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USDA Weekly Egg Price and Inventory Report, October 11th 2018.

10/11/2018
  • Hen Numbers in Production Increased 0.5 million to 320.3 million.
  • Shell Inventory Down by 1.5 Percent From Previous Week Representing a 6.5 Percent Swing Over Two Weeks Denoting Increased Demand
  • Generic Prices for Extra Large and Large up 5.1 Percent, Mediums up 4.5 Percent Compared to Previous Week.

OVERVIEW

Prices

According to the USDA Egg Market News Report posted on October 8 th the Midwest wholesale prices for Extra Large and Large sizes were up 5.1 percent and 5.2 percent respectively and Mediums were up 4.5 percent compared to the past week. The progression of prices during 2018 is depicted in the USDA chart reflecting three years of data, updated weekly.

The October 8th USDA Egg Market News Report (Vol. 65: No. 41) documented a USDA Combined Region value rounded to the nearest cent, of $1.06 per dozen delivered to warehouses effective October 5th This price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $0.97 per dozen. At the high end of the range, price in the South Central Region attained $1.10 per dozen. The USDA Combined Price last week was 2 cents per dozen above the three-year average but 25 cents per dozen below the corresponding week in 2017.

Flock Size

The number of producing hens this week was 320.3 million, an increase of 0.5 million partly due to second-cycle hens resuming production. Pullet chicks placed in mid-April have advanced in age and are now producing fewer Mediums resulting in a disproportional increase in price for this size category compared to past weeks. The hen population is more than adequate to meet late-Summer seasonal consumer and industrial demand but any number above 319 million in production over the short term at this time of year portends lower prices and increased inventory going forward. The total U.S. egg-flock comprises 328.2 million hens including 2nd Cycle birds and those in molt on all farms, unchanged from last week. The 7.9 million difference between hens in production and total hens is unchanged from last week and represents 2.4 percent of the national flock. This suggests that there are now more pullets and molted flocks soon to come back into production with implications for price given increased supply and seasonally low to moderate demand.

Stock levels

Generic shell-egg stock fell 1.5 percent to 1,390,200 cases following a 5.0 percent increase over the previous week. To maintain prices the market will have to find a balance between supply and demand as the Industry moves through the fourth quarter, generally characterized by increasing flock size with higher prices during early fall.

The National stock of frozen egg products as reported by the USDA on September 24th 2018 attained 32.0 million pounds (14,541 metric tons) on August 31st 2018 down 9.0 percent from August 31 st 2017.

Dried-egg inventory decreased by 5.0 percent during August to 13.2 million lbs. (6,001 metric tons) as of August 31st 2018 (was 13.9 million lbs. on July 31st 2018)

INVENTORY

Cold Storage

Cold storage stocks in selected regions on October 8th 2018 amounted to 2.940 million pounds (1,336 metric tons), 1.4 percent less than the stock of 2.893 million pounds during the week of October 1 st. 2018.

The most recent monthly USDA Cold Storage Report released on September 24th 2018 documented a total stock of 32.0 million pounds (14,541 metric tons) of frozen egg products on August 31st 2018. This value was down 9.0 percent from August 31 st 2017. A total of 88.9 percent of combined inventory comprised the categories of "Whole and Mixed" (45.3 percent) and "Unclassified" (43.6 percent). The lack of specificity in classification suggests a more diligent approach is required to enumerate and report inventory by the USDA.

Shell Inventory

The national stock of generic shell eggs reflecting October 8th 2018 was lower by 1.5 percent, following a 5.0 percent increase in inventory during the previous week and a 3.7 percent decrease during the preceding week. This suggests that the market is striving for equilibrium following oversupply in mid-September due to additional output from molted hens coming back into production and pullet flocks placed in mid-April reaching peak production. Medium size eggs in the Midwest, which were disproportionately low in price compared to Large and Extra Large in previous weeks rose to a range of 68 to 71 cents per dozen. Last week an additional 0.5 million hens were added to production.

Four of six USDA Regions reported lower stock levels. The Midwest Region was down 4.0 percent compared to the previous week to 446,400 cases. This region was followed in decreasing order of stock level by the Southeast Region, down 0.6 percent to 266,300 cases; the South Central Region up by 4.6 percent to 264,400 cases; the Southwest Region down 5.6 percent to 174,300 cases; the Northeast Region up 4.5 percent to 160,200 cases and the Northwest Region down 11.1 percent to 78,600 cases.

The total USDA Six-Area stock of commodity eggs comprised 1,724,200 cases, of which 80.6 percent were shell eggs. The inventory of breaking stock was down 1.2 percent to 333,900 cases consistent with the trend in recent weeks.

The price for breaking stock and hence availability from both mature and young flocks will be influenced by the demand for generic shell eggs and contract obligations for the breakers.

As of Monday October 8th 2018 the inventory of other than generic eggs, compared to the previous week in parentheses, comprised:-

  • Specialty category, up 3.9 percent to 47,500 cases. (up 19.4% to 48,500)
  • Certified Organic, down 5.5 percent to 80,700 cases. (up 7.4% to 85,400)
  • Cage-Free, down 8.0 percent to 82,800 cases. (down 0.3% to 90,100)

Recent data suggests a weekly fluctuation in demand for cage free products. This is attributed to an increase in production of this category in 2016 and 2017, motivated by commitments by members of the FMI, NCCR and NRA. Recent announcements by major egg producers indicate a pause in conversion of existing facilities and a short-term moratorium in erecting new complexes and houses until sale of eggs from non-caged flocks rises. There are indications from manufacturers that some expansion is either planned or is in progress supported by quarterly statistics. Demand for cage-free eggs is influenced by the relative shelf prices of the category in comparison with generic white-shelled eggs from caged flocks. At the other end of the price range, consumers will purchase less-expensive brown cage-free product over organic eggs when there is a differential in price greater than $1.20 per dozen. Similarly, consumers purchase white-shelled generic eggs in preference to brown-shelled cage-free with a differential of over $1.20 per dozen. The need for structured statistically relevant market research on willingness to pay for attributes such as housing, GM status and nutritional enrichment is self-evident.

Relative Prices of Shell-egg Categories

During the past week the USDA benchmark retail price of Cage-Free brown rose 22.8 percent or 49 cents per dozen to $2.63 per dozen, reversing the downward move last week. Certified Organic fell 7.5 percent or 35 cents per dozen to $4.31 per dozen narrowing the price differential to $1.68 per dozen ($2.52 per dozen last week) suggesting continued demand for cage-free brown over Certified Organic during the current week. The differential between generic white Large and Cage-Free brown was $1.38 per dozen ($0.85 per dozen last week) which will stimulate demand for generic white over cage-free brown. Preference for generic white over cage-free brown is evident with a price differential greater than $1.20 per dozen. Large week-to-week percentage fluctuations can be expected in the stock of specialty and organic eggs based on the small base of these categories. The low stock of specialty eggs is noted in the section on inventory.

USDA Cage-Free Data

According to the latest monthly USDA Cage-free Hen Report released October 1st 2018 the number of hens held in other than conventional cages in September increased as follows:-

Total U.S. flock held for USDA Certified Organic production = 15.7 million (was 15.6 million)

Total U.S. flock held for cage-free production = 41.4 million (was 39.1million)

Total U.S. non-caged flock = 57.1 million This value represents 18.0 percent of a nominal 317 million U.S. flock in production but 26.6 percent of a presumed flock of 215 million held for shell-egg production

Processed Eggs

For the week ending October 6th 2018 eggs processed under FSIS inspection decreased by 0.5 percent compared to the previous week to a level of 1,609,242 cases. The proportion of eggs broken by in-line complexes was 53.1 percent (was 53.3 percent) denoting a balance in consignment of non-contracted eggs to breaking from packing in response to prevailing spot prices. During the corresponding week in 2017 in-line breakers processed 55.2 percent of eggs broken due to higher wholesale prices for generic eggs.

Eggs broken YTD attained 61.4 million cases, 3.9 percent more than the corresponding period in 2017.

PRODUCTION AND PRICES

Breaking Stock

The price range for breaking stock delivered to Central States plants on October 8th was unchanged compared to the previous week over a range of 55 to 59 cents per dozen. Checks were also unchanged over a range of 39 to 44 cents per dozen. The revenue for breaking stock and checks was lower than the production cost for nest-run, estimated by the EIC at 60.1 cents per dozen during September 2018.

Shell Eggs

The USDA Egg Market News Reports released on October 8 th 2018 documented the changes in price for the major grades from the Midwest, for Central States Breaking Stock and Certified USDA Organic. The following table lists the "most frequent" ranges of values as delivered to warehouses*:-

Size/Type

Current Week

Previous Week

Extra Large

102-105 cents per dozen

97-100 up 5.1%

Large

100-103 cents per dozen

95-98 up 5.2%

Medium

68-71 cents per dozen

65-68 up 4.5%

Certified Organic EL

275-310 cents per dozen

unchanged long term

Breaking stock

55-59 cents per dozen

unchanged

Checks

39-44 cents per dozen

unchanged

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

The October 8th 2018 Regional (IA, WI, MN.) average FOB producer prices, for nest-run grade-quality white shelled eggs, with prices in rounded cents per dozen (last week in parentheses) were unchanged:-

EL. $0.85 ($0.81) estimated by proportion: L. $0.84 ($0.80): M. $0.50 ($0.48)

The following advertised retail prices for the week ending October 5 th 2018, (compared with the previous week in parentheses) were posted by the AMS for dozen packs:

  • USDA Certified Organic, Brown, Large: $4.31 ($4.66)
  • Cage-Free Brown, Large: $2.63 ($2.14)
  • Omega-3 Enriched Specialty, White, Large: $2.23 ($2.72)
  • Generic White, Large Grade AA $1.25 ($1.29)
  • Generic White, Large Grade A (Feature price) $1.31 ($1.31)

The retail price as determined by the USDA-AMS for generic white Large AA last week was down $0.04 per dozen to $1.25 per dozen. The price for generics is following seasonal trends.

(See the text, tables and figures in the review of production and prices comprising the report on USDA September 2018 data is posted in this edition. A report on the financial results posted by Cal-Maine Foods for the 1st Quarter of Fiscal 2019, is posted under the STATISTICS tab)

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for October 10th 2018 was numerically higher by 2.3 points from the last weekly report to 2.3 with a 1.5 percent decrease in inventory as determined by the USDA-ERS as follows:-

Productive flock

320,323,177million hens

Average hen week production

79.6 % (was 79.5%)

Average egg production

254,977,249 million per day

Proportion to shell egg market

67.5% (was 67.3%)

Total for in-shell consumption

478,082 cases per day

USDA Inventory

1,390,200 cases

26-week rolling average inventory

4.88 days (was 4.87)

Actual inventory on hand

4.77 days (was 4.87)

Shell Egg Demand Indicator

2.3 points (was zero on October 3rd 2018 )

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective October 5th 2018 were:-

Whole Egg

$3.15-$3.25

Unchanged

Yolk

$3.15-$3.30

Unchanged

Spray-Dried White

$5.40-$5.55

Unchanged

Blends

$2.75-$2.80

No new quotation

Although steadily declining, U.S. dried egg inventory is now at a moderate level attaining 13.2 million lbs. (equivalent to slightly less than 4-weeks current production) on August 31st 2018, with a 48 percent decrease compared to August 31st 2017. During the period July 29 th 2018 through September 1st 2018, dried egg processed under USDA inspection amounted to 12.8 million lbs. (10.6 million lbs. in July 2018). Lower shell-egg prices over the past few weeks restored the volume of non-contracted eggs from packing to breaking.

COMMENTS

Newcastle Disease (END)

Over 150 exotic Newcastle disease (END=vvND) cases in small multi-species backyard flocks were confirmed between May 26th and September 30 th in the Southern California Counties of San Bernardino, Riverside , Ventura and Los Angeles. An isolate of H7 AI was obtained from a live bird market in Los Angeles two weeks ago. This situation should not disrupt exports of raw poultry, breeding stock, hatching and table eggs and egg products to Mexico. Following negotiations after the index case of END was diagnosed in Los Angeles County during mid-May, authorities in Mexico have accepted regionalization and on May 23rd restored importation of raw poultry from other than the restricted Counties in California. There is absolutely no reason to embargo pasteurized egg products derived from a USDA-FSIS inspected plant.

After seventeen weeks since the first San Bernardino outbreak, it is time that APHIS and the CADA released the results of their preliminary epidemiologic investigations, assuming they have collected and processed data. It is important for commercial egg producers to know the source of the END virus, mode of dissemination, extent of infection and whether any species of wild bird may be a reservoir. This information is required to plan biosecurity procedures and predict possible outcomes since incidence rates are rising.

Avian Influenza

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

Two cases of LPAI H7N3 were diagnosed in organic turkey growing farms in Stanislaus County, California in early September followed by two subsequent cases in the same County. There is a presumption that migratory waterfowl cease shedding AI virus by the first week of April re-commencing in the fall. Accordingly enhanced biosecurity is still indicated under the Pacific, Central and Mississippi flyways. Flocks allowed outside access during periods when migratory birds are shedding virus are vulnerable to infection.