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Egg Week

01/12/2022

USDA Weekly Egg Price and Inventory Report, January 12th 2022.

Market Overview

  • Unit revenue for Midwest Extra-large and Large sizes after the Christmas surge was predictably down by an average of 13.6 percent this past week following a 7.5 percent drop in price over the previous week. Mediums were down 3.1 percent. The decrease in all sizes this past week coupled with rise in industry inventory above 2.0 million cases suggests a full pipeline and weakening demand moving through January 2022. December 2021 and early January 2022 prices contrasted favorably with the corresponding weeks in 2020 and 2021 respectively that were characterized by low ex-plant unit revenue. The price of shell-eggs will not be unduly affected by a net decrease of 1.2 million hens in the producing flock this past week but with a 13.1 million net increase in flock size over 22 weeks. Wholesale Midwest prices retreated positive margins still prevail, taking into account the combined costs of nest-run, grading, packaging and delivery.

 

  • Shell inventory was 1.8 percent higher after an 8.5 percent increase over the previous week, indicating that the pipeline from packing plants to the retail shelf has been filled although supply is more in balance with demand. It is now apparent that the inventory held by chains and other significant distributors may be more important in establishing wholesale price than the published USDA inventory for plants, especially over the short term. Chains spread their purchases in December and attempted to preempt anticipated pre-Christmas price rises. Industry observers and participants expected buyers to adjust purchases only in response to retail demand to hold down inventories in their DCs and stores while marking up shelf margins and pressuring suppliers for rapid replenishment of stocks to DCs and through DSD. Since the beginning of 2021 generic eggs have been priced, with a few exceptions, at levels to maximize store margins. This strategy noted during October and early November depressed the volume of sales of generics to the disadvantage of the industry. Market data suggests that chains have priced generic white eggs in response to prevailing demand and are infrequently featuring generic Large or Extra large.

 

  • Currently inventory has increased in response to the action of chain buyers and comprises close to five days of production. Price movement during 2021 and specifically since Labor Day and extending through Christmas defied conventional supply to demand relationships and indicates extraneous factors affecting price of eggs that are not constrained by an indexed feed-price arrangement. The decrease in price this past week suggests that unit revenue continues a seasonal decline through January 2022 after a one-week plateau that followed high pre-Christmas prices. 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 down 0.2 percent (0.6 million hens) from the week of January 5th to 324.1 million consistent with planned seasonal molting, placement and depletion, but with about 2.5 million molted hens having resumed production during the late weeks of December. The Industry demonstrated beneficial restraint in flock placement during the third and fourth quarters with continued depletions and non-restocking of some complexes or houses and disposal of flocks in the week before Christmas. Margins should continue to decline for commodity eggs due to decreased demand as predicated by the pattern of seasonal wholesale prices over the past three weeks. Production margins will be negatively impacted by increased prices for feed and pullet chicks. Higher labor and fuel costs will detract from profit especially if unit revenue fails to match expectations during the first quarter of 2022.

 

  • There is some prospect of a return in the food service sector with frozen egg prices marginally higher over the past month. The economy is reopening despite ongoing concern over COVID incidence rates and hospitalizations in many regions. There is some optimism over the rate of deployment and acceptance of the three available approved vaccines and boosters in diverse regions and among numerous demographics.

 

  • The Midwest price for breaking stock was down 1.4 percent to an average of 72.5 cents per dozen. Checks in the Midwest were down 1.1 percent to an average of 63.5 cents per dozen. It is anticipated that these prices will fluctuate in response to market trends and gradual recovery of the breaking sector.

 

The Week in Review

Prices

According to the USDA Egg Market News Reports released on January 10th, the Midwest wholesale price for Extra-large was 13.5 percent lower to an average of 128.5 cents per dozen; Large were 13.7 percent lower to an average of 126.5 cents per dozen; Mediums were lower by 3.1 percent to 95.5 cents per dozen as delivered to DCs. Prices should be compared with the USDA benchmark average 6-Region blended nest-run cost (excluding provisions for packing, packaging materials and transport) of 71.8 cents per dozen in December 2021. The progression of prices during 2021 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

 

The January 10th 2021 edition of the USDA Egg Market News Report (Vol. 69: No. 02) documented a USDA Combined Region value rounded to the nearest cent, of $1.57 per dozen delivered to warehouses for the week ending January 3rd 2022. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.47 per dozen. At the high end of the range, price in the South Central Region attained $1.65 per dozen. The USDA Combined Price last week was 60 cents above the 3-year average. This past week Midwest Large was approximately 73 cents above the corresponding week in 2021. Prices followed a plateau after Christmas and then fell with an anticipated downward trajectory in the near term given the full pipeline moving through January 2022.

 

Flock Size

According to the USDA the number of producing hens reflecting January 12 th (rounded to 0.1 million) was 0.6 million lower to 324.1 million. 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. Based on inventory level the hen population producing eggs is in excess in relation to current consumer demand. Exports in November were lower than October with negligible shell exports to South Korea following restoration of flocks previously depleted due to HPAI. 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 322 to 324 million in production during the first half of January, portends lower prices depending on relative levels of producer and store inventories. For the next week prices will decline, given the increases in inventory over the past two weeks. Oversupply as denoted by inventory is attributed to the contribution of hens returning to production from molt in early December 2021 coupled with pullets placed 24 weeks earlier that are now in production.

The total U.S. egg-flock was down 0.6 million hens (rounded to 0.1 million) to 328.1 million including second-cycle birds and those in molt. The difference of 4.0 million (4.0 million last week) between hens in production and total hens is equivalent to 1.2 percent of the national flock, suggesting that older flocks were depleted consistent with a decline in post-Christmas demand. In addition, young pullets will commence laying consistent with chick placements in late-July 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 upwards but still below pre-COVID numbers. Chick placement data suggests that 24.3 million pullets per month commenced production during the fourth quarter of 2021 and 21.2 million per month are projected for the first quarter of 2022. This has implications for prices, given current supply and stock levels in relation to anticipated depressed demand following the Christmas surge.

 

INVENTORY LEVELS

Cold storage stocks of frozen products in selected regions on January 10th 2022 amounted to 2.417 million pounds (1,099 metric tons) of frozen egg products, up 1.1 percent from the level of 2.391 million lbs. on January 1st 2022.

 

The most recent monthly USDA Cold Storage Report released on December 22nd 2021 documented a total stock of 23.1 million pounds (10,513 metric tons) of frozen egg products on November 30th 2021. This value was down 28.7 percent from November 30 th 2020. (26.4 million on October 31st 2021). A total of 89.7 percent of combined inventory comprised the categories of “Whole and Mixed” (42.7 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 January 10th 2022 was modestly higher by 1.8 percent after an increase of 8.5 percent over the previous week. Combined with breaking stock, the total inventory of shell eggs in the industry is now at 2.07 million cases (2.04 million last week, up 160,000 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 in late-July 2021. Going forward, older hens will assume a smaller proportion of the national flock as they are culled and more pullet flocks commence production.

 

Three USDA Regions reported higher stock levels. These are listed in descending amounts:-

  • The Midwest Region was up 4.1 percent compared to the previous week to 561,100 cases.
  • The Southeast Region was down 0.1 percent to 325,700 cases
  • The South Central Region was down 1.8 percent to 323,200 cases
  • The Northeast Region was up 4.0 percent to 261,200 cases.
  • The Southwest Region was down 7.2 percent to 148,700 cases
  • The Northwest Region was up 14.6 percent to 121,300 cases

 

The total USDA six-area stock of commodity eggs comprised 2,072,200 cases, up 1.6 percent, of which 84.0 percent were shell eggs (83.9 percent last week). The inventory of breaking stock was up 0.6 percent to 321,000 cases. Inventory of breaking stock increased disproportionately to shell stock suggesting higher demand for liquids. 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. Higher prices for shell eggs diverts uncommitted product to the shell market from breaking with a concurrent increase in the proportion of in-line breaking and with changes in price and inventory for contractors’ eggs.

 

On January 10th 2022 the inventory of other than generic eggs (with the previous week in parentheses) comprised:-

  • Specialty category, down 9.9 percent to 41,100 cases. (was up 23.5% to 45,600 cases)
  • Certified Organic, down 6.8 percent to 110,400 cases. (was up 2.6% to 118,500 cases)
  • Cage-Free category, down 8.9 percent to 247,600 cases. (was up 18.6% to 271,700 cases)

 

Demand for cage-free product will not increase materially while generic eggs from caged flocks and surplus down-classified cage-free eggs are on the shelf at $1.10 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 36 months away. A previous appeal regarding California Proposition #12 was not granted certiorari by SCOTUS, letting stand the lower court decision concerning the constitutionality of the California law with respect to supply states. New petitions to SCOTUS have been filed by associations representing livestock producers and red-meat packers. The California Department of Food and Agriculture has accordingly issued a revised draft of regulations for comment. With the current proportion of non-caged flocks, cage-free eggs are surplus to demand and 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 January 13 th 2022, (compared with the previous week in parentheses) were posted by the AMS on January 10th for dozen packs:

USDA Certified Organic, Brown, Large: $3.62 ($3.29)
Cage-Free Brown, Large: $2.24 ($2.22)
Omega-3 Enriched Specialty, White, Large: $2.41 ($2.29)
Generic White, Large Grade AA $0.87* ($0.88)
Generic White, Large Grade A (Feature price) $1.00 ($1.22)

 

* based on 18-egg pack

 

The advertised retail price this week as determined by the USDA-AMS for generic white Large Grade AA based proportionately on an 18-egg pack was down 1.1 percent or 1.0 cent per dozen from last week to $0.87 reflecting a considerably lower margin taken by chains operating during the pre-New Year period. Lower shelf price may increase demand for this category noting the relatively higher advertised prices for cage-free brown and certified organic eggs. Current demand is probably lower than supply as stock continues to be delivered to DCs and stores accumulating albeit with a lower rate within the industry this past week. Demand for shell eggs should now decline in response to seasonal trends. Retail purchases will continue although at a lower level by home cooking and baking reinforced by dining out as COVID restrictions are lifted.

 

During the present week the USDA benchmark-advertised retail price of brown Cage-Free was up 0.9 percent or 2 cents per dozen to $2.24 per dozen. (last week USDA advertised price was $2.22 per dozen). Certified organic was up 10.0 percent or 33 cents per dozen to $3.62 per dozen (last week $3.29 per dozen). The differential in advertised price between cage-free brown and certified organic was $1.38 per dozen ($1.07 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 $1.37 per dozen this week, (last week $1.34 per dozen) suggesting higher demand for generic white at the expense of the cage-free brown category of which there is a large stock. Preference for cage-free brown over generic white 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.

 

The advertised price for cage-free white was $1.97 per dozen, 27 cents less than cage-free brown at $2.24 per dozen

 

Features for the major categories this week by proportion included Organic (43.4 percent up from 21.3 percent last week); Cage-free (26.2 percent, up from 23.0 percent) and Omega-3 enriched (24.2 percent, down from 41.1 percent). Other categories amounted to 6.2 percent of features with the Large category predominating at 4.6 percent of the total consistent with young hens in the national flock and relatively low prices for breaking stock.

 

USDA Cage-Free Data

According to the latest monthly USDA Cage-free Hen Report released on January 3rd 2021, the number of certified organic hens during December 2021 was revised up 4.6 percent from November to 18.2 million.

 

The USDA reported a 13.7 percent increase in the cage-free (non-organic) flock to 92.9 million in December compared to November 2021 and 28.4 percent higher than an average of 72.6 in Q3 of 2021.

 

According to the USDA the population of hens producing cage-free and certified organic eggs in December 2021 comprised:-

 

Total U.S. flock held for USDA Certified Organic production = 18.2 million (17.6 million in Q3 2021).
Total U.S. flock held for cage-free production = 92.9 million (72.3 million in Q3 2021).
Total U.S. non-caged flock = 111.1 million (89.9 million in Q3 2021).

 

This total value represents 33.7 percent (last month 29.5 percent) of a nominal 330 million total U.S. flock but 49.6 percent (last month 42.1 percent) of a presumed pre-COVID flock of 224 million producing for the shell-egg market. Hens certified under the USDA Organic program have decreased 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 January 8th 2022 the quantity of eggs processed under FSIS inspection during the week as reported on January 12th 2021 was up 6.5 percent compared to the previous processing week to a level of 1,583,290 cases (1,485,371 cases last week). The proportion of eggs broken by in-line complexes was 54.9 percent (was 57.8 percent for the past week) denoting higher collection from contractors. With lower prices for shell eggs during the current week there will be a trend to redirect non-contracted eggs from shell sales to breaking. The relative prices of eggs for shell sales and breaking will determine the movement of uncommitted eggs. This past week 69.5 percent of egg production was directed to the shell market, (71.4 percent for the previous week) consistent with higher prices for shell eggs. Breaking stock inventory was up 0.6 percent this past week to 331,000 (up 10.5 percent for the previous week). There is evidence of a slight recovery in the food service sector, especially for QSRs and casual dining, complemented by increased demand from baking and eat-at-home. During the corresponding processing week in 2020 (during-COVID) in-line breakers processed 53.2 percent of eggs broken.

 

For the last available monthly report dated June 12th 2021, yield from 7,604,468, cases (6,120,364 cases last month) denoted a decrease in demand for liquid over the period November 28th 2021 through January 1st 2022. Edible yield was 37.8 percent, distributed in the following proportions expressed as percentages:- liquid whole, 58.3; white, 24.8; yolk, 12.4; dried, 4.3.

 

All eggs broken during 2021 attained 77.8 million cases, 2.6 percent more than 2020 attributed to increasing demand for egg liquids from food service and QSRs and casual dining restaurants with restoration of service as COVID restrictions are relaxed.

 

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 down 1.4 percent this past week to an average of 72.5 cents per dozen with a range of 71 to 74 cents per dozen delivered to Central States plants on January 10th. Checks were down 1.3 percent to an average of 63.5 cents per dozen over a range of 61 to 66 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 71.8 cents per dozen for December 2021.

 

Shell Eggs

The USDA Egg Market News Report released on January 10 th 2022 confirmed that Midwest prices for Extra Large and Large were lower by 13.6 percent on average compared to the previous week. Mediums were down 3.1 percent. The downward move in prices this week reflects slowing seasonal demand with retailers presumably depleting stock and deferring some purchases in anticipation of lower prices guided by the price discovery system in use. This is evidenced by a sharp increase in inventory last week and consecutive increases in weekly shell-egg inventory leading into the pre-Christmas week. The following table lists the “most frequent” ranges of values as delivered to warehouses*:-

Size/Type

Current Week

Previous Week

Extra Large

127-130 cents per dozen

147-150 Down 13.5%

Large

125-128 cents per dozen

145-148 Down 13.7%

Medium

94-97 cents per dozen

97-100 Down 3.1%

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

71-74 cents per dozen

71-76 Down 1.4%

Checks

61-66 cents per dozen

62-67 Down 1.3%

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

 

The January 10th 2022 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 higher from last week, with the previous week in parentheses:-

        EL. $1.09 ($1.33), (estimated by proportion): L. $1.05 ($1.29): M. $0.76 ($0.79)

The January 10th 2022 California prices per dozen for cage-free, California-compliant product in cartons delivered to a DC, with the previous week in parentheses demonstrated the effect of Proposition #12:-

        EL. $2.57 ($2.37); L. $2.55 ($2.35); M. $1.79 ($1.73)

(See the text, tables and figures and the review of production data and prices comprising the USDA costs for December 2021 in this edition and the Second Quarter FY 2022 results for Cal-Maine Foods under the Statistics Tab)

 

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for January 12th 2021 was down 4.4 points from the last weekly report to -7.3 with a 1.8 percent increase in inventory from the past week as determined by the USDA-ERS as follows:-

Productive flock

324,115,935 million hens

Average hen week production

82.3% (was 82.4%)

Average egg production

266,854,624 per day

Proportion to shell egg market

69.5% (was 71.4%)

Total for in-shell consumption

515,079 cases per day

USDA Inventory

1,741,200 cases

26-week rolling average inventory

4.98 days

Actual inventory on hand

5.37 days

Shell Egg Demand Indicator

-7.3 points (was -2.9 on January 5th 2022)

Dried Egg Products

Prices for dried whole-egg and yolk products (most frequent price with a range in $ per pound) effective January 7th 2022 compared to the previous week were unchanged denoting static demand from the domestic and export markets:-

Whole Egg

$3.97-$4.12

Unchanged

Yolk

$3.50-$3.60

Unchanged

Spray-Dried White

$4.80-$5.00

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 January 7th 2022 compared to the previous week were unchanged suggesting little or no increase in demand from manufacturing and retail sectors:-

Whole Egg

$1.10 - $1.1

$1.08-1.13

White

$0.65 - $0.68

Unchanged

Average for Yolks

$1.61 - $1.66

Unchanged

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

Increasingly frequent reports from the E.U. document shedding of H5N1 and other H5 strains by migratory waterfowl with mortality recently recorded in Holland, Israel, Italy, Ireland, France, Poland, Romania, Estonia, Bulgaria and the U.K., in addition to isolation of AI virus from waterfowl, raptors and some wild species. Outbreaks of HPAI are occurring on commercial farms 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 no prospect of relaxation due to widespread recovery of H5N1 HPAI from migratory waterfowl in Serbia, the U.K. and the Netherlands. Avian influenza strains H5 and H7 persist in Western and Eastern Europe, Asia and both Western and Southern Africa.

 

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

 

A case of Low-pathogenicity H7 avian influenza was reported from a multi-species non-commercial farm in Stanislaus County, CA. in early October, with restrictions due to expire this week. This event has had minimal impact on exports as receiving nations have imposed limited zone or county restrictions but denotes the danger of introducing infection. On November 22nd H5 low pathogenicity avian influenza was diagnosed on routine pre-harvest surveillance of a flock of growing turkeys in Kandiyohi County, MN. The farm has been quarantined and surveillance failed to identify additional cases.

 

There is concern over two H5N1 outbreaks in an exhibition unit and a backyard flock near St. Johns, Province of Newfoundland and Labrador confirming the presence of this AI strain in the Atlantic Flyway.

 

Webinars have been presented by USPOULTRY and USDA-APHIS to increase the level of awareness for biosecurity on egg-producing farms. This recognizes the deteriorating situation in the E.U and migration of free-ranging species in the U.S.