Review of October 2019 Production Costs and Statistics.

• October 2019 USDA ex-farm blended nest-run benchmark price was down 8.5 cent per dozen or 14.7 percent from September 2019 to 49.0 cents per dozen, below the U.S. average benchmark cost of production of 60.2 cents per dozen. Low price is consistent with seasonal purchase trends but accentuated by oversupply.
• October 2019 USDA average nest-run production cost was 2.0 percent higher than September 2019 at 60.2 cents per dozen due to increased feed cost.
• October 2019 USDA benchmark nest-run loss increased from September 2019 to 11.2 cents per dozen.
• October national flock ( over 30,000 hens/farm) was up 2.6 million or 1.0 percent to 317.0 million.
• September pullet chick hatch up 8.7 percent from August to 25.1 million.
• September exports of shell eggs and products down 6.4 percent to 722,000 case equivalents representing the equivalent production of 11.2 million hens.

INTRODUCTION.

Summary tables for the latest USDA October 2019 prices and flock statistics made available by the EIC on November 8th 2019 are arranged, summarized, tabulated and reviewed in comparison with values from the previous October 12th 2019 posting reflecting September 2019 cost and production data.

OVERVIEW

The November 8th 2019 USDA WASDE Report was released on due date despite the relocation of many ERS personnel from Washington D.C. to Kansas City. Projections for the 2019 corn and soybean harvests for the November WASDE are based on actual yield and harvested area with progressive updating as the season has advanced. The current unknown is the effect of predicted mid-October and early November frost and snowfall on yield for a late-planted crop in Illinois, Iowa and Nebraska.

The corn acreage to be harvested was determined from planting completed in June at 89.9 million acres (81.8 million in 2018) unchanged from the October WASDE. In 2019 soybeans will be harvested from 75.6 million acres, unchanged from the October estimate (88.3 million acres in 2018)

The USDA projected corn yield was reduced 0.8 percent to 167.0 bushels per acre, (178.9 bushels in 2018) due to late planting, delayed development and adverse weather during harvest. Soybean yield was retained at 46.9 bushels per acre from the October WASDE, (52.1 bushels in 2018). Yield values presume suitable climatic conditions through completion of the harvest.

The November USDA projection of the ending stock for corn was lowered by 1.0 percent from the October WASDE to 1,910 million bushels. Ending stock for soybeans will be 3.3 percent higher than the October estimate to 475 million bushels. Projections for ending stocks for both corn and soybeans have influenced recent CME price quotations concurrently with conflicting reports on trade negotiations with China. It is presumed that projections are based on the assumption that there will be no comprehensive settlement of the trade dispute with China during the fourth quarter of 2019. Some concessions on tariffs will be incorporated into an anticipated "Phase-1" accord. China failed to commit to purchase commodities following the June meeting between President Trump and Premier Xi at the G-20 Meeting in Osaka. No substantial orders have been placed by China since the mid-October negotiations in Washington. Some orders representing four percent of projected 2019 exports of soybeans were forthcoming in September after the August G-7 Summit in France. In mid-September, China rescinded a ban on all agricultural imports from the U.S. imposed on August 4 th. This followed the announcement of a delay in introducing a September 1st threatened tariff of 10 percent on imports from China valued at $300 billion not already subject to duty.

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 nine months of 2019 with the corresponding period in 2018:-

U.S. SHELL EGG AND EGG PRODUCT EXPORTS DURING

JANUARY-SEPTEMBER 2019 COMPARED WITH 2018

Source USDA-FAS/USAPEEC

SHELL EGGS

Shell egg exports from the U.S. during the first nine months of 2019 increased by 20.3 percent in volume but declined 15.9 percent in total value compared to Jan.-Sept. 2018. Unit value was lower by 29.7 percent or 33 cents per dozen for the nine-month comparison between 2018 and 2019. The top two importing nations represented 68.9 percent of volume and 66.8 percent of total value.

Hong Kong was the leading importer of shell eggs for Jan.-Sept. 2019, with 39.0 million dozen representing 37.6 percent of volume and 39.8 percent of the total value of U.S. shipments of shell eggs with an average unit value of $0.82 cents per dozen, above the average USDA benchmark price for nest-run during the third quarter.

Canada was the 2nd-ranked importer during Jan.-Sept. 2019 with 32.5 million dozen representing 31.3 percent of volume and 27.0 percent of total value at $21.8 million with a unit value of $0.67 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.-Sept. 2019 with 18.5 percent of volume and 15.1 percent of total value, at a unit value of $0.64 per dozen. Prospects for additional sales will depend on acceptance of washed eggs held under refrigeration for retail sale, announced in September. For the nine-month period in 2019 imports of shell eggs by Mexico increased by 327.0 percent and value by 190.5 percent compared to the corresponding period in 2018.

The Caribbean Region represented 4.9 percent of export volume for the first nine months of 2019. This region was down 3.8 percent in volume and 41.6 percent in total value, an obvious discrepancy, compared with 2018. The unit value of shell eggs exports to the Caribbean averaged $1.29 per dozen for Jan.-Sept. 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. It is most probable that a proportion of shell eggs enumerated may have been either fertile hatching eggs or enriched specialty eggs.

The Middle East Region imported 4.7 million dozen during the first nine months of 2019 valued at $4.1 million with a unit price of $0.87 per dozen. Volume and value were respectively lower by 21.6 percent and 22.6 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 nine months of 2019 decreased by 6.3 percent and total value was lower by 17.5 percent compared to the same period in 2018. Unit value decreased by 12.0 percent to $3,146 per ton from $3,573 obtained during Jan.-Sept. 2018. This decline reflected the relationship between World supply and demand with Ukraine and India as significant exporters.

During Jan.-Sept. 2019, 1st-ranked Japan represented 27.7 percent of the total U.S. export volume with 6,231 m. tons, a decrease of 26.4 percent compared with the first nine months of 2018. Unit value of $3,948 per m. ton reflects the product mix including yolks.

Mexico was the second ranked importer during Jan.-Sept. 2019 receiving 4,443 metric tons comprising 19.7 percent of volume and 13.8 percent of value exported with a unit price of $2,206 per metric ton

Canada represented the 3rd rank among importers purchasing 4,141 m. tons comprising 18.4 percent of volume and 12.6 percent of value ($8.9 million) exported with a unit price of $2,149 per m. ton. During the nine-month period in 2019 Canada increased volume by 17.4 percent and value by 3.4 percent compared to the corresponding period in 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., still over a year after signing the agreement. 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 $72.6 million over the first nine 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) principle of regionalization in the event of exotic Newcastle disease or isolation of either H5 or H7 avian influenza, irrespective of pathogenicity. Most importing nations, with the noted exception of China, are now applying regionalization and permitting imports on a county or state-exclusion basis following H5 or H7 AI infection.

The eighteen-month ongoing series of incident cases of END involving four small commercial units and 451 backyard flocks and, comprising predominantly game fowl (fighting cocks), appears to be over. Extension of the infection to four commercial farms in Southern California in late 2018 did not impact exports since importers are complying with the OIE principle of regionalization.

Generally pasteurized egg products should not be subject to any embargo imposed following reports of AI or Newcastle disease.

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 either no change or a significant increase in the cage-free flock for a specific month. It is questioned whether it would not be more informative to post accurate quarterly data in place of questionable 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 October 2019 released on November 5th documented a 1.9 percent increase in hens producing under the Certified Organic seal. The National cage-free flock increased by 1.5 percent. 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 retained at 75.8 percent percent for both categories of non-caged hens. (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.

The USDA Economic Research Service issued an updated forecast of egg production on October 17th, following the previous September 18 th report. The volume of eggs produced and per capita consumption in 2019 were increased by 2.7 and 1.9 percent respectively compared to 2018 data. Consistent with this disparity, the benchmark New York price was reduced by 34.7 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 -October 17th 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.