Egg Week

02/12/2020

USDA Weekly Egg Price and Inventory Report, February 13th 2020.

  • Hen numbers in production up 0.7 million to 336.8 million .
  • Shell inventory up by 2.4 percent after a 1.6 percent decrease last week reflecting softening demand and increased production.
  • USDA Midwest benchmark generic prices for Extra large and Large up 1.9 percent to an average of 107.5 and 105.5 cents per dozen. Mediums down 1.3 percent to 72.5 cents per dozen. The market increased last week but should stabilize or fall until the Easter surge unless demand falls off with a rise in inventory.
  • Price of breaking stock was unchanged at 25.0 cents per dozen on average. Checks were unchanged at 13.0 cents per dozen lagging shell-egg prices. Both categories are still substantially below the USDA January 2020 benchmark nest-run production cost. Of 60.8ncents per dozen.

OVERVIEW

Prices

According to the USDA Egg Market News Reports posted on February 10th 2020 the Midwest wholesale prices for Extra Large and Large as delivered to DCs were up 1.9 percent to averages of 105.5 and 103.5 cents per dozen respectively. Mediums were down 1.3 percent to 72.5 cents per dozen reflecting an imbalance in sizes influenced by young flocks. Prices should be compared with the USDA benchmark average 5-Region blended nest-run cost of 60.8 cents per dozen in January 2020, (excluding provisions for packing and transport). The progression of prices during 2018-2020 is depicted in the USDA chart reflecting three years of data, updated weekly.

The February 10th 2020 USDA Egg Market News Report (Vol. 67: No. 06) documented a USDA Combined Region value rounded to the nearest cent, of $1.13 per dozen delivered to warehouses for the week ending February 3rd. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.04 per dozen. At the high end of the range, price in the South Central Region attained $1.19 per dozen. The USDA Combined Price last week was 18 cents per dozen below the three-year average of $1.32 per dozen and also 18 cents per dozen below the price during the corresponding week in 2019.

Flock Size

According to the USDA the number of producing hens this past week (rounded to 0.1 million) was up 0.7 million to 336.8 million. If USDA data is accurate, producers are not disposing of old flocks at a rate consistent with demand resulting in price fluctuation. The hen population producing eggs is more than adequate to meet seasonal consumer and industrial demand moving through February and any number above 325 million in production over the short term, portends lower than average prices and increased inventory unless matched by proportional demand currently at a seasonal low. The total U.S. egg-flock comprised 342.3 million hens including second-cycle birds and those in molt on all farms. The difference of 5.5 million hens in production and total hens is equivalent to 1.6 percent of the national flock, down from a 52-week high of 2.4 percent in mid-June 2019. This suggests that there are still pullet flocks and molted flocks scheduled 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 2.4 percent, after a 1.6 percent decrease during the past week. Shell egg inventory was 1,467,000 cases. Given the decrease in inventory and apparently some seasonal post depletion of flocks there is a continuing prospect of stability or a small decline in price depending on demand. The market will have to find a balance between supply and demand as the Industry moves through February 2020. Seasonally the second month of the year is characterized by a stable flock size, (that is becoming apparent this year), after prices trended lower in early January.

The National stock of frozen egg products as reported by the USDA on January 22nd 2020 attained 40.8 million pounds (18,532 metric tons) on December 31st 2019.

Dried-egg inventory reported on January 10th increased by 4.0 percent during December 2019 to 22.71 million lbs. (10,322 metric tons) on December 31st 2019, (was 21.85 million lbs. on November 30 th 2019).

INVENTORY

Cold Storage

Cold storage stocks in selected regions on February 10 th 2020 amounted to 2.841 million pounds (1,291 metric tons) of frozen egg products, down 1.0 percent from the level of 2.869 million lbs. on February 1st 2020.

The most recent monthly USDA Cold Storage Report released on January 22nd 2020 documented a total stock of 40.8 million pounds (18,532 metric tons) of frozen egg products on December 31st 2019. This value was up 38.8 percent from December 31 st 2018. A total of 91.1 percent of combined inventory comprised the categories of "Whole and Mixed" (47.5 percent) and "Unclassified" (42.6 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 February 10th 2020 was up 2.4 percent after the previous weekly decrease of 1.6 and a decrease of 0.2 percent in the preceding week. Old first cycle flocks molted in October and November and retained for the pre-Christmas period are hopefully being depleted to reduce supply. Hen numbers are still too high in relation to seasonal sales trends. Pullet chicks placed during early July 2019 for Easter are producing medium-sized eggs as denoted by the price for this size.

Four USDA Regions reported higher stock levels. The Midwest Region was down by 1.2 percent compared to the previous week to 453,900 cases. This region was followed in decreasing order of stock level by the Southeast Region, down 0.2 percent to 254,500 cases; the South Central Region unchanged at 237,300 cases; the Northeast Region up 11.2 percent to 217,500 cases; the Southwest Region, up 2.1 percent to 208,600 cases the and the Northwest Region, up 17.0 percent to 95,300 cases.

The total of the USDA six-area stock of commodity eggs comprised 1,808,300 cases, of which 81.1 percent were shell eggs. The inventory of breaking stock was down 4.0 percent to 341,300 cases consistent with the previous processing week and the trend in shell-egg prices during the past three 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 February 10th 2020 the inventory of other than generic eggs (with previous week in parentheses) comprised:-

· Specialty category, up 4.3 percent to 37,300 cases. (was up 14.8% to 35,800 cases)

· Certified Organic, down 9.3 percent to 118,600 cases. (was up 4.1% to 130,800 cases)

· Cage-Free, down 7.0 percent to 119,000 cases. (was up 0.8% to 128,000 cases)

Low prices from April through early November 2019 and through January 2020 have deferred some expansion and conversion projects to cage-free systems. It is estimated that orders for seven million to ten million hen places were signed in 2019, mainly for aviaries, despite the reality that wholesale prices for generic cage-derived eggs were below production cost for seven successive months in 2019 and into early 2020. Whether this proposed volume will be housed according to plan or delayed, is a matter for 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 price for cage-free eggs. The rate of execution of these projects may be slowed consistent wigth market conditions and the willingness of financial institutions to advance funds for construction. Demand for cage-free product will not increase while generic eggs are on the shelf at $0.90 to $1.25 per dozen. This is suggested by the February 2020 USDA Cage-free Report recording January figures and denoting the first monthly decline in both organic and cage-free hens since the report was initiated. Only state or Federal legislation mandating other than cage-derived eggs will ensure the projected transition from cages and even so, not by 2025. Even with the current proportion of flocks, cage-free eggs are becoming a commodity subjected to the same price pressures as generic eggs from caged hens.

The Second Quarter Cal Maine financial report for FY 2020 fro released on January 7th 2020 indicated that the company would continue conversion of conventional cage housing on a market-demand basis. Investment in new production facilities 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 2019 noted progress on projects initiated. Both the Q1 and Q2 reports confirmed 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 potential production from figures posted by the USDA in the Monthly Cage Free Report. The discrepancy indicates 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 February 13 th 2020, (compared with the previous week in parentheses) were posted by the AMS on February 10th for dozen packs:

· USDA Certified Organic, Brown, Large: $3.66 ($4.02)

· Cage-Free Brown, Large: $2.80 ($2.60)

· Omega-3 Enriched Specialty, White, Large: $2.45 ($2.33)

  • Generic White, Large Grade AA $0.96 ($0.85)

· Generic White, Large Grade A (Feature price) $1.07 ($1.11)

The retail price as determined by the USDA-AMS for generic white Large AA last week was up 12.9 percent to $0.96 per dozen (last week $0.85). Prices for all sizes will remain stable to slightly lower through February 2020 but have risen above Midwest production cost.

During the present week the USDA benchmark-advertised retail price of brown Cage-Free was 7.7 percent lower corresponding to a rise of 20 cents per dozen to $2.80 per dozen. Certified Organic was lower by 9.8 percent or 36 cents per dozen to $3.66 per dozen narrowing the differential to $0.86 cents per dozen ($1.42 per dozen last week) suggesting demand for certified organic over cage-free brown. The differential between advertised retail prices for generic white Large and cage-free brown was $1.84 per dozen ($1.75 last week) suggesting greater 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 February 3rd 2020 the number of cage-free and certified organic hens during January 2020 was1.6 percent lower than December 2019. This decline, if valid, indicates saturation of the market for organic and cage-free eggs. The apparent population of hens producing cage-free and certified organic eggs in January 2020 comprised:-

Total U.S. flock held for USDA Certified Organic production = 15.7 million (16.2 million in December).

Total U.S. flock held for cage-free production = 54.0 million (54.6 million in December).

Total U.S. non-caged flock = 69.7 million (70.8 million in December).

This total value represents 21.1 percent of a nominal 330 million total U.S. flock but 31.2 percent of a presumed flock of 223 million producing for the shell-egg market.

Processed Eggs

For the processing week ending February 8th 2020 the quantity of eggs processed under FSIS inspection over the past week as reported on February 12th 2020 was up <0.1 percent compared to the previous week to a level of 1,636,385 cases. The proportion of eggs broken by in-line complexes was 56.3 percent (was 56.3 percent last week). With higher prices for shell eggs there is a trend to divert non-contracted eggs and eggs surplus to the spot market from breaking to shell-egg sales. This past week 69.0 percent of egg production was directed to the shell market unchanged from last week confirming less diversion of non-contracted generic eggs to breakers. During the corresponding processing week in 2019 in-line breakers processed 54.6 percent of eggs broken supporting the observation that diversion to shell sales is taking place consistent with price.

For the monthly report dated February 12th 2020 edible yield from 8,165,411 cases for the period December 29th 2019 through February 1st 2020 was 38.3 percent, distributed in the following proportions expressed as percentages:- liquid whole, 56.9; white, 25.6; yolk 12.4; dried, 5.0.

All eggs broken during YTD 2020 attained 9.8 million cases, 4.2 percent more than the corresponding period during 2019. The difference is in part due to significantly lower prevailing shell-egg prices for the first three weeks of 2020 compared to 2019, favoring breaking.

PRODUCTION AND PRICES

Breaking Stock

The price range for breaking stock delivered to Central States plants was unchanged over a range of 24 to 26 cents per dozen. Checks were unchanged over a range of 11 to 15 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 60.8 cents per dozen during January 2020.

Shell Eggs

The USDA Egg Market News Report released on February 10 th 2020 showed increased 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

106-109 cents per dozen

104-107 +1.9%

Large

104-107 cents per dozen

102-105 +1.9%

Medium

71-74 cents per dozen

72-75 -1.3%

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

24-26 cents per dozen

Unchanged

Checks

11-15 cents per dozen

Unchanged

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

The February 10th 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. $0.89 ($0.95) estimated by proportion: L. $0.85 ($0.91): M. $0.52 ($0.54)

(See the text, tables and figures and the review of production data and prices comprising the February report on USDA costs in January in this edition. Results for the 2nd Quarter of FY 2020 are posted by Cal-Maine Foods under the Statistics Tab.)

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for February 12th 2020 was down by 1.8 points from the last weekly report to +1.5 with a 2.4 percent lower inventory from the past week as determined by the USDA-ERS as follows:-

Productive flock

336,807,159 million hens

Average hen week production

80.6% (was 80.6%)

Average egg production

271,466,570 million per day

Proportion to shell egg market

69.0% (unchanged)

Total for in-shell consumption

521,065 cases per day

USDA Inventory

1,467,000 cases

26-week rolling average inventory

4.69 days

Actual inventory on hand

4.62days

Shell Egg Demand Indicator

+1.5 points (was +3.3 on February 5th 2020 )

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective February 7th 2020 were:-

 

Whole Egg

$2.15-$2.30

Up $0.05 on low end and up $0.10 on high end of the range

Yolk

$1.95-$2.15

Up $0.10 on high end of the range

Spray-Dried White

$4.50-$4.80

Down $0.05 on low end and up $0.15 on the high end of the range

Blends

$2.75-$2.80

No new quotation

Total U.S. dried egg inventory on December 31st 2019, as reported on January 10th 2020 was 53 percent lower than on December 31st 2018 attaining 22.71 million lbs. (10,322 metric tons), equivalent to approximately 2.0 weeks current production. Inventory was 4.0 percent higher compared to November 1st 2019. During the period December 1st 2019 through December 28 th 2019, dried egg processed under USDA inspection amounted to 11.54 million lbs. (5,246 metric tons). Lower shell-egg prices during the eight months prior to November diverted non-contracted eggs from packing to breaking.

The December 31st total dried egg inventory comprised whole egg (37.8%); albumen (24.7%); yolk (35.0%) and blends (2.5%).

The inventory of dried eggs will be updated in the subsequent edition of EGG-NEWS after release of the USDA Report .

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. The first case in 2020 was diagnosed in San Bernardino County on January 8th followed by a second on January 12th.There have been no additional reports since mid-January representing an improved situation compared to the corresponding period in 2019 and suggesting an end to the current outbreak.

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 compared to 2018 and 2019. The infection can now be regarded as endemic in backyard flocks and gamefowl in the four-county area. The progress of the END outbreak was as follows:-

A total of 473 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 February 7th 2020 in the Southern California Counties of San Bernardino (161), 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 2019.

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 one in early June. In late March the USDA released funds remaining from the 2015 HPAI outbreak but this could 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 possibly shedding virus in a cycle of exposure. As in 2018, incident cases have been diagnosed since late November 2019. 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 corresponding to mid-April 2020.

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 2018 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 and now 2020 should be a warning to U.S. producers during the late winter and early spring of 2020 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 sequentially in that order through winter. Flocks allowed outside access during periods when migratory birds are shedding virus are vulnerable to infection.


































































































































































































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