CME Prices

On Friday August 11^th at close of trading on the CME, the following rounded quotations for corn, soybeans and soybean meal were recorded, together with the bracketed value for the previous week.

Changes in the price of soybeans and soybean meal this week were:-

• Corn:                     Sept. quotation down by 6 cents.                    (-1.6 percent)
• Soybeans:            Aug. quotation down by 48 cents                    (-1.5 percent)
• Soybean Meal:    Aug. quotation down by $5/ton                    (-1.6 percent)                                  

For each 10 cent per bushel change in corn :-

• The cost of egg production would change by 0.45 cent per dozen
• The cost of broiler production would change by 0.25 cent per pound live weight

For each $10 per ton change in the price of soybean meal:-

• The cost of egg production would change by 0.40 cent per dozen
• The cost of broiler production would change by 0.25 cent per pound live weight

See posting on the August 11^th edition of CHICK-CITE (enter WASD in SEARCH block) summarizing the August 10^th USDA-WASDE Report #568, for a review of price projections and quantities of commodities to be produced during the 2017-18 season.

Status of 2017 Corn and Soybean Crops

                                                                            WEEK ENDING

How will Amazon Improve Whole Foods Profitability?

As reported by Mark Hamstra in the August 8^th edition of Supermarket News, Amazon will have to concentrate on the supply chain.  Since Whole Foods Market created the image of “healthful, fresh and local”, the supply chain to support the company image was expensive, especially with regard to small-farm organic produce.  It is essential for Amazon to reduce the “whole paycheck” image of WFM. This will require restrictions on sourcing of products. 

This is especially important given that Walmart, Aldi, emerging Lidl and even mainstream supermarkets have managed to improve freshness and quality of their produce but have restrained price.  These companies have sharpened their pencils when dealing with suppliers and have introduced private labels where possible to reduce prices into the basket

The obvious challenge facing Amazon will be to improve the profitability of Whole Foods Market but at the same time preserve the image and prevent disaffection by loyal customers – a trend which was evident before the announcement of the acquisition.

AEB to Partner with Laurie Hernandez for Back-to-School Promotion

During the contest a winner will be selected each week for a monetary grant and back-to-school themed prize. Laurie Hernandez will visit the school of the grand prize winner.

Hernandez noted, “I am very excited to partner with the American Egg Board to search for incredible kids across the country who are doing amazing things for the lives of others.”  She added “I know first-hand how important it is to recognize children for their accomplishments and look forward to seeing the inspiring stories about remarkable kids submitted to the You’re Incredible Because…Contest.

USDA Weekly Egg Price and Inventory Report, August 9^th 2017.

The August 4^th USDA Egg Market News Report documented a USDA Combined Region value of $0.91 per dozen delivered to warehouses. This price lags Midwest Weekly values by one week, and can be compared to a trailing peak price of $2.20 per dozen in late November 2015.  The USDA Combined range for Large, in the Midwest was $0.85 per dozen. At the high end of the range, the price in the Southeast and South Central Regions, attained $0.94 per dozen.

The current USDA Combined Price was approximately 65 cents per dozen below the corresponding three-year average. During the second Quarter of 2016 the average was inflated by the rise in prices attributed to the post-HPAI shortage of shell eggs and breaking stock.

The number of producing hens this week was 0.4 million higher at 305.0 million consistent with retention of flocks into the second cycle and by pullets placed 6 months ago attaining production. The hen population is high level relative to current demand. The total egg-flock comprises 312.0 million including hens in molt and small flocks, approximately 0.4 million more than last week.

Generic shell-egg stock rose by 0.2 percent compared to an increase of 2.9 percent for the previous week suggesting a balance between supply and demand albeit at a low price. Dried-egg inventory amounted to 27.6 million pounds (12,545 metric tons) as of June 30^th 2017. This is extremely high, as is the National stock of frozen egg products reported on July 24^th confirming a stock of 41.7 million pounds (18,960 metric tons) on June 30^th. 

INVENTORY

 Cold storage stocks in selected regions on August 1^st 2017 amounted to 3.320 million pounds (1,509 metric tons), 4.5 percent above the stock of 3.176 million pounds during the week of July 1^st. 2017.

The latest monthly USDA Cold Storage Report released on July 24^th documented a total stock of 41,712 million pounds (18,960 metric tons) of frozen egg products on June 30^th 2017. This value was up 9.9 percent from June 30^th 2016. Approximately 85 percent of inventory comprised the categories of “Whole and Mixed” (33.6 percent) and “Unclassified” (51.6 percent).

The national stock of generic shell eggs on August 7^th was up by 0.2 percent, compared to a 2.9 percent increase in inventory during the previous week. Three regions showed increases in stock levels. The Midwest Region was up 2.0 percent compared to the previous week to 368,600 cases. This region was followed in decreasing order of stock level by the South Central Region with no change at 261,700 cases; the Southeast Region down by 0.4 percent to 246,900 cases; the Southwest Region down by 7.6 percent to 182,500 cases, the Northeast Region up by 0.7 percent to 126,300 and the Northwest Region up by 12.8 percent to 96,500 cases representing a 22.9 percent swing in a week.

The total USDA Six-Area stock of commodity eggs comprised 1,595,500 cases, of which 80.4 percent were shell eggs. The inventory of breaking stock was up 1.1 percent to 312,600 cases. The price of breaking stock this week reflects the availability of eggs from both mature and young flocks in relation to the demand for generic eggs.

Specialty egg inventory was up by 2.5 percent compared to a fall of 1.4 percent for the previous week to 179,300 cases with organic stock comprising 38.7 (was 43.8) percent of inventory. Recent data suggests a fluctuating build in the stock of USDA Certified Organic product. This is attributed to an apparent trend by consumers to purchase less-expensive brown cage-free product over organic eggs when there is a differential in price over $1.00 per dozen During the past week the USDA benchmark retail price of cage-free brown fell by 6.6 percent, or 18 cents per dozen to $2.56 per dozen while USDA Certified Organic rose by 14.1 percent or 51 cents per dozen to $4.11 per dozen, widening the price differential to $1.35 per dozen ($0.86 per dozen last week) suggesting larger purchases of the cage-free category in the coming week at the expense of  certified organic eggs.  Large week-to-week percentage fluctuations can be expected in the stock of specialty and organic eggs based on the small base of these categories.

JULY 2017 USDA EX-FARM BENCHMARK PRICE RISES: NEGATIVE MARGINS PERSIST.

COSTS & REVENUE                                                                                         

Components of 6-Region 1^stCycle Cost of Production:-

Ex Farm Margin according to USDA values reflecting JULY 2017:-
51.0 cents per dozen¹- 60.8 cents per dozen = -9.8 cents per dozen
(June comparison 39.5 ¹ cents per dozen – 59.9 cents per dozen = -20.4 cents per dozen.)
Note 1:  USDA Blended egg price

USDA- WASDE FORECAST #568, August 10^th 2017

Corn

The projection of the corn harvest was lowered from July attaining 14,153 million bushels, down 6.0 percent from 2016. None of the major categories of use were appreciably changed. The projected USDA range in farm price incorporated an 80 cents per bushel spread as is normal for a mid-year report with many uncertainties relating to weather until harvest. Price was unchanged from the July WASDE Report at 290 to 370 cents per bushel. At close on August 10^th CME quotations for September and December 2017 corn were 360 cents and 373 cents per bushel respectively. September corn fell four percent after release of the August WASDE Report.

Soybeans

USDA projects a soybean harvest of 4,381 million bushels (was 4,260 million bushels in the July WASDE Report) due to an anticipated increase in yield to 49.4 bushels per acre. Use parameters were essentially unchanged from the July WASDE Report except that beginning stocks were decreased again by 40 million bushels to 370 million bushels and ending stocks were increased to 475 million bushels from 460 million bushels. USDA accordingly increased the August ex-farm price for soybeans for the 2017 harvest by 5 cents per bushel on the low end and decreased the projected price by 25 cents per bushel on the high end to a range of 845 cents to 1,015 cents per bushel. At close of trading on August 10^th CME quotations for soybeans for July and September 2017 delivery were 1,023 cents and 1,031 cents per bushel respectively. September 2017 and January 2018 delivery were 938 cents per bushel and 954 cents per bushel respectively. Soybeans fell three percent after release of the August WASDE Report.

Projected output of soybean meal was adjusted downward to 46.1 million tons (was 46.3 million tons in the July WASDE Report). Estimated soybean meal prices were adjusted downwards by $5 per ton to $295 to $335 per ton. At close of trading on August 10^th CME quotations for September and December 2017 soybean meal were $298 and $302 respectively.

Wendy’s Reports on Q2 of FY 2017

Passing of John Pedersen

CME Prices

Changes in the price of soybeans and soybean meal this week were:-

• Corn:                     Sept. quotation down by 8 cents.                    (-2.1 percent)
• Soybeans:            Aug. quotation down by 48 cents                    (-4.8 percent)
• Soybean Meal:    Aug. quotation down by $17/ton                    (-5.3 percent)                                  

For each 10 cent per bushel change in corn :-

• The cost of egg production would change by 0.45 cent per dozen
• The cost of broiler production would change by 0.25 cent per pound live weight

For each $10 per ton change in the price of soybean meal:-

• The cost of egg production would change by 0.40 cent per dozen
• The cost of broiler production would change by 0.25 cent per pound live weight

See posting on the July 14^th edition of CHICK-CITE (enter WASD in SEARCH block) summarizing the July 12^th USDA-WASDE Report #567, for a review of price projections and quantities of commodities produced during the 2016-17 season.

Egg Breaking in 2017

China Reports Avian Influenza in Inner Mongolia  

CNBC Highlights Relative Under- Consumption of Cage-Free Eggs

This situation follows the rapid expansion in aviary and slatted floor housing during late 2016 and early 2017 in response to the commitments by QSRs, supermarkets and food service companies to transition from conventional to cage-free.  Unfortunately, consumers were not involved in decisions made on their behalf by the HSUS and if they were, they were unaware of the cost differential. 

The over-supply results from members of the FMI, the NRA and the NCCR having been “snowed” or coerced by the HSUS and kindred organizations in the absence of meaningful and structured consumer research relating the principal product attribute with willingness to pay.

The clip may be viewed at https://www.agdaily.com/video/cage-free-egg-trend-creates-pricing-problem-ends/?utm_source=twitter&utm_medium=social&utm_campaign=general

Status of 2017 Corn and Soybean Crops

                                                                            WEEK ENDING

Hampton Creek Sued Over Label

In May, Hampton Creek changed labeling emphasizing the word “Just” conflicting with the previous agreement which stipulated that Hampton Creek should adhere to a specific design with cursive letters and a small font. Just Goods uses an uppercase “JUST” in its logo.

The Bloomberg posting reiterated the numerous legal and financial problems experienced by Hampton Creek relating to apparent unethical repurchasing of product from store shelves to create the deception of consumer demand, uncomplimentary postings by disaffected employees on the Glassdoor website, and numerous defections among senior technical and management personnel.

*Just Goods Inc., v. Hampton Creek Inc. CGC-17-559876, California Superior Court, San Francisco.

Recrimination over Fipronil Debacle

The Minister of Agriculture for Belgium Denis Ducarne addressing a Parliamentary investigation noted “One month without having any information from the Dutch Agency” --presumably the Dutch Food Authority.  Ducarne maintains the Dutch had been aware of Fipronil in eggs since November 2016 without any declaration.

It is significant that no official reports or media articles have actually quoted levels of Fipronil in eggs.  This data would be of interest to actually assess the risk to consumers. Actual assay results will be necessary to reconcile conflicting statements of low-risk made by Dutch, Belgian and U.K. officials in contrast to a more pessimistic interpretation by Germany.

It is hoped that investigations will soon be concluded which will reveal the duration of contamination, the levels in eggs from affected farms and the concentration of residual Fipronil in tissue from culled flocks.  Results from epidemiologic studies involving temporal and spatial considerations included in a comprehensive report should be forthcoming since there are lessons to be learned from this incident which is eerily reminiscent of the dioxin contamination in Germany and the Benelux Nations in 2011.

Agriculture Minister Dennis Ducarne of Belgium
reviewing aspects of the fipronil scandal with the media

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