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Egg Monthly

10/07/2022

REVIEW OF SEPTEMBER 2022 EGG PRODUCTION COSTS AND STATISTICS.

 

SEPTEMBER HIGHLIGHTS

  • September 2022 USDA ex-farm blended USDA nest-run benchmark price was 269.8 cents per dozen, 41.6 percent higher than the August 2022 value of 190.6 cents per dozen. For comparison average USDA benchmark price for 2021 was 84.3 cents per dozen with a range of 58.0 cents per dozen in June to a high of 123.6 in December. Stock levels and prices prior to the onset of flock depletion due to HPAI indicated a relative seasonal balance between supply and demand. Prevailing wholesale prices will be largely dependent on consumer demand in an inflationary environment, with the potential to impact retail sales and margins. Other considerations include diversion to shell sales from the egg-breaking sector and fluctuation attributed to the amplification of changes in unit wholesale revenue due to the price discovery system. A moderate decline from unseasonal current levels is anticipated unless additional depletion of flocks occurs due to HPAI.
  • September 2022 USDA average nest-run production cost was down 1.0 cent per dozen (1.2 percent) compared to August 2022 at 81.5 cents per dozen, mainly attributable to a 1.9 percent lower average feed cost per dozen.
  • September 2022 USDA benchmark nest-run margin attained a positive value of 188.4 cents per dozen compared to a margin of 108.1 cents per dozen for August 2022.
  • August 2022 national flock in production (over 30,000 hens/farm) was up 1.1 percent or 3.6 million hens to 287.9 over a revised July 2022 value of 284.8 million. Approximately 2.5 million hens returned to production from molt in early July together with projected maturation of 24.0 million pullets, with this number offset by depletion of spent flocks. Through the end of September, approximately 34 million hens were depopulated to control HPAI.
  • August 2022 pullet chick hatch was up 12.3 percent or 3.1 million from July 2022 to 28.0 million.
  • August 2022 exports of shell eggs and products combined were up 48.6 percent from a low volume in July 2022 to 361,600 case equivalents representing the theoretical production of 5.2 million hens.

 

INTRODUCTION.

Summary tables for the latest USDA September 2022 prices and flock statistics made available by the EIC on October 7th 2022 are arranged, summarized, tabulated and reviewed in comparison with values from the previous September 9th 2022 posting reflecting August 2022 costs and production data.

COSTS & REVENUE

Parameter

SEPTEMBER 2022

AUGUST 2022

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

81.4 c/doz

82.5 c/doz

Low

77.9c/doz (MW)

79.9 c/doz (SE)

High

88.5 c/doz (N.West)

89.0c/doz (N.West)

 

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

Note: 1. Rounded to decimal of a cent

SEPTEMBER 2022

 AUGUST 2022

Feed

50.5 c/doz

51.5c/doz

Pullet depreciation

13.6 c/doz

13.7 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*

8.3 c/doz

8.3 c/doz


* Adjusted January 2022 and used as a rounding factor

 

Ex Farm Margin (rounded to nearest cent) according to USDA values reflecting September 2022:-

269.8 cents per dozen1- 81.4 cents per dozen = +188.4 cents per dozen

(August 2022 comparison: 190.6 cents per dozen - 2.5 cents per dozen = +108.1 cents per dozen.)

Note 1: USDA Blended egg price

 

SEPTEMBER 2022

AUGUST 2022

USDA

Ex-farm Price (Large, White)

269.8 c/doz (Sep.)

190.6 c/doz (Aug.)

Cage-free to packing plant1

335.0 c/doz (Sep.)

236.0 c/doz (Aug.)

Warehouse/Dist. Center

277.0 c/doz (Sep.)

246.0 c/doz (Aug.)

Store delivered (estimate)

282.0 c/doz (Sep.)

251.0 c/doz (Aug.)

Dept. Commerce Retail

311.6 c/doz (Aug.)

294.0 c/doz (July)

  1. Negotiated price nest run loose

 

MONTH SEPTEMBER 2022 AUGUST 2022
U.S. Average Feed Cost per ton $317.54 $323.68
Low Cost Midwest $297.99 $309.29
High Cost Northwest $357.24 360.29
Differential $ 59.25 $ 51.00

Pullet Cost*

 (19 Weeks)     $5.11 SEPTEMBER 2022    $5.15 AUGUST 2022

(16 weeks)       $4.42 SEPTEMBER 2022    $4.46 AUGUST 2022

* Values adjusted by EIC in February 2022

 

VOLUMES OF PRODUCTION

PARAMETER

SEPTEMBER 2022

 AUGUST 2022

Table-egg strain eggs in incubators

49.2 million (Sep.)

 49.9 million (Aug.)

Pullet chicks hatched

28.0 million (Sep.)

 25.1 million (July)

Pullets to be housed 5 months after hatch

25.3 million (Jan. ‘23)

 22.6 million (Dec.)

2022 December 1st Flock Projection

317.3 million

321.2 million

National Flock in farms over 30,000 (2022)

287.9 million (Aug.)

284.81 million (July)

National egg-producing flock (2022)

304.7 million (Aug.)

301.1 million (July)

Cage-free flock excluding organic

87.0 million (Sep.)

87.1 million (Aug.)

Proportion of flocks in molt or post-molt

13.2% (Sep.)

13.4% (Aug.)

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

 249.8 million (Aug.)

246.2 million (July)

  1. USDA revision from July report

 

Total U.S. Eggs produced (billion)

7.78 (August)

7.69 (July)

Total Cage-Free hens in production

105.0 million (Aug.)

17.1% Organic

105.1 million (Aug.)

17.1% Organic

“Top-5” States hen population (USDA)1

143.4 million (Aug.)

140.9 (July)

Notes 1. Texas excluded to maintain confidentiality

 

PROPORTION OF U.S. TOTAL HENS BY STATE, 20221

Based on a nominal denominator of 288 million hens in flocks over 30,000 covering 95.0 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 2022

 JULY 2022

Iowa

12.9%

12.3%

Indiana

12.4%

12.4%

Ohio

12.3%

12.4%

Pennsylvania

7.8%

7.8%

Texas (estimate)

6.8% ?

6.7% ?

California

4.5%

4.6%

  1. Values rounded to 0.1%

 

Rate of Lay, weighted hen-week (USDA)  82.4% SEPTEMBER 2022. 82.4% AUGUST 2022

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

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:- 293.4 (up 5.6 eggs from 2018)

Revised per capita egg consumption 2020:- 285.4 (down 8.0 eggs from 2019)*

Estimated per capita egg consumption 2021:- 280.5 (down 4.9 eggs from 2020)*

Projected per capita  egg consumption 2022:- 278.3 (down 2.2 eggs from 2021 due to HPAI) Forecast per capita egg consumption 2023:- 289.7 (up 11.4 eggs from 2022)

 

*Revised, using data from USDA Livestock, Dairy and Poultry Outlook August 18th 2022 taking into account the decreased demand from the food service sector and including an effect from HPAI depopulation.

 

Egg Inventories at beginning of SEPTEMBER 2022:

Shell Eggs: 1.66 million cases down 5.7 percent from August 2022.

Frozen Egg Products: 662,364 case equivalents up 11.7 percent from August 2022

Dried Egg Products: Not disclosed since March 2020. Assume moderate level of inventory

Eggs broken under FSIS inspection (million cases)

 AUGUST 2022, 6.88 JULY 2022, 6.58

Cumulative eggs broken under FSIS inspection 2021 (million cases) 76.2 JAN. to DEC.

Cumulative 2021: number of cases produced (million) 268.7 JAN. to DEC.

Cumulative 2021: proportion of total eggs broken 28.3% (30.1% 2020)

Cumulative 2022: number of cases produced (million) 171.6 JAN. to AUG.

Cumulative 2022: proportion of total eggs broken 30.8 %

 

EXPORTS AUGUST 2022: (Expressed as shell-equivalent cases of 360 eggs).

Parameter

Quantity Exported

Exports:

2022

Shell Eggs (thousand cases)

JULY 58 AUG. 166

Products (thousand case equivalents)

JULY 186 AUG. 196

TOTAL (thousand case equivalents)*

JULY 244 AUG. 362

*Representing 1.7 percent of National production in AUGUST 2021.

 

COMMENTARY ON SEPTEMBER 2022 COSTS AND STATISTICS

COST AND REVENUE DATA FOR SEPTEMBER 2022

The USDA reports data for five regions, respectively comprising the Northeast, South East (Mid-Atlantic), South Central, Midwest, and Northwest (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. From March 2021 California costs were inexplicably excluded, representing an unjustified concealment of data. The three Pacific Coast states could be combined to maintain confidentiality while providing representative U.S. data. Costs including feed and depreciation were recalculated in January 2022.

  • The USDA ex farm benchmark blended egg price in September 2022 was 41.6 percent higher or 79.2 cents per dozen down from August 2022 to 269.8 cents per dozen. This contributed to a positive margin of 188.4 cents per dozen based on ‘nest-run’ eggs (delivered from the laying house) in September 2022, compared to a positive margin of 108.1 cents per dozen in August 2022. The September 2022 USDA benchmark price of 269.8 cents per dozen should be compared to 65.6 cents per dozen for the corresponding month in 2020 and 97.6 cents per dozen in August 2021. The relatively high values during the first and second quarters of 2022 compared to corresponding months for the two previous years were due to depletion of hens following the emergence of HPAI coupled with a rise in demand following relaxation of COVID restrictions.
  • During September 2022, the feed component of production cost averaged 50.5 cents per dozen, up 1.9 percent or 1.0 cents per dozen from August 2022. For 2021 average feed cost was 42.5 cents per dozen and 31.7 cents per dozen in 2020.
  • Combining data from the USDA and the EIC, producers recorded a positive margin of 188.4 cents per dozen at farm-level for generic-egg flocks during September 2022. This compares with a positive margin of 108.1 cents per dozen in August 2022. For 2021 the cumulative average algebraic margin was 91.0 cents per dozen; for 2020, 16.0 cents; for 2019, -2.8 cents and for 2018, 35.3 cents per dozen, against USDA benchmark ‘nest run’ values. During the nine months of 2022 cumulative algebraic margin attained 1,064 cents per dozen.
  • The simple average price of feed in September 2022 over 5-regions was $317.54 per ton, $6.14 per ton or 1.9 percent lower (using revised monthly USDA-AMS data) compared to August 2022. Southwest data is no longer disclosed to avoid compromising a company that predominates in Texas. The highest cost among five regions was the Northwest at $357.24 per ton, down 0.9 percent from August. This may be compared to the lowest-cost region, the Midwest at $297.99 per ton, down 3.8 from the previous month. The average cost value for feed includes ingredients plus milling and delivery at a nominal $10 per ton.
  • The benchmark price of corn was $263.08 per ton in September 2022, up $11.21 per ton or 4.5 percent higher than the August 2022 price, taking into account the difference in basis paid by producers. The differential in corn price between the Midwest and the Northwest in September 2022 was $60.18 per ton. An 11.3 percent decrease of $61.34 per ton in the price of soybean meal to $482.17 per ton in September offset the higher price of corn. The industry has experienced sharp increases in the cost of phosphate additives, fat and vitamins since March. During September 2022 there was a differential of $59.25 per ton in feed price between the Midwest and the Northwest compared to a difference of $51.00 per ton in August 2022.
  • Feed price will continue to be a major factor driving production cost and hence margin. WASDE #628 released on September 12th projected the volumes of the 2022 corn and soybean harvests, ingredient use, exports and ending stocks for the two commodities. Unknown factors influencing feed cost during the third and fourth quarters will include the consequences of the invasion of Ukraine with inevitable disruption in production and shipping from the region, coupled with the drought in the Midwest reducing corn yield and prevailing prices in international trade. The availability and hence prices of ingredients will be influenced by weather conditions as influenced by the persistent La Nina, export volume from the U.S. and especially to China, diversion of corn to ethanol combined with the remaining economic and logistic effects of COVID restrictions and inflation. There is obviously lower demand for ethanol with production below the one-million barrel per day benchmark for eight successive weeks. Substantial exports of corn and soybeans to China, in market year 2022/2023 have increased domestic price and hence cost of egg production. Each $10 per ton difference in feed cost represents approximately 1.70 cents per dozen. A change of 10 cents per bushel in the price of corn is reflected in a 0.45 cent per dozen difference in production cost. A $10 per ton change in the price of soybean meal affects production cost by 0.35 cent per dozen.
  • The EIC calculated the 5-Region total nest-run production cost in September 2022 to be 81.4 cents per dozen, 1.1 cents per dozen or 1.3 percent lower than in August 2022. Production costs during September 2022 ranged from 77.9 cents per dozen in the Midwest up to 88.5 cents per dozen in the Northwest, higher than the Midwest region by 10.6 cents per dozen.

 

Deletion of California data is considered a substantial deficiency of the EIC Report.

  • Retail egg prices as determined by the Department of Commerce for August 2022 averaged 311.6 cents per dozen, up 18.0 cents per dozen from July 2022. During August 2020 and 2021 retail prices were respectively 132.8 and 170.9 cents per dozen. Consistently since 2017 average retail prices have not declined in proportion to ex-farm prices, allowing higher margins at retail, thereby depressing demand. Retailers have recently demonstrated some restraint in pricing possibly due to competition from deep discounters and club stores, despite sustained demand.

 

PRODUCTION DATA FOR SEPTEMBER 2022

  • According to USDA, the estimated average complement of U.S. hens in flocks over 30,000 during August 2022 amounted to 287.9 million, reflecting a net increase in flock size by 3.6 million hens during the month. Routine depletion and depopulation due to HPAI was partly offset by pullet replacements and retained flocks. The average total U.S. flock including hens in molt on all farms counted by the USDA amounted to 304.7 million in August 2022. This value will be adjusted subsequently following an accounting of depopulations and replacements. The average end-of-year flock sizes over the past seven years respectively were, 2014, (311 million); 2015, (291 million post-HPAI losses); 2016, (319 million); 2017, (329.6 million); 2018, (341.6 million); 2019, (341.6 million) and 2020, (325.5 million). The December 1st 2022 flock was projected to be 317.3. This figure is depressed by flock depopulation amounting to 34 million hens through September. In the absence of a vaccine only effective biosecurity will protect flocks during the remainder of 2022.
  • 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 2020 the state had 56.4 million hens with a progressive reduction following retraction in the egg-liquid market. Hen population in Iowa stabilized at 46.9 million by May 2021 rising to 47.3 million in August 2021 but falling to 44.3 million in February 2022. The hen population was 21.2 percent lower (11.0 million hens) than the pre-COVID level. The decline in the population of hens in Iowa was accentuated by depopulation of 12.7 million in March to control outbreaks of HPAI. As of the end of August 2022 Iowa housed 37.0 million hens according to USDA figures.
  • Pullet chick hatch attained 28.0 million in August 2022, up 3.0 million from July 2022. It is anticipated that seasonal prices will be higher than for preceding years through the remainder of 2022, resulting in relatively larger chick placements if available in addition to necessary replacement of depleted pullets and hens. It is understood that production of additional pullet chicks is unlikely given forward planning by hatcheries and full utilization of facilities
  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA attained 13.2 percent of the national flock in September 2022, compared to 13.4 percent in August 2022. Annual averages for molt and post-molt combined were 14.4 percent in 2021, 13.5 percent for 2020, 15.2 percent for 2019 and 17.4 percent for 2018. The historical high value of 23.8 percent in 2016 was due to the loss of hens during the 2015 HPAI epornitic. This situation will be revisited in 2022 and 2023.
  • During the first quarter of 2022 the average monthly transfer of pullets to laying houses was 21.3 million followed by 21.1 million in the second quarter with projections of 25.1 million and 24.7 million for the third and fourth quarters of 2022 respectively.
  • The projected hatchery supply flock (parent generation) peaked during 2022 at 3.1 million hens in June. The previous peak parent-flock of 3.1 million hens in production was in June 2015, coinciding with the end of the HPAI epornitic. Parent hens then declined to a low of 2.5 million during the fourth quarter of 2016. Parent flocks attained a monthly average of 3.1 million during the second quarter with projections of 2.9 million and 2.8 million during the third and fourth quarters respectively. The size of the parent flock is unlikely to be revised based on pullet chick orders influenced by demand to replace depopulated hens and in response to higher producer margins.
  • Average hen-week production of 82.4 percent in September 2022 compared to a value of 82.3 percent in August 2022 reflects a slightly higher proportion of younger hens in the national flock with many first-cycle hens and early second-cycle hens in production. Average rate of lay in 2021 was 82.0 percent, with 80.9 percent in 2020 and compared to 79.2 percent during 2019. 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 the weighted flock age increases or conversely will rise due to early depletion thereby increasing the proportion of young hens in their first cycle.
  • The September 2022 USDA Poultry Slaughter Report documented 2.5 million light spent-hens processed under FSIS inspection during August 2022, 7.4 percent more than the previous month and 16.9 percent less than in August 2021. The reduction is attributed to the need to maintain flocks given high prices following depopulation due to HPAI. Provided space is available, prevailing high prices will result in retention of hens with fewer routine or previously scheduled flock depletions. 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 but this volume will decline as producers retain flocks to meet demand, subject to the availability of housing.

 

EXPORT DATA FOR AUGUST 2022.

  • According to USDA-FAS data, 166,000 cases of shell eggs were exported in August 2022, representing 0.8 percent of total production. The 186 percent increase over a small base in July 2022 is attributed to increased demand from Canada.
  • During August 2022 the following regions were importers of shell eggs but compared to a low base:- For North America, Canada received 66.9 percent of exports but Mexico did not import shell eggs. East Asia, predominantly Hong Kong- China, imported 16.9 percent of shell egg volume and the Caribbean and Central America combined accounted for 15 percent.
  • Exports of egg products in August 2022 attained 196,000 case-equivalents, representing 0.9 percent of U.S. output. The following regions were the leading importers of egg products by proportion of volume shipped but on a larger base compared to July:- Canada, (4 percent of exports, was 23.7 percent last month), East Asia with Japan predominating, (43.4 percent, was 52.2 percent). Mexico increased imports in September to 41,000 case equivalents representing 20.9 percent of U.S. exports, up from 9.7 percent in July. Central America and the Caribbean increased their proportion of imports from the U.S in July (15.1 percent, up from 12.9 percent). The E.U. represented 1.5 percent of U.S. exports of products in August. Shipments to the Middle East in August resumed with 8 metric tons representing 4.1 percent of shipments.
  • Collectively, exports of shell eggs and products in August 2022 represented the output from approximately 5.2 million hens in production during the month, attaining 361,600 case-equivalents, up 48.5 percent from July 2022 but was only 20.2 percent of combined exports during the first quarter of 2022. The major losses in shell eggs exported during June and July among traditional importers were due to contraction by Mexico, Canada and China. The major changes in destination of egg products during August compared to July were to Mexico up 128 percent and Japan up 36.7 percent.
  • Maintaining export volume is attributed to cooperation between the AEB and USAPEEC, in existing, new and potential 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 2022 corresponded to 1.7 percent of a nominal national flock of approximately 310 million hens, (before HPAI depletions) 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.