Egg Week

03/18/2020

USDA Weekly Egg Price and Inventory Report, March 19th 2020.

  • USDA hen numbers in production (if valid) were up 0.2 million during past week to 331.5 million .
  • Shell inventory down by 9.7 percent after a 10.0 percent decrease last week reflecting increased demand and limited increase in flock size.
  • USDA Midwest benchmark generic prices for Extra large and Large were up by 55.5 percent on average to 146.5 and 144.5 cents per dozen respectively. Mediums were up 45.5 percent to an average of 121.5 cents per dozen. The market advanced this past week after two successive declines in inventory responding to panic COVID-19 buying. This trend should persist at the current or a higher level until the Easter surge unless demand falls off due to consumers satisfying heightened but transitory demand. This will be indicated by a rise in inventory.
  • Price of breaking stock in the Midwest was 75.2 percent higher to 66.2 cents per dozen on average. Checks were up 51.4 percent to 53.0 cents per dozen. Checks are still substantially below the USDA February 2020 benchmark nest-run production cost of 60.4 cents per dozen.

OVERVIEW

 

Prices

According to the USDA Egg Market News Reports posted on March 13 th 2020 the Midwest wholesale prices for Extra Large and Large as delivered to DCs were higher by 55.0 and 56.2 percent to averages of 146.5 and 144.5 cents per dozen respectively. Mediums were up 45.5 percent to 121.5 cents per dozen reflecting a restoration in balance among sizes as young flocks increase in age and heightened demand increases the value of this size. Prices should be compared with the USDA benchmark average 5-Region blended nest-run cost of 60.4 cents per dozen in February 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 March 16th 2020 USDA Egg Market News Report (Vol. 67: No. 11) documented a USDA Combined Region value rounded to the nearest cent, of $1.02 per dozen delivered to warehouses for the week ending March 7th. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $0.93 per dozen. At the high end of the range, price in the South Central Region attained $1.08 per dozen. The USDA Combined Price last week was 21 cents per dozen below the three-year average of $1.22 per dozen and 11 cents per dozen above 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) attained 331.5 million. If USDA data is accurate, producers have disposed of old flocks at a rate consistent with demand during February resulting in price fluctuation. The hen population producing eggs is more than adequate to meet seasonal consumer and industrial demand moving through March 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 that appears to be responding to COVID-19 concern expressed as ‘Refrigerator Stuffing”

 

The total U.S. egg-flock comprised 338.2 million hens including second-cycle birds and those in molt on all farms. The difference of 6.7 million hens in production and total hens is equivalent to 2.0 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 transitory high demand possibly dropping in the last week of March before the seasonal rise during the pre-Easter weeks.

 

STOCK LEVELS

Generic shell-egg stock was down a noteworthy 9.7 percent, after a 10.0 percent increase during the previous week. Shell egg inventory was 1,308,600 cases. The decrease in inventory was due to consumers packing refrigerators in response to COVID-19 fears in addition to the seasonal post-February depletion of flocks. The market will have to find a balance between supply and demand as the Industry moves through March 2020. Seasonally, the third month of the year is characterized by stable to slightly increasing flock size. This is apparent in 2020, after prices trended lower in early January but have risen sharply in the past two weeks as a result of strong but transitory COVID-19 demand.

 

The National stock of frozen egg products as reported by the USDA on February 24th 2020 attained 38.3 million pounds (17,396 metric tons) on January 31st 2020.

 

Dried-egg inventory reported on March 13th increased by 9.0 percent during February 2020 to 28.5 million lbs. (12,958 metric tons) on February 29th 2020, (was 26.1 million lbs. on January 31 st 2020).

 

INVENTORY

Cold Storage

Cold storage stocks in selected regions on March 17th 2020 amounted to 2.719 million pounds (1,236 metric tons) of frozen egg products, down 2.3 percent from the level of 2.783 million lbs. on March 1 st 2020.

The most recent monthly USDA Cold Storage Report released on February 24th 2020 documented a total stock of 38.3 million pounds (17,396 metric tons) of frozen egg products on January 31st 2020. This value was up 18.6 percent from January 31 st 2020. A total of 90.7 percent of combined inventory comprised the categories of “Whole and Mixed” (48.9 percent) and “Unclassified” (41.8 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 March 16th 2020 was down 9.7 percent after a decrease of 10.0 percent during the past week following successive weekly increases of 4.5 and 3.6 percent. Some old first-cycle flocks molted in late October and November and retained for the pre-Christmas period are still producing for Easter inventory and will be held-in subject to availability of housing as prices move higher. Hen numbers are still high in relation to normal seasonal sales trends. Pullet chicks placed during mid-July 2019 for Easter are producing fewer medium-sized eggs as denoted by the relative price for this size.

All six USDA Regions reported lower stock levels. The Midwest Region was down by 7.7 percent compared to the previous week to 439,000 cases. This region was followed in decreasing order of stock level by the Southeast Region, down 2.6 percent to 249,700 cases; the South Central Region down 3.9 percent to 247,200 cases; the Southwest Region down by a substantial 13.2 percent to 169,500 cases; the Northeast Region down 19.3 percent to 137,000 cases and the Northwest Region down 28.5 percent to 71,200 cases.

The total of the USDA six-area stock of commodity eggs comprised 1,647,800 cases, of which 79.4 percent were shell eggs. The inventory of breaking stock was down 3.9 percent to 339,200 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 March 16th 2020 the inventory of other than generic eggs (with previous week in parentheses) comprised:-

· Specialty category, down 6.5 percent to 39,900 cases. (was down 8.0% to 42,700 cases)

· Certified Organic, down 12.7 percent to 103,000 cases. (was down 9.8% to 117,900 cases)

· Cage-Free, down 9.4 percent to 103,900 cases. (was down 9.4% to 114,700 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. The current transitory surge in prices will not persist after Easter and current optimism may not be reflected in actual experience over the intermediate term. One of two proposed large aviary complexes planned for two million hens in Ohio is apparently going forward, having received 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 with 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 over the long term. This is suggested by both the February and March 2020 USDA Cage-free Reports denoting the first monthly decline in both organic and cage-free hens in January 2020, the first since the report was initiated. State or Federal legislation mandating sale of only cage-free eggs will ensure the projected transition from cages and even so, not by 2025. 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 Foods financial report for FY 2020 released on January 7th 2020 indicated that the company would continue conversion of conventional cage housing only 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 previously. Both the Q1 and Q2 reports confirmed substantial losses. Comments by Chairman and CEO Dolph Baker implied restraint in conversion to cage-free housing 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 March 19 th 2020, (compared with the previous week in parentheses) were posted by the AMS on March 9th for dozen packs:

· USDA Certified Organic, Brown, Large: $4.18 ($3.93)

· Cage-Free Brown, Large: $2.44 ($2.60)

· Omega-3 Enriched Specialty, White, Large: $2.22 ($2.30)

· Generic White, Large Grade AA $0.98 ($1.12)

· Generic White, Large Grade A (Feature price) $1.15 ($1.21)

The weekly advertised retail price as determined by the USDA-AMS for generic white Large AA last week was down 12.5 percent to $0.98 per dozen (last week $1.12). Prices for all sizes are rising sharply driven by concerns over COVID-19. There is a limit however to the quantity of a perishable food consumers will buy and place in their refrigerators. Prices will increase for at least one more week and then decline unless there is a sharp increase in incident cases of COVID-19 infection. Midwest Large will probably peak at $2 per dozen as delivered to CDs Easter Sunday falls on April 12th in 2020 and is usually preceded by a two-week rise in prices.

During the present week the USDA benchmark-advertised retail price of brown Cage-Free was 6.2 percent lower corresponding to a fall of 16 cents per dozen to $2.60 per dozen. Certified Organic was higher by 6.4 percent or 25 cents per dozen to $4.18 per dozen widening the differential to $1.74 cents per dozen ($1.33 per dozen last week) suggesting continued demand for cage –free brown over certified organic. The differential between advertised retail prices for generic white Large and cage-free brown was $1.46 per dozen ($1.48 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 March 2 nd 2020 the number of cage-free and certified organic hens during February 2020 was unchanged from January suggesting the validity of the 1.6 percent from December 2019. This decline indicates saturation of the market for organic and cage-free eggs. The apparent population of hens producing cage-free and certified organic eggs in both January and February 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.

The inventory of cage-free hens will be updated after release of the monthly USDA Report.

 

Processed Eggs

For the processing week ending March 14th 2020 the quantity of eggs processed under FSIS inspection over the past week as reported on March 18th 2020 was down 2.1 percent compared to the previous week to a level of 1,513,700 cases. The proportion of eggs broken by in-line complexes was 56.0 percent (was 56.4 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 71.1 percent of egg production was directed to the shell market up from 73.8 percent last week. The differences among weeks denotes 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 March 11th 2020, edible yield from 6,424,208 cases for the period February 2nd 2019 through February 29th 2020 was 38.2 percent, distributed in the following proportions expressed as percentages:- liquid whole, 58.2; white, 24.6; yolk 12.5; dried, 5.0.

All eggs broken during YTD 2020 attained 17.65 million cases, 3.5 percent more than the corresponding period during 2019. The difference is in part due to significantly lower prevailing shell-egg prices for the first four weeks of 2020 compared to 2019, favoring breaking.

 

PRODUCTION AND PRICES

Breaking Stock

The price range for breaking stock delivered to Central States plants as at March 16th was up 75.2 percent to a range of 65 to 67 cents per dozen. Checks were up 51.4 percent to a range of 51 to 55 cents per dozen. Despite the increase, revenue for checks was lower than the benchmark production cost for nest-run, estimated by the USDA at 60.4 cents per dozen during February 2020.

 

Shell Eggs

The USDA Egg Market News Report released on March 16th 2020 showed sharply higher Midwest prices for all categories and sizes. The following table lists the “most frequent” ranges of values as delivered to warehouses*:-

Size/Type

Current Week

Previous Week

Extra Large

145-148 cents per dozen

93-96 +55.0

Large

143-146 cents per dozen

91-94 +56.2

Medium

120-123 cents per dozen

82-85 +45.5

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

65-67 cents per dozen

47-49 +75.2

Checks

51-55 cents per dozen

33-37 +51.4

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

The March 16th 2020 Regional (IA, WI, MN.) average FOB producer prices, for nest-run grade-quality white shelled eggs, with prices in rounded cents per dozen were unchanged from last week:-

EL. $1 38 ($0.86, estimated by proportion): L. $1.37 ($0.83): M. $1.07 ($0.69)

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

 

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for March 18th 2020 was up by 11.4 points from the last weekly report to +16.3 with a 9.7 percent lower inventory from the past week as determined by the USDA-ERS as follows:-

Productive flock

331,458,287 million hens

Average hen week production

81.2% (was 81.1%)

Average egg production

269,144,129 million per day

Proportion to shell egg market

71.1% (was 73.8%)

Total for in-shell consumption

531,560 cases per day

USDA Inventory

1,308,600 cases

26-week rolling average inventory

4.70 days

Actual inventory on hand

4.05 days

Shell Egg Demand Indicator

+16.3 points (was +4.9 on March 11th 2020 )

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective March 13th 2020 were:-

Whole Egg

$2.10-$2.25

Unchanged

Yolk

$1.95-$2.05

Unchanged

Spray-Dried White

$4.50-$4.65

Down $0.05 on high end of the range

Blends

$2.75-$2.80

No new quotation

Total U.S. dried egg inventory on February 29th 2020, as reported on March 13th 2020 was 65 percent lower than on February 28th 2019 attaining 28.5 million lbs. (12,958 metric tons), equivalent to approximately 10 weeks production at current levels. Inventory was 9.0 percent higher compared to January 31st 2019. During the period February 2nd 2019 through February 29 th 2020, dried egg processed under USDA inspection amounted to 12.0 million lbs. (5,896 metric tons). Lower shell-egg prices during the last eight months of 2019 and during the post-Christmas weeks diverted non-contracted eggs from packing to breaking.

The February 29th 2020 total dried egg inventory comprised whole egg (38.7%); albumen (25.2%); yolk (34.1%) and blends (2.0%).

The inventory of dried eggs will be updated monthly after release of the relevant 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 January 12th and 18th and the most recent on February 25 th. The low incidence rate compared to early 2019 suggests that the outbreak is coming to an end.

The progress of the END outbreak was as follows:-

A total of 476 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 March 13th 2020 in the Southern California Counties of San Bernardino (164), Riverside (262), 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.

An outbreak of low pathogenicity H7 avian influenza was diagnosed in a few flocks comprising grow-out and breeder turkeys in Anson and Union Counties in North Carolina from March 13th through the weekend. Affected flocks were rapidly depleted and surveillance on contact flocks is in progress. If this outbreak is attributed to migratory waterfowl it must be accepted that the virus has entered the Atlantic Flyway with implications for flocks along the Eastern seaboard including the Eastern Shore

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, Mississippi and Atlantic flyways. Flocks allowed outside access during periods when migratory birds are shedding virus are vulnerable to infection.






































































































































































































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