The USDA Economic Research Service issued an updated forecast of egg production on August 16th, following the previous July 17 th report. The volume of eggs produced and per capita consumption in 2019 were increased by 2.4 and 1.9 percent respectively compared to 2018 data. Consistent with this disparity, the benchmark New York price was reduced by 37.7 percent in unit value. Production data reflecting 2016 and 2017 should be compared to 2015, impacted by the Spring outbreak of HPAI in the upper-Midwest. The price elasticity of eggs is denoted by the disparity in the decline in the New York price benchmark relative to forecast volume of production. The latest data is reflected in the table below:-

Source: Livestock, Dairy and Poultry Outlook –August 16th 2019

*Impacted by Spring 2015 HPAI outbreaks. Consumption in 2014, 267 eggs per capita

Subscribers to EGG-NEWS are referred to the postings depicting weekly prices, volumes and trends and the monthly review of prices and related industry statistics.

USDA-FAS data collated by USAPEEC, reflecting export volume and values for shell eggs and egg products are shown in the table below comparing the first half of 2019 with the corresponding period in 2018:-

U.S. SHELL EGG AND EGG PRODUCT EXPORTS DURING

JANUARY-JUNE 2019 COMPARED WITH 2018

Source USDA-FAS/USAPEEC

SHELL EGGS

Shell egg exports from the U.S. during the first half of 2019 increased by 17.4 percent in volume but declined 14.8 percent in total value compared to Jan.-June 2018. Unit value was lower by 33.6 percent or 41 cents per dozen for the six-month comparison between 2018 and 2019. The top two importing nations represented 74.7 percent of volume and 70.3 percent of total value.

Hong Kong was the leading importer of shell eggs for Jan.-June 2019, with 25.6 million dozen representing 40.0 percent of volume and 42.6 percent of the total value of U.S. shipments of shell eggs with an average unit value of $0.81 cents per dozen above the average USDA benchmark price for nest-run during the second quarter.

Canada was the 2nd-ranked importer during Jan.-May 2019 with 22.2 million dozen representing 34.7 percent of volume and 27.7 percent of total value at $14.3 million with a unit value of $0.64 per dozen. Shell eggs shipped to Canada represent the difference between domestic demand and production, limited by their national controlled marketing system

Mexico was a distant third in rank during Jan.-June 2019 with 12.0 percent of volume and 11.2 percent of total value, at a unit value of $0.86 per dozen. Prospects for additional sales will depend on acceptance of washed eggs held under refrigeration for retail sale, expected in September.

The Caribbean Region represented 5.8 percent of export volume for the first six months of 2019. This region was down 14.0 percent in volume and 49.5 percent in total value compared with 2018. The unit value of shell eggs exports to the Caribbean averaged $1.30 per dozen for Jan.-June 2019 ($1.93 over entire 2018) which appears high compared with the average export realization, warranting validation of USDA data or an investigation of the price discrepancy. It is possible that a proportion of shell eggs enumerated may have been fertile hatching eggs.

The Middle East Region imported 2.3 million dozen during the first six months of 2019 valued at $2.2 million with a unit price of $0.96 per dozen. Volume and value were respectively lower by 30.3 percent and 31.3 percent compared with the corresponding period in 2018. Israel emerged as an importer at the end of 2018 attributed to depletion of domestic flocks due to SE. Southern E.U. nations have a transport advantage over the U.S in this market.

EGG PRODUCTS

The total volume of exported egg products during the first half of 2019 decreased by 11.1 percent and total value was lower by 23.8 percent compared to the same period in 2018. Unit value decreased by 14.3 percent to $3,117 per ton from $3,636 obtained during Jan.-June 2018. This decline reflected the relationship between World supply and demand.

During Jan.-June 2019, 1st-ranked Japan represented 27.2 percent of the total U.S. export volume with 4,061 m. tons, a decrease of 34.8 percent compared with the first six months of 2018. Unit value of $4088 per m. ton reflects the product mix including yolks.

Mexico was the second ranked importer during Jan.-June 2019 receiving 3,008 metric tons comprising 20.2 percent of volume and 15.2 percent of value exported with a unit price of $2,360 per metric ton

Canada represented the 3rd rank among importers purchasing 2,839 m. tons representing 19.0 percent of volume and 13.1 percent of value ($6.1 million) exported with a unit price of $2,149 per m. ton. During the six-month period in 2019 Canada increased volume by 25.2 percent and value by 12.9 percent compared to the corresponding period in 2018.

During the first six months of 2019, 4th-ranked E.U-28 imported 550 m. tons of egg products, representing 3.7 percent of volume and 7.3 percent of value shipped during Jan.-June 2019 at an apparently low price of $618 per m. suggesting a high proportion of dried product.

The E.U. and S. Korea reduced volume of egg liquid imports by 52.2 and 37.3 percent respectively for the first half of 2019 compared with 2018.

COMMENTS

Successful conclusion of negotiations to replace NAFTA led to the trilateral USMCA, announced on September 30th 2018. The agreement will have to be ratified by the legislatures of Canada and the U.S. Exports of shell eggs and egg products to our neighbors were valued at $74.7 million for 2017 and $89.7 million for 2018 and $33.3 million over the first six months of 2019.

Prospects for long-term exports of shell eggs will be limited by the willingness of importers to accept the World Organization for Animal Health (OIE) princip
 

Review of July 2019 Production Costs and Statistics.

July 2019 USDA ex-farm blended nest-run benchmark price was down 22.4 percent from June 2019 to 29.7 cents per dozen still below the cost of production. Low price is consistent with seasonal purchase trends but accentuated by oversupply.

• July 2019 USDA average nest-run production cost was 1.2 percent higher than June 2019 at 62.7 cents per dozen.

• July 2019 USDA benchmark nest-run loss increased from June 2019 to 33.0 cents per dozen.

• July national flock ( over 30,000 hens/farm) was down 5.1 million or 1.6 percent to 313.9 million.

Based on the importance of cage-free production, the USDA-AMS issues a monthly report on volumes and prices for the information of Industry stakeholders. There is some doubt as to the accuracy of the individual monthly flock numbers especially with reports that show a significant increase in the cage-free flock for a specific month followed by stasis in succeeding months. It is questioned is whether it would not be more desirable to post accurate quarterly data in place of unconvincing sequential monthly figures.

EGG-NEWS summarizes and comments on data and trends in the monthly USDA Cage-Free Report, supplementing the information posted weekly in the EGG-NEWS Egg Weekly Price and Inventory Report.

The USDA Cage Free Report for the month of July 2019 released on August 5 th 2019 documented a static flock size for hens producing under the Certified Organic seal. The National cage-free flock was also unchanged from June. The respective numbers of hens in organic and cage-free flocks should reflect the realities of supply and demand in the market over successive quarters. Average flock production was unchanged for June at 76.0 percent percent for both categories of non-caged hens reflecting a younger national flock (accepting USDA data).

Subscribers are referred to weekly USDA wholesale and retail prices posted in the EGG-NEWS Egg Price and Inventory Report E-mailed each Friday. The previous Monthly Cage-Free Report is available under the STATISTICS Tab.

In a press release dated July 22nd Cal-Maine Foods (CALM) announced results for the 4th Quarter and Fiscal 2019 ending June 1st.

Results for CALM, a bellwether for U.S. shell-egg production and sales, reflect low unit revenue experienced by the entire industry resulting in unfavorable comparisons with Q4 of 2019.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as $ x 1,000 except EPS)

52-Week Range in Share Price: $36.65 to $51.55

Market Close July 19th $39.37 Post release July 22nd 10H00 $37.90

Forward P/E 63.1 Beta 0.5

For FY 2019 CALM earned $54.2 million on revenue of $1.36 billion generating an EPS of $1.12

Comparable values for FY 2018 were net profit, $125.9 million, revenue $1.50 billion and EPS $2.60.

In reviewing the CALM quarterly report the following calculated values* represent key data for the most recent Quarter. (Q4 Fiscal 2018 and difference in parentheses):-

• Dozen shell eggs sold: 254,772,000 (251,955,000 +1.1)

• Average selling price of all shell eggs: $1.08 per dozen; ($1.72 per dozen; -37.2%).

• Average selling price of specialty eggs calculated from data released: $1.94 cents per dozen; ($1.95 per dozen; -0.5%).

• Average selling price of generic eggs calculated from data released: $0.80 cents per dozen; ($1.64 cents per dozen; -50.0%).

• Differential between generic and specialty eggs: $0.50 cents per dozen; ($0.31 per dozen; -61.3%)

• Specialty eggs as a proportion of volume sold: 23.3%; (25.5%; -8.6%)

• Specialty eggs as a proportion of sales value: 41.9%; (29.0%; +44.5%)

• Proportion of eggs sold actually produced by Cal-Maine flocks: 87.3%; (85.6%; -2.0%).

• Feed cost per dozen 41.1cents (41.6 cents)

*Assumes that 98 percent of sales value derived from shell eggs.

In commenting on results Dolph Baker, chairman and CEO of Cal-Maine Foods, Inc., stated, "our disappointing results for the fourth quarter reflect more challenging market conditions. The average market price in the Southeast for conventional eggs dropped 52.0 percent for the fourth quarter of 2019 compared to the fourth quarter of 2018 and was down 17.1 percent for the year.

He added "the unfavorable supply and demand balance and anticipated future egg supply growth trends have continued to affect market prices and our business. Over the past five quarters, we have noted our concern about the growing hatch rate pointing to a potential significant increase in laying hens and an oversupply of eggs. The USDA reported a near record high of 341.5 million hens as of April 1, 2019. While the hen numbers as of the June 2019 USDA report were down seasonally to 331.5 milli
 

OVERVIEW

The July 11th 2019 USDA WASDE projections for the 2019 corn and soybean harvests are based on historical yield and harvest data. The corn acreage to be harvested was determined from planting completed at 83.6 million acres (81.8 million in 2018) and is up 1.4 percent from the June WASDE. In 2019 soybeans will be harvested from 79.3 million acres (88.3 million acres in 2018) with the reduction due to uncertainty over the export market.

The USDA projected corn yield to attain 166.0 bushels per acre, (178.9 bushels in 2018) and unchanged from the June WASDE despite late planting and delayed development. Soybean yield was projected at 48.5 bushels per acre (52.1 bushels in 2018), 5 percent lower than in the June WASDE projection. These values presume suitable growing conditions, the time of sowing and standard rates of germination.

The July USDA projection of ending stock for corn was increased by 20.0 percent percent from the June WASDE to 2,010 million bushels. Ending stock for soybeans will be 23.9 percent lower at 795 million bushels. Ending stocks for both corn and soybeans have influenced recent CME price quotations. It is emphasized that projections are based on the presumption of at least a partial settlement of the trade dispute with China followed by restoration of exports to that Nation, a prospect that appears in question given lower demand from China and the failure to commit to purchases following the June meeting between President Trump and Premier Xi at the G-20 Meeting in Osaka.