Egg Monthly

11/12/2017

OCTOBER 2017 USDA EX-FARM BENCHMARK PRICE FALLS 4.8 PERCENT COSTS STABLE. SECOND MONTH OF POSITIVE MARGINS IN 2017

 

Introduction.

Summary tables for the latest USDA 2017 October statistics and prices made available by the EIC on November 10th 2017, are summarized, tabulated and discussed in comparison with values from the previous October 10th 2017 posting reflecting September 2017 data.

COSTS & REVENUE

Parameter

SEPTEMBER 2017

OCTOBER 2017

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

58.99 c/doz

58.95 c/doz

Low

53.64 c/doz (MW)

53.38 c/doz (MW)

High

74.66 c/doz (CA)

74.48 c/doz (CA)

Components c 1stCycle Cost of Production:-

 

SEPTEMBER 2017

OCTOBER 2017

Feed

31.21 c/doz

31.17 c/doz

Pullet depreciation

10.63 c/doz

10.63 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 OCTOBER 2017:-

79.2 cents per dozen1- 59.0 cents per dozen = +20.2 cents per dozen

(September comparison 84.0 1 cents per dozen – 59.0 cents per dozen = +25.0 cents per dozen.)

Note 1: USDA Blended egg price
 

   

SEPTEMBER 2017

OCTOBER 2017

USDA

Ex-farm Price (Large, White)

84.0 c/doz

79.2 c/doz

 

Cage-free to packing plant

160.0 c/doz

160.0 c/doz

 

Warehouse/Dist. Center

111.0 c/doz

117 c/doz

 

Store delivered (estimate)

116.0 c/doz

122 c/doz

Dept. Commerce retail 136.7 c/doz (August) 142.2c/doz (September)

Layer Feed Cost

SEPTEMBER 2017

OCTOBER 2017

U.S. Average

$198.77/ton

$198.52/ton

High

$237.32/ton (SE)

$237.65/ton (SE)

Low

$168.83/ton (MW)

$167.36/ton

Differential

$ 68.49/ton

$ 70.29/ton

Pullet Cost (19 Weeks) $3.67 September $3.65 October

VOLUMES OF PRODUCTION

PARAMETER

SEPTEMBER 2017

OCTOBER 2017

Egg-strain eggs in incubators

40.1 million (Sept.)

45.8 million (Oct.)

Pullet chicks hatched

22.8 million (Aug.)

21.1 million (Sept.)

Pullets to be housed in 5 months

20.6 million (Jan ‘18.)

17.8 million (Feb. ’18)

     

National Flock in farms over 30,000

301.9 million (Aug.)

302.8 million (Sept.)

National egg-producing flock

311.4 million (Aug.)

312.2 million (Sept.)

     

Proportion flock in molt or post-molt

18.8 (Sept.)

18.8% (Oct.)

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

243.6 (Sept.)

253.6 million (Oct.)

 

Eggs produced

7.69 billion (Sept.)

7.37 billion (Oct.)

Cage-Free hens housed

47.8 million (Sep.)

29.9% Organic

49.4 million (Oct.)

29.8% Organic

“Top-6” States hen population (USDA)

168.8 million (Aug)

169.8 million (Sept.)

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

Based on a denominator of 302.8 million hens in flocks over 30,000.

 

STATE

AUG. 2017

SEPT. 2017

Proportion by region (SEPT. 2017)

Iowa

17.7%

17.8%

MW 52.5%

Indiana

10.4%

9.9%

NE 10.9%

Ohio

9.8 %

10.5%

SE 9.9%

Pennsylvania

8.4%

8.4%

SC 12.1%

Texas

5.7%

5.8%

CA 3.8%

California

3.8%

3.8%

NW 3.0%

(Values rounded to 0.1%)

Rate of Lay, weighted hen-week (USDA) 79.6% (August) 78.5% (Sept.)

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:- 275.7 eggs (+1.0 from 2016)

Eggs broken under FSIS inspection (million cases)

AUGUST 6.603 SEPTEMBER 6.126

Cumulative 2017 number of cases produced 189.9 million

Cumulative 2017 proportion of total eggs broken 30.4%

 

EXPORTS

Parameter

Quantity Exported

Exports:

 

Shell Eggs (thousand cases)

AUG. 341 Sept. 397

Products (thousand case equivalents)

AUG. 465 Sept. 435

TOTAL (thousand case equivalents)

AUG. 806 Sept. 832*

*Representing 3.4 percent of National production in September 2017

COMMENTARY

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

October 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 October 2017 fell 4.8 cents per dozen or 5.7 percent to 79.2 cents per dozen, compared to the September value, contributing to a positive margin of 20.2 cents per dozen as delivered ‘nest-run’ (from the laying house). The October 2017 value should be compared to 29.5 cents per dozen for the corresponding month in 2016 and 123.6 cents per dozen in September 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 October 2017 feed price averaged 31.1 cents per dozen and 32.1 cents per dozen during the first ten months of 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 20.2 cents per dozen at farm level for flocks in October compared to a positive margin of 25.0 cents per dozen in September. The cumulative algebraic loss over the first nine months of 2017 was 75.5 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 October 2017 over 5-regions was $198.52, lower by $0.04 per ton compared to September. The Southeast recorded the highest cost among five regions at $237.65 compared to the lowest region, the Midwest at $167.36 per ton. The average figure includes ingredients plus milling and delivery at approximately $10 per ton. The benchmark price of corn was $143.96 per ton in October, down 1.2 percent from September. An increase of 1.2 percent in the price of soybean meal from $332 per ton in September to $336 per ton in October offset the decrease in price of corn. There was a $78 per ton differential in corn price between the Midwest and the Southeast in October. Feed price will continue to be a major factor driving production cost and hence margin. 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 October to be 58.95 cents per dozen, 0.04 cent per dozen less than in September. Production costs during October ranged from 53.4 cents per dozen in the Midwest up to 74.5 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 12.6 cents per dozen in October, compared to 12.2 cents per dozen in September.

  • Retail egg prices as determined by the Department of Commerce for September 2017 averaged 142.2 cents per dozen, 5.5 cents per dozen higher than August. During September 2015 and 2016 retail prices were respectively 296.6 cents per dozen (post-AI losses) and 147.1 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.

     

    October 2017 Production Data

  • According to USDA data, the estimated average complement of U.S. hens in flocks over 30,000 during September 2017 amounted to 302.8 million, 0.9 million more than in August 2017. The total U.S. flock including hens in molt on all farms counted by the USDA amounted to 312.2 million in September 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 is now projected by the EIC to attain 319.8 million (down 1.6 million from the September estimate) based on their current model. Market pressures on margins and prolonged losses will dictate a lower hen population as denoted by the recent trend in flock depletion and reduced chick placements.

  • Pullet chicks hatched were down a noteworthy 7.1 percent in September to 21.2 million compared to the previous month at 22.7 million. It is now evident that low prevailing prices 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 September and October.

  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA remained at 18.8 percent of the national flock in September, within a fraction of a percentage of values recorded in January through August, contrasted to the 2016 average of 20.8 percent.

  • Average monthly pullets transferred during the third quarter of 2017 amounted to 19.6 million. The monthly projection for pullets to be transferred during the fourth quarter of 2017 is 21.6 million unless cancellations of pullet chick orders occurs which is highly likely. This is evidenced by some 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 in October 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 4th Quarter of 2018 is considered to be too high.

  • 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 July and early August at 17 weeks of age achieved peak production. Average production of 78.5 percent in September 2017 reflected the balance between placements of pullets, the rate of depletion of flocks or 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 restricting production to the first cycle.

  • Processing of light hens under FSIS inspection attained 4.1 million in September compared to 4.8 million in August. The average for the period January through July 2017 was 5.4 million per month. In the U.S. spent hens are shipped to Canada from Northern-tier states or are rendered or composted in other regions. Approximately 13 million spent hens are disposed of each month.

 

September 2017 Export Data

  • According to USDA-FAS data, 396,800 cases of shell eggs were exported in September 2017 representing 1.9 percent of total production. This value should be compared to the high value of 409,700 cases in March 2016. During September 2017 the following regions were the leading importers:- North America (=NAFTA) (53.6 percent, was 40.4 percent), the Caribbean (7.4 percent), East Asia (28.2 percent, was 37.4 percent) and the Middle East (9.3 percent, was 12.0 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 September 2017 were down 7.0 percent from August to 434.7 million case-equivalents representing 2.1 percent of U.S. output. The following regions were the leading importers of egg products by proportion of volume shipped in September:- North America (=NAFTA) received (26.6 percent), East Asia (49.5 percent) and the EU-28 (13.1 percent, was 9.6 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 second quarter of 2017 exports of egg products increased by 89.4 percent over the corresponding second quarter of 2016 which was depressed during post-AI recovery.

  • Collectively, exports of shell eggs and products in September 2017 represented the equivalent of approximately 11.1 million hens in production during the month, attaining 831,500 case-equivalents. This was a 13.3 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 September 2017 corresponded to 4.2 percent of a nominal national flock of 315 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 three 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 1,851-17 November 12th 2017)


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