Egg Industry News and Commentary

  —  Jun 9

 
MAY 2017 USDA EX-FARM BENCHMARK PRICE FALLS BUT COSTS WERE STABLE

    

PULLET PLACEMENTS DOWN BUT NEGATIVE MARGINS PERSIST.

Introduction.

Summary tables for the latest USDA May 2017 statistics and prices made available by the EIC on, June 7th 2017, are presented together with comparison values from the previous May 7th 2017 posting reflecting April 2017 data.

 

COSTS & REVENUE                                                                                         

 

Parameter

MAY 2017

APRIL 2017

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

59.94 c/doz

59.94 c/doz

Low

55.11 c/doz (MW)

54.99 c/doz (MW)

High

74.99 c/doz (CA)

75.13 c/doz (CA)

 

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

 

MAY 2017

APRIL 2017

Feed

32.03 c/doz

32.05 c/doz

Pullet depreciation

10.75 c/doz

10.75 c/doz

Labor

4.00 c/doz

4.00 c/doz

Housing

5.30 c/doz

5.30 c/doz

Miscellaneous and other

7.86 c/doz

7.84 c/doz

 

Ex Farm Margin according to USDA values reflecting May 2017:-
37.71 cents per dozen1- 59.94 cents per dozen = -22.84 cents per dozen

(Revised April comparison 42.8 1 cents per dozen – 59.9 cents per dozen = -17.1 cents per dozen.)

Note 1:  USDA Blended egg price

 

 

 

MAY 2017

APRIL 2017

USDA

Revised ex-farm Price (Large, White)

37.1 c/doz

42.8 c/doz

 

Cage-free to packing plant

164.0 c/doz

163.0 c/doz

 

Warehouse/Dist. Center

61.0 c/doz

74.0 c/doz

 

Store delivered (estimate)

65.0 c/doz

79.0 c/doz

 

Dept. Commerce retail                         140.9 c/doz (Apr.)   140.4c/doz (March)

 

5-Region Layer Feed Cost

MAY 2017

APRIL 2017

Layer Feed Cost (U.S. Average

$204.09/ton

$204.12/ton

High

$235.66/ton (SE)

$238.67/ton (SE)

Low

$177.05/ton (MW)

$176.36/ton

Differential

$   58.61/ton

$   62.31/ton

                                               

 

 

 



(equivalent to 19.6 cents per dozen)

Pullet Cost (19 Weeks)                                  $3.71                     $3.71


VOLUMES OF PRODUCTION                                                                           

PARAMETER

MAY 2017

APRIL 2017

Egg-strain eggs in incubators

47.4 million (March)

51.1 million (April)

Pullet chicks hatched

25.8 million (Apr.)

27.9 million (March)

Pullets to be housed in 5 months

23.3 million (Sept.)

25.2 million (Aug)

 

 

 

National Flock in farms over 30,000

305.5 million (Apr.)

306.8 million (March)

National egg-producing flock

314.9 million (Apr.)

316.2 million (March)

 

 

 

Proportion flock in molt or post-molt

     17.7    (May)

17.2%             (April)

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

     258.0  (May)

254.7 million (April)

 

 

Inventories 1st of Month

MAY

APRIL

MARCH

Shell eggs (millions)

567.8

609.2

604.3

Frozen egg products (million egg equivalents)

-

359.0

351.8

Dried egg (million egg equivalents)

-

1,231

1,290

 

Eggs produced

7.55 billion     (Apr.)

7.84 billion    (March)

Table-egg hens in flocks over 30,000 (97% of total U.S.)

305.5 million (Apr.)

306.8 million (March

“Top-6” States hen population (USDA)

169.9 million (Apr.)

159.9 million (March)


Proportion of U.S. Total by State, 2017                                                                   

*(over 30,000 hen flocks)

STATE

APRIL 2017

MARCH 2017

Proportion by region (April 2017)

Iowa

17.4%

17.6%

MW    52.2%

Ohio

9.7%

9.7%

NE     10.9%

Indiana

10.4 %

10.3%

SE     10.0%

Pennsylvania

8.4%

8.3%

SC     12.2%

Texas

5.6%

5.7%

                    CA       3.9%

California

3.8%

3.8%

NW     2.9%

                                 (Values rounded to 0.1%)

 

Rate of Lay, weighted hen-week (USDA)       79.9% (Apr.)      80.0% (March)                                                          

Actual USDA-ERS 2015 U.S. per capita annual egg consumption revised due to HPAI:- 256.3 eggs (-11.2 from 2014)*

Projected USDA-ERS 2016 U.S. per capita annual egg consumption:-                                274.7 eggs (+18.4 from 2015)

Forecast USDA-ERS 2017 U.S. per capita annual egg consumption projected to be:-     275.8 eggs  (+1.1 from 2016)

Eggs broken under FSIS inspection (million cases)

                                                                                APRIL   6.128         MARCH 6.601                               

Cumulative proportion of total eggs                                      30.2%                        30.5%

 

EXPORTS

Parameter

Quantity Exported

Exports:

 

Shell Eggs (thousand cases)

APRIL 270     March 254

Products (thousand case equivalents)

APRIL 464    March 502

TOTAL (thousand case equivalents)

APRIL 734     March 756

                                                                                                                     

Representing 3.9 percent of National production in April 2017                    

 

COMMENTARY

The following observations and comparisons are provided on USDA values:-

MAY 2017 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 May 2017 fell 13.3 percent to 37.1 cents per dozen, compared to the revised April value yielding a negative margin of 22.8 cents per dozen as delivered nest-run (from the laying house). The May 2017 value should be compared to 30.6 cents per dozen for the corresponding month in 2016 and 128.4 cents per dozen in May 2015. It is noted that from November 2014 through March 2015, prices were inflated in anticipation of implementation of California Proposition #2 effective January 1st 2015 and then at the end of this period by the seasonal pre-Easter rise. Thereafter prices responded positively to shortages caused by HPAI in the upper Midwest with a peak in August 2015.
  • During May 2017 feed price averaged 32.0 cents per dozen and averaged 32.4 cents per dozen during the first five months of 2017. Feed cost during 2015 averaged 34.9 cents per dozen. The average feed cost in 2014 was 43.2 cents per dozen in contrast to 2013 which was considerably higher at 50.12 cents per dozen, reflecting the drought-affected crop of 2012.
  • Combining data from the USDA and the EIC (formerly data from the University of California), producers recorded a negative margin of 22.8 cents per dozen at farm level for flocks in May compared to a revised negative margin of 17.1 cents per dozen in April. The cumulative loss for the first five months of 2017 was 86.7 cents per dozen. 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 a monthly average of 74.5 cents per dozen. For 2014, average ex-farm contribution margin was 33.9 cents per dozen with all months positive.
  • The simple average price of feed for April 2017 over 5-regions was $204.09, lower by 3 cents per ton compared to April. The Southeast recorded the highest cost among five regions at $235.66 compared to the lowest region, the Midwest at $177.05 per ton. The average figure includes ingredients plus milling and delivery at approximately $10 per ton. The benchmark price of corn was $154.09 per ton in May, up 0.7 percent from April. A decrease of 1.0 percent in the price of soybean meal from $333 per ton in April to $330 per ton in May contributed to the stable price of feed. There was a $61 per ton differential in corn price between the Midwest and the Southeast in May. Feed price will continue to be a major factor driving production cost and hence margin. 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 May to be 59.94 cents per dozen, the same as in April. Production costs during May ranged from 55.1 cents per dozen in the Midwest up to 75.0 cents per dozen in California which was higher than the Midwest region by 19.9 cents per dozen. The differential in feed cost between the extremes, the Southeast and the Midwest regions was 10.5 cents per dozen in May, 0.7 cent per dozen below April.
  • Retail egg prices as determined by the Department of Commerce for April 2017 averaged 140.9 cents per dozen, up by 0.4 percent or 0.5 cents per dozen compared to March 2017. During April 2015 and 2016 retail prices were respectively  206.5 cents per dozen (post-CA. Prop. #2) and 179.3 cents per dozen (post-AI restocking)  During 2016 and 2017 to date retail prices have not declined in proportion to ex-farm prices allowing higher margins at retail thereby depressing demand.

 

MAY 2017 Production Data

  • According to USDA data, the estimated average complement of U.S. hens in flocks over 30,000 during April 2017 amounted to 305.5 million, down 1.2 million from March 2017. The total U.S. flock based on USDA data amounted to 313.5 million on May1st 2017. 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 (318 million). The December 2017 hen population is projected by the EIC model to attain 322.0 million
  • Pullet chick placements were down 7.8 percent in April to 25.8 million compared to the previous month at 28.0 million. It is now evident that low prevailing prices will result in flock reduction due to some producers ceasing operation or from early depletion or adoption of single-cycle programs.
  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA attained 17.7 percent of the national flock in May, within a fraction of a percentage for January through April but may be contrasted to the 2016 average of 20.8 percent.
  • Projected average monthly started pullet placements for the first six months of 2016 averaged 19.7 million compared to an average of 20.2 million for the second half of 2016, representing a 2.5 percent reduction. Monthly pullet placements for the 2nd half of 2017 are projected to average 19.5 million unless cancellations of pullet chick orders occur which is highly likely.
  • The hatchery supply flock increased from a level of 2.7 million hens in production in June 2015, coinciding with the end of the HPAI epornitic to 2.9 million hens in November 2015. Projections show monthly average of 2.54; 2.62 and 2.64 million breeder hens in production during the first three quarters of 2017 respectively. With decreased demand parent flocks will be depleted earlier than planned.
  • Average rate of lay attained 78.9 percent during 2016 and increased to 79.9 percent in April 2017 as new pullets transferred in late February and early March at 17 weeks of age achieved peak production.  Average production in April of 79.9 percent reflected the balance between placements of pullets, their age at transfer and the rate of depletion of flocks or retention of molted hens for a second cycle. Average flock production will rise as weighted flock age is reduced by early depletion and restricting production to the first cycle.

 

APRIL 2017 Export Data

  • According to USDA-FAS data, 270,700 cases of shell eggs were exported in April 2017 representing 1.3 percent of total production. This value should be compared to 409,700 cases in February 2016. During April 2017, North America (35.5 percent of exports, was 24.5 percent last month), the Caribbean (24.2 percent was 13.8), East Asia (27.6 percent) and the Middle East (8.9 percent, was 23.8) comprised the major importing regions.
  • Exports of shell eggs during the fourth quarter of 2016 attained an average of 321,200  cases per month compared to 290,000 cases during the corresponding 3rd Quarter of 2015 and 495,100 cases during the 1st Quarter of 2015 before the emergence of HPAI. Exports will depend on progress by authorities in controlling H5N6 HPAI and H5N8 in South Korea and Japan, future embargos, depending on HPAI status in the U.S., availability of eggs, promotional activities by USAPEEC and the AEB, the value of U.S. currency, international competition and domestic prices.
  • Exports of egg products in April 2017 amounting to 464.3 million case-equivalents represented 2.2 percent of U.S. output. North America (17.3 percent, was 23.2 percent), East Asia (43.6 percent was 46.5 percent) and the EU-28 (16.3 percent) comprised the principal importing regions with increases attributed to avian influenza in the EU and Asia. 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 with 2014, attaining 1.7 percent of total U.S. output. For 2016 export volume was 12.0 percent lower than in 2015. During the first quarter of 2017 exports of egg products increased by 24.9 percent over the corresponding quarter of 2016.
  • Collectively, exports of shell eggs and products in April 2017 represented the equivalent of approximately 10.7 million hens in production during the month, attaining 735,000 case-equivalents. This was a 23.4 percent decrease compared to monthly average shipments of 960 thousand case equivalents exported over the first four months of 2015 prior to the advent of HPAI. Exports of both egg-products and shell eggs corresponded to 3.5 percent of a nominal national flock of 305 million producing hens.
  • Future exports will stabilize given control over outbreaks of H5N6 HPAI in South Korea and to a lesser extent in Japan. South Korea has to date depleted 28 million hens and restoration of production to pre-HPAI levels will require replacement over a 13 to 15 month period as in the U.S. During the past week H5N8 was diagnosed in South Korea. It is apparent that the U.S will not participate in large volumes of export to South Korea. If eligible according to AI status the U.S. will compete with other suppliers including Spain and India (brown-shelled eggs) and the Ukraine (white shelled) for the available market. Unless South Korea adopts regionalization this market will be closed to U.S. shell eggs until late June. There is no scientific reason why any nation should embargo pasteurized egg products from an approved plant, based on diagnoses of avian influenza in a state or nation.