REVIEW OF AUGUST 2020 EGG PRODUCTION COSTS AND STATISTICS

09/09/2020

HIGHLIGHTS

  • August 2020 USDA ex-farm blended nest-run benchmark price was 53.7 cents per dozen, 3.7 percent higher than the amended July value of 51.8 cents per dozen but 58.2 percent lower than the exceptionally high April value of 128.5 cents per dozen. The downward price trend from mid-May through July is attributed to restoration of normal consumer purchasing patterns coupled with diversion of eggs form breaking to the shell-egg market. This situation followed COVID-19 panic buying during late March into early April. The supply pipeline was re-filled in April and consumption declined thereafter. Currently stock levels and prices indicate a balance between supply and demand albeit at a low price attributable to over-production and diversion.
  • August 2020 USDA average nest-run production cost was 0.2 cents per dozen lower than in July 2020 at 58.0 cents per dozen.
  • August 2020 USDA benchmark nest-run margin attained a negative value of 4.3 cents per dozen compared to a negative margin of 6.9 cents per dozen as amended for July 2020.
  • July 2020 national flock in production (over 30,000 hens/farm) was down 3.1 million hens or 1.0 percent to 299.1 million. There are approximately 7.5 million hens in molt or due to return from molt.
  • July 2020 pullet chick hatch was down 15.7 percent from June 2020 to 23.1 million.
  • July 2020 export of shell eggs and products combined was up 5.2 percent from June 2020 to 791,000 case equivalents representing the theoretical production of 11.5 million hens.

                                         

INTRODUCTION.

Summary tables for the latest USDA August 2020 prices and flock statistics made available by the EIC on September 9th 2020 are arranged, summarized, tabulated and reviewed in comparison with values from the previous August 11th 2019 posting reflecting July 2020 cost and production data.

 

COSTS & REVENUE

Parameter

    JULY 2020

  AUGUST 2020

5-Region Cost of Production ex farm (1st Cycle)

58.7 c/doz

58.0 c/doz

Low

55.5 c/doz (MW)

55.0c/doz (MW)

High

84.4 c/doz (CA)

83.5c/doz (CA)

Components of USDA 6-Region 1stCycle nest-run Cost of Production:-

 

 

JULY 2020

AUG. 2020

Feed

29.6 c/doz

28.9c/doz

Pullet depreciation

10.8 c/doz

10.8 c/doz

Labor (estimate)

  4.0 c/doz

  4.0 c/doz

Housing (estimate)

  5.0 c/doz

  5.0 c/doz

Miscellaneous and other*

  9.3 c/doz

  9.3 c/doz


* Adjusted January 2020 and used as a rounding factor

 

Ex Farm Margin (rounded to nearest cent) according to USDA values reflecting AUGUST 2020:-

                                            53.7 cents per dozen1- 58.0 cents per dozen = -4.3

    (Amended July 2020 comparison 51.81 cents per dozen – 58.7 cents per dozen = -6.9 cents per dozen.)

Note 1:  USDA Blended egg price

 

 

 

 

         JULY  2020

  AUGUST 2020

USDA

Ex-farm Price (Large, White)

       51.8 c/doz  (July)1

   53.7 c/doz   (Aug.)

 

Cage-free to packing plant

     153.0 c/doz  (July)

 151.0 c/doz.  (Aug.)

 

Warehouse/Dist. Center

       81.0 c/doz  (July)

   75.0 c/doz   (Aug.)

 

Store delivered (estimate)

       86.0 c/doz  (July)

   80.0 c/doz   (Aug.)

 

Dept. Commerce Retail

     155.4 c/doz  (June)

 140.1 c/doz   (July)


Notre 1. Amended

Layer Feed Cost

     JULY 2020

   AUGUST 2020

See note on source of data: now USDA

U.S. Average

 

$188.51/ton

 

$184.34/ton

High

$215.00/ton (West)

 

$209.83/ton (West)

Low

 

Differential

$170.27/ton (MW)

 

$44.73

$167.62/ton (MW)

 

$42.21

 

Pullet Cost (19 Weeks)       

$3.74 JULY 2020           

$3.71  AUGUST 2020

 

VOLUMES OF PRODUCTION                                                                           

 

PARAMETER

        JULY 2020

   AUGUST 2020

Table-egg strain eggs in incubators

46.1 million (July)*

46.3 million (Aug.)

Pullet chicks hatched

27.4 million (June)

23.1 million (July)

Pullets to be housed in 5 months

24.8 million (Nov.)

20.8million (Dec.)

 

 

 

National Flock in farms over 30,000

302.2 million (June)*

299.1 million (July)

National egg-producing flock

315.7 million (June)*

313.9 million (July)

 

 

 

Proportion flock in molt or post-molt

     16.1%         (July)*

16.3%             (Aug.)

Total of hens in flocks over 30,000, 1st cycle (estimate)

 264.8 million (June)*

262.7 million (July)

* USDA Revisions

 

 

Total U.S. Eggs produced

     7.60 billion   (June)

8.01 billion    (July)

Cage-Free hens in production

   78.8 million    (July)

   20.1% Organic

78.4 million   (Aug.)

20.2% Organic

“Top-5” States hen population (USDA)1

   150.9 million (June)*

   148.7           (July)

Note 1. Texas excluded to maintain confidentiality            

*USDA Update

 

PROPORTION OF U.S. TOTAL HENS BY STATE, 2020                                                                   

Based on a nominal denominator of 300 million hens in flocks over 30,000 covering 95.2 percent of the U.S complement.

USDA has amended inclusion of specific states in regions and eliminated Texas data to protect confidentiality of Company flock sizes

 

STATE

JUNE 2020

 AUGUST 2020

Iowa

    15.5%

      14.9%

Indiana

    10.6%

      10.7%

Ohio

    10.6%

      10.7%

Pennsylvania

      9.0%

        9.0%

Texas (estimate)

      6.0% ?

        6.0% ?

California

      4.2%

        4.2%

  1. Values rounded to 0.1%

 

Rate of Lay, weighted hen-week (USDA)                  81.0% (JULY)     83.2% (AUGUST)

 

 

Actual per capita         egg consumption 2016:-              275.3 (up 19.8 eggs from 2015)   

Actual per capita         egg consumption 2017:-              282.1 (up   6.8 eggs from 2016)   

Actual per capita         egg consumption 2018:-              287.8 (up   5.7 eggs from 2017)   

Revised per capita       egg consumption 2019:-             292.9 (up   5.1 eggs from 2018)*   

Projected per capita   egg consumption 2020:-              283.8 (down 9.1 eggs from 2019)*

Estimated per capita  egg consumption 2021:-              287.1 (up 3.3 eggs from 2020)*   

 

*Revised, using data from USDA Livestock, Dairy and Poultry Outlook August 18th 2020 taking into account the decreased demand from the food service sector

Egg Inventories at beginning of AUGUST 2020:

    Shell Eggs:        1.83 million cases up 4.0 percent from June 2020.

     Egg Products:  Not disclosed. Assume high level of dried egg.

 

Eggs broken under FSIS inspection (million cases)                                 June: 6.037    JULY:   6.353               

Cumulative eggs broken under FSIS inspection 2019 (million cases)  82.9    JAN. to DEC.      

Cumulative 2020: number of cases produced to date (million)      155.4   JAN. to JULY.

Cumulative 2019: proportion of total eggs broken to date          27.8%    (30.1%  2019)

Shell eggs broken YTD 2020:- 43.26 million cases.

 

EXPORTS JULY 2020: (Expressed as shell-equivalent cases of 360 eggs).

Parameter

Quantity Exported

Exports:

 

Shell Eggs (thousand cases)

JUNE 315    JULY 356

Products (thousand case equivalents)

JUNE  438   JULY 435

TOTAL (thousand case equivalents)*

JUNE  753   JULY 791

                                                                                                                               

*Representing 3.4 percent of National production in July 2020.                    

 

COMMENTARY ON AUGUST 2020 COSTS AND STATISTICS

 

AUGUST 2020 COST AND REVENUE DATA

The USDA reports data for six regions, respectively comprising the Northeast, South East (Mid-Atlantic), South Central, Midwest, Northwest and California (NW and California combined in some tables).

From March 2019 onward some state data was withheld to maintain confidentiality where a company predominates in a specific state or region.

  • The USDA ex farm benchmark blended egg price in August 2020 increased by 3.7 percent or 1.9 cents per dozen from July 2020 to 53.7 cents per dozen, contributing to a negative margin of 4.3 cents per dozen based on ‘nest-run’ eggs (delivered from the laying house) compared to a loss of 6.9 cents per dozen in July (as amended). The August 2020 USDA benchmark price of 53.7 cents per dozen should be compared to 57.6 cents per dozen for the corresponding month in 2019 and 85.8 cents per dozen in August 2018.

 

  • During August 2020, the feed component of production cost averaged 28.9 cents per dozen, down 2.2 percent from July 2020. For 2019 average feed price was 31.4 cents per dozen. The 2018 average feed cost was 33.3 cents per dozen compared with an average feed cost of 32.0 cents per dozen in 2017.

 

  • Combining data from the USDA and the EIC, producers recorded a negative margin of 4.3 cents per dozen at farm-level for generic-egg flocks in August 2020 compared to a negative margin of 6.9 cents per dozen in July 2020. For the first eight months of 2020 the cumulative algebraic margin was a positive 154.0 cents per dozen. The cumulative algebraic margin for 2019 was -33.3 cents per dozen or an average monthly loss of 2.8 cents per dozen. The cumulative margin for entire 2018 was a positive 424.0 cents per dozen or a monthly average of 35.3 cents per dozen. The algebraic margin for 2017 was a positive 39.2 cents per dozen, with the first eight months negative comparing production cost against USDA benchmark ‘nest run’ values. The algebraic average margin for 2016 was a loss of 9.6 cents per dozen with negative values recorded for eight consecutive months.

 

  • The simple average price of feed in August 2020 over 5-regions was $184.34 per ton, 2.3 percent higher (using USDA-AMS data) corresponding to $4.17 per ton compared to July 2020. Southwest data is no longer disclosed to avoid compromising a company that predominates in Texas. The highest cost among five regions was the West (including California) at $209.83 per ton can be compared to the lowest-cost region, the Midwest at $167.62 per ton. The average figure includes ingredients plus milling and delivery at a nominal $10 per ton.

 

  • The benchmark price of corn was $128.56 per ton in August 2020, down $6.26 per ton or 4.6 percent lower than the July 2020 price, taking into account the difference in basis paid by producers. A fractional increase of 5 cents per ton in the price of soybean meal to $310.29 per ton in August 2020 had no material effect on the increase in feed cost. There was a narrower differential of $42.21 per ton in feed price between the Midwest and the West compared to $44.73 per ton in July. The differential in corn price between the Midwest and the West in July was $43.40 per ton ($48.02 in July 2020).

 

 

  • Feed price will continue to be a major factor driving production cost and hence margin. Unknown factors influencing feed cost during the third and fourth quarters of 2020 will include uncertainty over international trade and especially exports to China, coupled with the economic and logistic effects of coronavirus restrictions. The decline in demand for crude oil and ethanol shuttered refineries in April depressing the price of corn. Substantial exports of soybeans to China, as they occur in market year 2020/2021 beginning in September will increase domestic price and hence cost of production. Each $10 per ton difference in feed cost represents 1.75 cents per dozen.

 

 

  • The EIC calculated the 6-Region total nest-run production cost in August 2020 to be 58.0 cents per dozen, 0.7 cents per dozen lower than in July 2020. Production costs during August 2020 ranged from 55.0 cents per dozen in the Midwest up to 83.5 cents per dozen in California which was higher than the Midwest region by 28.5 cents per dozen.

 

  • Retail egg prices as determined by the Department of Commerce for JULY 2020 averaged 140.1 cents per dozen, 15.3 cents per dozen or 9.8 percent lower than in July 2020. During July 2018 and 2019 retail prices were respectively 172.5 and 124.3 cents per dozen. Consistently since 2016 retail prices have not declined in proportion to ex-farm prices, allowing higher margins at retail, thereby depressing demand. In June and July shelf prices declined with restoration of normal purchasing patterns.

 

 

AUGUST 2020 PRODUCTION DATA

 

  • According to USDA data, the estimated average complement of U.S. hens in flocks over 30,000 during July 2020 amounted to 299.1 million, reflecting a seasonal adjustment in flock size. The average total U.S. flock including hens in molt on all farms counted by the USDA amounted to 313.9 million in July 2020. The average end-of-year flock sizes over the past five years respectively were, 2012 (299 million); 2013 (308 million); 2014 (311 million); 2015 (291 million post-HPAI losses) and in 2016 (319 million). The December 2020 flock is projected to be 323.7 million, down 2.9 million from the July 2020 forecast.

 

  • The effect of COVID restrictions on the egg-breaking segment of the industry is noted in the decline in the flock size in Iowa. In January the state had 56.4 million hens with a progressive decline to 44.8 million in July. Low prices and COVID-related factors have reduced hen numbers by approximately 2 million hens in each of the next three leading states of Ohio, Indiana and Pennsylvania. Hens in U.S. flocks over 30,000 declined 7.2 percent from 322.4 million in January to 299.1 million in July 2020.

 

  • Pullet chick hatch was down 15.7 percent in June 2020 to 23.1 million compared to the previous month at 27.4 million. It is evident that low seasonal prices will prevail through the remainder of the third quarter and possibly into the fourth quarter and accordingly flock placements will be constrained by some producers cancelling pullet-chick orders.

 

  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA attained 16.3 percent of the national flock in August 2020, 3.2 percent higher than in July 2020. Producers molted flocks in response to the drop in price of generic eggs following the end of the April surge in demand. Annual average for molt and post-molt combined were 15.2 percent for 2019, 17.4 percent for 2018 and 18.0 percent in 2017. The high value of 23.8 percent in 2016 was due to the loss of hens during the 2015 HPAI epornitic.

 

  • The average monthly projections for pullets to be transferred to laying houses during the third and fourth quarters of 2020 will be 25.5 and 23.2 million respectively.

 

  • The projected hatchery supply flock (parent generation) attained 2.6 million hens in August 2020. Peak parent-flock placements rose to 3.1 million hens in production in June 2015, coinciding with the end of the HPAI epornitic, to a low of 2.5 million hens during the fourth quarter of 2016. Projections show monthly averages of 2.7 and 3.0 million breeder hens in production during the third and fourth quarters of 2020. These values may be revised depending on pullet chick orders as influenced by margins.

 

  • Average production of 83.2 percent in August 2020 compared to 81.0 percent in July 2020 reflects younger hens and early second-cycle hens in the national flock. More pullet flocks are at or just past peak production as reflected in the availability and low price of Medium-sized eggs. Average rate of lay attained 78.7 percent during 2016, 79.8 percent in 2017 and 79.2 percent in 2018. The average rate of lay during any period is a function of the proportion of pullets placed, the rate of depletion of flocks and retention of molted hens for a second cycle. Average flock production will fall as weighted flock age increases or will rise due to early depletion and increasing the proportion of young hens in their first cycle.

 

  • The August 24th USDA Poultry Slaughter Report documented 3.0 million light spent-hens processed under FSIS inspection during July 2020, down 6.6 percent from June 2020 as hens were depleted after taking advantage of previously high prevailing prices. Spent-hens are shipped live to Canada from Northern-tier U.S. states or are rendered or composted in other regions. Approximately 14 million spent hens are disposed of each month.

 

 

JULY  2019 EXPORT DATA.

  • According to USDA-FAS data, 356,000 cases of shell eggs were exported in July 2020, compared to 315,000 in June 2020, representing 1.6 percent of total production. This value should be compared to the high value of 409,700 cases in March 2015 prior to the onset of HPAI.

 

  • During July 2020 the following regions were the leading importers:- North America,

             comprising the two neighboring USMCA nations but predominantly Mexico (41.0 percent,

                was 37.7 percent last month). East Asia (mainly China)  (37.6 percent, was 29.0 percent). The

             Caribbean and Central American Region combined represented 10.7 percent of shell egg

             exports in July. Shipments to the Middle East declined to 32,000 cases from a June

             volume of 38,000 cases or 8.9 percent of shell egg exports.

 

 

  • Exports of egg products in July 2020 were down 0.7 percent from June 2020 to 435,000 case-equivalents, representing 2.0 percent of U.S. output. The following regions were the leading importers of egg products by proportion of volume shipped in July:- North America, our USMCA neighbors (7 percent was 53.0 percent), East Asia (29.9 percent). The Middle East fell sharply from June with negligible exports in July. Southeastern Asia (4.8 percent), Central America, (3.4 percent) and the      EU-27+UK (5.7 percent) represented the other significant importer of egg products from the U.S. Exports of egg products represented 2.0 of U.S. production.

 

 

  • Collectively, exports of shell eggs and products in July 2020 represented the output from approximately 11.5 million hens in production during the month, attaining 790,900 case-equivalents, up 5.1 percent from June 2020. This was 17.6 percent lower compared to monthly average shipments of 960,000 case-equivalents exported over the first four months of 2015 prior to the advent of HPAI, indicating that international markets are being regained.

 

Maintaining export volume is attributed to cooperation between the AEB and USAPEEC, both in existing and new markets. Specific attention is directed to nations with the potential to import U.S. product based on landed price against competition. Exports of both egg-products and shell eggs in June 2020 corresponded to 3.6 percent of a nominal national flock of approximately 300 million hens in production on commercial farms holding more than 30,000 hens.

 

  • There is no scientifically justifiable reason why any nation should embargo pasteurized egg products from an approved plant, based on a diagnoses of avian influenza or END in a state or country.
     

 






























































































































































































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