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Egg Week

09/05/2019

USDA Weekly Egg Price and Inventory Report, September 5th 2019.

  • Hen numbers in production up 0.4 million to 324.6 million.
  • Shell inventory up a noteworthy 9.6 percent after pre-Labor Day orders completed
  • USDA Midwest benchmark generic prices for Extra large and Large up 2 percent to 104.5 and 102.5 cents per dozen respectively. Mediums were up 1.6 percent to 63.5 cents per dozen.
  • Price of breaking stock unchanged at 47.0 cents per dozen and checks at 34.0 cents per dozen respectively. Both categories substantially below cost of production

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on September 3rd the Midwest wholesale prices for Extra Large and Large were higher by 2.0 percent to 104.5 and 102.5 cents per dozen respectively. Mediums were up 1.6 percent to 63.5 cents per dozen. Extra Large and Large were above the USDA average 5-Region blended nest-run benchmark of 62.7 cents per dozen in July. The progression of prices during 2019 is depicted in the USDA chart reflecting three years of data, updated weekly.

The September 3rd USDA Egg Market News Report (Vol. 66: No. 35) documented a USDA Combined Region value rounded to the nearest cent, of $1.09 per dozen delivered to warehouses for the week ending August 25th. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.01 per dozen, above the USDA Regional Benchmark nest-run cost of $0.60 per dozen in July. At the high end of the range, price in the South Central Region attained $1.13 per dozen, above the USDA Regional nest-run cost of $0.61 per dozen in July. The USDA Combined Price last week was approximately $0.32 per dozen below the three-year average and equal to the price during the corresponding week in 2018.

Flock Size

The number of producing hens this week was up 0.4 million to 324.6 million. The hen population is more than adequate to meet seasonal consumer and industrial demand in early summer but any number above 320 million in production over the short term portends lower prices and increased inventory unless matched by proportional demand. The total U.S. egg-flock comprised 330.9 million hens including second-cycle birds and those in molt on all farms. The difference of 6.3 million hens in production and total hens is equivalent to 1.9 percent of the national flock, down from a high of 2.4 percent in mid-June. This suggests some depletion has occurred with fewer flocks scheduled to come back into production with implications for price, given current supply, stock level and seasonally moderate to depressed demand.

STOCK LEVELS

Generic shell-egg stock was up a substantial 9.6 percent to 1,384,600 cases. To maintain prices the market, will have to find a balance between supply and demand as the Industry moves through the third quarter of 2019, Seasonally the ninth month of the year is characterized by stable or decreasing flock size and stable to slightly rising prices.

The National stock of frozen egg products as reported by the USDA on August 22nd 2019 attained 35.6 million pounds (16,176 metric tons) on July 31st 2019

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

INVENTORY

Cold Storage

Cold storage stocks in selected regions on September 2 nd amounted to 2.858 million pounds (1,299 metric tons) of frozen egg products, 0.5 percent more than the level of 2.845 million lbs. on August 1st 2019.

The most recent monthly USDA Cold Storage Report released on August 22nd documented a total stock of 35.48 million pounds (16,176 metric tons) of frozen egg products on July 31st 2019. This value was up 19.5 percent from July 31st 2018. A total of 88.2 percent of combined inventory comprised the categories of "Whole and Mixed" (49.9 percent) and "Unclassified" (38.3 percent). The lack of specificity in classification suggests a more diligent approach is required to enumerate and report inventory by the USDA.

Shell Inventory

The national stock of generic shell eggs reflecting September 3rd 2019 was up a noteworthy 9.6 percent from the past week, following a decrease of 0.7 percent for the previous week and a decline of 1.9 percent during the preceding week. The build in stock reflects the effect of filling the retail pipeline during the week preceding the Labor Day weekend The market is moving into balance relative to supply mainly due to increased demand since old flocks continue to be molted and are not depleted. Hen numbers are still too high for late summer moving beyond the Labor Day weekend. Availability of shell eggs has increased over the past month from the contribution of newly transferred pullets and molted hens coming back into production. In addition pullet chicks placed during early to mid-February 2019 are now producing a disproportionate number of medium sized eggs as denoted by the low price for this size although demand for the category from food service has increased.

Five of six USDA Regions reported higher stock levels. The Midwest Region was up a substantial 18.4 percent compared to the previous week to 461,100 cases. This region was followed in decreasing order of stock level by the South Central Region, up 7.4 percent to 240,100 cases; the Southeast Region down 3.4 percent to 223,000 cases; the Southwest Region up 17.8 percent to 205,400 cases; the Northeast Region up 6.1 percent to 151,200 cases and the Northwest Region up 1.7 percent 93,800 cases.

The total of the USDA six-area stock of commodity eggs comprised 1,724,600 cases, of which 80.3 percent were shell eggs. The inventory of breaking stock was up 6.7 percent to 340,000 cases consistent with the trend in shell-egg price in recent weeks. The value of breaking stock and hence availability from both mature and young flocks will be influenced by the demand for generic shell eggs and contract obligations with breakers.

As of Tuesday September 3rd 2019 the inventory of other than generic eggs (with previous week in parentheses) comprised:-

  • Specialty category, down 8.0 percent to 32,700 cases. (was down 12.3 to 35,500 cases)
  • Certified Organic, down 3.3 percent to 105,500 cases. (was down 4.1% to 109,100 cases)
  • Cage-Free, up 0.1 percent to 79,700 cases. (was down 3.5% to 79,600 cases)

There are now firm indications from equipment manufacturers and builders and evidenced by interest at the 2019 IPPE and the Midwest Poultry Federation Convention, that expansion is either planned or is in progress despite low prices from April through July. It is estimated that orders for 7 million to 10 million hen places have been signed, mainly for aviaries, despite the reality that wholesale prices for generic cage-derived eggs were below production cost for five successive months.

The projected increase in cage-free flocks is supported by quarterly USDA statistics, the November 6th 2018 passage of California Proposition #12 and subsequent corresponding legislation by Oregon and Washington States. The Supreme Court declined to consider the multi-state challenge to California Proposition #2 and the Massachusetts ballot outcomes. The Fourth Quarter financial report from Cal-Maine released on July 22nd indicated that the company would house an additional 6.0 million hens in cage-free systems representing replacement of existing flocks and new facilities, requiring conversions and erection of housing and packing plants to the value of $187 million. Projects with a capital cost of $167 million will be completed through February 2002. It is evident that there was recent overproduction based on the differences between Nielsen sales data and the average weekly production posted by the USDA in the Monthly Cage Free Report indicating that a proportion of cage-free and organic eggs are currently either downgraded or sent to breakers

Demand for cage-free eggs is influenced by the relative shelf prices of the category in comparison with generic white-shelled eggs from caged flocks. At the other end of the price range, consumers will purchase less-expensive brown cage-free product over organic eggs when there is a differential in price greater than about $1.20 per dozen. Similarly, consumers purchase white-shelled generic eggs in preference to brown-shelled cage-free with a differential of over $1.20 per dozen. The need for structured statistically relevant market research on the willingness to pay for attributes such as housing, GM status and nutritional enrichment is self-evident.

RELATIVE PRICES OF SHELL-EGG CATEGORIES

The following advertised retail prices for the week ending September 5 th, (compared with the previous week in parentheses) were posted by the AMS on August 30th for dozen packs:

  • USDA Certified Organic, Brown, Large: $3.49 ($4.35)
  • Cage-Free Brown, Large: $2.53 ($2.25)
  • Omega-3 Enriched Specialty, White, Large: $2.41 ($2.45)
  • Generic White, Large Grade AA $0.87 ($0.86)
  • Generic White, Large Grade A (Feature price) $0.99 ($0.87)

The retail price as determined by the USDA-AMS for generic white Large AA last week was up $0.01 per dozen to $0.87 per dozen although no increase in demand is expected after the Labor Day weekend. There may have been a positive regional effect from Hurricane Dorian along the Eastern seaboard.

During the present week the USDA benchmark advertised retail price of brown Cage-Free eggs increased 12.4 percent or $0.28 per dozen to $2.53 per dozen. Certified Organic fell 19.8 percent or $0.86 per dozen to $3.49 per dozen narrowing the advertised price differential to $0.96 per dozen ($2.10 per dozen last week) suggesting short-term demand for certified organic over cage-free brown. The differential between advertised retail prices for generic white Large and cage-free brown was $1.66 per dozen ($0.84 per dozen last week) suggesting decreased demand for cage-free brown. Preference for generic white over cage-free brown is evident with a price differential greater than $1.20 per dozen. Large week-to-week percentage fluctuations can be expected in the stock of specialty and organic eggs based on the small base of these categories.

USDA Cage-Free Data

According to the latest monthly USDA Cage-free Hen Report released September 3rd 2019 the number of hens held in other than conventional cages in August 2019 was unchanged from June and July as follows:-

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

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

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

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

Processed Eggs

For the week ending August 31st 2019 eggs processed under FSIS inspection as reported on September 4th were up by 4.2 percent compared to the previous week to a level of 1,642,289 cases. The proportion of eggs broken by in-line complexes was 55.5 percent (was 57.2 percent last week). With lower prices for shell eggs there is a trend to divert non-contracted eggs from packing to breaking. During the corresponding processing week in 2018 in-line breakers processed 54.0 percent of eggs broken.

For the report dated August 28th edible yield for the period June 30th through July 27th from 6,369,443 cases was 37.9 percent distributed in the following proportions expressed as percentages:- liquid whole, 57.0; white, 25.2; yolk 12.9; dried, 4.9.

Eggs broken YTD 2019 attained 55.49 million cases, 3.8 percent more than the corresponding period during 2018. The difference is due to significantly higher prevailing shell-egg prices in 2018 disfavoring breaking.

PRODUCTION AND PRICES

Breaking Stock

The price range for breaking stock delivered to Central States plants was unchanged over a range of 45 to 49 cents per dozen. Checks were unchanged over a range of 32 to 36 cents per dozen. The revenue for both breaking stock and checks was far lower than the benchmark production cost for nest-run, estimated by the USDA at 62.7 cents per dozen during July 2019.

Shell Eggs

The USDA Egg Market News Report released on September 3rd documented changes in prices for the major grades from the Midwest, for Central States Breaking Stock and Certified USDA Organic. The following table lists the "most frequent" ranges of values as delivered to warehouses*:-

Size/Type

Current Week

Previous Week

Extra Large

103-106 cents per dozen

101-104 Up 2.0%

Large

101-104 cents per dozen

99-102 Up 2.0%

Medium

62-65 cents per dozen

61-64 Up 1.6%

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

45-49 cents per dozen

Unchanged

Checks

32-36 cents per dozen

Unchanged

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

The September 1st 2019 Regional (IA, WI, MN.) average FOB producer prices, for nest-run grade-quality white shelled eggs, with prices in rounded cents per dozen (last week in parentheses) were:-

EL. $0.90 ($0.90) estimated by proportion: L. $0.85 ($0.85): M. $0.44 ($0.44)

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

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for September 4th 2019 was numerically higher by 11.6 points from the last weekly report to 2.8 with a 9.6 percent increase in inventory from the past week as determined by the USDA-ERS as follows:-

Productive flock

324,580,576 million hens

Average hen week production

80.3% (was 80.3%)

Average egg production

260,638,2013 million per day

Proportion to shell egg market

67.6% (was 68.9%)

Total for in-shell consumption

489,421 cases per day

USDA Inventory

1,384,600 cases

26-week rolling average inventory

4.77 days

Actual inventory on hand

4.64 days (was 4.16 days)

Shell Egg Demand Indicator

2.80 points (was 14.4 on August 28th 2019)

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective August 30th 2019 were:-

Whole Egg

$2.00-$2.15

Unchanged

Yolk

$1.90-$2.00

Unchanged

Spray-Dried White

$4.60-$4.80

Unchanged

Blends

$2.75-$2.80

No new quotation

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

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

COMMENTS

Newcastle Disease

The incidence rate of Newcastle disease in Southern California declined over the past two months and no cases were diagnosed for eight weeks until a case was reported from a feed store on August 14th followed by a pop-up case in San Diego County confirmed on August 30th. To declare the 2018 to 2019 outbreak to be over requires 13 weeks from depletion of the last diagnosed case for official acceptance. Incident cases should be expected in the late fall from either introduction from Mexico or extension from non-recognized reservoirs in California. The progress of the 2018 - 2019 outbreak was as follows:-

A total of 450 exotic velogenic viscerotropic Newcastle disease (vvND = END) cases in small multi-species backyard flocks mainly comprising gamefowl (fighting cocks) were confirmed between May 18th and August 30h in the Southern California Counties of San Bernardino (142), Riverside (260), Los Angeles (45), Ventura (1) San Diego (1) and Alameda (1). Pre-emptive slaughter of all "birds" (presumed to be domestic galliformes and some anseriforms) in four communities in Los Angeles, Riverside and San Bernardino Counties was conducted under the direction of the State Veterinarian for California in November 2018. This probably resulted in dissemination of infection by owners moving birds. A case of vvND was diagnosed in a flock of non-commercial chickens, presumed to be fighting cocks in Utah County, UT on January 18th.

A surge of incident cases was detected in Riverside County during mid-December 2018 with 43 incident cases diagnosed during the month. There were 86 new cases in January 2019, 48 in February, 22 during March, 17 in April, 20 in May and 1 in early June. In late March the USDA released funds from the 2015 HPAI outbreak but this may be characterized as too-little and too-late after 13 months. The decline in incidence rate is less attributed to the "control procedures" carried out by APHIS/CDFA than to immunity developing in flocks from vaccination and exposure of vaccinated flocks that will remain non-clinically affected reservoirs shedding virus in a cycle of exposure. Clearly many flocks are not identified or diagnosed given the antagonism of owners of fighting cocks to federal and state agencies.

The END situation has not disrupted exports of raw poultry, breeding stock, hatching or table eggs or egg products to Mexico. Following negotiations after the index case of END was diagnosed in Los Angeles County during mid-May 2018, authorities in Mexico accepted regionalization and on May 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 any USDA-FSIS inspected plant.

Avian Influenza

In the U.S. and the E.U. reassortant strains of avian influenza virus are introduced into regions beneath flyways by migratory birds and then transmitted to backyard and commercial free-range flocks or to confined flocks by deficiencies in biosecurity. Incident cases in the E.U., Asia and North Africa during 2018 should serve as a warning to U.S. producers during the fall and early winter of 2019 since the risk of infection necessitates enhanced biosecurity and effective containment of flocks.

There is a presumption that migratory waterfowl cease shedding AI virus by the first week of April, re-commencing in December. Accordingly, enhanced biosecurity is required under the Pacific, Central and Mississippi flyways. Flocks allowed outside access during periods when migratory birds are shedding virus are vulnerable to infection.