Egg Week

01/09/2020

USDA Weekly Egg Price and Inventory Report, January 9th 2020 2019.

  • Hen numbers in production unchanged at 336.7 million .
  • Shell inventory up by 4.7 percent after an 8.0 percent increase last week reflecting lower post-Christmas purchases by chains.
  • USDA Midwest benchmark generic prices for Extra large and Large down 13.1 percent on average to 73.5 and 71.5 cents per dozen. Mediums were down 9.5 percent to 57.5 cents per dozen.
  • Price of breaking stock down 20.9 percent to 26.5 cents per dozen. Checks down 30.0 percent to 14.0 cents per dozen reflecting shell-egg prices. Both categories are now substantially below the USDA November benchmark nest-run production cost.

 

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on January 6 th 2020 the Midwest wholesale prices for Extra Large and Large as delivered to DCs were down 13.0 and 13.3 percent respectively to 73.5 and 71.5 cents per dozen. Mediums were 9.5 percent lower at 67.5 cents per dozen reflecting oversupply from young flocks. Prices should be compared with the USDA benchmark average 5-Region blended nest-run cost of 59.8 cents per dozen in November, (excluding provisions for packing and transport). The progression of prices during 2019 is depicted in the USDA chart reflecting three years of data, updated weekly.

 

The January 6th 2020 USDA Egg Market News Report (Vol. 67: No. 01) documented a USDA Combined Region value rounded to the nearest cent, of $0.89 per dozen delivered to warehouses for the week ending December 31st. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $0.83 per dozen. At the high end of the range, price in the South Central Region attained $0.97 per dozen. The USDA Combined Price last week was 19 cents per dozen below the three-year average of $1.10 per dozen and 44 cents per dozen below the price during the corresponding week in 2019.

Flock Size

According to the USDA the number of producing hens this week (rounded to 0.1 million) was unchanged from a 2019 high of 336.7 million. The hen population is more than adequate to meet seasonal consumer and industrial demand moving through January and any number above 328 million in production over the short term, portends lower than average prices and increased inventory unless matched by proportional demand that is seasonally low. The total U.S. egg-flock comprised 339.8 million hens including second-cycle birds and those in molt on all farms. The difference of 3.1 million hens in production and total hens is equivalent to 0.9 percent of the national flock, down from a YTD high of 2.4 percent in mid-June. This suggests that there are fewer pullet flocks and molted flocks due to commence production. This has implications for price, given current supply, stock level and seasonally moderate to declining demand until the pre-Easter weeks.

STOCK LEVELS

Generic shell-egg stock was up 4.7 percent, after an 8.0 percent increase in the past week. Inventory was 1,646,600 cases. There is a negligible prospect of an increase in price even with depletion of old hens. The market will have to find a balance between supply and demand as the Industry moves through January 2020. Seasonally the first month of the year is characterized by declining flock size and prices trending lower.

The National stock of frozen egg products as reported by the USDA on December 23rd 2019 attained 35.2 million pounds (16,004 metric tons) on November 30th 2019

Dried-egg inventory reported on December 13th decreased by 4.0 percent during November 2019 to 21.85 million lbs. (9,931 metric tons) on November 30th 2019, (was 22.66 million lbs. on October 31 st 2019).

INVENTORY

Cold Storage

Cold storage stocks in selected regions on January 6th 2019 amounted to 2.580 million pounds (1,173 metric tons) of frozen egg products, down 0.9 percent from the level of 2.603 million lbs. on January 1st 2020.

The most recent monthly USDA Cold Storage Report released on December 23rd documented a total stock of 35.2 million pounds (16,004 metric tons) of frozen egg products on November 30th 2019. This value was up 18.9 percent from November 30th 2018. A total of 91.6 percent of combined inventory comprised the categories of "Whole and Mixed" (57.3 percent) and "Unclassified" (34.3 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 6th 2020 was up 4.7 percent after the previous weekly increase of 8.0 percent. Previous successive weekly changes were a decline of 8.0 percent due to pre-Christmas buying by chains a decline of 0.3 percent and two successive weekly increases of 6.1 percent. The sharp increase in weekly stock level after Christmas suggested that chains apparently ordered forward before the holiday period, filling the pipeline through late December. Old 1 st cycle flocks molted in October and November retained for the pre-Christmas period should now be depleted. Hen numbers are still too high in relation to seasonal sales trends. Pullet chicks placed during late July 2019 are still producing a disproportionate number of medium-sized eggs as denoted by the price for this size.

Five USDA Regions reported higher stock levels. The Midwest Region was up by 3.7 percent compared to the previous week to 537,500 cases. This region was followed in decreasing order of stock level by the South Central Region, up 7.8 percent to 298,800 cases; the Southeast Region up 1.2 percent to 292,700 cases; the Southwest Region up 6.0 percent to 209,900; the Northeast Region up 12.3 percent to 193,800 cases; and the Northwest Region down 2.4 percent 113,800 cases.

The total of the USDA six-area stock of commodity eggs comprised 2,051,500 cases, of which 80.3 percent were shell eggs. The inventory of breaking stock was up 15.2 percent to 404,900 cases consistent with the short processing week and the trend in shell-egg prices during the past two 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 January 6th 2020 the inventory of other than generic eggs (with previous week in parentheses) comprised:-

· Specialty category, up 1.2 percent to 32,200 cases. (was down 3.9% to 31,800 cases)

· Certified Organic, up 6.4 percent to 137,900 cases. (was down 7.4% to 129,600 cases)

· Cage-Free, up 5.9 percent to 129,700 cases. (was up 3.3% to 122,500 cases)

There were firm indications from equipment manufacturers and builders and evidenced by interest at the Midwest Poultry Federation Convention during the first quarter of 2019, that expansion is either planned or is in progress. Low prices from April through early November may have deferred some projects. It is estimated that orders for 7 million to 10 million hen places have been signed, mainly for aviaries, despite the reality that wholesale prices for generic cage-derived eggs were below production cost for seven successive months in 2019. Whether this proposed volume will be housed according to plan or delayed, is a matter or conjecture. One of two proposed large aviary complexes representing two million hens in Ohio is apparently going forward pending permits. A second complex for three million hens in Wisconsin has applied for permits in anticipation of a rise in demand for cage-free eggs. Demand for cage-free product will not increase while generic eggs are on the shelf at $1.00 to $1.25 per dozen. Only state legislation mandating other than cage-free eggs will ensure the transition. If the rate of conversion continues, cage-free eggs will become a commodity subjected to the same price pressures as generic eggs from caged hens.

The projected increase in cage-free flocks is supported by quarterly USDA statistics, the November 6th 2018 passage of California Proposition #12 and subsequent corresponding legislation by Oregon and Washington States. The Supreme Court declined to consider the multi-state challenge to California Proposition #2 and the Massachusetts ballot outcomes.

The Second Quarter financial report for FY 2020 from Cal-Maine released on January 7th indicated that the company would continue conversion of conventional cage housing Investment in new facilities, packing plants and packing plants in 2018 and 2019 amounted to $167 million. The previous 1st Quarter report for FY 2020 posted by Cal-Maine Foods on September 30th noted progress on projects initiated. Both the Q1 and Q2 reports posted substantial losses. Comments by Chairman and CEO Dolph Baker implied restraint in conversion to cage-free going forward. It is evident that there is overproduction of cage-free eggs based on the difference between Nielsen sales data and the average weekly figures posted by the USDA in the Monthly Cage Free Report indicating that a proportion of cage-free and organic eggs produced are currently either downgraded or even 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 the 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 January 9 th 2020, (compared with the previous week in parentheses) were posted by the AMS on December 27th for dozen packs:

· USDA Certified Organic, Brown, Large: $3.56 ($4.11)

· Cage-Free Brown, Large: $2.54 ($2.97)

· Omega-3 Enriched Specialty, White, Large: $2.14 ($2.59)

  • Generic White, Large Grade AA $1.19* ($1.19)

· Generic White, Large Grade A (Feature price) $1.11 ($1.05)

* value retained from previous week as current value not disclosed by USDA

The retail price as determined by the USDA-AMS for generic white Large AA last week was apparently unchanged at $1.19 per dozen despite the 4.7 percent rise in U.S. inventory. Prices will remain low through January 2020 possibly dipping below production cost.

During the present week the USDA benchmark-advertised retail price of brown Cage-Free was 14.4 percent lower corresponding to a drop of 43 cents per dozen to $2.54 per dozen. Certified Organic was lower by 13.4 percent or 55 cents per dozen to $3.56 per dozen narrowing the differential to $1.02 cents per dozen ($1.14 per dozen last week) suggesting a continued demand for certified organic over cage-free brown. The differential between advertised retail prices for generic white Large and cage-free brown was $1.35 per dozen ($1.78 last week) suggesting a continued demand for 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 January 6th 2019 the number of cage-free and certified organic hens in December was unchanged from November. This is considered unlikely but must be accepted at face value. The apparent population of hens producing cage-free and certified organic eggs in December 2019 was:-

Total U.S. flock held for USDA Certified Organic production = 16.2 million (16.1 million in October).

Total U.S. flock held for cage-free production = 54.6 million (54.2 million in October).

Total U.S. non-caged flock = 70.8 million (70.3 million in October).

This total value represents 21.5 percent of a nominal 330 million U.S. flock but 31.7 percent of a presumed flock of 223 million producing for the shell-egg market.

Processed Eggs

For the processing week ending January 4th 2020 the quantity of eggs processed under FSIS inspection over the past short week as reported on January 8th 2020 was up by 5.2 percent compared to the previous week to a level of 1,552,239 cases. The proportion of eggs broken by in-line complexes was 59.8 percent (was 61.7 percent last week attributed to delayed collection from supply farms over Christmas). With higher prices for shell eggs there is a trend to divert non-contracted eggs from breaking to shell-egg sales. During the corresponding processing week in 2019 in-line breakers processed 58.5 percent of eggs broken.

For the monthly report dated January 8th 2020 edible yield from 6,422,458 cases for the period December 1st through December 28 th was 38.2 percent, distributed in the following proportions expressed as percentages:- liquid whole, 58.5; white, 24.8; yolk 12.2; dried, 4.5.

All eggs broken during the first week in 2020 attained 0.93 million cases, 7.5 percent more than the corresponding period during 2019. The difference is in part due to significantly lower prevailing shell-egg prices than in 2019 favoring breaking.

PRODUCTION AND PRICES

Breaking Stock

The price range for breaking stock delivered to Central States plants was down 20.9 percent over a range of 25 to 28 cents per dozen. Checks were down 30.0 percent over a range of 12 to 16 cents per dozen. The revenue for both breaking stock and checks was substantially lower than the benchmark production cost for nest-run, estimated by the USDA at 59.8 cents per dozen during November 2019.

Shell Eggs

The USDA Egg Market News Report released on January 6th 2020 showed reduced Midwest prices for Extra Large and Large. The following table lists the "most frequent" ranges of values as delivered to warehouses*:-

Size/Type

Current Week

Previous Week

Extra Large

72-75 cents per dozen

83-86 down 13.0%

Large

70-73 cents per dozen

81-84 down 13.3%

Medium

56-59 cents per dozen

62-65 down 9.5%

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

25-28 cents per dozen

32-35 down 20.9%

Checks

12-16 cents per dozen

18-22 down 30.0%

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

The January 6th 2020 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:-

EL. $0.55 ($0.68) estimated by proportion: L. $0.50 ($0.63): M. $0.38 ($0.42)

(See the text, tables and figures and the review of production data and prices comprising the December report on USDA November 2019 costs under the Statistics Tab and 2nd Quarter, 2020 financial results posted by Cal-Maine Foods in this edition.)

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for January 8th 2020 was lower by 6.2 points from the last weekly report to -6.2 with a 4.7 percent higher inventory from the past week as determined by the USDA-ERS as follows:-

Productive flock

336,746,781 million hens

Average hen week production

81.0% (was 81.1%)

Average egg production

272,764,893 million per day

Proportion to shell egg market

70.7% (was 72.2%)

Total for in-shell consumption

535,680 cases per day

USDA Inventory

1,646,600 cases

26-week rolling average inventory

4.73 days

Actual inventory on hand

5.04 days

Shell Egg Demand Indicator

-6.2 points (was zero on January 2nd 2020 )

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective January 3rd 2020 were:-

 

Whole Egg

$2.20-$2.30

Down $0.10 on high end of the range.

Yolk

$1.95-$2.05

Down $0.05 on high end of the range.

Spray-Dried White

$4.70-$4.90

Unchanged

Blends

$2.75-$2.80

No new quotation

Total U.S. dried egg inventory on November 30th 2019, as reported on December 13th 2019 was 4 percent lower than on November 30th 2018 attaining 21.85 million lbs. (9,931 metric tons), equivalent to approximately 2.5-weeks current production. Inventory was 3.1 percent lower compared to October 31st 2019. During the period November 3rd 2019 through November 30th 2019, dried egg processed under USDA inspection amounted to 8.5 million lbs. Lower shell-egg prices during the past eight months prior to November diverted non-contracted eggs from packing to breaking.

The November 30th total dried egg inventory comprised whole egg (40.3%); albumen (24.3%); yolk (34.2%) and blends (1.2%).

COMMENTS

Newcastle Disease

The incidence rate of Newcastle disease in Southern California declined over the period June through early August 2019 and no cases were diagnosed for eight consecutive weeks until mid-August. A case was reported from a feed store on August 14th 2019 followed by a spontaneous case in a vaccine-production flock in San Diego County on August 31st and then in a backyard flock on September 9th. Five incident cases were diagnosed in San Bernardino County in late November 2019 and fifteen in December 2019.

Given experience with Newcastle disease in small flocks in a confined area it is inevitable that incident cases will emerge resulting from either introduction from Mexico or extension from unrecognized reservoirs in California. An investigation of the current incident cases is in progress and it is hoped that greater transparency and disclosure will be forthcoming. The progress of the END outbreak was as follows:-

A total of 471 exotic velogenic viscerotropic Newcastle disease (vvND = END) cases in small multi-species backyard flocks with a proportion of gamefowl (fighting cocks) were confirmed between May 18th 2018 and December 31st 2019 in the Southern California Counties of San Bernardino (159), Riverside (263), Los Angeles (46), Ventura (1), (San Diego (1) and Alameda (1). 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 2018. 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.

A surge of new 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, 20 in May and 1 in early June. 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 decline in incidence rate 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. As in 2018 a surge of cases has occurred since late November. Clearly many flocks are not identified or diagnosed given the relationship of owners of fighting cocks to federal and state agencies.

To declare the 2018 - 2020 outbreak officially over will require 13 weeks from depletion of the last diagnosed case.

The END situation has not disrupted exports of raw poultry, breeding stock, hatching or table eggs or egg products to Mexico. Following negotiations after the index case of END was diagnosed in Los Angeles County during mid-May 2018, authorities in Mexico accepted regionalization and on May 23 rd 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

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 fall and early winter of 2019 since the risk of infection necessitates enhanced biosecurity and effective containment.

There is a presumption that migratory waterfowl cease shedding AI virus by the first week of April, re-commencing in December. Accordingly, increased 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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