Egg Week

03/25/2020

USDA Weekly Egg Price and Inventory Report, March 25th 2020.

  • The U.S. flock in production was 524.9 million .
  • Shell inventory down by 12.6 percent after two successive weekly declines reflecting unseasonal, COVID-19 driven demand and limited increase in flock size.
  • USDA Midwest benchmark generic prices for Extra large and Large were up by 53.5 percent on average to 225.5 and 223.5 cents per dozen respectively. Mediums were up 53.9 percent to an average of 187.0 cents per dozen. The market advanced this past week after two successive weekly declines in inventory responding to exceptional COVID-19 buying. This trend should persist at the current or a higher level until Easter 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 4.5 percent higher to 69.0 cents per dozen on average. Checks were up 6.6 percent to 56.5 cents per dozen. Checks are still 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 20 th 2020 the Midwest wholesale prices for Extra Large and Large as delivered to DCs were higher by 53.9 and 54.7 percent to averages of 225.5 and 223.5 cents per dozen respectively. Mediums were up 53.9 percent to 187.0 cents per dozen reflecting a restoration in balance among sizes as young flocks increase in age and heightened demand increased 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 23rd 2020 USDA Egg Market News Report (Vol. 67: No. 12) documented a USDA Combined Region value rounded to the nearest cent, of $1.54 per dozen delivered to warehouses for the week ending March 14th. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.45 per dozen. At the high end of the range, price in the South Central Region attained $1.60 per dozen. The USDA Combined Price last week was 3 cents per dozen above the three-year average of $1.50 per dozen and 64 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 324.9 million. If USDA data is accurate, producers have disposed of old flocks at a rate consistent with demand during March but COVID-19 buying resulted in exceptional demand. The hen population producing eggs is more than adequate to meet seasonal consumer and industrial demand moving through March but demand outpaced supply in 2020. Any number above 325 million in production over the short term in March , 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 330.5 million hens including second-cycle birds and those in molt on all farms. The difference of 5.6 million between hens in production and total hens is equivalent to 1.7 percent of the national flock, down from a 52-week high of 2.4 percent in mid-June 2019. This suggests that there are less pullet flocks and molted flocks scheduled to commence production. This has implications for price, given current supply, low stock levels and transitory high demand most possibly dropping after the Easter weekend.

STOCK LEVELS

Generic shell-egg stock was down a noteworthy 12.6 percent, after a 9.7 percent increase during the previous week. Shell egg inventory was 1,144,400 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 towards Easter. Seasonally, the third month of the year is characterized by stable to slightly decreasing flock size. Due to COVID-19 demand March prices are exceptionally high but welcome.

The National stock of frozen egg products as reported by the USDA on March 23rd 2020 attained 38.9 million pounds (17,697 metric tons) on February 29th 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, compared to 26.1 million lbs. on January 31 st 2020.

INVENTORY

Cold Storage

Cold storage stocks in selected regions on March 23rd 2020 amounted to 2.824 million pounds (1,284 metric tons) of frozen egg products, up 1.5 percent from the level of 2.783 million lbs. on March 1 st 2020.

The most recent monthly USDA Cold Storage Report released on March 23rd 2020 documented a total stock of 38.9 million pounds (17,697 metric tons) of frozen egg products on February 29th 2020. This value was up 12.8 percent from February 28th 2019. A total of 91.4 percent of combined inventory comprised the categories of “Whole and Mixed” (49.3 percent) and “Unclassified” (42.1 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 23rd 2020 was down 12.6 percent after a decrease of 9.7 percent during the past week and 10.0 percent during the preceding week. 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 lay subject to availability of housing as prices move higher. Hen numbers are no longer high in relation to current sales trends influenced by COVID-19 demand. 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 5.8 percent compared to the previous week to 413,500 cases. This region was followed in decreasing order of stock level by the South Central Region, down 14.4 percent to 207,200 cases; the Southeast Region down 20.5 percent to 198,500 cases; the Southwest Region down by a substantial 25.7 percent to 125,900 cases; the Northeast Region down 6.1 percent to 128,700 cases and the Northwest Region down 0.8 percent to 70,600 cases.

The total USDA six-area stock of commodity eggs comprised 1,465,500 cases, of which 78.1 percent were shell eggs. The inventory of breaking stock was down 5.3 percent to 321,100 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 23rd 2020 the inventory of other than generic eggs (with previous week in parentheses) comprised:-

· Specialty category, down 30.7 percent to 27,700 cases. (was down 6.5% to 39,900 cases)

· Certified Organic, down 8.1 percent to 94,600 cases. (was down 12.7% to 103,900 cases)

· Cage-Free, up 3.4 percent to 107,500 cases. (was down 9.4% to 103,900 cases)

Low prices from April through early November 2019 and through January to early March 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 declines in both organic and cage-free hens 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. During the past week the inventory of cage free rose 3.4 percent while specialty and organic declined in volume by a weighted average of 20.0 percent and total shell egg inventory was down 12.7 percent, suggesting market saturation in the cage-free category.

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 26 th 2020, (compared with the previous week in parentheses) were posted by the AMS on March 23rd for dozen packs:

· USDA Certified Organic, Brown, Large: $4.20 ($4.18)

· Cage-Free Brown, Large: $2.67 ($2.44)

· Omega-3 Enriched Specialty, White, Large: $2.18 ($2.22)

· Generic White, Large Grade AA $1.01 ($0.98)

· Generic White, Large Grade A (Feature price) $1.03 ($1.15)

The weekly advertised retail price as determined by the USDA-AMS for generic white Large AA last week was up 3.1 percent to $1.01 per dozen (last week $0.98). Prices for all sizes are rising sharply driven by concerns over COVID-19. There is a limit however to the quantity of perishable foods that consumers will buy and place in their refrigerators. Prices will increase for at least two more weeks and then decline after Easter unless there is a sharp increase in incident cases of COVID-19 infection resulting in more restrictions on movement. Midwest Large will probably peak at $2.50 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 9.4 percent higher corresponding to a rise of 23 cents per dozen to $2.67 per dozen. Certified Organic was higher by 0.5 percent or 2 cents per dozen to $4.20 per dozen narrowing the differential to $1.53 cents per dozen ($1.74 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 $1.66 per dozen ($1.46 last week) suggesting continued 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 decline from December 2019. This indicates saturation of the market for organic and especially 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 21st 2020 the quantity of eggs processed under FSIS inspection over the past week as reported on March 25th 2020 was down 10.4 percent compared to the previous week to a level of 1,471,781 cases. The proportion of eggs broken by in-line complexes was 57.5 percent (was 56.0 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 71.2 percent of egg production was directed to the shell market up from 71.1 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 54.2 percent of eggs broken supporting the observation that diversion to shell sales is taking place in response to 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 19.12 million cases, 2.8 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 23rd was up 4.5 percent to a range of 68 to 70 cents per dozen. Checks were up 6.6 percent to a range of 54 to 59 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 23rd 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

224-227 cents per dozen

145-148 +53.9%

Large

222-225 cents per dozen

143-146 +54.7%

Medium

186-188 cents per dozen

120-123 +53.9%

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

68-70 cents per dozen

65-67 +4.5%

Checks

54-59 cents per dozen

51-55 +6.6%

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

The March 23rd 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. $2.28 ($1.38, estimated by proportion): L. $2.26 ($1.37): M. $1.78 ($1.07)

(See the text, tables and figures and the review of production data and prices comprising the March 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 25th 2020 was up by 12.7 points from the last weekly report to +28.8 with a 12.6 percent lower inventory from the past week as determined by the USDA-ERS as follows:-

Productive flock

324,914,540 million hens

Average hen week production

80.8% (was 81.2%)

Average egg production

262,530,48 million per day

Proportion to shell egg market

71.2% (was 71.1%)

Total for in-shell consumption

519,228 cases per day

USDA Inventory

1,144,400 cases

26-week rolling average inventory

4.65 days

Actual inventory on hand

3.61 days

Shell Egg Demand Indicator

+28.8 points (was +16.3 on March 18th 2020 )

Dried Egg Products

Prices for dried egg products (most frequent price with a range in $ per pound) effective March 20th 2020 were:-

 

Whole Egg

$2.10-$2.25

Unchanged

Yolk

$1.95-$2.10

Up $0.05 on high end of the range

Spray-Dried White

$4.50-$4.65

Unchanged

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 as 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 20th 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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