)

National Flock in farms over 30,000 

299.7million (Dec.)

305.8 million (Nov.)

National egg-producing flock 

316.5 million (Dec.)

322.8 million (Nov.)

Cage-free flock excluding organic

105.4 million (Jan.)

105.4 million (Dec.)

Proportion of flocks in molt or post-molt

12.5% (Jan.)

12.7% (Dec.)

Total of hens in National flock, 1st cycle (estimate)

 276.9 million (Dec.)

 279.5 million (Nov.)

Total U.S. Eggs produced (billion)

8.14 December

8.02 November

Total Cage-Free hens in production

122.3 million (Jan.)

12.3% Organic

123.9 million (Dec.)

14.9% Organic

“Top-5” States hen population (USDA)1

147.9 million (Dec.)

153.7 million (Nov.)

Notes 1. Texas excluded to maintain confidentiality

 

PROPORTION OF U.S. TOTAL HENS BY STATE, 20231

Based on a nominal denominator of 300 million hens in flocks over 30,000 covering 94.6 percent of the U.S complement.

USDA has amended inclusion of specific states in regions and eliminated Texas data to protect confidentiality of Company flock

Sizes

STATE

DECEMBER *

2023

 NOVEMBER*

 2023

 

 Iowa

14.3%

13.8%

 

Indiana

11.8%

11.5%

 

Ohio

12.6%

13.2%

 

Pennsylvania

8.0%

8.1%

 

Texas (estimate)

7.5% ?

7.4%

 

California

3.0%

3.5%

 
  1. Values rounded to 0.1%

*USDA data is questioned based on known values for hen depopulation and pullet placements with discrepancies in stated values during the 4th quarter of 2023

Rate of Lay, weighted hen-week (USDA) 83.0% November 2023. 82.8% December 2023

Revised per capita egg consumption 2020:- 285.6 (down 7.8 eggs from 2019)*

Revisedper capita egg consumption 2021:- 282.5 (down 3.1 eggs from 2020)*

Revised per capita egg consumption 2022:- 279.0 (down 3.5 eggs from 2021 due to HPAI) Projected per capita egg consumption 2023:- 281.3 (up 1.3 eggs from 2022) Forecast per capita  egg consumption 2024 284.4 (up 3.1 eggs from 2023 accepting HPAI losses)

*Revised, using data from USDA Livestock, Dairy and Poultry Outlook January 19th 2023 taking into account demand from the food service sector and presumably including the effect of HPAI depopulation.

 

Egg Inventories at beginning of January 2024:

Shell Eggs: 1.83 million cases down 5.7 percent from December 2023.

Frozen Egg Products: 769,306 case equivalents up 2.0 percent from December 2023

Dried Egg Products: Not disclosed since March 2020 following market disruption due to COVID. Moderate level of inventory are assumed

Eggs broken under FSIS inspection (million cases)

NOVEMBER 2023, 6.73 DECEMBER 2023, 6.41

 

Cumulative eggs broken under FSIS inspection 2023 (million cases) 78.7 JAN. to DEC.

Cumulative 2023: number of cases produced (million) 262.9 JAN. to DEC.

Cumulative 2023: proportion of total eggs broken 29.9% (30.8% 2022)

Cumulative eggs broken under FSIS inspection 2024 (million cases) tba JAN.

Cumulative 2024: number of cases produced (million) tba JAN.

Cumulative 2024: proportion of total eggs tba JAN.

EXPORTS DECEMBER 2023: (Expressed as shell-equivalent cases of 360 eggs).

Parameter

Quantity Exported

Exports:

2023

Shell Eggs (thousand cases)

NOV. 185 Dec. 250

Products (thousand case equivalents)

NOV. 251 Dec. 355

TOTAL (thousand case equivalents)*

NOV. 436 Dec. 605

 

*Representing 2.7 percent of National production in DECEMBER 2023.

 

COSTS AND UNIT REVENUE VALUES FOR CONVENTIONAL EGGS FROM CAGED HENS

Parameter

JANUARY 2024

DECEMBER 2023

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

76.8 c/doz

80.9 c/doz

Low

75.0c/doz (MW)

76.6 c/doz (MW)

High

78.2 c/doz (West)

90.5c/doz (N.West)

Components of Production cost per dozen:-

 

JANUARY 2024

DECEMBER 2023

Feed

36.9 c/doz

41.8c/doz

Pullet depreciation

12.0 c/doz

12.2 c/doz

Labor (estimate) plus

   

Housing (estimate) plus

 27.9c/doz1

 26.9c/doz

Miscellaneous and other (adjusted May 2023)

   

 

Ex Farm Margin (rounded to nearest cent) according to USDA values reflecting JANUARY 2024:-

172.0 cents per dozen1- 76.8 cents per dozen =95.2 cents per dozen (December 2023 comparison: 170.4 cents per dozen – 80.9 cents per dozen = 89.5 cents per dozen.

 

Note 1: USDA Blended nest-run egg price

   

DECEMBER 2024

DECEMBER 2023

USDA

Ex-farm Price (Large, White)

172.0 c/doz (Jan.)

170.4c/doz (Dec.)

 

Warehouse/Dist. Center

213.8 c/doz (Jan.)

195.0c/doz (Dec.)

 

Store delivered (estimate)

218.8 c/doz (Jan.)

200.0 c/doz (Dec.)

 

Dept. Commerce Retail National

251.0 c/doz (Dec.)

213.8 c/doz (Nov.)

 

Dept. Commerce Retail Midwest

239.0 c/doz (Dec.)

 

asdfasdf

MONTH DECEMBER 2024 DECEMBER 2023

U.S. Average Feed Cost per ton

$240.60 $258.97

Low Cost Midwest

$218.57 $235.16

High Cost Northwest

$288.32 $312.62

Differential

$ 69.75 $ 77.46

 

Pullet Cost*

 (19 Weeks)  $4.67 JANUARY 2024 $4.79 DECEMBER 2023

(16 weeks) $4.10 JANUARY 2024 $4.19 DECEMBER 2023

* Values adjusted by EIC in May 2023

 

COSTS AND UNIT REVENUE FOR EGGS FROM CAGE-FREE HENS

Parameter

JANUARY 2024

 

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

96.7 c/doz

 

Low

92.3c/doz (MW)

 

High

106.3 c/doz (West)

 

 

Components of Production cost of cage-free eggs per dozen:-

 

JANUARY 2024

 

Feed

43.1 c/doz

 

Pullet depreciation

15.8 c/doz

 

Labor (estimate) plus

   

Housing (estimate) plus

 37.8c/doz1

 

Miscellaneous and other (adjusted May 2023)

   

Ex Farm Margin (rounded to nearest cent) according to USDA values reflecting JANURY 2024:-

 

Cage-Free brown 3.00 cents per dozen1- 96.7 cents per dozen = 203.3cents per dozen

   

JANUARY 2024

 

USDA

Average Ex-farm Price1

168 c/doz (Jan.)

 
 

Warehouse/Dist. Center

300 c/doz (Jan.)

 
 

Store delivered (estimate)

305 c/doz (Jan.)

 
 

Dept. Com. Retail C-F Brown

Dept. Com. Retail C-F White

336 c/doz (Dec.)

322 c/doz (Dec.)

 
 

Dept. Com. Retail Organic

Dept. Com. Retail Pasture

522 c/doz (Dec.)

1,051 c/doz (Dec.)

 

  1. Contract price, nest-run loose Range 135 to 235 c/doz.

 

Cage-Free Pullet Cost*

 (19 Weeks)  $5.67 JANUARY 2024

(16 weeks) $4.95 JANUARY 2024

Average national and regional conventional feed as per caged flocks

 

COMMENTARY ON JANUARY 2024 STATISTICS AND COSTS

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

 

From March 2021 California costs were inexplicably excluded, representing an unjustified concealment of data. The three Pacific Coast states could be combined to maintain confidentiality while providing representative U.S. data. Costs include fixed components (interest, depreciation and overhead) and variable components (feed, pullet depreciation, labor) recalculated in May 2023 by the EIC based on surveys

PRODUCTION DATA FOR JANUARY 2024 COMBINING CAGED AND CAGE-FREE FLOCKS

 

  • According to USDA, the estimated average complement of U.S. hens in flocks over 30,000 during December 2023 amounted to 299.7 million, reflecting a net 6.1 hens (2.0 percent) decrease in flock size during the month. The apparent reduction represented a delayed adjustment for depopulations during the fourth quarter of 2023 that were not incorporated in monthly reports. Losses and routine depletion were offset by pullet replacements second cycle hens and retained flocks. The average total U.S. flock including hens in molt on all farms counted by the USDA amounted to 316.5 million in December 2023. The average end-of-year flock sizes over the past seven years respectively were, 2014, (311 million); 2015, (291 million post-HPAI losses); 2016, (319 million); 2017, (329.6 million); 2018, (341.6 million); 2019, (341.6 million) and 2020, (325.5 million). The December 1st 2024 flock was projected to be 328.9 million hens during January 2024 applying the EIC model. With replacements, molting and delayed depopulation it is estimated that the national flock now comprises 12 to 14 million million fewer hens at present] than before the advent of the H5N1 HPAI epornitic in 2022. In the absence of a vaccine only effective biosecurity will help protect flocks going forward.
  • Pullet chick hatch attained 24.2 million in December 2023, up 0.2 million from November 2023. During late January 2024 egg prices rose above the seasonal average possibly influencing demand for chicks together with the need to compensate for depopulated pullet and hen flocks.
  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA attained 12.5 percent of the national flock in January 2024, down 1.6 percent from the previous month. Annual averages for molt and post-molt combined were 14.4 percent in 2021; 13.5 percent for 2020 and 15.2 percent for 2019. The historical high value of 23.8 percent in 2016 was due to the loss of hens during the 2015 HPAI epornitic. This situation will not be revisited in 2024.
  • During the fourth quarter of 2023 the average monthly transfer of pullets to laying houses was 25.2 million compared to 24.9 million in the third quarter. Revised data anticipate the transfer of 23.1 million pullets per month during the first quarter of 2024.
  • The projected hatchery supply flock (parent generation) peaked at 3.1 million hens in June 2022. The previous high parent-flock of 3.1 million hens in production was in June 2015, coinciding with the end of the HPAI epornitic in that year. Parent hens then declined to a low of 2.5 million during the fourth quarter of 2016. During 2023 the flock size for parent hens averaged 2.4 million over the fourth quarter of 2023 and 2.5 million during the first and second quarters of 2024. The size of the parent flock is unlikely to be revised based on pullet chick orders influenced by the demand to replace depopulated pullets and hens and in response to possible higher producer margins. It is understood that production of additional pullet chicks is unlikely given forward planning by breeder-hatcheries and full utilization of facilities.
  • Average hen-week production of 82.8 percent in December 2023 compares to a value of 83.0 percent in January 2024. This reflects an increasing proportion of younger hens in the national flock with many first-cycle hens and early second-cycle hens in production. Average rate of lay in 2023 was 81.8 percent. 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 declines as the weighted flock age increases or conversely will rise due to early depletion thereby increasing the proportion of young hens in their first cycle.
  • The January 25th edition of the USDA Poultry Slaughter Report documented 4.96 million light spent-hens processed under FSIS inspection during December 2023, 3.3 percent more than the previous month of November 2023 and 0.7 percent less than in December 2022. These differences are inconsequential in comparison to the presumed depletion of 15 million hens per month with most either rendered or consigned to landfills. Provided housing space is available, prevailing low prices will result in depletion of flocks with more routine or previously scheduled flock depletions.

 

JANUARY 2024 COST AND UNIT REVENUE DATA FOR CONVNTIONAL EGGS FROM CAGED FLOCKS.

  • The USDA ex farm benchmark blended egg price in January 2024 was 0.9 percent higher at 172 cents per dozen from the December 2023 value of 170.4 cents per dozen. This contributed to a positive margin of 89.5 cents per dozen based on ‘nest-run’ generic eggs (ungraded as delivered from the laying house) in January 2024, compared to a positive margin of 83.5 cents per dozen in December 2023. The January 2024 USDA benchmark price of 172.0 cents per dozen should be compared to 106 cents per dozen for the corresponding month in 2022 and 323 cents per dozen in January 2023 influenced by HPAI and demand. The relatively high values from the second through fourth quarters of 2022 compared to corresponding periods for the two previous years were due to depletion of hens following the emergence of HPAI coupled with a rise in demand following relaxation of COVID restrictions and the amplification of price rises due to the benchmark costing system.
  • During January 2024, the feed component of production cost averaged 36.9 cents per dozen, down 11.7 percent or 4.9 cents per dozen from December 2023. During 2023 average feed cost was 46.4 cents per dozen compared to 50.1 cents per dozen in 2022 and 42.5 cents per dozen in 2021.
  • Combining data from the USDA and the EIC, producers recorded a positive margin of 95.2 cents per dozen at farm-level for generic-egg flocks during January 2024. This compares with a margin of 89.5 cents per dozen in December 2023. Cumulative average monthly algebraic nest run margin for 2023 attained 71.5 cents. During 2022 cumulative average monthly algebraic margin attained 1,887 cents. For 2021 the cumulative average algebraic margin was 9.1 cents per dozen against USDA benchmark ‘nest run’ values.
  • The simple average price of feed in January 2024 over 5-regions was $240.60 per ton, lower by $18.37 per ton or 7.1 percent compared to December 2023. Southwest data is no longer disclosed to avoid compromising a company that predominates in Texas. The highest cost among five regions was the West at $288.32 per ton, down 7.8 percent from December 2023. This may be compared to the lowest-cost region, the Midwest at $218.57 per ton, down 7.1 percent from the previous month. The average cost for feed includes ingredients plus milling and delivery at a nominal $10 per ton.
  • The benchmark price of corn was $175.46 per ton in January 2024, down $7.22 per ton or 4.0 percent from the average December 2023 price, taking into account the difference in basis paid by producers. The differential in corn price between the Midwest and the West in January 2024 was $75.10 per ton. A 14.8 percent decrease of $68.98 per ton in the price of soybean meal to $398.15 per ton in January 2024 added to the lower price of corn in reducing feed and hence production cost. During January 2024 there was a differential of $69.75 per ton in feed price between the Midwest and the West compared to a difference of $77.46 per ton in December 2023 corresponding to 16.9 cents per dozen compared to 12.5 cents per dozen in December 2023. The industry has experienced sharp increases in the cost of phosphate additives, fat and vitamins since Mid- 2022.
  • Feed price will continue to be a major factor driving production cost and hence margin. December WASDE #645 (under the STATISTICS TAB) released on February 8th projected the volumes for the 2024 corn and soybean harvests, ingredient use, exports and ending stocks for the two major feed ingredients. Unknown factors influencing feed cost during the fourth quarter of 2023 will include:-
  • the consequences of conflict in Ukraine and the Middle East with inevitable disruption in production and especially for shipping through the Black Sea and Suez Canal.
  • The projected large harvests in Brazil and Argentina.
  • Demand by China will influence prevailing prices in international trade.
  • The availability and hence prices of ingredients will also be influenced by weather conditions in the Southern Hemisphere following the transition to an El Nino event in the second quarter of 2023.
  • Export volume from the U.S. and especially to China.
  • Diversion of corn to ethanol and of soy oil to biodiesel.
  • The economic and logistic effects associated with inflation.

 

There is obviously higher demand for ethanol with production projected by the U.S. Energy Information Administration at 970,000 barrels per day but with an average exceeding one-million barrels per day during 2023. Substantial exports of soybeans to China, during the current 2o23-2024 market year is supporting domestic price and hence cost of egg production. Each $10 per ton difference in feed cost represents approximately 1.70 cents per dozen. A change of $1 per ton (2.8 cents per bushel) in the price of corn is reflected in a 0.11 cent per dozen change in production cost. A $10 per ton change in the price of soybean meal affects production cost by 0.35 cent per dozen.

 

  • The EIC calculated the 4-Region (excluding the West) adjusted total nest-run production cost in January 2024 to be 76.8 cents per dozen, 4.1 cent per dozen lower than December 2023. Production costs for conventional eggs from caged flocks during January 2024 ranged from 75.0 cents per dozen in the Midwest up to a calculated value of 85.7 cents per dozen in the West, higher than the Midwest region by 10.7 cents per dozen. During 2023 the average monthly cost of production was 85.9 cents per dozen and 81.0 cents per dozen in 2022.

 

Deletion of California and West data is considered a substantial deficiency of the EIC Report.

 

  • Retail egg prices as determined by the Department of Commerce for December 2024 averaged 251 cents per dozen, up 37 cents per dozen or 17.3 percent, compared to November 2023 at 214 cents per dozen. During December 2022 and 2023 retail prices were respectively 179 and 425 cents per dozen. From 2017 through 2021 average retail prices did not decline in proportion to ex-farm prices, with chains imposing higher margins at retail, thereby depressing demand. Conventional supermarkets have recently demonstrated some restraint in pricing possibly due to competition from deep discounters and club stores, despite sustained demand.
  • December 2023 average retail markup on generic white Large was 28.7 percent based on a delivered-to-warehouse price of $1.95 per dozen and USDA Retail of $2.51 per dozen.

 

EXPORT DATA FOR JANUARY 2024 COMBINING ALL EGGS.

  • Monthly export data can be accessed under the STATISTICS Tab.
  • According to USDA-FAS data, 250,000 cases of shell eggs were exported in December 2023, representing 1.1 percent of total production. This was a 35.1 percent increase compared to November 2023 despite higher prevailing domestic prices. The increase in exports was attributed to 60,000 more cases to Canada, 10,000 cases to Mexico but offset 6,000 fewer cases to Hong Kong and China.
  • Exports of egg products in December 2023 attained 355,000 case-equivalents up 41.4 percent from the previous month, representing 1.6 percent of U.S. output. Increases were attributed to higher volumes to Mexico, up 19,000 case equivalents, Canada, up 15,000; the E.U.,17,000; Mexico, 12,000; Asia, 61,000 cases including South Korea and Japan impacted by HPAI.
  • Collectively, exports of shell eggs and products in December 2023 comprised the output from approximately 8.0 million hens in production during the month, attaining 604,100 case-equivalents, up 38.9 percent from November 2023 and 1.3 percent more than combined exports during the pre-HPAI first quarter of 2022 averaging 596,300 case equivalents per month.
  • Maintaining export volume is attributed to cooperation between the AEB and USAPEEC, in existing, new and potential 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 December 2023 corresponded to 2.7 percent of a nominal national flock of approximately 305 million producing hens, (before HPAI depletions) on commercial farms holding more than 30,000 hens.
  • There is no scientifically justifiable reason why any nation should embargo pasteurized egg products from an approved plant, based on a diagnoses of H5 or H7 avian influenza or velogenic Newcastle disease in a specific state or country.






 

Egg Projection

Updated February 2024 USDA Projection for U.S. Egg Production and Consumption. 

 

On February 14th 2024 the USDA Economic Research Service issued updated values for egg production during 2022 with a projection for 2023 and a forecast for 2024. Production, consumption and prices were only slightly revised from the previous January 19th 2024 report.

 

Projected egg production for 2023 was reduced by three million dozen from the January 2024 Report to 7,887 million dozen This will be 1.4 percent higher than in 2022 due to progressive replacement of the 44 million hens depleted due to HPAI over the period extending from early spring through mid-December 2022. The per capita consumption of shell eggs and liquids combined for 2023 will be 0.1 percent lower than in the December report to 280.9 eggs but up one egg (0.4 percent) from 2022. The projected average 2023 benchmark New York bulk unit price was unchanged from the January report at 192 cents per dozen. This was 31.9 percent lower than in 2022 attributed to a comparison with unseasonal high prices from the end of March through the 2nd Quarter of 2023.

 

Subsequent USDA projections will provide greater clarity on the recovery in consumption in an economy that is impacted by declining inflation. The 2023 Midwest in-carton wholesale price peaked at $5.17 per dozen on January 3rd 2023 but fell precipitously to a market bottom of $0.78 per dozen on May 8th attaining $2.92 on February 15th This was above the USDA/EIC projection of the combined nest-run December 2023 cost of 76.8 cents per dozen plus processing, packaging and transport of 60 cents per dozen amounting to $1.37 cents per dozen delivered to a distribution center.

 

Restoration in flock size after HPAI flock depletions in 2022 progressed at a rate of approximately 0.5 million per week but was limited by the availability of pullet chicks for replacement and in some companies the rate of conversion to alternative housing systems. Restoration of the national flock was compromised by a resurgence of HPAI with 13.0 million layers depleted during the 4th quarter of 2023 representing 4.0 percent of the nominal producing flock of 325 million hens, mainly on complexes averaging over one million hens. The cost of ingredients will influence margins and may result in cessation of production by some small-scale producers that run out of working capital since financial losses were incurred through summer up to mid-fall. Unpredictable factors affecting price will include the extent of losses during the spring of 2024 due to a predicted reemergence of avian influenza; the supply and cost of ingredients as influenced by world and national availability; exports of eggs and products and the intensity and persistence of domestic consumer demand.

The forecast for 2024 includes a production of 8,000 million dozen, up 1.4 percent from 2023. Consumption will attain 283.7 per capita, up a realistic 2.8 eggs or 1.0 percent above the projection for 2023. This will naturally depress prices with the NY-Large price dropping by 9.9 cents per dozen or 5.1 percent from the average for 2023.

 

In 2023 egg exports as shell and products combined attained 5,161 million dozen shell-equivalents, or 2.2 percent of production. During 2022 egg imports as a result of HPAI depopulation, some in shell form but predominantly products, attained 25.9 million dozen shell-equivalents, up 42.8 percent from 14.9 million dozen and 26.4 percent from 2021.

 

During 2023 shell egg exports attained 89.4 million dozen, up 28.6 percent compared to 2022 when high domestic prices prevailed. Egg products were up 18.2 percent to 20,814 metric tons compared to 2022.

 

February 2024 USDA data is shown in the table below:-

Parameter

2020

(actual)

2021

(actual)

2022

(actual)

HPAI

2023

(projection)

2024

(forecast)

% Difference

2022-2023

             

Production (m. dozen)

8,070

8,031

7,781

7,887

8,000

+1.0

Consumption (eggs per capita)

279.0

282.5

279.0

280.9

283.7

+0.7

New York price c/doz.)

112

119

282

192

183

-31.9

Source: Livestock, Dairy and Poultry Outlook released February 14th 2024

 

Subscribers to EGG-NEWS are referred to the postings depicting weekly prices, volumes and trends and the monthly review of prices, exports and related industry statistics.


 

Benefits of Subway In-Store Sliced Meat Promotion Questioned

In July 2023, Subway embarked on a program of installing slicers in each franchise store to ensure that meat appeared fresh.  The program also shifted the cost of slicing from suppliers to individual stores.

 

The accompanying publicity campaign promoting freshly sliced meat had little impact on sales but increased cost to operators of stores.  Although slicers were provided at no cost to franchisees, the program involved additional labor and created a higher risk of injury when slicers were operated by relatively untrained staff, many of whom were legally restrained from using dangerous equipment.  The program involved expenditure of $80 million on slicers by Subway.

 

Subway has a history of offending and disaffecting franchisees. It appears that the freshly sliced initiative, that appeared to be a good idea and attractive from a promotional perspective was introduced without consideration of the practical issues involved.

 

Since acquisition of the company, Subway has pursued an active promotional program on cable television and social media emphasizing price and new menus but strangely without including the in-store freshness aspect.


 

Federal Court Revokes Re-approval of Dicamba Herbicide by EPA

The U.S. District Court of Arizona has overturned the 2020 re-approval of Dicamba by the Environmental Protection Agency.  Originally licensed in 2017, the product has been responsible for damage to a wide range of crops including soybeans on fields close to treated fields. Additional restrictions on application and reformulation to avoid drift were generally unsuccessful in preventing collateral destruction of vulnerable non-GM crops.

 

The Court in Arizona was critical of the EPA in allowing the 2020 re-registration citing the failure of the Agency to take into account data provided by independent researchers who documented the problem of drift. EPA did not ascertain that reformulation was ineffective and failed to conduct an appropriate risk analysis as required.

The situation was characterized by Nathan Donley, Environmental Health Science Director at the Center for Biologic Diversity who stated, “Endangered butterflies and bee populations will keep tanking if the EPA keeps twisting itself into a pretzel to approve this product just to appease the pesticide industry.”

 

The Court also took into account the fact that numerous stakeholders including farmers were deprived of the opportunity to comment on their financial losses attributed to damage caused by inadvertent exposure of crops to Dicamba. The USDA estimated that 15 million acres of susceptible soybeans among the acreage of other fruit, grain and vegetable crops were seriously damaged by the herbicide.

In response to the Court ruling the American Soybean Association (ASA) addressed a letter to EPA Administrator Michael Regan requesting that he appeal the decision. It is estimated that 37 million acres will be planted to soybeans compatible with Dicamba in 2024 representing 45 percent of the crop. Dicamba is an effective herbicide used to control weeds including palmer amaranth that may be resistant to glyphosate. The ASA also is requesting an exemption to apply existing stocks of “low volatility” formulations of Dicamba 


 

California Plastic Bag Ban Unworkable

Almost ten years ago, California passed a ban on single-use plastic grocery bags.  At the time, it was estimated that plastic waste from discarded bags added 160,000 tons of waste to the state total.  Despite legislation and attempts at providing alternatives, grocery bags now add 230,000 metric tons to the waste stream.

Part of the problem has been the widespread availability of alternative high-density polyethylene bags that are not recycled but are discarded, according to CALPIRGA, an environmental advocacy organization.

 

California Proposition #67 in 2016 failed to eliminate the previous law SB270 law enacted in 2014.  Accordingly, the Legislature is now considering alternatives to high-density polyethylene bags, but this will require a radical change in consumer attitudes regarding use and recycling. 

 

California SB54, enacted in 2022, is intended to phase out single-use plastic through the principle of Extended Producer Responsibility. This places the onus for recycling on manufacturers rather than municipalities.  By January 1st, 2028, 30 percent of all plastic items sold in California will have to be recyclable rising to 65 percent in 2032 with a short-term goal of 25 percent for expanded polystyrene by the end of 2025.


 

Zoetis Reports on Q4 and FY 2023

In a release dated February 13th, Zoetis (ZTS) reported on results for the fourth quarter and FY 2023 ending December 31st.  For FY 23023 revenue was in line with estimates but the Company was below consensus on EPS. Zoetis reported net income of $525 million on revenue of $2,213 million.  These values are compared with Q4 of FY 2022 with net earnings of $461 million on sales of $2,040 million.  Diluted EPS increased from $0.99 in Q4 of FY 2022 to $1.14 for the most recently completed quarter.

 

For Q4 2023 gross margin was 67.1 percent (68.0 percent Q4 2022); operating margin attained 24.3 percent (22.5 percent)

 

For FY 2023 the Company reported net income of $2,344 million on revenue of $8,544 million.  These values are compared with FY 2022 with net earnings of $2,114 million on sales of $8,080 million.  Diluted EPS increased from $4.09 in FY 2022 to $5.07 for FY 2023.

 

In reviewing product segments, Q4 2023 total revenue from companion animal products amounted to $1,448 million (65.4 per cent of Company sales) compared to revenue from livestock products amounting to $745 million (33.7 percent).  The remainder was derived from other products and services. 

 

Domestic U.S. sales of livestock products at $270 represented 22.2 percent of livestock revenue of $1,211 million, up 4.2 percent from Q4 2022.  International sales of livestock products represented 48.3 percent of non-U.S. Company revenue of $982 up 5.3 percent from Q4 2022.  Poultry products at $127 million represented 17.0 percent of livestock sales of $745, an increase of 10.4 percent from Q4 2022 and comprising 5.7 percent of total sales.

 

In commenting on Q2 results, Kristin Peck, CEO stated, " Zoetis delivered another strong performance in 2023 thanks to our diverse portfolio across markets and species and our dedicated colleagues,” She added “We grew revenue 7 percent operationally, driven by our innovative companion animal franchises across pain, dermatology and parasiticides. We also grew our adjusted net income 7 percent operationally, while continuing to support investments in R&D, supply chain, and commercial excellence capabilities that will drive our next phase of growth.”

 

Ms. Peck concluded “We are well-positioned for growth in our other key franchises, including dermatology, parasiticides and diagnostics, and will continue to invest in solutions that will shape and expand the future of animal health. We are committed to continuing our track record of innovation and growing faster than the market, even during times of global uncertainty, and are guiding to full-year operational growth of 7 to 9 percent in revenue in 2024,”

 

Zoetis posted guidance for fiscal 2024 including revenue ranging from $9,075 to $9,225 million, net income from $2,468 to $2,513 million and diluted EPS ranging from $5.34 to $5.44.

 

The Company posted total assets of $14,286 million on December 31st 2023 of which $4,097 million represented goodwill and intangibles against long-term debt of $6,989 million. Market capitalization was $86,260 million on February 16th. Zoetis has traded over the past 52-weeks in a range of  $151.03 to $190.33 with a 50-day moving average of $192.60. The Company achieved a trailing twelve-month operating margin of 32.1 percent and a profit margin of 27.4 percent. The return on assets attained 13.2 percent and 49.8 percent on equity.


 

Restaurant Brands International Q4 and FY 2023 Financial Results

In a February 13th release, Restaurant Brands International Inc. (QSR) posted financial results for the 4th quarter and fiscal 2023. Along with other QSRs and casual dining competitors, the Company and its franchisees among five operating divisions are subject to the pressures of increased costs for food, packaging and labor in a competitive environment restrained by inflation that is impacting discretionary spending by consumers.  The newly formed International Division faces geopolitical headwinds and the challenges of currency fluctuation.

 

For the 4th Quarter of FY 2023 ending December 31st 2023 the Company attained revenue consistent with consensus estimates but beat on EPS.  Net income was $726 million on total revenue of $1,820 million.  Comparable figures for the 4th quarter of FY 2022 were net income of $336 million on total revenue of $1,689 million. Diluted EPS attained $1.60 for the most recent quarter compared to $0.74 for the corresponding quarter of FY 2022.

 

For the FY 2023 ending December 31st 2023 the Company posted net income of $1,718 million on total revenue of $7,022 million. Comparable figures for FY 2022 were net income of $1,482 million on total revenue of $6,505 million. Diluted EPS attained $3.76 for FY 2023 compared to $3.25 for FY 2022.

For the 4th quarter, system-wide sales increased by 9.6 percent compared to 11.4 percent for Q4 of FY 2022.

Comparing Q4 of FY 2023 with 2022, revenue increased by 7.8 percent and operating margin increased from 20.5 percent in Q4 2022 to 25.7 percent for the most recent quarter.

 

Segment results comprised:-

Tim Horton’s: Sales, $1,849 million; adjusted operating income (AOI), $231 million; Comparable store sales increase, 8.4 percent with 4,525 stores

Burger King: Sales $2,903 million; AOI, $69 million; Comparable store sales increase 6.3 percent with 7,144 stores

Popeye’s LA Kitchen: Sales,  $1,503 million; AOI, $56 million; Comparable store sales increase, 5.5 percent with 3,394 stores

Firehouse Subs: Sales, $298 million; AOI, $8 million; Comparable store sales increase, 3.5 percent with 1,265 stores.

International: Sales, $4,332 million; AOI, $145 million; Comparable store sales increase, 4.6 percent with 14,742 stores

 

Josh Kobza , CEO of RBI commented. "We are delivering better experiences for our guests, better profitability for our franchisees and are making the right long-term investments behind the growth of our brands. We have started 2024 with a foundation of strong operational performance and I'm thankful to all our teams, franchisees and their team members who work so hard to make us successful."

 

On December 31st 2023, QSR posted assets of $23,391 million of which $16,882 million comprised goodwill, lease obligations and intangibles against long-term debt and leases of $15,221 million. The Company had an intraday market capitalization of $24,160 million on February 16th. QSR trades with a forward P/E of 16.5 and has ranged over a 52-week period from $59.99 to $79.94 with a 50-day moving average of $76.50.  Twelve-month trailing operating margin was 27.0 percent and profit margin 17.0 percent.  Return on assets over the trailing twelve months was 5.8 percent and the return on equity 38.2 percent.


 

Oklahoma to Assist in Conversion to Group Housing of Sows

A bill has been introduced into the Oklahoma Senate to provide financial support to producers to convert from gestation crates to group housing.  The Bill is sponsored by Senator George Young who evidently is responding to concerns by hog producers faced with pressure exerted by animal welfare groups.  Senate Bill 1325 would establish a $4 million fund to be administered by the Department of Commerce to provide grants to farmers to establish sow housing compliant with Proposition #12.

 

There is now adequate U.S. production of pork derived from group-housed sows to satisfy Proposition #12 and Question #3. Belatedly the hog industry has recognized the impact of both consumer and retailer concern over gestation crates and the groundswell for conversion.

 

It is interesting that the legislature of Oklahoma recognizes the need to provide financial support to farmers to transition from gestation crates.  There was no assistance requested by or offered to egg producers to comply with California Proposition #2 after 2008.  The transfer of approximately 100 million hens from conventional cages to alternative housing systems was financed entirely by producers without state or federal assistance.


 

Instacart to Reduce Head Count

Instacart has announced a seven percent reduction in employees representing 250 jobs.  Chief Operating Officer Asha Sharma will leave the company of March 1st without a replacement.

 

CEO Fidji Simo stated, “Today we made the tough decision to part with approximately 250 of our talented team members, this will allow us to reshape the company and flatten the organization so we can focus on our most promising initiatives that we believe will transform our company and industry over the long term.” Projects that will receive attention include AI-powered smart carts, enhancing the retail media network and other rationalization initiatives.

 

For FY 2023 ending 31st December, Maple Bear Inc. trading as Instacart posted a loss of $1,624 million on revenue of $3,042 million with a diluted EPS of $(12.43).  Comparative figures for FY 2022 were a net income of $97 million on revenue of $2,551 million with a diluted EPS of $0.96.  For the most recent fiscal year, gross margin was 74.9 percent, but operating margin was (70.4 percent) due mainly to an eye-watering research and development cost of $2,312 million representing 76 percent of revenue.  General administrative costs attained $803 million up from $339 million in FY 2022.

 

Maple Bear Inc. (CART) has traded over a 52 week range from $22.13 to $42.95.  On February 15th the company had a market capitalization of $7,350 million and traded with a forward P/E of 105.3. On a trailing 12-month basis, profit margin was -53.3 percent and operating margin 5.7 percent.  The company has generated a return on assets of 32.0 percent and on equity -48.5 percent.  Nine percent of the equity is held by insiders and 53.3 percent by institutions.  Six percent of the float was short as of January 31st, 2024.

 

 


 

Kentucky Senate Approves “No Flyover” Bill

Kentucky Senate Bill SB16 would prohibit flying drones over concentrated animal feeding operations (CAFOs) and food processing facilities, including meat and poultry packing plants.  In addition, the Bill would ban unauthorized photo and video equipment in the vicinity of agricultural operations and the distribution of recordings.

The Senate Bill is simply an extension of Ag Gag legislation that is generally ruled unconstitutional when challenged in federal courts.  Legislators in agricultural states are ever eager to frame and pass legislation that is subsequently ruled as unconstitutional.  State laws to ban intrusion and distribution of videos by animal rights organizations, while justifiable, appear unfortunately to be unenforceable.


 

Opposition to Kroger-Albertsons Merger in Colorado

Phil Weiser, Attorney General of Colorado has filed a lawsuit against Kroger and Albertsons alleging contravention of the Colorado State Antitrust Act.  At issue is an apparent “non-poach agreement” that was entered into after a 10-day strike by workers at King Soopers, a Kroger banner during January 2022.  Consumers were obliged to obtain pharmaceutical and other requirements from competitor, Safeway during the strike.  It is also alleged that the two companies agreed not to solicit pharmacy customers.  The State of Colorado is seeking $1 million in civil penalties as a result of the agreements that the state alleges harmed workers and “blatantly violated antitrust law”.

 

Attorney General Weiser is also suing to block the proposed merger between Kroger and Albertsons based on the reality that it would reduce competition and ultimately result in both inconvenience and higher prices for consumers.  Kroger operates 148 King Soopers and City Market stores in Colorado with Albertsons owning 105 Safeway and Albertsons stores.

 

There is considerable skepticism over the viability of the proposed spin-off of over 400 stores to C&S Wholesale Grocers. This is based on the debacle following divestment of 168 stores as a condition for the 2015 merger between Safeway and Albertsons. The acquirer, Haggen was overwhelmed and filed for bankruptcy within a year.  Albertsons then bought back the stores at a low price and many were closed.  Attorney General Wiser predicts that a similar situation will occur if C&S Wholesale Grocers that currently operates 23 stores finds itself responsible for 413 locations divested following the combination of Kroger and Albertsons.  Of the designated units, 50 Safeway and 2 Albertsons stores are located in Colorado.

 

In the event that the transaction is completed, and the combined company shuts either of the two banners in any small town, consumers would have no choice other than to drive considerable distances to a competing grocery chain.

 

Currently the Federal Trade Commission is evaluating the proposed merger but has delayed a ruling for many months while Kroger is actively planning the merger of the two companies in a $25 billion transaction.


 

SpartanNash to Deploy Additional Robotic Tally Units

Following a successful trial in 15 stores, SpartanNash will now extend the use of Tally Robots to 60 additional company stores.

 

Tom Swanson executive V-P for Corporate Retail stated, “Tally saves associates time in inventory tracking and gathering real-time data intelligence.”  He commented that the robots allow associates to spend more time on the floor serving guests and ensuring that produce is adequately stocked and is fresh.

 

Tally Robots using Simbe store-intelligence software, provide details on products on shelves to facilitate ordering, merchandising and fulfillment of E-commerce orders.

 


 

Interim Director of EIC Appointed

Dr. Brett Ramirez has been appointed Interim Director of the Egg Industry Center located on the campus of Iowa State University. Since April 2023, Dr. Ramirez has served as the Assistant Director assisting Dr. Richard Gates who sadly passed in November.

Dr. Ramirez holds appointments as an Associate Professor in the Department of Agricultural and Biosystems Engineering with research and extension responsibilities. His research relating to the egg industry includes livestock housing, ventilation, energy efficiency and environmental control.  He was a key collaborator in the review of the 2022 Environmental Protection Agency Draft Emissions Model.

 

Dr. Ramirez earned Bachelors’ and Masters’ degrees in agricultural and biological engineering from the University of Illinois and a Doctoral degree in agricultural engineering from Iowa State in 2017.  He received the 2021 Young Engineer of the Year award from the American Society of Agricultural and Biological Engineers.

 

In accepting the interim position, Dr. Ramirez stated, “My goal is to continue the great things that Dr. Rich Gates started and to add my unique style to accomplishing and furthering those goals.” He added, “I will strive to drive the EIC mission forward and ensure we achieve our goals supporting the Nation’s egg industry through evidence-based research.”


 

Harvard University Team Develops Synthetic Antibiotic

Based on the structure of the lincosamide class of antibiotics, a Harvard University team led by Dr. Andrew Myers has developed a synthetic antibiotic.  Cresomycin was synthesized using component-based technology that will allow more effective binding to bacterial ribosomes.  It is anticipated that the synthetic antibiotic will overcome the protective mechanism developed by bacteria by producing ribosomal RNA methyltransferase.

 

If clinical trials demonstrate the efficacy and safety of cresomycin, it will represent a new class of antibiotics effective against both Gram-positive and Gram-negative pathogens and especially against multidrug resistant strains of Staphylococcus, Escherichia and Pseudomonas


 

Utah Extending Deadline for Cage Ban

The Senate Business and Labor Committee of the Utah Legislature voted unanimously to advance Bill SB222 on February 14th.  This would extend the date for housing hens as cage-free in the state to January 1st 2030. Senator Mike McKell the sponsor stated, “We need to delay the implementation date”

 

The 2021 Act that mandated cage-free housing by 2025 was apparently accepted by both producers and consumers.  Utah farms are currently between 50 and 70 percent converted at considerable cost and could not be completely transitioned to alternative housing systems.  Significant issues that have emerged since passage of the 2021 measure include the status of eggs from both caged and alternative housing introduced from other states. 

 

If SB222 is approved by the Senate, the House of Representatives will have to enact similar legislation before adoption.  Since passage of California Proposition #2 in 2008 and the subsequent California Proposition #12, it is evident that the cage-free market is well supplied and that a large proportion of consumers who are unconcerned over welfare select the cheapest generic eggs to match their budgets. 

 

Perhaps with the passage of time, both economic realities and reason have prevailed and that now even states are reneging on their commitments in addition to retailers. Many on either side of the check-out counter recognize the implications of decisions that were made on the basis of emotion and sentiment without consideration of unintended consequences. The most important is the “Pacelle Tax” borne by consumers in California and similar states that mandate cage-free eggs to the detriment of many consumers who are deprived of choice.


 

Nebraska Public Schools Using Collection Agencies to Recover Overdue Payments for Meals

According to an investigation by the School Nutrition Association, in 2023, Lincoln Public Schools referred 1,700 school lunch debts to Professional Choice Recovery, a collection agency.  Among the 20 largest districts in Nebraska, Kerney, Columbus and Scotts Bluff also use private collectors, according to a study conducted by Flatwater Free Press.  If parents are unable to pay the complete debt, judgement is obtained, substantial costs are added and the wages of parents are garnished.

 

Other school districts in Nebraska, including the largest in Omaha, do not refer debts to collection agencies.  Apart from the stress associated with dunning letters and phone calls, a judgement negatively impacts credit scores with far-reaching consequences.

 

As a result of the revelations, the Nebraska Legislature is considering a bill that would prevent school districts referring debts to commercial collection agencies. 

 

Kate Murphy, the Food Service Director for Kerney Public Schools, is apparently opposed to the proposed bill claiming that using collection agencies “Helps their meal programs stay afloat amid challenging economic circumstances and holds families responsible for the deficits they accrue”.  Murphy opined that “If the bill is passed, it will remove the incentive for parents to pay their kids’ lunch bill.”  Consistently the Lincoln Public Schools system has referred debts to collectors at a rate higher than any other school district in Nebraska.  More than a quarter of the 1,681 referrals were for debts under $50 with the public school system receiving 40 percent of the approximately 38 percent recovered from debtors. This 15 percent recovery is hardly sufficient to “keep the meal programs afloat”.

 

The clamor over attempts to recover overdue payments for school meals in Nebraska has played out concurrently with the December 2023 decision of Governor Pillen to refuse approximately $17 million in federal funding for summer supplementary food assistance.  This decision was reversed by the Governor during February after counseling by political advisors, strenuous opposition included a petition with 6,000 signatures and vigils outside his home.

EGG-NEWS is strongly in favor of free meals for K-12 students to provide necessary nutrition and to avoid “food shaming” of disadvantaged children. Extending school feeding programs should indirectly increase consumption of shell eggs and products.


 

Costco January Sales

In a February 7th release, Costco Wholesale Corporation reported net sales of $22,100 million for January comprising five weeks ending February 4th.  This was a 4.5 percent increase over the corresponding period in 2023 but with one less shopping day.

Over the five-week period, the comparable same store sales increase amounted to 1.6 percent for the U.S., 6.2 percent for Canada and 5.1 percent for other international warehouses, contributing to a total company increase of 2.7 percent.  E-commerce increased by 21 percent over the corresponding five-week period in 2023.

 


 

USPOULTRY 2024 Feed Mill Management Seminar

The 2024 Feed Mill Management Seminar will take place on March 7th and 8th at the Embassy Suites by Hilton Downtown in Nashville, TN.  The program will include an update on regulatory and FSMA aspects, an OSHA update, inventory management, transportation, energy saving and sustainability in feed production.

Additional information and registration can be obtained from the organizers by accessing <www.uspoultry.org>.


 

Ahold-Delhaize Posts Q4 Results

Ahold-Delhaize, the multinational food retailer operating numerous banners in the U.S. including Food-Lion, Giant Food, Hannaford and Stop & Shop, recently published results for the 4th quarter of Fiscal 2023.  U.S. sales attained $14,854 million, representing 60 percent of total group sales including the E.U.  During the most recent quarter U.S. operating income attained $470 million, 65 percent of group operating income.  Sales were down 1.5 percent from the corresponding 4th quarter of FY2022 and operating income was 46 percent lower. 

 

During the quarter, Ahold divested FreshDirect. During Q4 U.S. comparable sales were lower by 1.0 percent with online sales down 3.6 percent.


 

Deere and Co. Reduces FY2024 Sales Projection

Deere and Co. is regarded as a bellwether of the agricultural sector.  In their report for the first quarter of Fiscal 2024 released on February 15th, the company reported sales of $12,185 million, down 4 percent from the corresponding first quarter of Fiscal 2023.  Net earnings were 11 percent lower at $1,750 million and the company posted a diluted EPS of $6.23 compared to $6.55 for Q1 FY 2023.  The company projects lower revenue for FY 2024 in the range of $7,500 to $7,750 million.  Sales in USA and Canada will decline by between 10 and 15 percent with sales to large agricultural operations down 5 percent and corresponding reductions in the forestry and construction markets.  Demand in Eastern Europe will be affected by ongoing hostilities in Ukraine and economic conditions in other markets.  Reduced sales to small agricultural operations is evidence that many farmers are reluctant to assume additional debt at prevailing high interest rates and are delaying replacement of high-priced equipment.


 

Benson Hill Divests Soy Plant

Benson Hill (BHIL) has concluded the sale of the Creston, IA. soybean crushing plant for $72 million.  According to the CEO, Deanie Elsner, the company will concentrate on core activities including specialized soybean cultivars and an “expanded focus on animal feed markets”.

 

For the nine months of FY 2023 ending September 30th, the company posted a net loss of $77.5 million on revenue of $356.8 million.  Over the past 52 weeks, the share price of BHIL has declined from $2.34 to $0.12.  On a trailing 12-month basis, operating margin was -21 percent and profit margin -28 percent.  The company has generated a return on assets of -13 percent and  -57 percent on equity. This suggest a downward spiral ending in acquisition or bankruptcy.


 

Walmart Announces Q4 and FY 2024 Financial Results

In a February 20th release, Walmart Inc. (WMT) posted financial results for the 4th quarter and Fiscal 2024 ending January 31st 2024. All U.S. retailers, both brick-and-mortar and online are subject to the same pressures from increased costs for goods, transport and labor in a competitive environment with most consumer demographics and especially lower earners concerned over expenditure. As a multinational company, Walmart faces additional risks associated with currency fluctuation, geopolitical events and adverse policies by regulators in host-nations. Walmart serves as a bellwether for U.S retail combining groceries, clothing, electronics, drugs, toiletries and household necessities.

 

For the 4th quarter of FY 2024 ending January 31st 2024 net income was $5,494 million on net revenue of $173,388 million that beat consensus estimates yielding a profit margin of 3.2 percent.  Comparable figures for the 4th quarter of fiscal 2023 ending January 31st 2023, were  net income of $6,277 million on total revenue of $164,048 million with a profit margin of 3.8 percent. Diluted EPS declined from $2.32 for the 4th quarter of FY 2023 to $2.03 for the most recent quarter.

 

Comparing the 4th quarter of FY 2024 with the corresponding quarter of the previous year, revenue was up 5.7 percent; comparable store sales up 4.0 percent for the U.S.; gross margin rose from 22.1 percent to 23.3 percent; operating margin increased from 3.4 percent to 4.2 percent for the most recent quarter.

 

For FY 2024 net income was $15,511 million on net revenue of $648,124 million.  Comparable figures for FY 2023 were net income of $11,680 million on total revenue of $611,289 million. Diluted EPS increased to $5.74 in FY 2024 compared to $4.27 for FY 2023.

 

In commenting on Q4 results, in the Investor’s Call, Doug McMillon, CEO and president stated “We were strong in the U.S., Mexico, Canada, and India, where we had the best Big Billion Days ever, and we continued the strong performance in China with the start of Chinese New Year. Typically, we see some of our customer experience scores dip during the high-volume hours and days we experience during the holidays. During Q4, the Walmart U.S. team delivered three-year high customer scores in our stores for pickup and delivery from stores and for those orders that flow directly from our e-commerce fulfillment centers”.

 

McMillon concluded “I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3”.

 

Forward guidance for FY 2025 included:- A 3.0 to 4.0 percent increase in consolidated revenue; operating income over a range of 4.0 to 6.0 percent, and an adjusted EPS of $6.70 to $7.20 (pre-split). Capital expenditure will be equivalent to 3.2 percent of net sales.

 

For the 4th quarter of FY 2024 segment results comprised:-

  • Walmart US: Net sales of $117,600 million, up 3.4 percent over Q4 FY 2023. Operating income $5,100 million with strong gains in groceries and general merchandise. Comparable same-store sales were up 4.0 percent (excluding fuel). Transactions were up 4.3 percent but ticket was down 0.3 percent. Growth in E-commerce, was up 17 percent over the corresponding quarter of FY 2023. Inventory declined approximately 4.5 percent.
  • International: Net sales of $32,400 million, up 17.6 percent. Operating income was $1,300 million. Growth in E-commerce, 44 percent over the corresponding quarter of FY 2023.
  • Sam’s Club U.S.: Net sales of $21,900 million, up 2.0 percent excluding fuel. Operating income was $600 million. Comparable same-store sales were up 3.1 percent. Membership revenue grew 10.0 percent. Growth in E-commerce, increased 17 percent over the corresponding quarter of FY 2023, attributed to curbside pick-up service and delivery.

 

Walmart operates more than 10,500 stores worldwide of which 5,400 are in the U.S. including 600 Sam’s Club warehouses. Walmart trades under 46 banners in 19 nations and employs 2.1 million.

 

On January 31st 2024, Walmart posted assets of $252,399 million including goodwill of $28,113 million. Long-term debt and lease obligations amounted to $54,784 million. The Company had an intraday market capitalization of $458,650 million on February 20th. WMT trades with a forward P/E of 24.1 and has ranged over a 52-week period from $136.09 to $181.35 with a 50-day moving average of $160.95.  Twelve-month trailing operating margin was 3.9 percent and profit margin 2.6 percent.  Return on assets over the past twelve months was 7.3 percent with a return on equity 19.7 percent. At close of trading on February 19th pre-release, WMT was priced at $170.39. On November 20th WMT opened post-release at $179.97, up 5.6 percent.  

 

WMT will split three-for-one on February 23rd.


 

Consumer Reports Highlights Chemical Contamination of Foods

Consumer Reports has issued a report purporting to show high levels of bisphenols and phthalates in wide variety of food products.  It is not a question of whether these chemicals compounds are present in prepared foods, but the reality is the level in relation to acute and clinical effects.

 

The compounds analyzed were in the low nanogram per serving range and it is questioned whether the quantum assayed could be correlated to possible clinical effects.  This said there is now no question that bisphenols and phthalates are potentially toxic with adverse effects on metabolism and neural development, following accumulation in tissues and organs.

The Consumer Reports findings should however be a warning that food scientists and manufacturers should do everything possible to restrict the levels the accumulation of potentially toxic compounds among consumers.  This will involve evaluation of packaging materials with specific reference to polymers used to coat paper and other packaging.


 

HPAI Outbreaks in Asia

Authorities in India and Taiwan have reported outbreaks of H5N1 strain highly pathogenic avian influenza to the World Organization for Animal Health. 

 

The case in India involved at least two egg-producing farms in the Nellore region in Andhra Pradesh. In Taiwan, a small-scale commercial farm in Pingtung County was diagnosed with HPAI. 

Appropriate control measures have been implemented although with the high density of chickens in both locations, and also ducks in the case of Taiwan, deficiencies in biosecurity will most probably lead to additional cases. Early diagnosis relies on farmers alerting regulatory officials to clinical signs and mortality to initiate control measures.


 

Iowa Proposes to Allow Unapproved Application of Animal Waste

The Iowa Department of Natural Resources requires adherence to regulations governing disposal of animal waste from Concentrated Animal Feeding Operations (CAFOs).  Approved plans are based on the need for soil nutrients and the possibility of runoff given the capacity of designated fields. Iowa operates a Nutrient Reduction Strategy that presumes pre-approval of plans to dispose of waste by soil application.

 

Given problems relating to compliance and implementation, situations have arisen such as the Supreme Beef situation in April 2023 in which conflicts arose between the Department of Natural Resources and operators of a CAFO.

 

Proposed Senate Bill 3152 would effectively “water down” current procedures relating to the assessment of suitability of agricultural land to receive waste and to allow CAFOs to operate under plans that have been rejected, pending an appeal. Given considerable opposition, the Bill intended to “water down” regulation of waste will have to be amended and will then be referred to the Senate for consideration.

It is noted that Iowa with 40 million hens representing 14 percent of the nation's total produces considerable quantities of manure over and above the contribution from hog farms and feed-lots. Collectively livestock waste adds nitrates and phosphorus to waterways, aquifers and ultimately drinking water supplied from wells and by municipalities.  Accordingly large egg-production complexes should consider installation of manure drying and processing installations that would reduce the necessity for application of waste to agricultural land.


 

No Progress on 2023 Farm Bill

Secretary of Agriculture Tom Vilsack characterized his five-hour testimony before the House Agriculture Committee as a “wasted opportunity”.  The 2023 Farm Bill is mired in controversy in both Chambers of Congress.  Issues in contention include the magnitude of SNAP support and eligibility for the program.  The second conflict concerns farm assistance.  The current Administration wishes to divert support to small-scale farmers at the expense of larger operations that are the most productive contributing to the bulk of grains and oilseeds required for the domestic market and for export. There is also opposition from the right on climate-related expenditure.

 

What ever happened to compromise and deadlines?


 

Commentary


Iowa Egg Company Receives FDA Warning Letter

A December 15th 2023, warning letter to the Iowa Egg Company located in Osage, IA. confirmed a wide range of deficiencies in conforming to the FDA Final Rule on Salmonella. Effectively product is technically “adulterated” under section 402 (a) (4) of the Federal Food Drug and Cosmetic Act Section 21 U.S.C. 342 (a) (4) as potentially injurious to health.

 

The warning letter followed issue of a FDA Form 483 following a June 2023 inspection of the complex by the Iowa Department of Agriculture, acting on behalf of the FDA.

 

The warning letter was issued since the company did not respond within the statutory period acknowledging deficiencies and providing an action program for remediation.

Defects noted by the Iowa Department of Agriculture included:

 

  • Failure to have available a written Salmonella Enteritidis Prevention Plan as required.

 

  • Failure to document that pullets were monitored for SE prior to transfer.

 

  • Failure to maintain an acceptable program to suppress rodents and flies and evident structural defects allowing entry of rodents.

 

  • Failure to document or implement appropriate holding temperatures for eggs.

 

  • Failure to comply with required ages for drag-swab screening of flocks for environmental SE contamination.

 

  • Failure to register a farm as required.

 

The delay between the FDA Form 483 in June 2023 and the warning letter in mid-December raises questions of timing in the response to obvious public health-related issues. Given the date of the original report documenting multiple defects relating to testing and other requirements, the FDA was negligent in waiting 21 weeks before issuing a warning letter.  Had flocks on the operation been infected with SE, product would have been released to the market with the potential for human infection. Any egg-borne outbreak of SE results in degradation of the image of the egg industry indirectly affecting all compliant farms.

 

If the FDA is sincerely interested in protecting the food supply then a 21-week delay in follow-up is unacceptable.  This situation appears to be a replay of the infant formula crisis but on a much smaller scale. Failure by the FDA to inspect major production facilities and a lack of response to evident problems of contamination led to a debacle characterized by a shortage of product with economic, political and social implications. It remains to be seen whether organizational changes at the FDA will improve concern within the Agency for food-related risks.


 

Sponsored Announcements


Unbeatable Prices on Galvanized Feed Bins




 
Dr. Simon M. Shane
Simon M. Shane
Contact     C. V.































































































































































































Managed by Goosedown Web Development