WEEKLY COMMODITY REPORT: May 19th 2022.

Over the past five trading days prices for corn and soybeans again fluctuated but with a consistent upward trend and with similar intensity as the previous week with inter-day ranges of up to two percent of value for corn and soybeans. The market is still dominated by the consequences of the invasion of Ukraine reinforced by the effects of drought in Brazil and neighboring producer nations. Prices were also influenced by increased orders from China coupled with moderate domestic U.S. demand.

Factors influencing commodity prices in either direction included:-

• Geopolitical tensions threatening wheat, corn, oilseeds and oil exports from Ukraine following the invasion together with evident restriction in Black Sea shipping. Russia has allegedly stolen in excess of 400,000 metric tons of grain from the Eastern occupied regions and is destroying agricultural infrastructure including elevators and crushing plants. (upward pressure on corn and wheat and an indirect effect on soybeans)
• Release of the May 12th WASDE #624. Projections for corn and soybean yield, acreage to be planted and production were revised based on the March Prospective Planting Report. Corn ending stocks were reduced 5.5 percent (neutral on corn price) and soybean ending stocks were raised 19.2 percent. (downward pressure on soybeans and meal)
• Persistent drought in Argentina, Paraguay and Brazil especially in that nation’s Southern states due to a prolonged La Nina The USDA-FAS projects that collectively the three Southern hemisphere nations will be short 8.7 million metric tons of soybeans in 2022. (intermediate upward pressure).
• Planting is slower than in 2021 due to inclement weather and delays in delivery of fertilizer. (moderate effect on corn approaching a critical date for planting but neutral on soybeans)
• Increased orders from China for soybeans despite projections of reduced domestic demand due to COVID restrictions and economic slowdown. (transitory upward pressure)
• Demand for soy oil to be diverted to biodiesel, exacerbated by concerns over shortages of sunflower oil from Ukraine and restrictions on export of palm oil by Indonesia (variable upward pressure on soybeans and meal)
• Slightly higher weekly ethanol demand with static production evidenced by lower ethanol stock levels in relation to production. Year-round E-15 has been authorized but with minimal uptake. (moderate pressure on corn)
• Purchase of commodities by hedge funds amid speculation in fluctuating equity and bond markets (upward pressure)

Based on CME quotations U.S. farmers are now receiving and conversely livestock producers and ethanol refiners in the Midwest will pay above $7.85 per bushel for corn delivered in July, up 4.4 percent from the May 12th quotation for May delivery. Crushers will pay $16.70 per bushel for soybeans plus transport and basis for July delivery, up 4.7 percent from the May 12th quotation for May delivery. Soybean meal was up 7.3 percent or $29 per ton, for July delivery, reflecting a higher soybean price at current crush volume, responding to both domestic and export demand for soy oil.

• The FAS Export Report released on May 19th for the week ending May 12th reflecting market year 2021-2022, confirmed that outstanding export orders for corn for the new market year amounted to 16.01 million metric tons (630.0 million bushels) with 42.92 million metric tons (1,689 million bushels) actually shipped. During the past week orders for the 2021-2022 market year amounted to 0.44 million metric tons (17.1 million bushels) with 1.38 million metric tons (54.3 million bushels) shipped. For the current market year shipments of corn to date are 4.6 percent lower than at the corresponding week a year ago. For market year 2022-2023 outstanding sales this week amounted to 5.58 million metric tons (219.6 million bushels), with 0.59 million metric tons (23.2 million bushels) ordered for the following market year.
   (Conversion 39.36 bushels per metric ton)

• The FAS Export Report released on May 19th 2022 for the week ending May 12th reflecting market year 2021-2022, recorded outstanding export orders for soybeans amounting to 10.49 million metric tons (385.3 million bushels) with 48.72 million metric tons (1,790 million bushels) actually shipped. Weekly soybean orders attained 0.75 million metric tons (27.7 million bushels) with 0.96 million metric tons (35.2 million bushels) shipped. For the current market year to date shipments of soybeans are 14.4 percent lower than for the corresponding week a year ago. For market year 2022-2023 outstanding sales amounted to 11.38 million metric tons (417.9 million bushels), with 0.15 million metric tons (5.5 million bushels) ordered this past week)
  (Conversion 36.74 bushels per metric ton)

• For the week ending May 12th 2021, 293,100 metric tons of soybean meal and cake were ordered for the market year 2021-2022, up 61.1 percent from the previous week. During the past week 192,100 metric tons of meal and cake combined was shipped, down 19.4 percent from the previous week and representing 2.5 percent of the total 7,651,900 metric tons shipped during the current marketing year to date. This quantity is 1.9 percent lower than the previous market year.

• Projected harvests and ending stocks were documented in the May 12th WASDE #624,in this edition. The anticipated WASDE #625 will be reviewed in the June 17th edition of EGG-NEWS with projections on quantities harvested and the effect of trade and domestic consumption on ending stocks of corn updated from the May report. Data should take into account the late planting of corn in the U.S. and the predicted consequences of the invasion of Ukraine by Russia. These events will affect world trade and the negative effect on spring planting in the Ukraine that is underway.

The following quotations for delivery for the months of delivery as indicated were posted by the CME at 14H00 on May 19th 2022, compared with values posted at 14H00 on May 12th 2021 (in parentheses):-

Changes in the price of corn, soybeans and soybean meal over five trading days this past week were:-

Corn: July quotation up 33 cents per bushel (+4.4 percent)

Soybeans: July quotation up 77 cents per bushel (+4.7 percent)

Soybean Meal: July quotation up $29 per ton (+7.3 percent)

The NASDQ spot prices for feedstuffs per short ton for May 11th 2022 with prices for the previous week were:-

• Corn (ZC): $279 was $286. 52-week range $177 to $292
• Soybean Meal (ZM): $414 was $397. 52-week range $311 to $488

Values for other common ingredients per short ton:-

• Meat and Bone Meal (ruminant, Central U.S.): $500 to $550 (wide range for this ingredient according to source and location)
• DDGS, (MO.): $316 (was $310)
• Wheat Middlings: $204 (was $194 reflecting surge in wheat price due to invasion of Ukraine)
• Bakery Meal (MO): $180 (was $165)

• For each $1 per ton (2.8 cents/bushel) change in corn the cost of egg production would change by 0.11 cent per dozen

• For each $10 per ton change in the price of soybean meal the cost of egg production would change by 0.35 cent per dozen

The respective changes in the prices of corn and soybean meal for May 18th spot prices compared with May 12th would lower nest-run production cost for eggs by 0.2 cents per dozen.

*(rounded to 0.1cent)

According to the May 12th WASDE #624, corn harvested in calendar 2022 will attain 14,460 million bushels with ending stocks projected at 1,360 million bushels down 5.5 percent from the April 2022 WASDE Report. Total corn stocks on December 1st 2021 amounted to 11.6 billion bushels up 3 percent from December 1st 2020.

The social restrictions imposed in the U.S. as a result of COVID-19, that are now being eased, were projected to reduce ethanol demand by 1.5 billion gallons or 10 percent of projected 2020-2022 requirement, accepting a nominal ten percent addition (E-10) to gasoline. This past week 87.2 percent of the U.S. ethanol fermentation volume was operational, based on the September 2021 U.S. Energy Information Administration (U.S. EIA) capacity data. The outlook for increased production will depend on higher domestic demand in addition to increasing the proportion of production that is exported.

According to the U.S. EIA, for the week ending May 13th 2022 the industry produced on average 991,000 barrels per day. This was unchanged from the week ending May 6th 2022, falling slightly below the one-million gallon per day benchmark for the sixth consecutive week. On May 13th ethanol stock was down 1.2 percent from the previous week to 23.8 million barrels, representing an approximately 19-day reserve but suggesting slightly increased demand given a disproportional decrease in stock relative to production. The White House has allowed all-year round 15 percent addition to gasoline. Given that many light vehicles cannot use more than E-10 and drivers are curtailing mileage due to high fuel cost and with restraints imposed on fuel station storage and dispensing, the short-term prospects for increased domestic consumption are unfavorable. 

Ethanol quoted on the CBOT (EH) at close of trading on May 18th was priced at $2.16 per gallon, up 2 cents per gallon from the previous week and compared to a 52-week range of $2.13 to $2.48 per gallon. Concurrently RBOB gasoline traded on NASDQ (RB) at $3.73 per gallon on May 18th was up 4 cents per gallon (1.1 percent) from the previous week. The 52-week range for RBOB gasoline is $1.90 to $3.96. The NYMEX WTI crude price of $110.20 per barrel at close of trading on May 18th was 5.1 percent higher than the previous week. Gasoline is now $1.57 per gallon more expensive than ethanol but with a 63 percent higher BTU rating.

With most plants among the 197 that were operational on January 1st 2021 now functioning, DDGS is freely available but commands a higher price consistent with the escalation in corn. A Missouri plant priced a branded DDGS at $316 per ton on May 18th 2022 but wide price variation exists depending on supplier and location. It is anticipated that the cost of DDGS will reflect changes in the price of corn. Generally DDGS is currently incorporated at low inclusion levels in egg-production formulas based on price relative to the nutrient contribution of corn and other ingredients. This may change as corn and hence DDGS fluctuates in price

Soybeans continue to be the beneficiary of export demand by China and other nations in addition to domestic livestock production and demand for soy oil. The USDA projected a harvest of 4,640 million bushels in the May WASDE #624. Ending stocks were increased 15.4 percent from 260 to 310 million bushels. Total soybean stock on December 1st 2021 amounted to 3.15 billion bushels down 14 percent from December 1st 2020 indicating the extent of exports during the 2020-2021 market year.

The CME soybean price for July delivery at 14H00 on May 19th 2022 was higher by 27 cents per bushel to 1,691 cents compared to 1,614 cents per bushel for July delivery quoted last week. The increase in the price of soybeans reverses a downward trend over four previous weeks and is attributed to the invasion of Ukraine with disruption of the winter harvest and spring planting. Predictions of lower yields in Argentina, Paraguay and Brazil vary but Dan Basse of AgResource recently estimated a 2.9 billion bushel shortfall (116 million metric tons). This is more extreme than the conservative USDA estimate of 0.66 billion bushels (24 million metric tons).

According to a release on May 15th by the National Oilseed Processors Association 169.8 million bushels of soybeans were crushed in April 2022. The April crush value was down 6.5 percent from March 2022 at 181.5 million bushels and up 5.9 percent from the April 2021 quantity of 160.3 million bushels.

 Soybean oil moved lower to 81.1 cents per lb. on May 18th from 83.1 cents per lb. last week. This is despite the realization that world oilseed supply will be limited by a sharply diminished crop of sunflower from Ukraine, the world’s largest exporter with restrictions on export imposed by Russia. Indonesia has placed a moratorium on the export of some palm oil products. For calendar 2022, it is anticipated that 43 percent of U.S. soy oil will be diverted from fuel to biodiesel.

On May 18th 2022 soybean meal was quoted on NASDAQ at $414 per ton, $17 per ton higher than the spot price last week and compared to a 52-week range of $312 to $500 per ton.

On May 18th 2022 Ruminant Meat and Bone meal was priced over a range of $500 to $550 per ton quoted from Central U.S. plants but with a wide range of prices based on composition, source and location. Price fluctuation reflects changes in soybean meal and other oilseed meals.

On May 18th the conversion of the CNY to the BRL was 0.73 BRL, up 0.03 BRL from the previous week. The conversion of the US$ to the CNY was CNY 6.66, unchanged from the previous week.

For consecutive calendar years 2017 through 2019 the U.S. supplied 34.4 percent of soybean requirements for China amounting to 95.5 million metric tons. This was followed by a decline to 16.9 percent of 88.5 million metric tons in 2018 and 16.6 percent of 88.0 million metric tons in 2019. The USDA anticipated that soybean imports by China would attain 95.0 million metric tons during the 2020-2021 market year but in reality only 60.3 million tons was shipped through August 2021.

For the 2019/2020 market year China imported 2.1 million metric tons of corn from the U.S., 4.8 percent of total exports of 43.3 million tons, but 12 percent less than in the 2018/2019 market year. The USDA-FAS documented sales of U.S. corn to China through late August 2021 comprising the 2020/2021market year amounting to 73 million metric tons (2,876 million bushels) with 93 percent shipped.

For 2021 the U.S. exported corn to the value of $17,473 million, 112 percent more than in 2020 and comprising 10 percent of the value of all U.S. agricultural exports.

For 2021 the U.S. exported soybeans to the value of $26,476 million 48 percent more than in 2020 and 15 percent of the value all U.S. agricultural exports.

COMMENTS

Subscribers are referred to the May 12th 2021 WASDE # 624 and the USDA quarterly Grain Stocks Report available under the STATISTICS tab.

The USDA Economic Research Service issued an updated forecast of egg production for 2022 on May 18th 2022, revising the previous April 15th 2022 report quantifying the impact of HPAI. The latest revision of production for 2022 was lowered by 1.1 percent to 7,688 million dozen from the April report and was 3.6 percent lower than in 2021. The per capita consumption of shell eggs and liquids combined for 2022 will be 274.8, down 4.5 eggs (2.0 percent) from 2021. The average 2022 benchmark New York bulk unit price was raised to 194 cents per dozen, 63.1 percent higher than in 2021 attributed to unseasonal high prices during the first quarter and again reflecting losses of close to 30 million hens from the end of February through mid-May.

Subsequent USDA projections will provide greater clarity on the effect of HPAI together with the recovery of the post-COVID economy. Egg-liquid consumption will be influenced by reduced availability and higher cost that will once more drive demand for alternatives to ‘real eggs’ as in 2015. Flock size will be influenced by the availability of pullet chicks for replacement, rate of conversion to alternative housing systems and the cost of ingredients that will influence margins. Unknown factors such as the eventual extent of avian influenza, the supply and cost of ingredients as influenced by events in Ukraine, export volume and recovery of the economy will all influence production and marketing of shell eggs and products.

USDA projected egg production in 2023 will attain 8,170 million dozen with a per capita consumption of 289 eggs.

May 2022 data is shown in the table below:-

Source: Livestock, Dairy and Poultry Outlook released May 18th 2022

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

USDA Weekly Egg Price and Inventory Report, May 19th 2022.

Market Overview

• Average wholesale unit revenue for Midwest Extra-large and Large sizes was lower by 11.1 percent from the past week. Mediums were down 11.8 percent. This follows depletion of more than 29.6 million hens including 12 large complexes in nine states over the previous twelve weeks. The decrease in price for all sizes and breaking stock this past week occurred concurrently with a 2.4 percent decrease in industry shell-egg inventory up from a 3.7 percent weekly decrease. This suggests fewer orders by chains to replenish the retail pipeline. Lower demand is projected over the short term with declining prices through the remainder of May. If additional cases of HPAI are diagnosed, availability will be more severely impacted especially in the breaking sector. Industry inventory increased this past week to 1.83 million cases due to a 2.4 percent increase in shell eggs contrasted with a 1.8 percent decrease in breaking stock. Retailers are expected to maximize shelf prices in relation to demand. Wholesale unit prices during the 1st quarter of 2022 and the subsequent two months contrasted favorably with the corresponding periods in both 2020 and 2021 that were characterized by low ex-plant unit revenue. Wholesale Midwest prices are yielding unusually high positive margins, despite the higher combined costs of nest-run, (feed, chicks, labor and fuel), grading, packaging and delivery.

• Shell inventory was 2.4 percent higher after a 3.7 percent decrease during the previous week. It is now apparent that the inventory held by chains and other significant distributors may be more important in establishing wholesale price than the USDA regional inventory figures published weekly, especially over the short term. The seasonal strategy of retailers is to adjust purchases only in response to retail demand and to hold down inventories in their DCs and stores while marking up shelf margins and pressuring suppliers for rapid replenishment of stocks to DCs and through DSD. Market data suggests that chains have priced generic white eggs in response to prevailing demand and are infrequently featuring generic Large or Extra large.

• Due to the depletion of more than 29.6 million hens (through May 15th) due to HPAI, unseasonal unit revenue will now be a reality through the remainder of May, even without extension of HPAI to additional complexes. 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 as at present and functions to the detriment of the industry over the long term. A CME quotation based on Midwest Large, responding to demand relative to supply would be more equitable.

• According to the USDA the U.S. flock in production was down 0.9 million hens or 0.3 percent from the week of May 11th to 281.9 million hens. This figure presumably reflects the total loss of 29.6 million hens to date depleted as a result of HPAI in twelve large egg-production complexes and additional losses on smaller farms. The producing flock includes about 2.0 million molted hens resuming production during the past week. Wholesale margins declined this past week despite attaining the highest level for the corresponding week in May since the 2015 epornitic. The current price for all sizes and categories is a response to flock depletion coupled with sustained demand. The USDA reports include recent diagnoses in Pennsylvania, Utah and Colorado flocks.

• There is some prospect of a return in the food service sector and with frozen and dried egg prices higher over the past two weeks. The price for breaking stock on average was lower this past week at 192.5 cents per dozen (down 24.5 percent compared to 0.8 percent higher for the previous week). Checks delivered to Midwest plants were down 23.9 percent to 191.0 cents per dozen. The disparity between the rise in shell inventory and a fall in breaking stock suggests demand for egg products. Prices for breaking stock will remain high in relation to season for the duration of the current epornitic and will be moderately elevated through the recovery period as replacement flocks are reared, reminiscent of 2015-2016. The U.S. economy is clearly reopening despite increased COVID incidence rates in some areas but with and hospitalizations declining in the nation.

Week in Review

Prices

According to the USDA Egg Market News Reports released on May 16th, the Midwest wholesale price for Extra-large was down 11.1 percent to 238.5 cents per dozen; Large size was down 11.2 percent to 236.5 cents per dozen; Mediums were down 11.8 percent to 223.7 cents per dozen as delivered to DCs. Prices should be compared to the USDA benchmark average 6-Region blended nest-run cost (excluding provisions for packing, packaging materials and transport) of 84.5 cents per dozen during April 2022. The progression of prices during 2022 to date is depicted in the USDA chart reflecting three years of data, updated weekly.

Status of 2022 Corn and Soybean Crops

The USDA Crop Progress Report released on May 16th documented a welcome doubling in planting both corn and soybeans from the previous week. Corn is now at 49 percent and soybeans 30 percent in the ground but lagging the 4-year average and behind the corresponding week in 2021 when farmers had achieved 67 and 39 percent respectively by May 16th. The delay in 2022 is attributed to wet field conditions. During the week ending May 8th 2021 an average of 2.3 days were suitable for field-work in IL, NE, IA, MN and OH. Comparable days available over the previous week rose to 4.5 days. There may also be delays due to availability of seed and fertilizer or late decisions on selection of crop.

Reference is made to the May 12th WASDE Report #624 retrievable under the STATISTICS Tab.

Topsoil and subsoil moisture levels were comparable with the corresponding weeks in 2021 although some areas will continue to experience delays in planting. EGG-NEWS will report on the progress of the two major crops as monitored by the USDA through the end of the 2022 harvest in October.

WEEK ENDING   Crop May 8 May 15th 4-Year Average Corn Planted (%) Corn Emerged (%) 22 5 49 14 67 32 Soybeans planted (%) Soybeans emerged (%) 12 3 30 9 39 12   Crop Condition To be recorded in June. V. Poor  Poor Fair Good Excellent Corn 2022 Corn 2021 Soybeans 2022 Soybeans 2021     Parameter V. Short Short Adequate Surplus Topsoil moisture: Past Week 11 17 61 11 Past Year 13 21 57 9 Subsoil moisture: Past Week 13 20 58 9 Past Year 14 23 56  7

OVERVIEW

In a preamble to the May WASDE Report the USDA cautioned that events in Eastern Europe following the invasion of Ukraine by the Russian Federation would have unpredictable consequences. It is evident that the 2022 harvests will be seriously reduced and that Black Sea shipping is disrupted.

The May 12th 2022 WASDE changed corn and soybean data for the 2022 growing season consistent with planting commencing at the beginning of the present month with delays in the major production areas due to inclement weather. Projections of the acreages of corn and soybeans to be planted were updated from the April report to conform to the Prospective Planting Report released on March 31st. This showed a four percent reduction in corn acreage and a corresponding increase in the area planted to soybeans. Corn yield was unchanged from April but soybean yield was increased fractionally.

The USDA ERS lowered the projected ending stock for corn consistent with the reduced acreage planted. Ending stocks for soybeans were increased in response to the proportional extent of planting. The area of corn to be harvested in 2022 was projected to be 81.7 million acres. Soybean acreage was increased to 90.1 million acres. The respective acreages will be subject to revision depending on the situation in Ukraine, relative CME prices for corn and soybeans and predicted production margins as influenced by costs of fertilizer and fuel that are increasing rapidly. The June WASDE will confirm the respective acreages planted to the major crops.

The May 2022 WASDE initial estimate of corn yield was retained at 177.0 bushels per acre, despite the delay in planting as compared to 175.8 bushels per acre in 2021. The estimate of soybean yield was raised to 51.5 bushels per acre compared to 51.2 bushels per acre in 2021.

The May 2022 USDA projection for the ending stock of corn was reduced to 1,360 million bushels assuming predetermined production level, domestic use and exports. The USDA raised the projected ending stock for soybeans from 260 million bushels in April to 310 million bushels. The ending stocks for corn and soybeans will be revised in the June WASDE in the light of more accurate projections of acreage planted, emergence and exports as influenced by geopolitical events.

The May 2022 WASDE projection raised the price of corn to $6.75 per bushel. The projected price for soybeans was adjusted upwards to 1440 cents per bushel. Soybean Meal was lowered to $400 per ton. All three of the price projections deviate from the May 12th CME quotations for May delivery.

Projections included in the May 2022 WASDE were developed before the full impact of the invasion of the Ukraine can be evaluated. It is evident that production and hence exports of wheat, corn and sunflower seed by Ukraine will be sharply reduced compared to recent annual averages. This will have implications for current U.S planting intentions with respect to crop selection and acreage. It is accepted that USDA projections for export are also based on the perceived intentions and needs of China. This Nation has sharply curtailed purchases of commodities during the current market year despite drought and COVID-related disruption of imports during the first quarter of 2021.

Reports on volumes of commodities exported are included in weekly editions of EGG-NEWS based on USDA data.

CORN

Based on March 2022 planting intentions the projected corn harvest for 2022 was reduced to 1,440 million bushels compared to 15,062 million bushels in 2021. If farmers maintain application rates of more expensive fertilizer to maximize yields the projected 2022 harvest will be 4.6 percent lower than the previous 2016 record harvest of 15,148 million bushels. The “Feed and Residual” category was lowered by 275 million bushels from April to 5,350 million bushels. The “Ethanol and Byproducts” category was unchanged at 5,375 million bushels consistent with stable domestic demand for E-10 and other blends following relaxation of COVID-19 restrictions. Projected corn exports were lowered to 2,400 million bushels based on recent and projected shipments to China and Mexico and taking into account the anticipated availability from Eastern Europe. Ending stocks were 5.9 percent lower than in the April WASDE to 1,360 million bushels.

The forecast USDA farm price for corn was raised 16.3 percent to 675 cents per bushel. At 14H00 on May 12th after release of the WASDE the CME quotation for May delivery was at 814 cents per bushel, up 6.0 percent from the quotation on April 8th for April delivery and currently 20.6 percent above the April USDA projection.

REVIEW OF APRIL 2022 EGG PRODUCTION COSTS AND STATISTICS.

HIGHLIGHTS

• April 2022 USDA ex-farm blended USDA nest-run benchmark price was 235.9 cents per dozen, 48.8 percent higher than the March 2022 value of 158.5 cents per dozen. For comparison average USDA benchmark price for 2021 was 84.3 cents per dozen with a range of 58.0 cents per dozen in June to a high of 123.6 in December. Stock levels and prices prior to the onset of flock depletion due to HPAI indicated a relative seasonal balance between supply and demand. Prevailing wholesale prices will be largely dependent on the magnitude of any future flock depletions, retail sales and margins, diversion from the egg-breaking sector and fluctuation attributed to the price discovery system.

• April 2022 USDA average nest-run production cost was 1.2 cents per dozen (1.4 percent) higher than in March 2022 to 84.5 cents per dozen, mainly attributable to a 1.9 percent higher average feed cost per dozen.

• April 2022 USDA benchmark nest-run margin attained a positive value of 151.4 cents per dozen compared to a margin of 74.7 cents per dozen for March 2022.

• March 2022 national flock in production (over 30,000 hens/farm) was down 2.9 percent or 8.7 million hens over a revised February 2022 value of 296.3 million. Approximately 2.5 million hens returned to production from molt in early April together with projected maturation of 24.0 million pullets, with this number offset by depletion of spent flocks. Through the end of April, 29.5 million hens were depleted to control HPAI

• March 2022 pullet chick hatch was up 19.6 percent or 5.0 million from February 2022 to 30.5 million.

• March 2022 exports of shell eggs and products combined were up 24.8 percent from February 2022 to 697,400 case equivalents representing the theoretical production of 10.2 million hens. Decreased exports to South Korea were responsible for the decline in Q3 and Q4 as flocks depleted by HPAI were restored. Canada imported 51.5 percent of egg liquid and shell eggs combined during March 2022 contributing to the increase during March.

INTRODUCTION.

Summary tables for the latest USDA April 2022 prices and flock statistics made available by the EIC on May 9th 2022 are arranged, summarized, tabulated and reviewed in comparison with values from the previous April 8th 2022 posting reflecting March 2022 costs and production data.

COSTS & REVENUE

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

*Adjusted by EIC

Notes: 1. Rounded to decimal of a cent

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

The USDA Cage-Free Report for April 2022, released on April 29th documented an unchanged population of hens since January 2022, producing under the Certified Organic Program at 18.2 million (rounded to 0.1 million). The number of hens classified as cage-free (but excluding Certified Organic) including aviary, barn and other systems of housing were unchanged at 90.5 million from March 2022. 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. It is evident that a noteworthy proportion of organic and cage-free eggs are down-priced to the generic category when comparing Nielsen retail sales data with potential production based on apparent hen numbers as posted by the USDA.

Average weekly egg production for Certified organic in March was increased by 1.7 percent from March 2022 attaining a questionably high average of 84.5 percent on a hen-week basis (last month 82.8 percent). Average weekly flock production for cage free flocks other than Certified Organic in April was up by 1.7 percent from March 2022 attaining a questionable average of 83.4 percent on a hen-week basis (last month 81.7 percent). This reflects a reduced average age of flocks compared to the previous month. Seasonally, younger flocks increase the availability of cage-free and organic eggs in response to pullet chick placements in anticipation of pre-Easter demand. Average flock production in April 2022 represented a balance between older flocks some of which were molted and the relatively higher production from pullet chicks placed during late October 2021.

*Excludes HI and AK.

Negotiated nest-run cage-free price for April 2022 averaged $1.64 per dozen down from $1.69 per dozen in March 2022 reflecting unseasonal Q1 demand. April 2022 retail prices for cage-free eggs were 2.9 percent higher than March 2022 consistent with seasonal demand. In reality a substantial proportion of both cage free and organic production is downgraded and sold as commodity brown eggs.

The disparity between wholesale and retail prices indicates that chains are maximizing margins especially on Organic and pastured categories. This strategy restricts volume of sales and is to the disadvantage of producers.

Based on the importance of cage-free production, the USDA-AMS issues the report on volumes and prices at monthly intervals for the information of Industry stakeholders. There is obvious doubt as to the accuracy of individual monthly flock numbers especially when reports show a marked change for the last month in a quarter or no change in the cage-free flock for intervening or sequential months. It is suggested that USDA should consider a quarterly report with more accurate and consistent hen data. This would be more useful to the industry for planning and marketing decisions.

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 quarterly Grain Stocks Report released on March 31st 2022 documented storage of the major commodities, classified according to on-site and remote facilities including elevators and commercial installations. Quantities of corn and soybeans, the two major commodities relevant to the cost of poultry production were stated to be:-

“Corn stocks in all positions on March 1, 2022 totaled 7.85 billion bushels, up 2 percent from March 1, 2021. Of the total stocks, 4.08 billion bushels were stored on farms, up 1 percent from a year earlier. Off-farm stocks, at 3.77 billion bushels, are up 3 percent from a year ago. The December 2021 - February 2022 indicated disappearance is 3.79 billion bushels, compared with 3.60 billion bushels during the same period last year”.

“Soybeans stored in all positions on March 1, 2022 totaled 1.93 billion bushels, up 24 percent from March 1, 2021. Soybean stocks stored on farms are estimated at 750 million bushels, up 26 percent from a year ago. Off-farm stocks, at 1.18 billion bushels, are up 22 percent from last March. Indicated disappearance for the December 2021 - February 2022 quarter totaled 1.22 billion bushels, down 12 percent from the same period a year earlier”.

Prices and commentary are incorporated in the Weekly Commodity Report in this edition and WASDE #622 issued on March 9th under the STATISTICS tab.

In a press release dated December 28th Cal-Maine Foods (CALM) announced results for the 2nd Quarter of FY 2022 ending November 27th 2021.   

Cal-Maine serves as a bellwether for the shell egg sector as the only public-quoted almost pure-play company in the industry. 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)

Note 1. $670,000 tax benefit and $2.53 million additional income in Q2 FY 2022 compared to $1.43 million in Q2 FY 2021

52-Week Range in Share Price:  $33.85 to $43.24      50-day Moving average  $36.46

Market Close, Tuesday, Dec. 28th pre-release: $38.36.

14H00 Wednesday, Dec. 29th post-release: $36.74 (down 4.1 percent)

In reviewing the CALM quarterly report the following calculated values represent key data for the most recent Quarter. (Q2 Fiscal 2021 and percent difference in parentheses):-

• Shell egg sales attained $379.17 million in Q2 2022 assuming that this category represented 97 percent of total revenue. ($336.91 million in Q1 2021, up in value by 12.5 percent)

• Dozen shell eggs sold (thousands): 276,108 (273,651; +0.9%)
• Average selling price of all shell eggs: $1.37 per dozen; ($1.23 per dozen; +11.4%).
• Average selling price of specialty eggs (excluding co-pack) calculated from data released: $1.86 cents per dozen; ($1.85 per dozen;  +0.5%).
• Average selling price of generic eggs calculated from data released: $1.16 cents per dozen; ($1.01 cents per dozen; +14.9%).
• Differential between generic and specialty eggs: $0.70 cents per dozen; ($0.84 per dozen; -16.7%)
• Specialty eggs as a proportion of volume sold: 30.3%; (26.4%; +14.8%)
• Specialty eggs as a proportion of sales value: 41.1%; (39.7 %; +3.5%)
• Proportion of eggs sold actually produced by Cal-Maine flocks: 93.0%  (92.1%  +1.0%;).
• Feed cost per dozen 52.9 cents (41.0 cents +29.0%)

The following observations relate to the comparison of Q2 2022 with the corresponding quarter in 2021:-

• Q2 of FY 2022 represented a more favorable marketing comparison to Q2 2021 based on higher prices for shell eggs during the most recent quarter, as influenced by partial restoration of institutional and consumer demand with evident recovery from COVID restrictions.
• Gross profit was impacted positively by higher unit revenue for generic eggs but offset by significantly higher feed cost and obviously inflation in expenditure on labor, fuel and packaging.
• Loss was constrained by the relatively high proportion of specialty eggs sold that generated a higher margin compared to generics.
• In a down-market the relative contribution of specialty eggs is amplified and Cal- Maine achieved an increase in the value sold in this category
• Responding to the market in Q2 2022 Cal-Maine purchase of eggs was within one percent of the corresponding quarter in FY 2021.
• Apart from family-trust shareholding of 14.7 percent, institutions hold 92.1 percent of equity. Shares short of float December 15th attained 21.5 percent. CALM must generate slightly over $20 million in net earnings before restoring the dividend.

In commenting on Q2 results Dolph Baker, chairman and CEO of Cal-Maine Foods, Inc., stated, “We were pleased to report higher sales for the second quarter of fiscal 2022 compared with the prior year, driven by improved shell egg pricing. We are pleased that our operating results helped drive a return to modest profitability in the second quarter despite the impacts of higher costs for feed ingredients, processing and packaging.”

Baker added "For the second quarter of fiscal 2022, specialty egg sales accounted for 41.1 percent of total shell egg revenue, compared to 39.7 percent, for the prior-year quarter. We continue to focus on offering a favorable product mix that meets the needs of our customers, including conventional, cage-free, organic and other specialty eggs and egg products. Consumer preference for specialty eggs, including cage-free eggs, continues to expand”.

With regard to expansion Baker noted “In October, we announced that our Board of Directors approved a $23.0 million capital project to expand the Company’s cage-free egg production at our Okeechobee, Florida, facility, which will add capacity for approximately 400,000 cage-free hens and 210,000 pullets. This most recent expansion project in Florida supports our strategy to position Cal-Maine Foods as an industry leader” Cal-Maine made an additional investment in Southwest Specialty Eggs, LLC, to acquire warehouse and distribution capability to expand the customer base in the southern California, Arizona and Nevada markets. Given the cage-free egg requirement in California will take effect on January 1, 2022, we believe this investment will be immediately accretive given our enhanced ability to better utilize our cage-free egg offerings and support the sales and distribution of other specialty eggs into these important retail markets”.

Baker concluded “In spite of current and expected inflationary headwinds, we remain focused on what we can control by managing our costs and running efficient operations. We are mindful of our essential role to support the nation’s food supply with nutritious and affordable protein. We are confident we have the right strategy in place to meet this objective, with a proven operating model that will drive long-term growth. Importantly, we have sufficient capital to fund internal expansion projects and consider potential acquisitions to support our strategy”.

Since 2008, Cal-Maine Foods has invested more than $482 million in facilities, equipment, and related operations to expand cage-free production and distribution capability.