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Egg Week

05/18/2020

USDA Weekly Egg Price and Inventory Report, May 20th 2020.

  • The U.S. flock in production was 322.5 million, down 0.7 million from the previous week.
  • Shell inventory up by 6.9 percent after a 2.2 percent fall last week indicating an imbalance in the supply to demand equilibrium. This is attributed to an increase in the size of the Nation’s producing flock and hence availability of eggs.
  • USDA Midwest benchmark generic prices for Extra large and Large were down 13.5 percent to averages of 77.5 and 75.5 cents per dozen respectively. Mediums were up by 1.6 percent to an average of 62.5 cents per dozen. The market was lower and probably bottomed after a week of relative stability following five successive weekly declines in price.
  • The price of breaking stock in the Midwest was up 40.6 percent on average. Checks were up 136.8 percent.

 

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on May 18th 2020 the Midwest wholesale prices for Extra Large and Large as delivered to DCs were down 13.5 percent to averages of 77.5 and 75.5 cents per dozen respectively. Mediums were up 1.6 percent to 61.8 cents per dozen reflecting a restoration of balance between availability and demand across all sizes Prices should be compared with the USDA benchmark average 5-Region blended nest-run cost of 58.4 cents per dozen in April 2020, (excluding provisions for packing and transport). The progression of prices during 2018-2020 is depicted in the USDA chart reflecting three years of data, updated weekly.

 

The May 18th 2020 USDA Egg Market News Report (Vol. 67: No. 20) documented a USDA Combined Region value rounded to the nearest cent, of $0.97 per dozen delivered to warehouses for the week ending May 11th. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $0.88 per dozen. At the high end of the range, price in the South Central Region attained $1.03 per dozen. The USDA Combined Price last week was $0.25 per dozen above the three-year average of $0.72 per dozen and approximately $0.40 cents per dozen above the price during the corresponding week in 2019.

Flock Size

According to the USDA the number of producing hens this past week (rounded to 0.1 million) attained 322.5 million, 0.7 million lower than the past week. If USDA data is accurate, the producing flock is stabilizing at the same time that prices are bottoming after a sharp decline. The hen population producing eggs is more than adequate to meet seasonal consumer and industrial demand although unprecedented retail consumption outpaced supply in March 2020. Any number above 320 million hens in production during late spring portends lower than average prices and increased inventory unless matched by proportional demand. The “March Madness” buying in response to COVID-19 concern is long since over and the Industry must face the downside of the roller coaster accentuated by an influx of shell eggs from the food service sector.

The total U.S. egg-flock comprised 326.8 million hens including second-cycle birds and those in molt on all farms. The difference of 4.3 million between hens in production and total hens is equivalent to 1.3 percent of the national flock, down from a 52-week high of 2.4 percent in mid-June 2019. This suggests that there are still pullet flocks and molted flocks scheduled to commence production. This has implications for price, given current supply, higher stock levels and transitory high demand dropping sharply transiting to the first week in May. Flocks held over for Easter should now be depleted or molted.

STOCK LEVELS

Generic shell-egg stock was up 6.9 percent, after a 2.2 percent decrease last week. Shell egg inventory was 1,454,800 cases. The decrease in inventory during early through mid-March was due to consumers packing refrigerators in response to COVID-19 fears in addition to the lesser effect of the seasonal post-February depletion of flocks. The market has declined sharply to re-establish a balance between supply and demand as the Industry moves into Summer. The fifth month of the year is characterized by stable to slightly decreasing flock size. Due to COVID-19 demand March prices were exceptionally high but after a sharp decrease have apparently bottomed.

The National stock of frozen egg products as reported by the USDA on May 21st 2020 attained 44.9 million pounds (20,427 metric tons) on April 30th 2020.

The USDA has delayed release of the mid-April dried-egg inventory report on stock levels The March 13th report noted an increased of 9.0 percent during February 2020 to 28.5 million lbs. (12,958 metric tons) on February 29th 2020, compared to 26.1 million lbs. on January 31st 2020.

INVENTORY

Cold Storage

Cold storage stocks in selected regions on May 18th 2020 amounted to 2.648 million pounds (1,204 metric tons) of frozen egg products, 4.7 percent less than the level of 2.777 million lbs. on April 1st 2020.

The most recent monthly USDA Cold Storage Report released on May 21st 2020 documented a total stock of 44.9 million pounds (20,427 metric tons) of frozen egg products on April 29th 2020. This value was up 24.5 percent from April 30th 2020. A total of 89.6 percent of combined inventory comprised the categories of “Whole and Mixed” (47.5 percent) and “Unclassified” (42.1 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 effective May 18th 2020 was higher by 6.9 percent after a decrease of 2.2 percent last week. The U.S. population of laying hens must be reduced by molting and disposal of flocks to prevent overproduction during summer. This is an appropriate response to declining sales and price trends following the termination of intense COVID-19 demand extending from early March through mid-April. Pullet chicks placed during mid-July 2019 for Easter are producing fewer medium-sized eggs as denoted by two successive weekly increases in the price for this size, coupled with a slight increase in demand from the food service market.

Five of six USDA Regions reported higher stock levels. The Midwest Region was up by 3.7 percent compared to the previous week to 434,900 cases. This region was followed in decreasing order of stock level by the South Central Region, up a substantial 13.2 percent to 307,600 cases; the Southeast Region down by 1.0 percent to 230,500 cases; the Northeast Region up 11.6 percent to 205,900 cases; the Southwest Region up 10.2 percent to 154,400 cases and the Northwest Region up 7.6 percent to 121,300 cases.

The total USDA six-area stock of commodity eggs comprised 1,702,300 cases, of which 85.5 percent were shell eggs (83.7 percent last week). The inventory of breaking stock was down 6.6 percent to 247,500 cases hence the increase in price consistent with the previous processing week and the trend in shell-egg prices during the past four weeks. The value of breaking stock and hence availability from both mature and young flocks will be influenced by the demand for generic shell eggs and contract obligations with breakers.

As of Monday May 18th 2020 the inventory of other than generic eggs (with previous week in parentheses) comprised:-

 

  • Specialty category, down 4.2 percent to 24,700 cases. (was up 16.9% to 25,800 cases)
  • Certified Organic, down 4.0 percent to 60,100 cases. (was up 7.1% to 62,600 cases)
  • Cage-Free, down 0.5 percent to 109,400 cases. (was down 3.2% to 108,800 cases)

Extensive demand for cage-free product will not increase while generic eggs are on the shelf at $1.25 to $1.45 per dozen over the long term. State or Federal legislation mandating sale of only cage-free eggs will support some of the anticipated transition from cages but not by the beginning of 2025, less than 54 months away. With the current proportion of non-caged flocks, cage-free eggs are becoming a commodity subjected to the same price pressures as generic eggs from caged hens.

The Second Quarter Cal Maine Foods financial report for FY 2020 released on January 7th 2020 indicated that the company would continue conversion of conventional cage housing only on a market-demand basis. Investment in new production facilities and packing plants since 2008 to through March 2020 amounted to $344 million with $167 million expended over the past two years. Comments by Chairman and CEO Dolph Baker in the Q3 report implied restraint in conversion to cage-free housing going forward.

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 May 21st 2020, (compared with the previous week in parentheses) were posted by the AMS on May 18th for dozen packs:

 

 

USDA Certified Organic, Brown, Large: not released (not released)

Cage-Free Brown, Large: $2.50 ($3.31)

Omega-3 Enriched Specialty, White, Large: $2.06 ($2.00)

Generic White, Large Grade AA $0.96 ($1.11)

Generic White, Large Grade A (Feature price) $1.03 ($1.19)

The weekly advertised retail price as determined by the USDA-AMS for generic white Large AA last week was $0.96 per dozen (last week $1.11). Prices for all sizes rose sharply in late February through mid-March driven by transitory COVID-19 demand but have declined with a similar trajectory to the ascent over the past four weeks. There is a limit to the quantity of perishable foods consumers will buy and place in their refrigerators. Wholesale prices will trend stable to lower through the last week of May.

During the present week the USDA benchmark-advertised retail price of brown Cage-Free was 24.5 percent lower corresponding to a fall of 81cents per dozen to $2.50 per dozen. There has been no data for Certified Organic for two weeks due to the absence of advertisements for this category. The low price of cage-free brown in relation to shelf prices in the region of $4.00 per dozen for Certified Organic suggests continued demand for cage–free brown during the next week.. 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 May 4th 2020 the number of certified organic hens during March 2020 is unchanged since January. In contrast the USDA reported an apparent decrease of 0.5 percent in the cage-free flock to 60.9 million after a 13.4 percent apparent increase over the first quarter of 2020. This indicates saturation of the market for organic eggs. Given the fall in prices across all categories this past week there will be a surplus of cage-free eggs. The stated population of hens producing cage-free and certified organic eggs in April comprised:-

Total U.S. flock held for USDA Certified Organic production = 15.7 million (16.2 million in December).

Total U.S. flock held for cage-free production = 60.9 million (60.2 million in March).

Total U.S. non-caged flock = 76.6 million (76.9 million in March).

This total value represents 23.6 percent of a nominal 325 million total U.S. flock but 34.8 percent of a presumed flock of 220 million producing for the shell-egg market.

The inventory of cage-free hens will be updated after release of each monthly USDA Report.

Processed Eggs

For the processing week ending May 16th 2020 the quantity of eggs processed under FSIS inspection over the past week as reported on May 20th 2020 was down 0.7 percent compared to the previous week to a level of 1,148,40 cases. The proportion of eggs broken by in-line complexes was 54.1 percent (was 51.6 percent for two weeks week) denoting less availability of shell eggs at spot prices that rose sharply. With lower prices for shell eggs there is a trend to divert non-contracted eggs to breaking from shell sales and vice versa. This is evidenced by the higher price for breaking stock and cracks. This past week 77.5 percent of egg production was directed to the shell market almost the same as the 77.4 percent last week, consistent with declining price. During the corresponding processing week in 2019 in-line breakers processed 54.6 percent of eggs broken.

For the monthly report dated May 13th 2020, edible yield from 5,850,734 cases for the period March 29th 2019 through May 2nd 2020 was 37.6 percent, distributed in the following proportions expressed as percentages:- liquid whole, 49.4; white, 28.5; yolk 14.7; dried, 7.4.

All eggs broken during YTD 2020 attained 28.85 million cases, 7.6 percent less than the corresponding period during 2019. Significantly lower prevailing shell-egg prices for the first four weeks of 2020 compared to 2019, favored breaking. This was followed by a transitory rise in price for shell eggs during March drawing non-committed product into the shell market reversing the trend during the first two months of the year. During the past four weeks shell egg prices reverted to levels prevailing before the price surge.

 

PRODUCTION AND PRICES

Breaking Stock

The price range for breaking stock delivered to Central States plants on May 18th was higher by 40.6 percent over a range of 31 to 33 cents per dozen. Checks were up by a substantial 136.8 percent over a range of 20 to 25 cents per dozen. Revenue for both breaking stock and checks was lower than the benchmark production cost for nest-run, estimated by the USDA at 58.4 cents per dozen during April 2020.

Shell Eggs

The USDA Egg Market News Report released on May 18th 2020 showed lower Midwest prices for all categories and sizes consistent with the end of panic COVID-19 buying. The following table lists the “most frequent” ranges of values as delivered to warehouses*:-

 

Size/Type

Current Week

Previous Week

Extra Large

76-79 cents per dozen

88-91 Down 13.4%

Large

74-77 cents per dozen

86-89 Down 13.7%

Medium

58-67 cents per dozen

60-63 Up 1.6%

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

31-33 cents per dozen

18-20 Up 40.6%

Checks

20-25 cents per dozen

7-12 Up 136.8%

 

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

The May 18th 2020 Regional (IA, WI, MN.) average FOB producer prices, for nest-run grade-quality white shelled eggs, with prices in rounded cents per dozen were unchanged from last week:-

  1. $0.75 ($0.85), estimated by proportion): L. $0.58 ($0.68): M. $0.42 ($0.42)

(See the text, tables and figures and the review of production data and prices comprising the May report on USDA costs for April 2020 and results for the 3rd Quarter of FY 2020 for Cal-Maine Foods posted under the Statistics Tab.)

 

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for May 20th 2020 was down by 7.3 points from the last weekly report to +4.2 with a 6.9 percent increase in inventory from the past week as determined by the USDA-ERS as follows:-

Productive flock

322,519,947 million hens

Average hen week production

81.4% (was 81.3%)

Average egg production

262,527,167 million per day

Proportion to shell egg market

77.5% (was 77.4%)

Total for in-shell consumption

565,163 cases per day

USDA Inventory

1,454,800 cases

26-week rolling average inventory

4.40 days

Actual inventory on hand

4.22 days

Shell Egg Demand Indicator

+4.3 points (was +11.6 on May 13th 2020 )

 

 

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective May 15th 2020 were:-

Whole Egg

$1.90-$2.05

Unchanged

Yolk

$1.90-$2.00

Unchanged

Spray-Dried White

$4.50-$4.70

Unchanged.

Blends

$2.75-$2.80

No new quotation

 

USDA did not release a new report on dried egg inventory reflected stock as at the end of March. Total U.S. dried egg inventory on February 29th 2020, as reported on March 13th 2020 was 65 percent lower than on February 28th 2019 attaining 28.5 million lbs. (12,958 metric tons), equivalent to approximately 10 weeks production at current levels. Inventory was 9.0 percent higher as compared to January 31st 2019. During the period February 2nd 2019 through February 29th 2020, dried egg processed under USDA inspection amounted to 12.0 million lbs. (5,896 metric tons). Lower shell-egg prices during the last eight months of 2019 and during the post-Christmas weeks diverted non-contracted eggs from packing to breaking.

The February 29th 2020 total dried egg inventory comprised whole egg (38.7%); albumen (25.2%); yolk (34.1%) and blends (2.0%).

The inventory of dried eggs will be updated after release of the relevant USDA Report

COMMENTS

Newcastle Disease

The first case of END in 2020 was diagnosed in San Bernardino County on January 8th followed by January 12th and 18th and the most recent on February 25th. The low incidence rate compared to early 2019 suggests that the outbreak is coming to an end.

A total of 476 exotic velogenic viscerotropic Newcastle disease (vvND = END) cases in small multi-species backyard flocks with a proportion of gamefowl (fighting cocks) were confirmed between May 18th 2018 and May 18th 2020 in the Southern California Counties of San Bernardino (164), Riverside (262), Los Angeles (46), Ventura (1), (San Diego (1) and Alameda (1). 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 2019.

To declare the 2018 - 2020 outbreak officially over will require 13 weeks from depletion of the last diagnosed case corresponding to late-May 2020.

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 2018 restored importation of raw poultry from other than the restricted Counties in California. There is absolutely no reason to embargo pasteurized egg products derived from a USDA-FSIS inspected plant.

Avian Influenza

In the U.S. and the E.U. reassortant strains of avian influenza virus are introduced into regions beneath flyways by migratory birds and then transmitted to backyard and commercial free-range flocks or to confined flocks by deficiencies in biosecurity. Incident cases in the E.U., Asia and North Africa during 2018 and now 2020 should be a warning to U.S. producers during the late winter and early spring of 2020 since the risk of infection necessitates enhanced biosecurity and effective containment.

An outbreak of low pathogenicity H7N3 avian influenza was diagnosed on routine surveillance in asymptomatic flocks of turkeys comprising nine grow-out and one breeder flock in Anson and Union Counties in North Carolina from March 13th through March 25th. One grow-out flock in adjacent Chesterfield County, South Carolina was identified with recovery of LP H7N3. Subsequently isolation of an H7 AI virus was made from a 12-week tom flock that showed mild respiratory signs and was depleted. The virus from this second flock in Chesterfield County was characterized as a high pathogenicity strain by the NVSL. All infected flocks comprising 350,000 turkeys were rapidly depleted. Surveillance on contact and other flocks continues. If this outbreak is attributed to migratory waterfowl it is suspected that the virus has entered the Atlantic Flyway with implications for flocks along the Eastern seaboard including the Delmarva Peninsula.

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