The USDA Economic Research Service issued an updated forecast of egg production on November 17th 2020 revising the previous October 16th 2020 report. The volume of eggs to be produced in 2020 was reduced by 0.1 percent from the October report. Consumption was lowered by 0.2 egg per capita consistent with current trends. The November projection for 2020 production and per capita consumption were revised downward to reflect reductions of 2.9 and 2.7 percent respectively from 2019. The discrepancy between production and consumption in 2020 will be partly offset by the substantial but transitory rise in price in March and April. The 2020 benchmark New York unit price for 2020 was unchanged from 2019. The price elasticity of eggs is denoted by the disparity in the decline in the New York price benchmark relative to volume of production in 2019. Subsequent USDA forecasts will provide greater clarity on reopening of the economy that is still depressed with high unemployment associated with COVID restrictions.

For 2021 the USDA forecast production to attain 8,165 million dozen, up 1.8 percent from 2020 production with a disproportionate 1.4 percent increase in per capita consumption to 288.7 eggs that will be reflected in lower unit realization.

October 2020 data is shown in the table below:-

Source: Livestock, Dairy and Poultry Outlook –November 17th 2020

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.

OVERVIEW

The November 10th 2020 USDA WASDE Report was updated from the October edition reflecting drought conditions and the August 10th derecho with consequences to corn and soybean harvests and ending stocks. November projections are based on actual harvest areas and yields. The corn acreage to be harvested is currently estimated at 82.5 million acres, unchanged from the October 9th WASDE report. Soybeans will be harvested from 82.3 million acres, unchanged from the October 9th WASDE report.

The November 2020 WASDE estimate of corn yield was lowered 1.5 percent to 175.8 bushels per acre, (168.0 bushels per acre in 2019). The projection of soybean yield was reduced 2.3 percent 50.7 bushels per acre. (47.4 bushels per acre in 2019)

The November USDA projection for the ending stock of corn was decreased by 21.5 percent to 1,702 million bushels. Due to decreased supply and exports the ending stock for soybeans was reduced by 34.5 percent to 190 million bushels.

Projections for ending stocks of both corn and soybeans have influenced recent CME price quotations concurrently with increased compliance with the Phase-One trade agreement with China. The November WASDE projected the corn price at $4.00 per bushel and soybeans at 1,040 cents per bushel.

It is presumed that projections are based on the assumption that China will as far as possible honor commitments that were disrupted during the first quarter of 2020 by COVID-19. China booked substantial orders for corn and soybeans delivered through August for the 2019-2020 market year in addition to large quantities booked from September onwards for the 2020-2021 market year. Reports on volumes of commodities exports to China will be included in upcoming editions of CHICK-NEWS and in subsequent mailings as data becomes available.

CORN

The corn harvest for 2020 documented in the November 2020 WASDE Report #606 is projected at 14,507 million bushels consistent with actual planting data and crop progress. The projected 2020 harvest can be compared to 2019 at 13,692 million bushels and is 4.2 percent lower than the previous 2016 record harvest of 15,148 million bushels. The “Feed and Residual” category was reduced by 1.3 percent to 5,700 million bushels. The “Ethanol and Byproducts” category was retained at 5,050 million bushels despite reduced domestic demand for E-10 due to COVID-19 restrictions and competitive export markets. Corn exports were raised 14.0 percent to 2,650 million bushels in the face of intense competition from Brazil and Argentine and high world domestic coarse grain production relative to demand. Ending stocks were decreased by 21.5 percent or 465 million bushels to 1,702 million bushels.

REVIEW OF OCTOBER 2020 EGG PRODUCTION COSTS AND STATISTICS.

HIGHLIGHTS

• October 2020 USDA ex-farm blended nest-run benchmark price was 85.6 cents per dozen, 30.5 percent higher than the September value of 65.6 cents per dozen but 33.4 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 from breaking to the shell-egg market. Currently stock levels and prices indicate a balance between supply and demand albeit at a low seasonal price attributable to moderate over-production and diversion from the egg-breaking sector.
• October 2020 USDA average nest-run production cost was 4.0 cents per dozen higher than in September 2020 at 64.6 cents per dozen due to feed cost.
• October 2020 USDA benchmark nest-run margin attained a positive value of 21.0 cents per dozen compared to a margin of 5.0 cents per dozen for September 2020.
• October 2020 national flock in production (over 30,000 hens/farm) was up 4.7 million hens or 1.6 percent to 303.9 million. There are approximately 7.0 million hens in molt or due to return from molt.
• September 2020 pullet chick hatch was unchanged from August 2020 at 25.0 million.
• September 2020 export of shell eggs and products combined was down 4.3 percent from August 2020 to 770,000 case equivalents representing the theoretical production of 7.9 million hens.

INTRODUCTION.

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

COSTS & REVENUE

Export of Shell Eggs and Products, January-September 2020.

USDA-FAS data collated by the USAPEEC, reflecting export volume and values for shell eggs and egg products are shown in the table below comparing the first nine months of 2020 with the corresponding period in 2019:-

U.S. SHELL EGG AND EGG PRODUCT EXPORTS DURING

JANUARY-SEPTEMBER 2019 COMPARED WITH JANUARY-SEPTEMBER 2020

Source USDA-FAS/USAPEEC

SHELL EGGS

Shell egg exports from the U.S. during the first nine months of 2020 increased by 6.6 percent in volume and 9.4 percent in total value compared to January-September 2019. Unit value was 5.1 percent higher or 4 cents per dozen for the comparison between 2020 and 2019. The top two importers, Hong Kong and Mexico combined, represented 68.4 percent of volume and 59.2 percent of total value.

Mexico was the leading importer of shell eggs in January-September 2020 with 39.5 million dozen representing 35.7 percent of volume and 28.9 percent of total value corresponding to a unit value of $0.66 per dozen. Prospects for additional sales will depend on continued acceptance of washed eggs held under refrigeration for retail sale, first announced in September 2018 but implemented in late 2019. For January-September 2020 imports of shell eggs by Mexico increased by 108.9 percent in volume and 113 percent in value compared to January-September 2019. During September 2020 Mexico imported 4.9 million dozen from the U.S., up 28.9 percent from September 2019 and valued at $2.6 million with a low unit price of 53 cents per dozen, below the nest-run production cost

Hong Kong was the second-ranked importer of shell eggs in January-September 2020, with 36.1 million dozen representing 44.7 percent of volume and 30.2 percent of the $90.1 million total value of U.S. shipments of shell eggs. Average unit value was $0.76 cents per dozen, similar to the average prevailing nest-run USDA benchmark price during the first three quarters of 2020.

Canada was a distant third in rank as an importer during January-September 2020 with 13.7 million dozen representing 12.3 percent of volume and 13.9 percent of total value at $15.4 million with a unit value of $1.13 per dozen. Canada reduced volume by 57.8 percent during January-September 2020 compared to 2019. With the advent of COVID-19, April consignments of shell eggs were down 80.6 percent from 2019 and in May, June and July exports were negligible. During August exports resumed with 3.2 million dozen shipped followed by 4.2 million dozen in September. This reflected increased demand from the food service sector paralleling the situation in the U.S. Shell eggs shipped to Canada represent the difference between domestic demand and production, limited by a national controlled marketing system that reduced farmers’ quotas.

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

The USDA Cage Free Report for the month of October 2020 released on November 2nd 2020 documented no change in the population of hens producing under the Certified Organic seal at 17.2 million, but up 6.2 percent (1.0 million hens) from the average in Q3 2020. Cage free flocks were up 0.2 percent (0.1 million hens) from September but unchanged from the average of Q3 at 62.9 million. 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 raised to 79.5 percent for October for both categories of non-caged hens reflecting the balance between older flocks and the higher relative production from chicks placed during April and May 2020.

Based on the importance of cage-free production, the USDA-AMS issues their report on volumes and prices at monthly intervals for the information of Industry stakeholders. There is some doubt as to the accuracy of the individual monthly flock numbers especially when reports show either no change in the cage-free flock for sequential months or a large difference usually after the end of a quarter. It is suggested that USDA consider a quarterly report with more accurate and consistent data to be more useful to the industry.

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.

THE USDA Agricultural Prices Report posted September Prices for agricultural commodities and expenditures. The index for prices received rose 0.9 percent from August. The index for prices paid was up 0.4 percent, widening margins. The ratio of prices received to prices paid was 81 percent in September compared with 80 percent in August 2020 and September 2019.

The USDA ERS detailed prices as follows:-

The September Prices Received Index (2011 Base for Agricultural Production at 89.0), increased 0.9 percent from August and 1.1 percent from September 2019. At 93.7, the Crop Production Index was up 1.3 percent from last month and 5.9 percent from September 2019. The Livestock Production Index, at 84.1, increased 0.2 percent from August, but decreased 3.7 percent from September 2019. Producers received higher prices during September for lettuce, hogs, corn, and soybeans but lower prices for milk, broilers, potatoes, and hay. In addition to prices, the indexes are influenced by the volume change of commodities producers market. In September, there was increased monthly movement for soybeans, corn, apples, and dry beans and decreased marketing of cattle, wheat, cotton, and strawberries.

The September Prices Paid Index for Commodities and Services, Interest, Taxes, and Farm Wage Rates (PPITW), at 110.3, was up 0.4 percent from August 2020 and 0.6 percent from September 2019. Higher prices in September for feeder pigs, feed grains, complete feeds, and supplements more than offset lower prices for hay and forages, feeder cattle, other services, and LP gas.

Corn farmers received $3.41 per bushel in September 2020 compared to $3.80 per bushel in September 2019, down 11.4 percent.

Soybean farmers received $9.24 per bushel in September 2020 compared to $8.35 per bushel in September 2019, up 10.7 percent.

Cal-Maine Foods Reports on Q4 and FY 2020

In a press release dated July 20th Cal-Maine Foods (CALM) announced results for the 4th quarter and Fiscal 2020 ending May 30th 2020.

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 US$ x 1,000 except EPS)

• Dozen shell eggs sold: 282,422,000 (254,722,000; +10.8%)
• Average selling price of all shell eggs: $1.57 per dozen; ($1.08 per dozen; +45.3%).
• Average selling price of specialty eggs calculated from data released: $1.93 cents per dozen; ($1.80 per dozen; +7.2%).
• Average selling price of generic eggs calculated from data released: $1.46 cents per dozen; ($0.80 cents per dozen; +82.5%).
• Differential between generic and specialty eggs: $0.47 cents per dozen; ($1.00 per dozen; -53%)
• Specialty eggs as a proportion of volume sold: 24.4%; (24.5%; +0.4%)
• Specialty eggs as a proportion of sales value: 9%; (44.1%; -32.2%)
• Proportion of eggs sold actually produced by Cal-Maine flocks: 86.0%; (87.6%; -1.8%).
• Feed cost per dozen 40.5 cents (41.1 cents; -1.5%)

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

In commenting on results for the quarter and year Dolph Baker, Chairman and CEO of Cal-Maine Foods, Inc., stated, “Fiscal 2020 demonstrated Cal-Maine Foods’ resiliency in the face of challenging business conditions and volatile egg prices. After three fiscal quarters characterized by an oversupply of eggs and depressed market prices, demand for eggs increased and market prices rose 62.4 percent during our fourth fiscal quarter over the average price for the first three quarters, as consumers purchased more eggs for preparing meals at home in response to the COVID-19 pandemic. This demand trend also coincided with higher seasonal demand during the peak Easter season. As a result, our sales volumes were up 10.9 percent compared with the fourth quarter of fiscal 2019.

The Southeast large market average price for conventional eggs for the fourth quarter of fiscal 2020 increased to $1.71 compared to $0.86 for the fourth quarter of fiscal 2019, with a high of $3.18 and a low of $1.02. For fiscal 2020 the Southeast large market average price for conventional eggs was $1.22 compared to $1.23 for fiscal 2019, with a high of $3.18 and a low of $0.62.

"Specialty eggs are an important part of our growth strategy, and we strive to provide a favorable product mix in line with consumer demand. We have continued to position Cal-Maine Foods to meet the expected additional demand for cage-free eggs. California, Colorado, Washington, Oregon, Massachusetts, Rhode Island and Michigan have all passed minimum space and/or cage-free requirements, mandating sale of only cage-free eggs with implementation of these laws ranging from January 2022 to January 2026. These states represent approximately 22.9 percent of the U.S. total population according to the U.S. Census Bureau. Legislation is also pending in Arizona and Hawaii for cage-free requirements. We have invested over $371.7 million in facilities, equipment and related operations to expand our cage-free production starting with our first facility in 2008. Throughout the next two years, additional cage-free capacity will come online in Florida, Texas and Utah, which will provide significant additional processing, pullet and production capacity in time to meet expected customers’ needs.

Operating income was $76.1 million in the fourth quarter compared to an operating loss of $30.4 million in the prior-year fourth quarter. We also benefitted from a more favorable effective tax rate in fiscal 2020 and in the fourth quarter, as we recorded a tax benefit of $2.4 million related to the carryback provisions of the Coronavirus Aid, Relief and Economic Security Act of 2020 (CARES Act). Overall, our farm production costs per dozen were down 0.8 percent over the fourth quarter of fiscal 2019, reflecting a 1.5 percent drop in feed costs. We believe we will continue to have an adequate supply of ingredients in fiscal 2021. However, current ongoing uncertainties and supply chain disruptions related to the COVID-19 outbreak, weather fluctuations and geopolitical issues surrounding trade agreements and international tariffs may lead to further price volatility.

 As the coronavirus continues to spread and reach more rural communities where we operate, it is critical that we provide a safe working environment, and we continue to implement appropriate protections taking into account protocols recommended by the Centers for Disease Control (CDC) and other government health agencies. For fiscal 2020, we incurred expenses of approximately $2.8 million related primarily related to supplemental pay. We are committed to making the necessary investments to support and protect all Cal-Maine Foods employees.

Baker concluded “while we are facing an uncertain environment, we will continue to execute our growth strategy in fiscal 2021 - provide a favorable product mix, including cage-free and other specialty eggs, invest in our operations, identify acquisition or other growth opportunities that enhance our production, and manage our operations in a responsible and sustainable manner.