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Egg Week

10/07/2021

USDA Weekly Egg Price and Inventory Report, October 7th 2021.

  • Shell inventory was up by 1.0 percent, following a similar rise during the past week reflecting continued oversupply relative to demand, consistent with the net addition of 0.5 million hens in the producing flock this week and 5.3 million increase over eight weeks. Increased consumer activity prior to the Labor Day Weekend and more intense buying before Hurricane Ida moved stock from shelves but predictably prices are now falling albeit now at a slower rate. Midwest prices for generics are still above breakeven taking into account the combined costs of nest-run, grading, packaging and delivery. Chains are spreading their purchases and are preempting anticipated price rises as a trend. It is possible that with a large National flock this strategy will suppress traditional pre-Christmas increases. Industry observers and participants expect buyers to adjust purchases only in response to retail demand and will hold down inventories in their DCs and stores. Since the beginning of 2021 generic eggs have been consistently priced, with a few exceptions, at levels to maximize margins. This strategy has depressed the volume of sales to the disadvantage of the industry. Market data suggests that chains have priced generic white eggs in response to prevailing demand and are not featuring generic Large or Extra large.

 

  • Currently inventory comprises close to five days of production. Price movement over the past eight months defies conventional supply to demand relationships and indicates extraneous factors affecting price. Wholesale Midwest prices for Extra- large and Large were down this past week after sequential declines. This suggests that prices have plateaued and will decline through October. The commercial shell-egg price discovery system is obviously used by buyers to negotiate lower prices, serving as a self-fulfilling prophecy and a de facto instrument of potential indirect, but not necessarily intentional, collusion. The current relationship between producers and chain buyers based on a single price discovery system constitutes an impediment to a free market. The benchmark price amplifies both downward and upward swings and functions to the detriment of the industry. A CME quotation based on Midwest Large, responding to demand relative to supply would be more equitable.

 

  • The U.S. flock in production was up 0.2 percent (0.5 million hens) from the week of September 29th to 315.5 million consistent with seasonal depletions but with about 2.0 million molted hens having resumed production during the past month. The Industry previously demonstrated beneficial restraint in flock placement with continued depletions and non-restocking of some complexes or houses. The trend going forward into October is for a stable flock with a build in November. Margins will continue to decline for commodity eggs unless matched by increased demand as predicated by prevailing seasonal wholesale prices over the past four weeks.

 

  • The USDA average Midwest benchmark prices for generic Extra Large and Large were unchanged over the past week to averages of 107.5 and 105.5 cents per dozen respectively. Mediums were also unchanged at 75.5 cents per dozen. Second quarter prices reflected static demand, offset by decreases in the U.S. flock in production. The trajectory of prices through the last week of September suggests a small decline moving into October as confirmed by the benchmark price discovery system. Margins going forward will be shaved despite stability in feed price but with higher labor and fuel costs especially as unit revenue erodes.

 

  • There is some prospect of a return of the food service sector with both frozen and dried-egg prices marginally higher over the past month. The economy is reopening with a recent decline in COVID incidence rates and hospitalizations in many regions. There is some optimism over the rate of deployment and acceptance of the three vaccines especially in rural areas and inner city zones. Reopening of the economy and schools in specific areas with low population immunity has resulted in a surge in the incidence rate of COVID. This is especially the case following the introduction and dissemination of the Delta variant of SARS-CoV-2 virus that is more infectious and possibly with higher pathogenicity than the alpha and beta strains especially among the non-immunized proportion of the population that represent an overwhelming majority of those hospitalized.

 

  • The Midwest price for breaking stock was up 0.8 percent to an average of 63.0 cents per dozen. Checks in the Midwest were 0.9 percent lower to an average of 54.5 cents per dozen. It is anticipated that these prices will fluctuate in response to market trends and gradual recovery of the breaking sector.

 

OVERVIEW

Prices

According to the USDA Egg Market News Reports released on October 4th, the Midwest wholesale prices for Extra-large were unchanged at an average of 107.5 cents per dozen; Large were unchanged at 105.5 cents per dozen; Mediums were unchanged at 75.5 cents per dozen as delivered to DCs. Prices should be compared with the USDA benchmark average 6-Region blended nest-run, (excluding provisions for packing, packaging materials and transport) cost of 69.7 cents per dozen in August 2021. The progression of prices during 2021 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

 

The October 4th 2021 edition of the USDA Egg Market News Report (Vol. 68: No. 40) documented a USDA Combined Region value rounded to the nearest cent, of $1.17 per dozen delivered to warehouses for the week ending September 27th 2021. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.06 per dozen. At the high end of the range, price in the South Central Region attained $1.25 per dozen. The USDA Combined Price last week was 32 cents per dozen above the 3-year average. This past week Midwest Large was approximately 27 cents above the corresponding week in 2020.

Flock Size

According to the USDA the number of producing hens reflecting October 6 th (rounded to 0.1 million) was 0.5 million higher to 315.5 million contributing to a net decline of 2.8 million hens over 23 weeks. If USDA data is accurate, the producing flock contains molted hens now coming back into production with approximately 4.5 million new pullets reaching maturity during the week, offset by flock depletion. The hen population producing eggs is in slight excess relative to current consumer demand. Exports are moderate to high but industrial and food service off-take although increasing, has not reverted to pre-COVID levels. Any number of producing hens above a subjectively determined range of 312 to 315 million in production during the second week of October, portends lower prices with increased inventory, as is currently evident, unless matched by proportional increases in demand. Prices are generally following seasonal trends although at higher absolute values compared to 2020. Declines are now expected given the rise in inventory over successive weeks following the Labor Day weekend. The oversupply is attributed to the contribution of hens returning to production from molt plus maturing pullets.

 

The total U.S. egg-flock was up 0.5 million hens (rounded to 0.1 million) to 321.3 million hens including second-cycle birds and those in molt. The difference of 5.8 million hens (5.8 million last week) between hens in production and total hens is equivalent to 1.8 percent of the national flock, suggesting that despite an apparent increase in the disposal of older flocks, molted hens are still resuming production. In addition, young pullets will commence lay consistent with chick placements in late April 2021.

 

The obvious reduction in hen numbers in Iowa and to a lesser extent among the next three largest egg-producing states that occurred following the onset of COVID-19 in February 2020 has been partly reversed with flocks trending to pre-COVID numbers. Chick placement data suggests that 22.4 million pullets per month commenced production during the second quarter of 2021 and 27.0 million per month are projected for the third quarter. This has implications for prices, given current supply and stock levels in relation to anticipated depressed demand during the fourth quarter.

 

INVENTORY LEVELS

Cold storage stocks of frozen products in selected regions on October 4th 2021 amounted to 2.411 million pounds (1,096 metric tons) of frozen egg products, 0.7 percent less than the level of 2.429 million lbs. on September 1st 2021.

 

The most recent monthly USDA Cold Storage Report released on September 23rd 2021 documented a total stock of 26.8 million pounds (12,169 metric tons) of frozen egg products on August 31st 2021. This value was down 31.8 percent from August 31 st 2020. (26.8 million on July 31st 2021). A total of 87.1 percent of combined inventory comprised the categories of “Whole and Mixed” (40.1 percent) and “Unclassified” (47.0 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 October 4th 2021 was higher by 1.0 percent after an increase of 1.0 percent for the preceding week. Combined with breaking stock, the total inventory of shell eggs now at 1.99 million cases. The U.S. population of laying hens at this time is influenced by the number of flocks retained after molting coupled with chick placements made in late April 2020. Going forward, older hens will assume a smaller proportion of the national flock as molted flocks are depleted.

 

Four of the six USDA Regions reported higher stock levels. These are listed in descending stock level:-

  • The Midwest Region was up 0.9 percent compared to the previous week to 550,700 cases.
  • The South Central Region, was down 1.4 percent to 357,000 cases
  • The Southeast Region was up 0.8 percent to 274,000 cases
  • The Northeast Region was up 9.3 percent to 231,500 cases.
  • The Southwest Region was up 0.6 percent to 139,100 cases
  • The Northwest Region was down a noteworthy 5.7 percent to 109,600 cases

 

The total USDA six-area stock of commodity eggs comprised 1,986,800 cases, of which 83.6 percent were shell eggs (82.9 percent last week). The inventory of breaking stock was down 4.3 percent to 325,000 cases. The value of breaking stock and hence availability from both mature and young flocks is influenced by the demand for generic shell eggs and contract obligations with breakers. Low prices for shell eggs diverts uncommitted product from the shell market to breaking with a concurrent decrease in the proportion of in-line breaking with changes in price and inventory of contractors’ eggs.

 

On Monday October 4th the inventory of other than generic eggs (with previous week in parentheses) comprised:-

  • Specialty category, up 5.4 percent to 39,000 cases. (was down 15.1% to 37,000 cases)
  • Certified Organic, up 4.1 percent to 108,500 cases. (was down 9.3% to 104,200 cases)
  • Cage-Free, down 4.7 percent to 151,600 cases. (was up 3.0% to 159,100 cases)

 

Demand for cage-free product will not increase materially while generic eggs from caged flocks and surplus cage-free eggs are on the shelf at $1.00 to $1.45 per dozen over the long term. Existing and proposed individual state legislation mandating sale of only cage-free eggs will support most of the anticipated transition from cages but total re-housing will not be completed, if ever, by the beginning of 2025, less than 39 months away. An appeal regarding the constitutionality of California Proposition #12 was not granted certiorari by SCOTUS, letting stand the lower court decision. With the current proportion of non-caged flocks, cage-free eggs are becoming a commodity in some markets subjected to the same price pressures as generic eggs from caged hens.

 

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, shell color, GM status and nutritional enrichment is self-evident.

 

RELATIVE PRICES OF SHELL-EGG CATEGORIES

The following advertised retail prices for the week ending October 7 th, (compared with the previous week in parentheses) were posted by the AMS on October 4th for dozen packs:

    

USDA Certified Organic, Brown, Large: $3.93 ($3.76)

    

Cage-Free Brown, Large: $2.47 ($2.79)

    

Omega-3 Enriched Specialty, White, Large: $2.25 ($2.31)

    

Generic White, Large Grade A $1.04 ($1.02)

    

Generic White, Large Grade A (Feature price) $1.14 ($1.14)

 

The retail price this week as determined by the USDA-AMS for generic white Large Grade A was unchanged from last week at $0.99 reflecting a continued slightly higher margin taken by chains three weeks after the holiday weekend. Shelf price will not materially decrease demand for this category given the higher advertised prices for cage-free brown eggs. Clearly demand is not balanced relative to supply based on the successively higher inventory of shell eggs over the past four weeks. The restraint to demand for shell eggs is both seasonal in addition to the decline in home cooking as COVID restrictions are lifted.

 

During the present week the USDA benchmark-advertised retail price of brown Cage-Free was down 11.8 percent or 33 cents per dozen to $2.47 per dozen. (last week USDA advertised price was $2.79 per dozen). Certified organic was up 4.5 percent or 17 cents per dozen to $3.93 per dozen. The differential in advertised price between cage-free brown and certified organic was $1.46 per dozen ($0.97 per dozen last week) suggesting relatively higher demand for cage-free brown over certified organic during the current week. The differential between cage-free brown and generic white Grade AA was $1.43 per dozen this week, (last week $1.77 per dozen) favoring the generic white category. Preference for cage-free brown is evident with a price differential lower 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.

 

There was a $0.68 per dozen difference between the advertised per dozen prices for cage-free brown ($2.47) and cage-free white ($1.79).

 

Features for the major categories this week by proportion included Organic (14.3 percent down from 20.9 percent last week); Cage-free (42,7 percent, up from 27.6 percent) and Omega-3 enriched (24.9 percent, down from 31.1 percent). Other categories amounted to 18.1 percent of features

 

USDA Cage-Free Data

According to the latest monthly USDA Cage-free Hen Report released on October 4th 2021, the number of certified organic hens during September 2021 was revised downward from August to 17.4 million.

 

The USDA reported a 1.6 percent increase in the cage-free (non-organic) flock to 75.1 million in September compared to August and 12.8 percent higher than an average of 66.6 in Q1 2021.

 

The stated population of hens producing cage-free and certified organic eggs in September 2021 comprised:-

Total U.S. flock held for USDA Certified Organic production = 17.4 million (17.5 million in Q2 2021).

Total U.S. flock held for cage-free production = 75.1 million (68.5 million in Q2 2021).

Total U.S. non-caged flock = 92.5 million (86.0 million in Q2 2021).

 

This total value represents 28.9 percent of a nominal 320 million total U.S. flock but 40.8 percent of a presumed pre-COVID flock of 224 million producing for the shell-egg market. Hens certified under the USDA Organic program have not increased in proportion to cage-free flocks since Q1 2021. The accuracy of individual monthly values is questioned given either sharp changes or periods of no change as evidenced over the past two years. Precise quarterly reports would be more suitable for the industry in planning expansion and allocation of capital.

 

Processed Eggs

For the processing week ending October 2nd 2021 the quantity of eggs processed under FSIS inspection as reported on October 6th 2021 was down 2.3 percent compared to the previous processing week to a level of 1,548,580 cases (1,584,167 cases last week). The proportion of eggs broken by in-line complexes was 54.5 percent (was 53.0 percent last week) denoting more non-committed eggs consigned to the shell market. With lower prices for shell eggs there is a trend to divert non-contracted eggs from shell sales to breaking and vice versa resulting in either a higher or lower proportion of in-line breaking. This past week 69.3 percent of egg production was directed to the shell market, (68.5 percent for the previous week) consistent with lower prices for shell eggs. Breaking stock inventory was down 4.3 percent this past week (down 0.8 percent last week). There is evidence of slight recovery in the food service sector, especially for QSRs, offset by decreased demand from baking and eat-at-home. During the corresponding processing week in 2020 (during-COVID) in-line breakers processed 55.1 percent of eggs broken.

 

For the last available monthly report dated September 4th 2021, yield from 6,192,503 cases (6,680,840 cases last month) denoted an increase in demand for liquid over the period August 1st 2021 through August 28th 2021. Edible yield was 38.0 percent, distributed in the following proportions expressed as percentages:- liquid whole, 58.1; white, 25.8; yolk 12.5; dried, 3.6.

 

All eggs broken during YTD 2021 attained 57.6 million cases, 1.1 percent more than the corresponding period during 2020 attributed to increasing demand for egg liquids from food service and QSRs and casual dining restaurants.

 

Consumption of liquids is still constrained by COVID-19 home-cooking resulting in diversion of breaking stock into the shell market partly balanced by a reduction in hens dedicated to breaking.

 

PRODUCTION AND PRICES

Breaking Stock

The average price for breaking stock was up 0.8 percent to an average of 63.0 cents per dozen with a range of 61 to 65 cents per dozen delivered to Central States plants on October 4th. Checks were 0.9 percent lower to an average of 54.5 cents per dozen over a range of 52 to 78 cents per dozen. Average revenue for both breaking stock and checks should be compared to the benchmark production cost for nest-run Large, estimated by the USDA at 69.7 cents per dozen for August 2021.

 

Shell Eggs

The USDA Egg Market News Report released on October 4th confirmed that Midwest prices for Extra Large, Large and Medium were unchanged from the previous week. There is an imbalance between production and demand accentuated by the price discovery system in use. The following table lists the “most frequent” ranges of values as delivered to warehouses*:-

    

Size/Type

Current Week

Previous Week

    

Extra Large

106-109 cents per dozen

Unchanged

    

Large

104-107 cents per dozen

Unchanged

    

Medium

74-77 cents per dozen

Unchanged

    

Certified Organic EL

275-310 cents per dozen

Unchanged long term

    

Breaking stock

61-65 cents per dozen

61-64 Up +0.8%

    

Checks

52-57 cents per dozen

52-58 Down 0.9%

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

 

The October 4th 2021 Midwest 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, with the previous week in parentheses:-

    

EL. $0.98 ($0.98), (estimated by proportion): L. $0.86 ($0.88): M. $0.58 ($0.56)

 

The October 4th 2021 California prices per dozen for cage-free, California-compliant product in cartons delivered to a DC, with the previous week in parentheses:-

    

EL. $1.84 ($1.84); L. $1.74 ($1.74); M. $1.33 ($1.33)

(See the text, tables and figures and the review of production data and prices comprising the USDA costs for August 2021 and the First Quarter FY 2021 results for Cal-Maine Foods under the Statistics Tab)

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for OCTOBER 6th 2021 was up 0.6 points from the last weekly report to -3.2 with a 1.0 percent increase in inventory from the past week as determined by the USDA-ERS as follows:-

    

Productive flock

315,491,600 million hens

    

Average hen week production

82.2% (was 82.0%)

    

Average egg production

259,450,080 per day

    

Proportion to shell egg market

68.5% (was 69.0%)

    

Total for in-shell consumption

499,468 cases per day

    

USDA Inventory

1,661,800 cases

    

26-week rolling average inventory

5.11 days

    

Actual inventory on hand

5.28 days

    

Shell Egg Demand Indicator

-3.2 points (was -3.8 on September 29th 2021)

 

Dried Egg Products

Prices for dried whole-egg and yolk products (most frequent price with a range in $ per pound) effective October 1st 2021 compared to the previous week were higher denoting increased demand from the institutional sector:-

    

Whole Egg

$3.70-$3.85

Up $0.05 on both ends of the range.

    

Yolk

$2.80-$2.95

Up $0.20 on both ends of the range.

    

Spray-Dried White

$4.70-$4.90

Unchanged

    

Blends

$2.75-$2.80

No new quotation

 

Prices for frozen egg products (most frequent price with a range in cents per pound) effective October 1st 2021 compared to the previous week were:-

    

Whole Egg

$0.96 - $0.99

$0.93 - $0.96

    

White

$0.65 - $0.67

Unchanged

    

Average for Yolks

$1.43 - $1.48

$1.38 - $1.43

 

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

 

COMMENTS

There are reports with increasing frequency in the E.U. of continued shedding of H5N8 and other H5 strains by migratory waterfowl with mortality recently in central Holland in addition to raptors and some wild species. Outbreaks of HPAI on commercial farms are attributed to contact between wild birds and both domestic chicken, turkey and duck flocks, many of which are on pasture. Most veterinary authorities in Western Europe are advising or mandating flock confinement with the prospect of relaxation only if justified by incidence rates. Avian influenza strains H5 and H7 persist in Western and Eastern Europe and both West and Southern Africa and isolations continue from free-living birds, backyard flocks and commercial farms.

 

France is considering changing from an “annual eradication” program to vaccination against H5 and H7 strains of avian influenza. Free-range chickens and especially waterfowl maintained by the foie gras industry, comprising numerous small-scale family operations are devastated at almost yearly intervals requiring indemnity payments for control including preemptive depletion.