Egg Week

12/15/2021

USDA Weekly Egg Price and Inventory Report, December 15th 2021.

Market Overview

  • Unit revenue for Midwest Extra-large and Large sizes were up 8.1 percent this past week following slightly higher prices for the previous week. Mediums were unchanged. This suggests increased demand with a pre-Christmas surge compared to the corresponding three weeks in 2020. Shell-egg prices are higher despite the net addition of 0.3 million hens in the producing flock this past week and a 16.4 million algebraic increase over eighteen weeks. Midwest prices for generics are now above the corresponding week in 2020 after lagging through early November. Wholesale Midwest prices have advanced further into positive margin, well above breakeven taking into account the combined costs of nest-run, grading, packaging and delivery.
  • Shell inventory was 0.6 percent higher after substantial 9.7 and 7.5 percent increases over the previous two weeks, indicating that the pipeline from packing plants to retail shelves is full. It is now apparent that the inventory held by chains and other significant distributors may be more important in establishing wholesale price than USDA inventory in plants, especially over the short term. Chains are spreading their purchases and have attempted to preempt anticipated pre-Christmas price rises. Industry observers and participants expect buyers to adjust purchases only in response to retail demand and will attempt to hold down inventories in their DCs and stores while marking up shelf margins and pressuring suppliers for rapid replenishment of DSD stock. Since the beginning of 2021 generic eggs have been priced, with a few exceptions, at levels to maximize store margins. This strategy noted during October and early November depressed the volume of sales of generics to the disadvantage of the industry. Market data suggests that chains have priced generic white eggs in response to prevailing demand and are infrequently featuring generic Large or Extra large.
  • Currently inventory has increased in response to the action of chain buyers and comprises close to five days of production. Price movement over the past ten months and specifically since Labor Day, defies conventional supply to demand relationships and indicates extraneous factors affecting price. Wholesale Midwest prices for Extra-large and Large were up 8.1 this past week after sequential weekly increases. This suggests that prices will now show a pause in intensity of upward trajectory and then decline in late December given high inventory. The commercial shell-egg price discovery system is obviously used by buyers to negotiate lower prices, serving as a self-fulfilling prophecy and a de facto instrument of potential indirect, but not necessarily intentional, collusion. The current relationship between producers and chain buyers based on a single price discovery system constitutes an impediment to a free market. The benchmark price amplifies both downward and upward swings and functions to the detriment of the industry. A CME quotation based on Midwest Large, responding to demand relative to supply would be more equitable.
  • The U.S. flock in production was up 0.10 percent (0.3 million hens) from the week of December 8th to 326.8 million consistent with planned seasonal molting, placement and depletion, but with about 2.5 million molted hens having resumed production during the past three weeks. The Industry demonstrated beneficial restraint in flock placement in the third and fourth quarters with continued depletions and non-restocking of some complexes or houses. The trend going forward through the end of December is for a build in numbers through the third week of December based on chick placement data for July and August. Margins should continue to increase for commodity eggs due to increased demand as predicated by the pattern of seasonal wholesale prices over the past three years.
  • The USDA Midwest benchmark prices for generic Extra Large and Large were up 8.1 percent to averages of 147.5 and 145.5 cents per dozen respectively. Mediums were unchanged at 101.5 cents per dozen. The trajectory of prices through the second week of November confirmed increased seasonal demand coincident with the advent of colder weather. Prices going forward will be determined by the buyers for the major chains in response to consumer demand and taking into account their inventory levels. The spike in price for all categories ebbed after Thanksgiving as the pipeline was filled but resumed in December. The Industry should hope that retail demand persists or is even intensified as consumers recognize the value of eggs as a source of inexpensive protein in a situation of food inflation. Production margins will be negatively impacted by increased prices for feed and pullet chicks. Higher labor and fuel costs will detract from profit especially if unit revenue fails to match expectations after the pre-Christmas weeks.
  • There is some prospect of a return in the food service sector with both frozen and dried-egg prices marginally higher over the past month. The economy is reopening despite ongoing concern over COVID incidence rates and hospitalizations in many regions. There is some optimism over the rate of deployment and acceptance of the three available approved vaccines and boosters in diverse regions and demographics. Concern over emergence of the Omicron variant of COVID has subsided following reports that a regimen of two priming mRNA doses and a booster provide protection against other than mild symptoms coupled with the approval of therapeutic anti-viral drugs. Reopening of the economy and schools in areas with low population immunity has resulted in a rise in incidence rates of COVID. This is especially the case following the introduction and dissemination of the Delta variant of SARS-CoV-2 virus that is the dominant clade in circulation. The non-immunized proportion of the population represents an overwhelming majority of those hospitalized.
  • The Midwest price for breaking stock was unchanged at an average of 63.0 cents per dozen. Checks in the Midwest were up 23.8 percent to an average of 67.5 cents per dozen enigmatically higher than breaking stock. It is anticipated that these prices will fluctuate in response to market trends and gradual recovery of the breaking sector.

 

The Week in Review

 

Prices

According to the USDA Egg Market News Reports released on December 13th, the Midwest wholesale price for Extra-large was 8.1 percent higher to an average of 147.5 cents per dozen; Large were also 8.1 percent higher at an average of 145.5 cents per dozen; Mediums were unchanged at 101.5 cents per dozen as delivered to DCs. Prices should be compared with the USDA benchmark average 6-Region blended nest-run, (excluding provisions for packing, packaging materials and transport) cost of 69.2 cents per dozen in November 2021. The progression of prices during 2021 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

 

The December 13th 2021 edition of the USDA Egg Market News Report (Vol. 68: No. 50) documented a USDA Combined Region value rounded to the nearest cent, of $1.45 per dozen delivered to warehouses for the week ending December 6th 2021. This average price lags current Midwest weekly values by one week. The USDA Combined range for Large in the Midwest was $1.35 per dozen. At the high end of the range, price in the South Central Region attained $1.53 per dozen. The USDA Combined Price last week was 43 cents above the 3-year average. This past week Midwest Large was approximately 48 cents above the corresponding week in 2020 that demonstrated a sharp decline in early December. Prices are expected to plateau and then fall in the immediate term given the full pipeline moving into Christmas.

!More!

Flock Size

According to the USDA the number of producing hens reflecting December 15th (rounded to 0.1 million) was 0.4 million higher to 326.8 million. If USDA data is accurate, the producing flock contains molted hens now coming back into production with approximately 4.5 million new pullets reaching maturity during the week, offset by seasonally limited flock depletion. Based on inventory level the hen population producing eggs is in balance with ongoing consumer demand. Exports are at a moderate level with restoration of flocks in South Korea following previous depletion due to HPAI. Industrial and food service off-take although increasing, has not reverted to pre-COVID levels. Any number of producing hens above a subjectively determined range of 322 to 325 million in production during the second week in December, portends stable to higher prices depending on relative levels of producer and chain-store inventory. For the next week prices will stabilize, given the high plateau in inventory over the past week following two successive weekly increases. Seasonal demand through December intensified from 2020 with the onset of cold weather. Previous oversupply is attributed to the contribution of hens returning to production from molt coupled with pullets placed 24 weeks earlier that are now in production.

 

The total U.S. egg-flock was up 0.3 million hens (rounded to 0.1 million) to 330.7 million including second-cycle birds and those in molt. The difference of 3.9 million hens (4.0 million last week) between hens in production and total hens is equivalent to 0.9 percent of the national flock, suggesting that despite disposal of older flocks, molted hens have resumed production as planned to meet pre-Christmas demand. In addition, young pullets will commence laying consistent with chick placements in early July 2021.

 

The obvious reduction in hen numbers in Iowa and to a lesser extent among the next three largest egg-producing states that occurred following the onset of COVID-19 in February 2020 has been partly reversed with flocks trending upwards but still below pre-COVID numbers. Chick placement data suggests that 24.3 million pullets per month commenced production during the fourth quarter of 2021 and 21.2 million per month are projected for the first quarter of 2022. This has implications for prices, given current supply and stock levels in relation to anticipated depressed demand following the Christmas surge.

 

INVENTORY LEVELS

Cold storage stocks of frozen products in selected regions on December 13th 2021 amounted to 2.469 million pounds (1,122 metric tons) of frozen egg products, up 0.3 percent from the level of 2.461 million lbs. on December 1st 2021.

 

The most recent monthly USDA Cold Storage Report released on November 27th 2021 documented a total stock of 26.4 million pounds (11,996 metric tons) of frozen egg products on October 31st 2021. This value was down 24.3 percent from October 31st 2020. (25.2 million on September 30th 2021). A total of 89.5 percent of combined inventory comprised the categories of “Whole and Mixed” (36.8 percent) and “Unclassified” (52.7 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 December 13th 2021 was 0.6 percent higher after sequential rises of 9.7 and 7.5 percent over the preceding two weeks. Combined with breaking stock, the total inventory of shell eggs in the industry is now at 1.93 million cases (1.91 million last week). The U.S. population of laying hens at this time is influenced by the number of flocks retained after molting coupled with chick placements in late July 2021. Going forward, older hens will assume a smaller proportion of the national flock as more pullet flocks commence production.

 

Three USDA Regions reported higher stock levels. These are listed in descending amounts:-

  • The Midwest Region was up 3.7 percent compared to the previous week to 527,700 cases.
  • The Southeast Region, was up 10.5 percent to 312,900 cases
  • The South Central Region was down 9.6 percent to 297,300 cases
  • The Northeast Region was down 4.1 percent to 263,300 cases.
  • The Southwest Region was up 2.5 percent to 141,900 cases
  • The Northwest Region was down 0.1 percent to 104,300 cases

 

The total USDA six-area stock of commodity eggs comprised 1,930,100 cases, of which 83.9 percent were shell eggs (84.2 percent last week). The inventory of breaking stock was up 3.2 percent to 309,900 cases. The value of breaking stock and hence availability from both mature and young flocks is influenced by the demand for generic shell eggs and contract obligations with breakers. Higher prices for shell eggs diverts uncommitted product to the shell market from breaking with a concurrent increase in the proportion of in-line breaking and with changes in price and inventory for contractors’ eggs.

 

On December 13th the inventory of other than generic eggs (with previous week in parentheses) comprised:-

  • Specialty category, down 5.6 percent to 36,500 cases. (was up 15.1% to 38,700 cases)
  • Certified Organic, up 3.0 percent to 124,100 cases. (was down 5.5% to 120,500 cases)
  • Cage-Free category, up a substantial 12.6 percent to 183,800 cases. (was up 5.6% to 163,800 cases)

 

Demand for cage-free product will not increase materially while generic eggs from caged flocks and surplus down-classified cage-free eggs are on the shelf at $1.10 to $1.45 per dozen over the long term. Existing and proposed individual state legislation mandating sale of only cage-free eggs will support most of the anticipated transition from cages but total re-housing will not be completed, if ever, by the beginning of 2025, less than 38 months away. An appeal regarding the constitutionality of California Proposition #12 was not granted certiorari by SCOTUS, letting stand the lower court decision concerning the constitutionality of the California law with respect to supply states. The California Department of Food and Agriculture has accordingly issued a revised draft of regulations for comment. With the current proportion of non-caged flocks, cage-free eggs are in surplus to demand and are becoming a commodity in some markets subjected to the same price pressures as generic eggs from caged hens.

 

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, shell color, GM status and nutritional enrichment is self-evident.

 

RELATIVE PRICES OF SHELL-EGG CATEGORIES

The following advertised retail prices for the week ending December 16th, (compared with the previous week in parentheses) were posted by the AMS on December 13th for dozen packs:

USDA Certified Organic, Brown, Large: $3.22 ($3.64)

Cage-Free Brown, Large: $2.49 ($2.65)

Omega-3 Enriched Specialty, White, Large: $2.45 ($2.37)

Generic White, Large Grade AA $1.46* ($1.45)

Generic White, Large Grade A (Feature price) $1.11 ($0.97)

 

The advertised retail price this week as determined by the USDA-AMS for generic white Large Grade AA (* based proportionately on 18-egg pack values) was up 0.7 percent or one cent per dozen from last week to $1.46 reflecting a high margin taken by chains entering the pre-Christmas demand period. Shelf price may decrease demand for this category given the relatively lower advertised prices for cage-free brown eggs. Current demand is in balance with supply as chains have filled their pipelines. This is evident from the high inventory of shell eggs held by the industry over the past three weeks. Demand for shell eggs should respond to seasonal increases in retail purchases with restoration of home cooking and baking coupled with dining out as COVID restrictions are lifted.

 

During the present week the USDA benchmark-advertised retail price of brown Cage-Free was down 6.0 percent or 16 cents per dozen to $2.49 per dozen. (last week USDA advertised price was $2.65 per dozen). Certified organic was down 11.5 percent or 42 cents per dozen to $3.22 per dozen (last week $3.64 per dozen). The differential in advertised price between cage-free brown and certified organic was $0.73 per dozen ($0.99 per dozen last week) suggesting relatively higher demand for certified organic during the current week. The differential between cage-free brown and generic white Grade AA was $1.03 per dozen this week, (last week $1.20 per dozen) suggesting demand for cage-free at the expense of the generic white category. Preference for cage-free brown is evident with a price differential lower 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.

 

There was a $0.17 per dozen difference between the advertised retail per dozen for cage-free brown ($2.49) and cage-free white ($2.66).

 

Features for the major categories this week by proportion included Organic (18.7 percent up from 16.3 percent last week); Cage-free (51.1 percent, down from 34.2 percent) and Omega-3 enriched (11.1 percent, down from 13.7 percent). Other categories amounted to 19.2 percent of features with the Large category predominating at 14.7 percent of the total features consistent with young hens in the national flock and relatively low prices for breaking stock.

 

USDA Cage-Free Data

According to the latest monthly USDA Cage-free Hen Report released on December 6th 2021, the number of certified organic hens during November 2021 was revised down 0.6 percent from October to 17.4 million.

 

The USDA reported a 2.0 percent increase in the cage-free (non-organic) flock to 76.9 million in November compared to October and 14.0 percent higher than an average of 66.6 in Q1 2021.

 

According to the USDA the population of hens producing cage-free and certified organic eggs in November 2021 comprised:-

Total U.S. flock held for USDA Certified Organic production = 17.4 million (17.6 million in Q3 2021).

Total U.S. flock held for cage-free production = 76.9 million (72.3 million in Q3 2021).

Total U.S. non-caged flock = 94.3 million (89.9 million in Q3 2021).

 

This total value represents 29.5 percent of a nominal 330 million total U.S. flock but 42.1 percent of a presumed pre-COVID flock of 224 million producing for the shell-egg market. Hens certified under the USDA Organic program have decreased in proportion to cage-free flocks since Q1 2021. The accuracy of individual monthly values is questioned given either sharp changes or periods of no change as evidenced over the past two years. Precise quarterly reports would be more suitable for the industry in planning expansion and allocation of capital.

 

Processed Eggs

For the processing week ending December 11th 2021 the quantity of eggs processed under FSIS inspection as reported on December 15th 2021 was up 0.9 percent compared to the previous processing week to a level of 1,572,442 cases (1,558,552 cases last week). The proportion of eggs broken by in-line complexes was 52.8 percent (was 52.7 percent for the past week). With slightly higher prices for shell eggs during the current week there will be a trend to divert non-contracted eggs from shell breaking to shell sales. The relative prices of eggs for shell sales and breaking will determine the movement of uncommitted eggs. This past week 70.0 percent of egg production was directed to the shell market, (70.2 percent for the previous week) consistent with higher prices for shell eggs and following a short week without collection from remote farms. Breaking stock inventory was up 3.2 percent this past week (down 6.4 percent for the past week). There is evidence of a slight recovery in the food service sector, especially for QSRs and casual dining, complemented by increased demand from baking and eat-at-home. During the corresponding processing week in 2020 (during-COVID) in-line breakers processed 54.8 percent of eggs broken.

 

For the last available monthly report dated December 8th 2021, yield from 6,120,364, cases (6,684,560 cases last month) denoted a decrease in demand for liquid over the period October 31st 2021 through November 27th 2021. Edible yield was 37.6 percent, distributed in the following proportions expressed as percentages:- liquid whole, 59.0; white, 24.6; yolk, 12.0; dried, 4.4.

 

All eggs broken during YTD 2021 attained 73.4 million cases, 2.2 percent more than the corresponding period during 2020 attributed to increasing demand for egg liquids from food service and QSRs and casual dining restaurants with restoration of service as COVID restrictions are relaxed.

Consumption of liquids is still constrained by COVID-19 home-cooking resulting in diversion of breaking stock into the shell market partly balanced by a reduction in hens dedicated to breaking.

 

PRODUCTION AND PRICES

 

Breaking Stock

The average price for breaking stock was unchanged this past week at an average of 63.0 cents per dozen with a range of 59 to 67 cents per dozen delivered to Central States plants on December 13th. Checks were up 23.8 percent to an average of 67.5 cents per dozen over a range of 65 to 70 cents per dozen. Average revenue for both breaking stock and checks should be compared to the benchmark production cost for nest-run Large, estimated by the USDA at 69.2 cents per dozen for November 2021.

 

Shell Eggs

The USDA Egg Market News Report released on December 13th confirmed that Midwest prices for Extra Large and Large were higher by 8.1 percent on average compared to the previous week. Mediums were unchanged. The upward increase in prices this week reflects increased demand and retailers held stock and deferred some purchases in anticipation of lower prices guided by the price discovery system in use. This is evidenced by three consecutive increases in weekly shell-egg inventory leading into the pre-Christmas week. The following table lists the “most frequent” ranges of values as delivered to warehouses*:-

 

Size/Type

Current Week

Previous Week

Extra Large

146-149 cents per dozen

135-138 Up 8.1%

Large

144-147 cents per dozen

133-136 Up 8.1%

Medium

100-103 cents per dozen

Unchanged

Certified Organic EL

275-310 cents per dozen

Unchanged long term

Breaking stock

59-67 cents per dozen

Unchanged

Checks

65-70 cents per dozen

52-57 Up 23.8%

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

 

The December 13th 2021 Midwest Regional (IA, WI, MN.) average FOB producer prices, for nest-run, grade-quality white shelled eggs, with prices in rounded cents per dozen were higher from last week, with the previous week in parentheses:-

  1. $1.35 ($1.20), (estimated by proportion): L. $1.32 ($1.17): M. $0.82 ($0.82)

 

The December 13th 2021 California prices per dozen for cage-free, California-compliant product in cartons delivered to a DC, with the previous week in parentheses:-

  1. $2.30 ($2.25); L. $2.26 ($2.23); M. $1.73 ($1.73)

 

(See the text, tables and figures and the review of production data and prices comprising the USDA costs for November 2021 in this edition and the First Quarter FY 2022 results for Cal-Maine Foods under the Statistics Tab)

 

Shell-Egg Demand Indicator

The USDA-AMS Shell Egg Demand Indicator for December 15th 2021 was down 1.3 points from the last weekly report to +2.2 with a 0.6 percent increase in inventory from the past week as determined by the USDA-ERS as follows:- 

 

Productive flock

326,764,460 million hens

Average hen week production

82.4%(was 82.5%)

Average egg production

269,194,141 per day

Proportion to shell egg market

70.0% (was 70.2%)

Total for in-shell consumption

 523,127 cases per day

USDA Inventory

1,620,200 cases

26-week rolling average inventory

5.03 days

Actual inventory on hand

4.92 days

Shell Egg Demand Indicator

+2.2 points (was +3.5 on December 8th 2021)

 

Dried Egg Products

Prices for dried whole-egg and yolk products (most frequent price with a range in $ per pound) effective December 10th 2021 compared to the previous week were slightly higher denoting increased demand from the institutional sector:-

 

Whole Egg

$3.95-$4.10

Up $0.05 on both ends of the range

Yolk

$3.35-$3.45

Up $0.10 on both ends of the range

Spray-Dried White

$4.70-$4.90

Unchanged

Blends

$2.75-$2.80

No new quotation

 

Prices for frozen egg products (most frequent price with a range in cents per pound) effective December 10th 2021 compared to the previous week were marginally higher for white:-

 

Whole Egg

$1.04 - $1.07

$1.02-$1.05

White

$0.64 - $0.67

Unchanged

Average for Yolks

$1.59 - $1.63

Unchanged

 

The USDA has not released a report on dried egg inventory since March 13th 2020 due to an inability to obtain data from producers, and will not issue reports for the immediate future.

 

COMMENTS

There are reports with increasing frequency in the E.U. of continued shedding of H5N1 and other H5 strains by migratory waterfowl with mortality recently in central and northern Holland, Italy, Ireland, France, Poland, Romania, Estonia, Bulgaria and the U.K., in addition to isolation of AI virus from waterfowl, raptors and some wild species. Outbreaks of HPAI are occurring on commercial farms attributed to contact between wild birds and both domestic chicken, turkey and duck flocks, many of which are on pasture. Most veterinary authorities in Western Europe are advising or mandating flock confinement with no prospect of relaxation due to widespread recovery of H5N1 HPAI from migratory waterfowl in Serbia, the U.K. and the Netherlands. Avian influenza strains H5 and H7 persist in Western and Eastern Europe and both West and Southern Africa.

 

France is considering changing from their “annual eradication” program to vaccination against H5 and H7 strains of avian influenza following three outbreaks. Free-range chickens and especially waterfowl maintained by the foie gras industry, comprising numerous small-scale family operations are devastated at almost annual intervals requiring indemnity payments for control including preemptive depletion.

 

A case of Low-pathogenicity H7 avian influenza was reported from a multi-species non-commercial farm in Stanislaus County, CA. in early October. This has had minimal impact on exports as receiving nations have imposed limited zone or county restrictions but denotes the danger of introducing infection. On November 22nd H5 low pathogenicity avian influenza was diagnosed on routine pre-harvest surveillance of a flock of growing turkeys in Kandiyohi County, MN. The farm has been quarantined and surveillance is in progress with no additional cases recorded.

 

Webinars have been presented by USPOULTRY and USDA-APHIS to increase the level of awareness for biosecurity on egg-producing farms. This recognizes the deteriorating situation in the E.U and the start of the Fall migration in the U.S.






































































































































































































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