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Monthly Egg Report

01/09/2018

DECEMBER 2017 USDA EX-FARM BENCHMARK PRICE RISES 13 PERCENT

COSTS UP 0.8 PERCENT. FOURTH MONTH OF POSITIVE MARGINS IN 2017

 

Introduction.

Summary tables for the latest USDA 2017 December statistics and prices made available by the EIC on January 8th 2017, are summarized, tabulated and discussed in comparison with values from the previous December 7th 2017 posting reflecting November 2017 data.

COSTS & REVENUE

Parameter

NOVEMBER 2017

DECEMBER 2017

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

58.98 c/doz

59.47 c/doz

Low

53.77 c/doz (MW)

53.80 c/doz (MW)

High

74.28 c/doz (CA)

74.91 c/doz (CA)

 

Components of 6-Region 1stCycle Cost of Production:-

 

NOVEMBER 2017

DECEMBER 2017

Feed

31.19 c/doz

31.63 c/doz

Pullet depreciation

10.63 c/doz

10.69 c/doz

Labor

4.00 c/doz

4.00 c/doz

Housing

5.30 c/doz

5.30 c/doz

Miscellaneous and other

7.86 c/doz

7.85 c/doz

 

Ex Farm Margin according to USDA values reflecting DECEMBER 2017:-

124.1 cents per dozen1- 59.5 cents per dozen = +64.6 cents per dozen

(November comparison 109.6 1 cents per dozen – 59.0 cents per dozen = +50.6 cents per dozen.)

Note 1: USDA Blended egg price

   

NOVEMBER 2017

DECEMBER 2017

USDA

Ex-farm Price (Large, White)

109.6 c/doz

124.1 c/doz

 

Cage-free to packing plant

160.0 c/doz

160.0 c/doz

 

Warehouse/Dist. Center

139.0 c/doz

177 c/doz

 

Store delivered (estimate)

144.0 c/doz

182 c/doz

Dept. Commerce retail 154.0 c/doz (October) 150.6c/doz (November)

Layer Feed Cost

NOVEMBER 2017

DECEMBER 2017

U.S. Average

$198.66/ton

 

$201.45/ton

High

$234.62/ton (SE)

$235.71/ton (SE)

Low

$169.53/ton (MW)

$169.70/ton

Differential

$ 65.09/ton

$ 66.01/ton

 

Pullet Cost (19 Weeks) $3.67 November $3.69 December

VOLUMES OF PRODUCTION

PARAMETER

NOVEMBER 2017

DECEMBER 2017

Egg-strain eggs in incubators

44.9 million (Nov.)

48.5 million (Dec.)

Pullet chicks hatched

23.2 million (Oct.)

24.0 million (Nov.)

Pullets to be housed in 5 months

23.0 million (Mar. ‘18.)

21.7 million (Apr. ’18)

     

National Flock in farms over 30,000

305.3 million (Oct.)

308.8 million (Nov.)

National egg-producing flock

314.1 million (Oct.)

318.2 million (Nov.)

     

Proportion flock in molt or post-molt

19.0 (Nov.)

18.1% (Nov.)

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

247.3 (Nov.)

252.9 million (Dec.)

Eggs produced

7.68 billion (Oct.)

7.60 billion (Nov.)

Cage-Free hens in production

47.8 million (Nov.)

29.9% Organic

49.7 million (Dec.)

25.7% Organic

“Top-6” States hen population (USDA)

171.4 million (Oct.)

174.0 million (Nov.)

PROPORTION OF U.S. TOTAL HENS BY STATE, 2017

Based on a denominator of 309 million hens in flocks over 30,000.

 

STATE

OCT. 2017

NOV. 2017

Proportion by region (NOV. 2017)

Iowa

17.8%

17.6%

MW 53.2%

Indiana

10.3%

10.3%

NE 11.2%

Ohio

10.0 %

10.0%

SE 9.9%

Pennsylvania

8.6%

8.6%

SC 12.2%

Texas

5.8%

5.8%

CA 4.1%

California

3.9%

4.1%

NW 2.9%

(Values rounded to 0.1%)

Rate of Lay, weighted hen-week (USDA) 79.0% (Nov.) 80.2% (Dec.)

Actual USDA-ERS 2015 U.S. per capita annual egg consumption revised due to HPAI:- 256.3 eggs (-11.2 from 2014)*

Projected USDA-ERS 2016 U.S. per capita annual egg consumption:- 274.7 eggs (+18.4 from 2015)

Forecast USDA-ERS 2017 U.S. per capita annual egg consumption projected to be:- 273.7 eggs (-1.0 from 2016)

Eggs broken under FSIS inspection (million cases)

OCTOBER 6.583 NOVEMBER 6.307

Cumulative 2017 number of cases produced 232.4 million

Cumulative 2017 proportion of total eggs broken 30.4%

 

EXPORTS

Parameter

Quantity Exported

Exports:

 

Shell Eggs (thousand cases)

OCT. 382 NOV. 285

Products (thousand case equivalents)

OCT. 496 NOV. 563

TOTAL (thousand case equivalents)

OCT. 878 NOV. 848

*Representing 4.0 percent of National production in November 2017

 

COMMENTARY

The following comments and comparisons are provided on December USDA values:-

December 2017 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)

  • The USDA ex farm benchmark blended egg price in December 2017 rose 14.5 cents per dozen or 13.2 percent to 124.1 cents per dozen, compared to the November value, contributing to a positive margin of 64.6 cents per dozen as delivered ‘nest-run’ (from the laying house). The December 2017 value should be compared to 73.3 cents per dozen for the corresponding month in 2016 and 106.1 cents per dozen in December 2015. It is noted that from November 2014 through March 2015, prices were inflated in anticipation of implementation of California Proposition #2 effective January 1 st 2015 and then at the end of this period by the seasonal pre-Easter rise. Thereafter prices responded positively to shortages caused by HPAI in the upper Midwest with a peak in August 2015 and a marked downward slide thereafter as hen numbers were restored to pre-HPAI levels.

  • During December 2017 feed price averaged 31.6 cents per dozen and 32.0 cents per dozen for 2017. Feed cost during 2015 averaged 34.9 cents per dozen. The average feed cost in 2014 was 43.2 cents per dozen in contrast to 2013 which was considerably higher at 50.12 cents per dozen, reflecting the drought-affected crop of 2012. It is fortunate that low prices for eggs through August 2017 coincided with relatively moderate feed costs.

  • Combining data from the USDA and the EIC (formerly data from the University of California), producers recorded a positive margin of 64.6 cents per dozen at farm level for flocks in December compared to a positive margin of 50.6 cents per dozen in November. The cumulative algebraic margin for 2017 was a positive 39.2 cents per dozen, with the first eight months negative comparing production cost against USDA ‘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. Ex-farm margin for 2015 amounted to an average of 74.5 cents per dozen. For 2014, average ex-farm contribution margin was 33.9 cents per dozen with all months positive.

  • The simple average price of feed for December 2017 over 5-regions was $201.45, higher by $2.79 per ton compared to November. The Southeast recorded the highest cost among five regions at $235.70 compared to the lowest region, the Midwest at $169.70 per ton. The average figure includes ingredients plus milling and delivery at approximately $10 per ton. The benchmark price of corn was $146.10 per ton in December, up 1.3 percent from November. An increase of 2.1 percent in the price of soybean meal from $335.89 per ton in November to $343.01 per ton in December also contributed to the rise in feed cost. There was a $73 per ton differential in corn price between the Midwest and the Southeast in December. Feed price will continue to be a major factor driving production cost and hence margin in 2018 especially if a La Nina event causes a drought in the Midwest. 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 December to be 59.47 cents per dozen, 0.49 cent per dozen more than in November. Production costs during December ranged from 53.8 cents per dozen in the Midwest up to 74.9 cents per dozen in California which was higher than the Midwest region by 21.1 cents per dozen. The differential in feed cost between the extremes, the Southeast and the Midwest regions was 10.4 cents per dozen in December, compared to 10.2 cents per dozen in November.

  • Retail egg prices as determined by the Department of Commerce for November 2017 averaged 150.6 cents per dozen, 3.4 cents per dozen lower than October. During November 2015 and 2016 retail prices were respectively 266.40 cents per dozen (post-AI losses) and 132.10 cents per dozen (post-AI restocking). During 2016 and in 2017 to date, retail prices have not declined in proportion to ex-farm prices allowing higher margins at retail thereby depressing demand.

 

December 2017 Production Data

  • According to USDA data, the estimated average complement of U.S. hens in flocks over 30,000 during December 2017 amounted to 308.8 million, 3.5 million more than in October 2017 reflecting the seasonal increase in flock size for Christmas sales. The total U.S. flock including hens in molt on all farms counted by the USDA amounted to 315.2 million in November 2017. 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) and 2016 (319 million). The December 2017 hen population was 319.2 million hens. Market pressures on margins and prolonged losses will dictate a lower hen population as post-Christmas prices fall and especially if feed costs rise.

  • Pullet chicks hatched were down 6.3 percent in November to 24.0 million compared to the previous month at 25.5 million. It is now evident that low prices in coming months will result in flock reduction due to some producers ceasing operation, cancellation of pullet orders, early depletion and adoption of single-cycle programs notwithstanding the respite in prices achieved during the past four months.

  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA attained 18.1 percent of the national flock in December, with a range of 17.3 percent (April) to 19.0 percent (November), contrasted to the 2016 average of 20.8 percent.

  • Average monthly pullets transferred during the third quarter of 2017 amounted to 21.5 million. The monthly projection for pullets to be transferred to laying houses during the first quarter of 2018 is 20.5 million. Cancellation of pullet chick orders are highly likely if prices resume a downward trend. This is evidenced by suppliers imposing penalties for cancellation in orders and introducing loyalty discounts for customers holding to orders.

  • The hatchery supply flock increased from a level of 3.1 million hens in production in June 2015, coinciding with the end of the HPAI epornitic compared to a low of 2.5 million hens during the 4 th Quarter of 2016. Projections show monthly average of 2.64 and 2.67 million breeder hens in production during the third and fourth quarters of 2017 respectively. With a likely decrease in demand for pullet chicks, parent flocks will be depleted earlier than planned. The projection for supply flocks averaging 2.7 million hens during the 1st Quarter of 2018 will contribute to an oversupply of pullet chicks. The projection for the second quarter of 2018 is 2.5 million hens, a reduction of 7.4 percent.

  • Average rate of lay attained 78.7 percent during 2016 and increased to 80.4 percent in August 2017 as new pullets transferred in late September and early October at 17 weeks of age achieved peak production. Average production of 80.2 percent in December 2017 reflected the balance between placements of pullets, the rate of depletion of flocks or retention of molted hens for a second cycle. The average for 2017 was 79.7 percent. Average flock production will fall as weighted flock age increases or will rise due to early depletion and restricting production to the first cycle.

  • Processing of light hens under FSIS inspection attained 6.7 million in November compared to 4.1 million in September and October. The average for the period January through July 2017 was 5.4 million per month. Spent-hens are shipped to Canada from Northern-tier U.S. states or are rendered or composted in other regions. Approximately 13 million spent hens are disposed of each month.

 

November 2017 Export Data

  • According to USDA-FAS data, 285,200 cases of shell eggs were exported in November 2017 representing 1.4 percent of total production. This value should be compared to the high value of 409,700 cases in March 2016 prior to the onset of HPAI. During November 2017 the following regions were the leading importers:- North America (=NAFTA) (50.6 percent, was 45.6 percent last month), the Caribbean (8.3 percent), East Asia (37.0 percent, was 28.2 percent) and the Middle East (2.3 percent, was 6.4 percent).
  • Exports of shell eggs during the fourth quarter of 2016 attained an average of 321,200 cases per month compared to 290,000 cases during the corresponding 3rd Quarter of 2015 and 495,100 cases during the 1st Quarter of 2015 before the emergence of HPAI. Average monthly shell egg exports during the third quarter of 2017 attained 343,500 cases. Prospects for exports will depend on the value of U.S. currency, international competition and domestic prices, possible future embargos due to AI, availability of eggs and promotional activities by USAPEEC and the AEB

  • Exports of egg products in November 2017 were up 13.3 percent from October to 562.5 million case-equivalents representing 2.7 percent of U.S. output. The following regions were the leading importers of egg products by proportion of volume shipped in November:- North America (=NAFTA) received (26.8 percent), East Asia (34.9 was 41.1 percent) and the EU-28 (10.6 percent, was 15.0 percent) Increases to the E.U. and Asia were attributed to avian influenza. Due to the shortage of breaking stock and reduced capacity through large in-line units, exports were curtailed in 2015 and volume decreased by 34.8 percent compared to 2014, attaining 1.7 percent of total U.S. output. For 2016 export volume was 12.0 percent lower than in 2015. During the third quarter of 2017 exports of egg products increased by 43.8 percent over the corresponding third quarter of 2016 which was depressed during post-AI recovery.

  • Collectively, exports of shell eggs and products in November 2017 represented the equivalent of approximately 12.4 million hens in production during the month, attaining 847,700 case-equivalents. This was an 11.9 percent decrease compared to monthly average shipments of 960,000 case equivalents exported over the first four months of 2015 prior to the advent of HPAI. Exports of both egg-products and shell eggs in November 2017 corresponded to 4.0 percent of a nominal national flock of 318 million hens on all farms.

  • Future exports will stabilize given cessation of outbreaks of H5N6 HPAI in South Korea and Japan. South Korea depleted 28 million hens and restoration of production to pre-HPAI levels is proceeding, requiring complete replacement over the proximal nine months corresponding to U.S. experience. It is apparent that the U.S will not participate in future exports of shell eggs to South Korea. Now eligible according to AI status, the U.S. will compete with other suppliers including Spain and India (brown-shelled eggs) and the Ukraine (white shelled) for the available World market. The statutory OIE 90-day period after decontamination from the last reported case of AI expired five months ago.

  • There is no scientific reason why any nation should embargo pasteurized egg products from an approved plant, based on a diagnoses of avian influenza in a state or nation.

 

(SMS 055-18 January 9th 2017)