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REVIEW OF SEPTEMBER 2020 EGG PRODUCTION COSTS AND STATISTICS.

10/12/2020

HIGHLIGHTS

  • September 2020 USDA ex-farm blended nest-run benchmark price was 65.6 cents per dozen, 22.2 percent higher than the August value of 53.7 cents per dozen but 48.9 percent lower than the exceptionally high April value of 128.5 cents per dozen. The downward price trend from mid-May through July is attributed to restoration of normal consumer purchasing patterns coupled with diversion of eggs from breaking to the shell-egg market. Currently stock levels and prices indicate a balance between supply and demand albeit at a low price attributable to over-production and diversion from the egg-breaking sector.
  • September 2020 USDA average nest-run production cost was 2.1 cents per dozen higher than in August 2020 at 60.6 cents per dozen.
  • September 2020 USDA benchmark nest-run margin attained a positive value of 5.0 cents per dozen compared to a negative margin of 4.3 cents per dozen for August 2020.
  • August 2020 national flock in production (over 30,000 hens/farm) was down 3.1 million hens or 1.0 percent to 299.1 million. There are approximately 6.9 million hens in molt or due to return from molt.
  • August 2020 pullet chick hatch was up 8.3 percent from July 2020 to 25.0 million.
  • August 2020 export of shell eggs and products combined was up 6.9 percent from June 2020 to 805,100 case equivalents representing the theoretical production of 8.3 million hens.

INTRODUCTION.

Summary tables for the latest USDA September 2020 prices and flock statistics made available by the EIC on October 11th 2020 are arranged, summarized, tabulated and reviewed in comparison with values from the previous September 9th 2019 posting reflecting August 2020 cost and production data.

COSTS & REVENUE

Parameter

SEPTEMBER 2020

AUGUST 2020

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

60.6 c/doz

58.0 c/doz

Low

57.4 c/doz (MW)

55.0c/doz (MW)

High

86.5c/doz (CA)

83.5c/doz (CA)

Components of USDA 6-Region 1stCycle nest-run Cost of Production:-

SEPTEMBER 2020

AUGUST 2020

Feed

31.2 c/doz

28.9c/doz

Pullet depreciation

11.1 c/doz

10.8 c/doz

Labor (estimate)

4.0 c/doz

4.0 c/doz

Housing (estimate)

5.0 c/doz

5.0 c/doz

Miscellaneous and other*

9.3 c/doz

9.3 c/doz


* Adjusted January 2020 and used as a rounding factor

Ex Farm Margin (rounded to nearest cent) according to USDA values reflecting SEPTEMBER 2020:-

65.6 cents per dozen1- 60.6 cents per dozen = 5.0 cents per dozen

(August 2020 comparison 53.71 cents per dozen – 58.0 cents per dozen = -4.3 cents per dozen.)

Note 1: USDA Blended egg price

SEPTEMBER 2020

AUGUST 2020

USDA

Ex-farm Price (Large, White)

65.6 c/doz (Sept.)

53.7 c/doz (Aug.)

Cage-free to packing plant

151.0 c/doz (Sept.)

 151.0 c/doz. (Aug.)

Warehouse/Dist. Center

89.0 c/doz (Sept.)

75.0 c/doz (Aug.)

Store delivered (estimate)

94.0 c/doz (Sept.)

80.0 c/doz (Aug.)

Dept. Commerce Retail

132.8 c/doz (Aug.)

 140.1 c/doz (July)

Layer Feed Cost

 SEPTEMBER 2020

 AUGUST 2020

See note on source of data: now USDA

U.S. Average

$198.11/ton

$184.34/ton

High

$226.79/ton (West)

$209.83/ton (West)

Low

Differential

$181.06/ton (MW)

$45.73

$167.62/ton (MW)

$42.21

Pullet Cost (19 Weeks)

$3.82 SEPTEMBER 2020 $3.71 AUGUST 2020

VOLUMES OF PRODUCTION

PARAMETER

SEPTEMBER 2020

AUGUST 2020

Table-egg strain eggs in incubators

47.2 million (Sept.)

46.2 million (Aug.)*

Pullet chicks hatched

25.0 million (Aug.)

23.1 million (July)

Pullets to be housed in 5 months

22.6 million (Jan ‘21.)

20.8million (Dec.)

National Flock in farms over 30,000

300.0 million (Aug.)

299.2 million (July)*

National egg-producing flock

315.7 million (Aug)

314.9 million (July)*

Proportion flock in molt or post-molt

16.3% (Sept.)

16.3% (Aug.)

Total of hens in flocks over 30,000, 1st cycle (estimate)

 264.2 million (Aug.)

262.7 million (July)

* USDA Revisions

Total U.S. Eggs produced

8.03 billion (Aug.)

8.01 billion (July)

Cage-Free hens in production

80.0 million (Sept.)

21.5% Organic

78.4 million (Aug.)

20.2% Organic

“Top-5” States hen population (USDA)1

148.9 million (Aug.)

148.7 (July)

Note 1. Texas excluded to maintain confidentiality

PROPORTION OF U.S. TOTAL HENS BY STATE, 2020

Based on a nominal denominator of 300 million hens in flocks over 30,000 covering 95.2 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

AUGUST 2020

JULY 2020

Iowa

15.0%

14.9%

Indiana

10.8%

10.7%

Ohio

10.9%

10.7%

Pennsylvania

8.7%

9.0%

Texas (estimate)

6.0% ?

6.0% ?

California

4.2%

4.2%

  1. Values rounded to 0.1%

Rate of Lay, weighted hen-week (USDA) 80.9% (SEPTEMBER) 83.2% ? (AUGUST)

Actual per capita egg consumption 2016:- 275.3 (up 19.8 eggs from 2015)

Actual per capita egg consumption 2017:- 282.1 (up 6.8 eggs from 2016)

Actual per capita egg consumption 2018:- 287.8 (up 5.7 eggs from 2017)

Revised per capita egg consumption 2019:- 292.8 (up 5.0 eggs from 2018)*

Projected per capita egg consumption 2020:- 284.2 (down 8.6 eggs from 2019)*

Estimated per capita egg consumption 2021:- 287.4 (up 3.2 eggs from 2020)*

*Revised, using data from USDA Livestock, Dairy and Poultry Outlook September 18th 2020 taking into account the decreased demand from the food service sector

Egg Inventories at beginning of SEPTEMBER 2020:

Shell Eggs: 1.69 million cases down 7.7 percent from August 2020.

Egg Products: Not disclosed since March. Assume high level of dried egg.

Eggs broken under FSIS inspection (million cases) AUGUST: 6.280 JULY: 6.353

Cumulative eggs broken under FSIS inspection 2019 (million cases) 82.9 JAN. to DEC.

Cumulative 2020: number of cases produced to date (million) 177.7 JAN. to AUG.

Cumulative 2020: proportion of total eggs broken to date 27.9% (30.1% 2019)

Shell eggs broken YTD 2020:- 49.5 million cases.

EXPORTS AUGUST 2020: (Expressed as shell-equivalent cases of 360 eggs).

Parameter

Quantity Exported

Exports:

Shell Eggs (thousand cases)

JULY 356 AUGUST 490

Products (thousand case equivalents)

JULY 435 AUGUST 315

TOTAL (thousand case equivalents)*

JULY 791 AUGUST 805

*Representing 3.5 percent of National production in August 2020.

COMMENTARY ON SEPTEMBER 2020 COSTS AND STATISTICS

SEPTEMBER 2020 COST AND REVENUE DATA

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

From March 2019 onward some state data was withheld to maintain confidentiality where a company predominates in a specific state or region.

  • The USDA ex farm benchmark blended egg price in September 2020 increased by 22.2 percent or 11.9 cents per dozen from August 2020 to 65.6 cents per dozen, contributing to a Positive margin of 5.0 cents per dozen based on ‘nest-run’ eggs (delivered from the laying house) compared to a loss of 4.3 cents per dozen in August. The September 2020 USDA benchmark price of 65.0 cents per dozen should be compared to 57.5 cents per dozen for the corresponding month in 2019 and 75.4 cents per dozen in September 2018.
  • During September 2020, the feed component of production cost averaged 31.2 cents per dozen, up 7.9 percent from August 2020. For 2019 average feed price was 31.4 cents per dozen. The 2018 average feed cost was 33.3 cents per dozen compared with an average feed cost of 32.0 cents per dozen in 2017.
  • Combining data from the USDA and the EIC, producers recorded a positive margin of 5.0 cents per dozen at farm-level for generic-egg flocks in September 2020 compared to a negative margin of 4.3 cents per dozen in August 2020. For the first nine months of 2020 the cumulative algebraic margin was a positive 159.0 cents per dozen. The cumulative algebraic margin for 2019 was -33.3 cents per dozen or an average monthly loss of 2.8 cents per dozen. The cumulative margin for entire 2018 was a positive 424.0 cents per dozen or a monthly average of 35.3 cents per dozen. The algebraic margin for 2017 was a positive 39.2 cents per dozen, with the first eight months negative comparing production cost against USDA benchmark ‘nest run’ values. The algebraic average margin for 2016 was a loss of 9.6 cents per dozen with negative values recorded for eight consecutive months.
  • The simple average price of feed in September 2020 over 5-regions was $198.91 per ton, 7.9 percent higher (using USDA-AMS data) corresponding to $14.57 per ton compared to August 2020. Southwest data is no longer disclosed to avoid compromising a company that predominates in Texas. The highest cost among five regions was the West (including California) at $226.79 per ton can be compared to the lowest-cost region, the Midwest at $181.06 per ton. The average figure includes ingredients plus milling and delivery at a nominal $10 per ton.
  • The benchmark price of corn was $141.74 per ton in September 2020, up 13.8 per ton or 10.3 percent higher than the August 2020 price, taking into account the difference in basis paid by producers. An 8.4 percent increase of $26.13 per ton in the price of soybean meal to $336.42 per ton in September 2020 had a material effect on the increase in feed cost. There was a narrower differential of $45.73 per ton in feed price between the Midwest and the West compared to $47.21 per ton in August. The differential in corn price between the Midwest and the West in July was $46.94 per ton ($43.40 in August 2020).
  • Feed price will continue to be a major factor driving production cost and hence margin. Unknown factors influencing feed cost during the third and fourth quarters of 2020 will include uncertainty over international trade and especially exports to China, coupled with the economic and logistic effects of coronavirus restrictions. The decline in demand for crude oil and ethanol shuttered refineries in April depressing the price of corn. Substantial exports of soybeans to China, as they occur in market year 2020/2021 that began in September has increased domestic price and hence cost of production. Each $10 per ton difference in feed cost represents 1.75 cents per dozen.
  • The EIC calculated the 6-Region total nest-run production cost in September 2020 to be 60.6 cents per dozen, 2.6 cents per dozen higher than in August 2020. Production costs during September 2020 ranged from 57.4 cents per dozen in the Midwest up to 86.5 cents per dozen in California which was higher than the Midwest region by 29.2 cents per dozen.
  • Retail egg prices as determined by the Department of Commerce for AUGUDT 2020 averaged 132.8 cents per dozen, 7.3 cents per dozen or 5.2 percent lower than in August 2020. During August 2018 and 2019 retail prices were respectively 162.2 and 121.9 cents per dozen. Consistently since 2016 retail prices have not declined in proportion to ex-farm prices, allowing higher margins at retail, thereby depressing demand. From June through August shelf prices declined with restoration of normal purchasing patterns.

SEPTEMBER 2020 PRODUCTION DATA

  • According to USDA data, the estimated average complement of U.S. hens in flocks over 30,000 during August 2020 amounted to 300.0 million, reflecting a seasonal adjustment in flock size. The average total U.S. flock including hens in molt on all farms counted by the USDA amounted to 315.7 million in August 2020. The average end-of-year flock sizes over the past five years respectively were, 2012 (299 million); 2013 (308 million); 2014 (311 million); 2015 (291 million post-HPAI losses) and in 2016 (319 million). The December 2020 flock is projected to be 324.6 million, up 0.9 million or 0.3 percent from the August 2020 forecast.
  • The effect of COVID restrictions on the egg-breaking segment of the industry is noted in the decline in the flock size in Iowa. In January the state had 56.4 million hens with a progressive decline to 45.1 million in August. Low prices and COVID-related factors have reduced hen numbers by approximately 2 million hens in each of the next three leading states of Ohio, Indiana and Pennsylvania. Hens in U.S. flocks over 30,000 declined 6.9 percent or 22.4 million hens from 322.4 million in January to 300.0 million in August 2020.
  • Pullet chick hatch was up 8.3 percent in August 2020 to 25.0 million compared to the previous month at 23.1 million. It is evident that low seasonal prices will prevail through October into the fourth quarter and accordingly flock placements will be constrained by some producers cancelling pullet-chick orders.
  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA attained 16.3 percent of the national flock in September 2020, unchanged from August 2020. Producers molted flocks in response to the drop in price of generic eggs following the end of the April surge in demand. Annual average for molt and post-molt combined were 15.2 percent for 2019, 17.4 percent for 2018 and 18.0 percent in 2017. The high value of 23.8 percent in 2016 was due to the loss of hens during the 2015 HPAI epornitic.
  • The average monthly projections for pullets to be transferred to laying houses during the third and fourth quarters of 2020 will be 25.5 and 23.2 million respectively.
  • The projected hatchery supply flock (parent generation) attained 2.9 million hens in September 2020. Peak parent-flock placements rose to 3.1 million hens in production in June 2015, coinciding with the end of the HPAI epornitic, to a low of 2.5 million hens during the fourth quarter of 2016. Projections show a monthly average of 3.0 million breeder hens in production during the fourth quarter of 2020. The value may be revised depending on pullet chick orders as influenced by margins.
  • Average production of 80.9 percent in September 2020 compared to a questionable 83.2 percent in August 2020 reflects younger hens and early second-cycle hens in the national flock. More pullet flocks are at or just past peak production as reflected in the availability and low price of Medium-sized eggs. Average rate of lay attained 78.7 percent during 2016, 79.8 percent in 2017 and 79.2 percent in 2018. 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 will fall as weighted flock age increases or will rise due to early depletion and increasing the proportion of young hens in their first cycle.
  • The September 24th USDA Poultry Slaughter Report documented 2.8 million light spent-hens processed under FSIS inspection during August 2020, down 6.6 percent from July 2020 when hens were depleted after taking advantage of previously high prevailing prices. Spent-hens are shipped live to Canada from Northern-tier U.S. states or are rendered or composted in other regions. Approximately 14 million spent hens are disposed of each month.

AUGUST 2019 EXPORT DATA.

  • According to USDA-FAS data, 490,000 cases of shell eggs were exported in August 2020, compared to 356,000 in July 2020, representing 2.2 percent of total production. This value should be compared to the high value of 409,700 cases in March 2015 prior to the onset of HPAI.
  • During August 2020 the following regions were the leading importers:- North America,

comprising the two neighboring USMCA nations but predominantly Mexico (49.7 percent,

was 41.1 percent last month). East Asia (mainly Hong Kong/China) (24.2 percent, was 37.6

percent). The Caribbean and Central American Region combined represented 9.6 percent

of shell egg exports in August. Shipments to the Middle East rose to 72,000 cases from a

July volume of 32,000 cases or 14.7 percent of shell egg exports. (See egg export data in

the report in this edition)

  • Exports of egg products in August 2020 were down 27.5 percent from July 2020 to 315,000 case-equivalents, representing 1.4 percent of U.S. output. The following regions were the leading importers of egg products by proportion of volume shipped in August:- North America, our USMCA neighbors (8 percent was 54.7 percent), East Asia (23.8 percent). The Middle East increased to 2.2 percent following negligible exports in July. Southeastern Asia (4.8 percent), Central America, (4.1 percent) and the EU-27+UK (5.7 percent) represented the other significant importer of egg products from the U.S.
  • Collectively, exports of shell eggs and products in August 2020 represented the output from approximately 8.3 million hens in production during the month, attaining 805,100 case-equivalents, up 1.8 percent from July 2020. This was 16.1 percent lower compared to monthly average shipments of 960,000 case-equivalents exported over the first four months of 2015 prior to the advent of HPAI, indicating that international markets are being regained.

Maintaining export volume is attributed to cooperation between the AEB and USAPEEC, both in existing and new 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 August 2020 corresponded to 3.5 percent of a nominal national flock of approximately 300 million hens in production 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 avian influenza or END in a state or country.