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REVIEW OF JULY PRODUCTION STATISTICS AND COSTS.

08/08/2018
  • July 2018 USDA Ex-Farm Benchmark Price up 24 Percent from June Consistent with Demand.

  • Production Cost Down 0.9 Percent with Feed Lower by 1.9 Percent.

  • Positive Nest-run Margin Increased to 32.2 Cents per Dozen

 

INTRODUCTION.

Summary tables for the latest USDA July 2018 statistics and prices made available by the EIC on August 6th are arranged, summarized, tabulated and discussed in comparison with values from the previous July 9th 2018 posting reflecting June 2018 data.

COSTS & REVENUE

Parameter

JULY 2018

JUNE 2018

5-Region Cost of Production ex farm (1st Cycle)

61.49 c/doz

62.22 c/doz

Low

55.78 c/doz (MW)

56.94c/doz (MW)

High

77.81 c/doz (CA)

78.89 c/doz (CA)

Components of 6-Region 1stCycle Cost of Production using EIC data:-

 

JULY 2018

JUNE 2018

Feed

32.95 c/doz

33.60c/doz

Pullet depreciation

11.02 c/doz

11.10 c/doz

Labor

4.00 c/doz

4.00 c/doz

Housing

5.30 c/doz

5.30 c/doz

Miscellaneous and other*

8.22 c/doz

8.22 c/doz


* adjusted February 2018

Ex Farm Margin according to USDA values reflecting JULY 2018:-

93.7 cents per dozen1- 61.5 cents per dozen = +32.2 cents per dozen

(June 2018 comparison 75.9 1 cents per dozen - 62.2cents per dozen = =13.7 cents per dozen.)

Note 1: USDA Blended egg price

   

JULY 2018

JUNE 2018

USDA

Ex-farm Price (Large, White)

93.7 c/doz

75.9 c/doz

 

Cage-free to packing plant

159.0 c/doz

159.0 c/doz

 

Warehouse/Dist. Center

137.0 c/doz (June)

96.0 c/doz (May)

 

Store delivered (estimate)

142.0 c/doz (June)

101.0 c/doz (May)

 

Dept. Commerce Retail

162.8 c/doz (June)

198.7 c/doz (May)

 

Layer Feed Cost

JULY 2018

J UNE 2018

U.S. Average

$209.90/ton

 

$214.00/ton

High

$245.33/ton (SE)

$245.33/ton (SE)

Low

$177.91/ton (MW)

$184.38/ton

Differential

$ 67.42/ton

$ 60.95/ton

 

Pullet Cost (19 Weeks) $3.80 JULY 2018 $3.83 JUNE 2018

 

VOLUMES OF PRODUCTION

PARAMETER

JULY 2018

JUNE 2018

Egg-strain eggs in incubators

47.9 million (July)

50.5 million (June)

Pullet chicks hatched

26.9 million (June)

30.0 million (May)

Pullets to be housed in 5 months

24.3 million (Nov.)

27.1 million (Oct.)

     

National Flock in farms over 30,000

302.7million (June)

304.0 million (May)

National egg-producing flock

323.5 million (June)

323.5 million (May)

     

Proportion flock in molt or post-molt

17.4% (July)

17.9% (June)

Total of hens in flocks over 30,000, 1st cycle (estimate)

250.1 (July)

265.6 million (June)

 

Eggs produced

7.67 billion (June)

7.93 billion (May)

Cage-Free hens in production

54.7 million (June)

28.6% Organic

54.7 million (May)

28.5% Organic

"Top-6" States hen population (USDA)

175.4 million (June)

175.5 million (May)

 

PROPORTION OF U.S. TOTAL HENS BY STATE, 2018

Based on a denominator of 302.7 million hens in flocks over 30,000 region.

 

STATE

JUNE 2018

MAY 2018

Proportion by region (JUNE 2018)

Iowa

17.8%

17.8%

MW 54.7%

Indiana

10.1%

10.1%

NE 10.9%

Ohio

9.8%

10.0%

SE 9.6%

Pennsylvania

8.0%

8.0%

SC 12.6%

Texas

5.7%

5.7%

CA 4.6%

California

4.4%

4.3%

NW 3.0%

(Values rounded to 0.1%)

Rate of Lay, weighted hen-week (USDA) 78.7% (JULY) 78.9% (JUNE)

Actual USDA-ERS 2015 U.S. per capita annual egg consumption revised due to HPAI:- 255.8 eggs (-11.7 from 2014)

Actual USDA-ERS 2016 U.S. per capita annual egg consumption:- 271.6 eggs (+15.8 from 2015)

Actual USDA-ERS 2017 U.S. per capita annual egg consumption:- 276.3 eggs (+4.7 from 2016)

Forecast USDA-ERS 2018 U.S. per capita annual egg consumption projected to be:- 277.9 eggs (+1.6 from 2017)

Eggs broken under FSIS inspection (million cases)

JUNE 6,878 MAY 6,919

Cumulative 2018: number of cases produced 128.2 million

Cumulative 2018: proportion of total eggs broken 30.3%

 

EXPORTS

Parameter

Quantity Exported

Exports:

 

Shell Eggs (thousand cases)

JUNE 274 MAY 324

Products (thousand case equivalents)

JUNE 334 MAY 418

TOTAL (thousand case equivalents)

JUNE 608* MAY 742

*Representing 2.9 percent of National production in May 2018

 

COMMENTARY ON JULY 2018 COSTS AND STATISTICS

The following comments and comparisons are provided on July 2018 USDA values:-

JULY 2018 COST AND REVENUE DATA

The USDA reports data for six regions, respectively comprising the Northeast, South East (Mid-Atlantic), South Central, Midwest, Northwest and California (NW and California combined in some tables)

  • The USDA ex farm benchmark blended egg price in July 2018 increased by 17.8 cents per dozen from June 2018 (23.5 percent) to 93.7 cents per dozen, contributing to a positive margin of 32.2 cents per dozen as delivered 'nest-run' (from the laying house). The July 2018 value of 93.7 cents per dozen should be compared to 51.0 cents per dozen for the corresponding month in 2017 and 39.9 cents per dozen in 2016.

  • During July 2018 the feed component of production cost averaged 33.0 cents per dozen. The YTD feed cost was 34.1 cents per dozen compared with an average feed cost of 32.0 cents per dozen in 2017.
  • Combining data from the USDA and the EIC (formerly data from the University of California), producers recorded a positive margin of 32.2 cents per dozen at farm level for flocks in July 2018 compared to a positive margin of 13.7 cents per dozen in June 2018. The cumulative margin for the first seven months of 2018 was 304.4 cents per dozen. The algebraic margin for 2017 was a positive 39.2 cents per dozen, with the first eight months negative comparing production cost against USDA 'nest run' values. The algebraic average margin for 2016 was a loss of 9.6 cents per dozen with negative values recorded for eight consecutive months. Ex-farm margin for 2015 amounted to an average of 74.5 cents per dozen.

  • The simple average price of feed for July 2018 over 5-regions was $209.90 per ton, lower by $4.10 per ton (1.9 percent) compared to June 2018. The Southeast recorded the highest cost among five regions at $245.30 per ton compared to the lowest region, the Midwest at $177.91 per ton. The average figure includes ingredients plus milling and delivery at approximately $10 per ton. The benchmark price of corn was $147.68 per ton in July 2018, down 2.2 percent from June 2018. A decrease of 2.3 percent in the price of soybean meal from $382.54 per ton in June 2018 to $373.90 per ton in July 2018 also contributed to a lower feed cost. There was a $60.26 per ton differential in corn price between the Midwest and the Northwest in July 2018. Feed price will continue to be a major factor driving production cost and hence margin. Unknown factors influencing feed cost in 2018 will include disruption of international trade due to threatened tariffs imposed by China. Each $10 per ton difference in feed cost represents 1.75 cents per dozen.

  • The EIC-calculated the 6-Region total nest-run production cost in July 2018 to be 61.49 cents per dozen, 0.71 cent per dozen less than in June 2018. Production costs during July 2018 ranged from 55.78 cents per dozen in the Midwest up to 77.81 cents per dozen in California which was higher than the Midwest region by 22.03 cents per dozen.

  • Retail egg prices as determined by the Department of Commerce for June 2018 averaged 162.8 cents per dozen, 35.9 cents per dozen less than in May 2018. During June 2016 and 2017 retail prices were respectively 149.1 cents per dozen 133.2 cents per dozen. During entire 2016 and extending through August 2017, retail prices did not decline in proportion to ex-farm prices allowing higher margins at retail thereby depressing demand.

 

JULY 2018 PRODUCTION DATA

  • According to USDA data, the estimated average complement of U.S. hens in flocks over 30,000 during June 2018 amounted to 302.7 million, 1.3 million less than in May 2018 reflecting a seasonal decrease in flock size. The total U.S. flock including hens in molt on all farms counted by the USDA amounted to 323.5 million in June 2018. The average end-of-year flock sizes over the past five years respectively were, 2012 (299 million); 2013 (308 million); 2014 (311 million); 2015 (291 million) and 2016 (319 million). The EIC predicts the December 2018 total egg production flock to be 338.9 million.

  • Pullet chicks hatched were down 10.5 percent in June 2018 to 26.9 million compared to the previous month at 30.0 million. It is evident that if low prices prevail during late Summer months flock placements will decline due to some producers cancelling pullet-chick orders.

  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA attained 17.4 percent of the national flock in July 2018, corresponding to an average of 17.4 percent in 2017 and 23.8 percent in 2016.

  • Average monthly pullets transferred to laying houses during the first and second quarters of 2018 amounted to 20.5 and 21.7 million respectively. The monthly projection for pullets to be transferred to laying houses during the third quarter of 2018 is 26.0 million. Cancellation of pullet chick orders are unlikely if wholesale prices continue above production cost.

  • The hatchery supply flock increased from a level of 3.1 million hens in production in June 2015, coinciding with the end of the HPAI epornitic to a low of 2.5 million hens during the 4 th Quarter of 2016. Projections show monthly average of 2.5 and 2.4 million breeder hens in production during the third and fourth quarters of 2018 respectively.

  • Average rate of lay attained 78.7 percent during 2016 and increased to 79.8 percent in 2017. Average production of 78.7 percent in July 2018 reflected young pullets reaching peak and the balance among placements of pullets, the rate of depletion of flocks and retention of molted hens for a second cycle. Average flock production will fall as weighted flock age increases or will rise due to early depletion and restricting production to the first cycle.

  • Processing of light hens under FSIS inspection attained 4.0 million hens in June (4.3 million in May 2018 and 5.3 million in June 2017). The average for the period January through July 2017 was 5.4 million per month. Spent-hens are shipped to Canada from Northern-tier U.S. states or are rendered or composted in other regions. Approximately 13 million spent hens are disposed of each month.

JUNE 2018 EXPORT DATA

  • According to USDA-FAS data, 273,500 cases of shell eggs were exported in June, (324,100 in May 2018) representing 1.3 percent of total production. This value should be compared to the high value of 409,700 cases in March 2016 prior to the onset of HPAI. During June 2018 the following regions were the leading importers:- North America =NAFTA (36.9 percent, was 58.6 percent), East Asia (57.1 percent, was 36.1 percent.). The E.U. and Southeast Asia did not import shell eggs in June and shipments to the Middle East were negligible.

 

  • Exports of egg products in June 2018 were down 20.1 percent from May 2018 to 334 million case-equivalents representing 1.6 percent of U.S. output. The following regions were the leading importers of egg products by proportion of volume shipped in June:- North America (=NAFTA) (received 27.3 percent), East Asia (51.3 percent) and the EU-28 (8.9 percent, was 5.8 percent) Decreases to the E.U. and Asia were attributed to the lower prevalence of avian influenza and complete restocking following the 2017 fipronil contamination event. Due to the shortage of breaking stock and reduced capacity through large in-line units, exports were curtailed in 2015 and volume decreased by 34.8 percent compared to 2014, attaining 1.7 percent of total U.S. output. For 2016 export volume was 12.0 percent lower than in 2015. During the fourth quarter of 2017 exports of egg products increased by 23.8 percent over the corresponding fourth quarter of 2016 which was depressed during post-AI recovery.
  •  Collectively, exports of shell eggs and products in June 2018 represented the equivalent of approximately 9.9 million hens in production during the month, attaining 607,500 case-equivalents (was 742,000 in May). This was a 36.7 percent decrease compared to monthly average shipments of 960,000 case equivalents exported over the first four months of 2015 prior to the advent of HPAI indicating the need to re-build markets. Exports of both egg-products and shell eggs in June 2018 corresponded to 2.9 percent of a nominal national flock of 305 million hens in production on all farms.
  • There is no scientific reason why any nation should embargo pasteurized egg products from an approved plant, based on a diagnoses of avian influenza in a state or country.