Egg Week

07/03/2019

USDA Weekly Egg Price and Inventory Report, July 3rd 2019.

  • Hen Numbers in Production up 0.1 million to 325.2 million.
  • Shell Inventory Up 3.0 percent from the Past Week.
  • USDA Midwest Benchmark Generic Prices for Extra Large and Large Down 3.0 from Past Week. Mediums Down 5.3 Percent Compared to the Past Week.
  • Price of Breaking Stock (23 cents per dozen) and Checks (7 cents per dozen) Unchanged. Both Categories Substantially Below Cost of Production

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on July 1 st the Midwest wholesale prices for Extra Large, and Large were down 3.0 and 3.1 percent respectively to averages of 66.5 and 64.5 cents per dozen. Mediums were down 5.3 percent to 37.5 cents per dozen, below the USDA average 5-Region nest-run benchmark of 59.7 cents per dozen. The progression of prices during 2019 is depicted in the USDA chart reflecting three years of data, updated weekly.

The July 1st USDA Egg Market News Report (Vol. 66: No. 26) documented a USDA Combined Region value rounded to the nearest cent, of $0.73 per dozen delivered to warehouses for the week ending June 24th. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $0.67 per dozen, above the cost of production. At the high end of the range, price in the South Central Region attained $0.76 per dozen. The USDA Combined Price last week was $0.50 per dozen below the three-year average and $0.52 per dozen below the corresponding week in 2018.

Flock Size

The number of producing hens this week was higher by slightly less than 0.1 million to 325.2 million. The hen population is more than adequate to meet seasonal consumer and industrial demand in early summer but any number above 330 million in production over the short term portends lower prices and increased inventory unless matched by proportional demand. The total U.S. egg-flock comprised 331.5 million hens including 2nd Cycle birds and those in molt on all farms. The high level of 6.3 million hens is the difference between hens in production and total hens representing 1.9 percent of the national flock, down from 2.4 percent in mid-June. This suggests actual depletion of flocks with fewer flocks scheduled to come back into production with implications for price, given current supply, stock level and seasonally moderate to depressed demand.

STOCK LEVELS

Generic shell-egg stock was up 3.0 percent to 1,384,400 cases following a 1.9 percent decline in inventory during the past week and unchanged for the preceding week. To maintain prices the market, will have to find a balance between supply and demand as the Industry moves through the end of the second quarter of 2019, Seasonally the sixth month of the year is characterized by stable or decreasing flock size but low prices.

The National stock of frozen egg products as reported by the USDA on June 21st 2019 attained 35.4 million pounds (16,020 metric tons) on May 321st 2019

Dried-egg inventory reported on June 17th increased by 9.0 percent during May 2019 to 19.7 million lbs. (8,963 metric tons) as of May 31st 2019 (was 18.1 million lbs. on April 30th 2019)

INVENTORY

Cold Storage

Cold storage stocks in selected regions on July1st amounted to 2.890 million pounds (1,314 metric tons), obviously unchanged from th base level of 2.890 million lbs. million pounds on July 1 st 2019.

The most recent monthly USDA Cold Storage Report released on June 21st documented a total stock of 35.4 million pounds (16,020 metric tons) of frozen egg products on May 31st 2019. This value was up 16.9 percent from May 31st 2018. A total of 86.6 percent of combined inventory comprised the categories of "Whole and Mixed" (52.6 percent) and "Unclassified" (34.0 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 reflecting July 1st 2019 was up 3.0 percent from the past week, following a decline of 1.9 percent for the previous week and no change for the preceding week. The market will only move into balance relative to supply if old flocks are now depleted not simply molted. Hen numbers are still too high for the "summer doldrums" Availability of shell eggs increased over the past month from the contribution of newly transferred pullets and molted hens coming back into production. In addition pullet chicks placed during late-December 2018 in anticipation of Easter are now producing large and extra-large sizes.

Four of six USDA Regions reported lower stock levels. The Midwest Region was up 2.2 percent compared to the previous week to 422,000 cases. This region was followed in decreasing order of stock level by the Southeast Region, up 6.2 percent to 286,900 cases; the South Central Region up 5.3 percent to 213,200 cases; the Southwest Region up 8.1 percent to 201,400 cases; the Northeast Region down 4.4 percent to 165,600 cases and the Northwest Region down 3.4 percent 95,100 cases.

The total of the USDA six-area stock of commodity eggs comprised 1,712,800 cases, of which 80.8 percent were shell eggs. The inventory of breaking stock was up 0.9 percent to 328,400 cases consistent with the trend in shell-egg price in recent weeks. The value of breaking stock and hence availability from both mature and young flocks will be influenced by the demand for generic shell eggs and contract obligations with breakers.

As of Monday July 1st 2019 the inventory of other than generic eggs (with previous week in parentheses) comprised:-

  • Specialty category, up 8.4 percent to 39,300 cases. (was down 7.6% to 36,300 cases)
  • Certified Organic, up 10.0 percent to 110,300 cases. (was up 0.9% to 100,300 cases)
  • Cage-Free, up 12.0 percent to 95,700 cases. (was down 3.8% to 85,400 cases)

Recent data suggests a weekly fluctuation in demand for cage free products. This is attributed to an increase in production of this category starting in 2017, motivated by commitments by members of the FMI, NCCR and NRA. In mid-2018 announcements by major egg producers indicated a pause in conversion of existing facilities and a moratorium on erecting new complexes and houses until sale of eggs from non-caged flocks rose in competition with generic white. There are now firm indications from equipment manufacturers and builders and evidenced by interest at the 2019 IPPE and especially the Midwest Poultry Federation Convention, that expansion is either planned or is in progress despite low prices. It is estimated that orders for 7 million to 9 million hen places have been signed, mainly for aviaries. This projected increase is supported by quarterly USDA statistics, the November 6th 2018 passage of California Proposition #12 and the failure of the Supreme Court to consider the multi-state challenge to California Proposition #2 and Massachusetts ballot outcomes. The Third Quarter financial report from Cal-Maine released on April 1st indicated that the company would house 4.4 million hens in cage-free systems representing replacement of existing flocks and new facilities, requiring conversions and erection of housing and packing plants to the value of $185 million. It is evident that there is overproduction from the differences between Nielsen and USDA data indicating that an extensive proportion of cage-free and organic eggs are either downgraded or sent to breakers

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 willingness to pay for attributes such as housing, GM status and nutritional enrichment is self-evident.

RELATIVE PRICES OF SHELL-EGG CATEGORIES

The following advertised retail prices for the week ending July 3 rd 2019, (compared with the previous week in parentheses) were posted by the AMS on July 1st for dozen packs:

        • USDA Certified Organic, Brown, Large: $3.99 ($3.99)
        • Cage-Free Brown, Large: $2.67 ($2.67)
        • Omega-3 Enriched Specialty, White, Large: $2.58 ($2.76)
        • Generic White, Large Grade AA $0.95 ($0.77)
        • Generic White, Large Grade A (Feature price) $0.93 ($0.97)

The retail price as determined by the USDA-AMS for generic white Large AA last week was up $0.18 per dozen to $0.95 per dozen but this will not materially alter demand for this category. The price for generics is moving up consistent with seasonal trends.

During the present week the USDA benchmark advertised retail price of Cage-Free remained constant at $2.67 per dozen. Certified Organic was also constant at $3.99 per dozen maintaining the advertised price differential at $1.32 per dozen suggesting continued short-term demand for cage-free brown over certified organic hence the relative build in organic stock. The differential between advertised retail prices for generic white Large and cage-free brown is $1.72 per dozen ($1.90 per dozen last week) continuing to favor generic white over cage-free brown. Preference for generic white over cage-free brown is evident with a price differential greater 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.

USDA Cage-Free Data

According to the latest monthly USDA Cage-free Hen Report released June 28 th 2019 the number of hens held in other than conventional cages in June 2019 was higher by 0.4 million hens (corresponding to 0.8 percent) as follows:-

Total U.S. flock held for USDA Certified Organic production = 15.8 million (15.8 million May).

Total U.S. flock held for cage-free production = 51.3 million (50.9 million May).

Total U.S. non-caged flock = 67.1 million (66.7 million May).

This value represents 20.3 percent of a nominal 330 million U.S. flock in production but 29.8 percent of a presumed flock of 225 million held for shell-egg production

Processed Eggs

For the processing week ending June 29th 2019 eggs processed under FSIS inspection decreased by 0.9 percent compared to the previous week to a level of 1,608,151 cases. The proportion of eggs broken by in-line complexes was 57.7 percent (was 56.7 percent). With lower prices for shell eggs there is a trend to divert non-contracted eggs from packing to breaking as evidenced by data this past week. During the corresponding processing week in 2018 in-line breakers processed 53.4 percent of eggs broken.

Eggs broken YTD 2019 attained 40.91 million cases, 3.7 percent more than the corresponding period during 2018. The difference is in part due to significantly higher prevailing shell-egg prices in 2018.

PRODUCTION AND PRICES

Breaking Stock

The price range for breaking stock delivered to Central States plants was unchanged on July 1st compared to the past week over a range of 22 to 24 cents per dozen. Checks were also unchanged at a 'throw away' range of 6 to 9 cents per dozen. The revenue for both breaking stock and checks was far lower than the benchmark production cost for nest-run, estimated by the USDA at 59.6 cents per dozen during May 2019.

Shell Eggs

The USDA Egg Market News Report released on July 1st documented changes in prices for the major grades from the Midwest, for Central States Breaking Stock and Certified USDA Organic. The following table lists the "most frequent" ranges of values as delivered to warehouses*:-

Size/Type

Current Week

Previous Week

Extra Large

65-68 cents per dozen

67-70 Down 3.0%

Large

63-66 cents per dozen

65-68 Down 3.1%

Medium

36-39 cents per dozen

38-41 Down 5.3%

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

22-24 cents per dozen

Unchanged

Checks

6-9 cents per dozen

Unchanged

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

The July 2019 Regional (IA, WI, MN.) average FOB producer prices, for nest-run grade-quality white shelled eggs, with prices in rounded cents per dozen (last week in parentheses) were unchanged:-

EL. $0.46 ($0.50) estimated by proportion: L. $0.45 ($0.49): M. $0.16 ($0.20)

(See the text, tables and figures in the review of production and prices comprising the June report on USDA May 2019 cost data, posted under the STATISTICS TAB. A report on the financial results attained by Cal-Maine Foods for the 3rd. Quarter of Fiscal 2019, is also posted under the STATISTICS TAB.

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for July 3rd 2019 was numerically lower by 2.1 points from the last weekly report to +2.2 with a 3.0 percent increase in inventory from the past week as determined by the USDA-ERS as follows:-

Productive flock

325,179,711 million hens

Average hen week production

80.2%

Average egg production

263,070,386 million per day

Proportion to shell egg market

68.6%

Total for in-shell consumption

501,295 cases per day

USDA Inventory

1,384,400 cases

26-week rolling average inventory

4.63 days

Actual inventory on hand

4.53 days

Shell Egg Demand Indicator

+2.2 points (was 4.3 on June 26th 2019)

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective June 28th 2019 were:-

Whole Egg

$2.00-$2.15

Unchanged

Yolk

$1.95-$2.10

Unchanged.

Spray-Dried White

$4.60-$4.80

Unchanged

Blends

$2.75-$2.80

No new quotation

U.S. dried egg inventory on May 31st 2019, as reported on June 14th 2019 was 69 percent lower than on May 31st 2018 attaining 19.7 million lbs. (8,963 metric tons), equivalent to approximately 1.5-weeks current production. Inventory was 9.2 percent higher compared to April 30th 2019. During the period April 28 th 2019 through May 1st 2019, dried egg processed under USDA inspection amounted to 15.8 million lbs. Lower shell-egg prices during the past two months diverted non-contracted eggs from packing to breaking.

The May 31st total dried egg inventory comprised whole egg (41.5%); albumen (17.7%); yolk (38.9%) and blends (1.9%).

COMMENTS

Newcastle Disease

The incidence rate of Newcastle disease in Southern California is declining with only one or two case diagnosed each week. A total of 448 exotic velogenic viscerotropic Newcastle disease (vvND = END) cases in small multi-species backyard flocks mainly comprising gamefowl (fighting cocks) were confirmed between May 18th and June 28th in the Southern California Counties of San Bernardino (141), Riverside (260), Los Angeles (45), Ventura (1) and Alameda (1). This case was confirmed in northern California during the week of March 8th. Pre-emptive slaughter of all "birds" (presumed to be domestic galliformes and some anseriforms) in four communities in Los Angeles, Riverside and San Bernardino Counties was conducted under the direction of the State Veterinarian for California in November. This probably resulted in dissemination of infection by owners moving birds. A case of vvND was diagnosed in a flock of non-commercial chickens, presumed to be fighting cocks in Utah County, UT on January 18th. An investigation was initiated to ascertain whether there was any direct or indirect contact with similar flocks in Southern California but no results have been released.

The incidence rate for END fell sharply after mid-October 2018 with only 17 new cases in November. A surge of incident cases was detected in Riverside County during mid-December 2018 with 43 incident cases diagnosed during the month. There were 86 new cases in January 2019, 48 in February, 22 during March, 17 in April and 20 in May. In late March the USDA released funds from the 2015 HPAI outbreak but this may be characterized as too-little and too-late after 13 months. The outbreak is apparently declining in incidence rate. This is less attributed to the "control procedures" carried out by APHIS/CDFA than to immunity developing in flocks from vaccination and exposure of vaccinated flocks that will remain non-clinically affected reservoirs shedding virus in a cycle of exposure. Clearly many flocks are not identified or diagnosed given the relationship of owners of fighting cocks to federal and state agencies.

A flock of 103,000 pullets aged 6 weeks located near Perris in Riverside County was depleted following PCR-diagnosis of vvND during the third week of December 2018. A second commercial flock comprising 180,000 egg-producing hens in Riverside County was diagnosed with vvND during the first week of January 2019 followed by two other laying flocks located about 5 miles from the previous case.

As yet the END situation has not disrupted exports of raw poultry, breeding stock, hatching or table eggs and egg products to Mexico. Following negotiations after the index case of END was diagnosed in Los Angeles County during mid-May, authorities in Mexico accepted regionalization and on May 23rd restored importation of raw poultry from other than the restricted Counties in California. There is absolutely no reason to embargo pasteurized egg products derived from a USDA-FSIS inspected plant.

Avian Influenza

As in the U.S. and the E.U. reassortant strains of avian influenza virus are introduced into regions beneath flyways by migratory birds and then transmitted to backyard and commercial free-range flocks or to confined flocks by deficiencies in biosecurity. Incident cases in the E.U., Asia and North Africa during 2018 should be a warning to U.S. producers during the early winter of 2019 since the risk of infection necessitates enhanced biosecurity and effective containment.

Four cases of LPAI H7N3 were diagnosed in organic turkey growing farms in Stanislaus County, California in early September 2018. Cases of H5N2 LPAI were diagnosed in flocks of commercial turkeys in Kandiyohi (4) and Stearns Counties (4) in Minnesota, during late-October through mid-November with an additional case in Chippewa County in February 2019. The affected flocks have since been depleted following application of "controlled marketing". There is a presumption that migratory waterfowl cease shedding AI virus by the first week of April, re-commencing in December. Accordingly, enhanced biosecurity is required under the Pacific, Central and Mississippi flyways. Flocks allowed outside access during periods when migratory birds are shedding virus are vulnerable to infection.


















































































































































































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