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APRIL MARGINS HIGH IN FACE OF ONSET OF HPAI OUTBREAK

  

Jun 8, 2015

    

Due to pressure of work associated with the onset of H5N2 Highly Pathogenic Avian Influenza in late April the Egg Industry Center was unable to circulate a report in May covering USDA data for April.

Comments supplementing the production summary tables for the latest series made available by the EIC on June 5th 2015 are tabulated together with comparison values from the March postings.

It is emphasized that due to the rapidly moving situation and continuing losses, the USDA figures for May do not represent the current numbers of hens in production nor the prices obtained for products. The current report however will serve as a basis from which comparisons can be made in subsequent months. EGG-CITE has reported on USDA data documenting egg prices each week concurrent with outbreaks impacting flocks in Iowa, Nebraska, Wisconsin and Minnesota, producing mainly for the egg-liquid segment of the Industry.

As of June 4th 2015 the USDA-APHIS documented the loss of approximately 38 million hens and 3 million pullets representing 12 percent of all hens in flocks over 30,000 birds and 6 percent of rearing pullets. The loss has been disproportionate in the egg-liquid segment of the industry with an estimated 33 percent of the supply flock dead or euthanized, principally in large in-line breaking complexes.   States with confirmed cases in egg-producing flocks comprised Iowa (7 premises); Nebraska (5) Minnesota (3) and South Dakota (1)

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 EIC has elected to break down costs to 1st and 2nd cycles reflecting May costs. This has complicated comparisons with previous data which aggregated all egg production. Accordingly values have been provided in this report for the first cycle which represents 70 percent of all U.S. output.  

  • The USDA blended egg price in May 2015 at 128.4 cents per dozen, was 4.3 cents per dozen higher than in March 2015 and 48 cents per dozen higher than in April. The May figure should be compared to 92.6 cents per dozen in the corresponding month in 2014.
  • There was an 11.4 percent decrease in feed cost expressed as a component of the first cycle production cost per dozen over the 5-regions monitored by the USDA, attaining 33.07 cents per dozen in May compared to 34.99 cents per dozen in March. Year to date feed cost amounted to 34.86 cents per dozen for the first cycle. Taking both cycles into consideration weighted average feed cost was calculated to be 33.86 cents per dozen in May. The average feed cost in 2014 was 43.2 cents per dozen. The average monthly feed cost during 2013 was considerably higher at 50.12 cents per dozen reflecting the drought-affected crop of 2012.
  •   Combining data from the USDA and the University of California, producers recorded a positive margin of 67.38 cents per dozen at farm level for the first cycle in May 2015 compared to an equivalent value of 60.86 cents per dozen in March 2015. The margin in May corresponded to a value of 141 cents per hen. Farm profit for the first five months of 2015 amounted to a monthly average of 42.34 cents per dozen or $4.32 per hen. For 2014, average ex-farm contribution was 33.9 cents per dozen with all months positive. The contribution per hen in 2014 was $7.89. During 2013, a monthly algebraic average of 15.3 cents per dozen was attained.
  • The simple average price of feed over the 5-regions decreased by 5.5 percent in May compared to March. The May 2015, University of California 5-Region value attained $212.69 per ton. The Southeast recorded the highest cost among regions at $256.05.The average figure includes ingredients plus milling ($10/ton) and delivery ($3/ton).  An 8.2 percent decrease in the price of soybean meal from $390.08 per ton to $357.93 per ton in March was a contributory factor resulting in a lower feed cost. Corn decreased by 4.7 percent from $165.84 per ton in March to $157.94 per ton in May. There was a $74 per ton differential in corn price between the Midwest and the Southeast in May. Average feed cost during 2012 was $315.80 per ton compared to $300.80 for 2013.  Average feed cost per dozen for 2014 was 43.1 cents per dozen with an average cost for feed of $259.10 per ton. Feed price will continue to be the major factor driving production cost and hence margin. Each $10 per ton difference in feed cost represents 1.75 cents per dozen.
  • Average total nest-run production cost in May 2015 for 6-regions was 61.12 cents per dozen.  Production costs during May ranged from 56.29 cents per dozen in the Midwest up to 77.04 cents per dozen in California which was higher than the Midwest region by 20.8 cents per dozen. The differential in feed cost between the traditional high (West) and low-cost (Midwest) regions attained 7.5 cents per dozen in May.
  • Retail egg prices as determined by the Department of Commerce for April 2015 averaged 206.5 cents per dozen, down 2.3 cents per dozen or 1.1 percent from seasonally lower values in March 2015. Shelf prices in April did not reflect the onset of mortality which commenced in mid-April and initially was confined to in-line breaking complexes. This situation has changed as the supply chain for table eggs is now being filled with product carrying a higher price. This reflects the disparity between total demand for liquid and table eggs compared to the production capacity which has been reduced by 10 to 12 percent with corresponding diversion from table eggs to breaking.  Where previously the liquid and shell egg markets existed as separate entities with approximately 100 million and 200 million hens respectively, price driven by post-HPAI demand has effectively merged egg production into a single market. The retail values for commodity eggs in the region of 206.5 cents per dozen in April 2015 should be compared with a monthly average of 201.9 cents per dozen for 2014, 191.0 cents per dozen for 2013; 188.9 cents per dozen for 2012 and 194.7 cents per dozen in 2011.   
  • According to USDA-NASS data, flocks above 30,000 hens, representing 97.4 percent of the U.S. total, amounted to 295.9 million hens on May1st 2015. The averages for 2014, 2013 and 2012 were 303.0, 289.1 and 285.3 million hens respectively. The advent of HPAI with unprecedented mortality has invalidated all models projecting future flock sizes and prices.  Accordingly predictions  of price and hen numbers through the remainder of 2015 or until the epornitic is controlled would be speculation.
  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA remained fairly constant at 20.7 percent in May 2015 compared to the previous three months. This situation is expected to change as there will be an increased demand for pullets to replace 45 million hens depleted in flocks producing table-egg and egg-liquid product and for the 4 million pullets lost to date from HPAI. This requirement will be over and above the 18 million pullets required each month to maintain a flock level of 300 million hens. The inability of existing hatcheries to supply extra chicks over the short and intermediate term and the time-related biological restraints of rearing will dictate retention of a high proportion of hens through the second cycle as cage capacity will outstrip availability of replacements. It is also possible that some Midwest producers who reduced stocking density to conform to California cage requirements may revert to 67 inches2 per hen using second or even third-cycle flocks to satisfy demand at high prices justifying this strategy.
  • Slaughter of hens under USDA-FSIS inspection attained 6.0 million in April as flocks continued to be depleted after Easter sales. Regular mortality and alternative methods of flock  disposal including landfills,  rendering and shipment of live hens to Canada, account for the majority of depletion amounting to an average of 12 to 13 million hens per month.  Again with longer cycles and additional molting the number of hens slaughtered will decline through the remainder of 2015.
  • Average rate of lay attained 79 percent in April as new pullets transferred in late February and early March achieved peak production.  Average production reflects the balance between placement of pullets, their ages and the rate of depletion of flocks or retention of molted hens for a second cycle. Average flock production will decline as weighted age advances with retention and molting of older flocks.
  • According to USDA-FAS data, 540 thousand cases of shell eggs were exported in April 2015 representing 2.7 percent of total production.  North America (78.8 percent of exports) and East Asia (17.7 percent), comprised the major importing regions.

Reports from Mexico confirm that the HPAI continues to be efficiently suppressed applying vaccination, contributing to an adequate domestic supply supplemented from the U.S. Both Canada and Mexico have imposed embargos on states with confirmed HPAI.

  • Exports of egg products in April 2015 represented 2.0 percent of U.S. output with North America (52.1 percent of exports), Asia (32.2 percent) and the EU (8.9 percent ) comprising the three largest importing regions. Due to the shortage of breaking stock and idling of large in-line units, exports will be curtailed. The USDA is allowing importation of pasteurized liquid from the Netherlands to compensate for deficiencies in supply to bakeries and food service customers.
  • Collectively, exports in April 2015 represented the equivalent of approximately 12.7 million hens in production during the month, attaining 942 thousand case-equivalents. This was a 4.8 percent decrease compared to 990 thousand case equivalents shipped in March 2015.

 

MAY 2015 STATISTICS

COSTS & REVENUE                                                                                         

 

Parameter                                                                                               MAY 2015                    MARCH 2015

6-Region Cost of Production ex farm (1st Cycle)                          61.12 c/doz                 63.39 c/doz

                Low                                                                                          56.29 c/doz (MW)      57.93c/doz  (MW)               

                High                                                                                          77.04 c/doz  (CA)        79.21 c/doz (CA)         

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

                                                                       MAY 2015                                           MARCH 2015.

                Feed                                              33.07c/doz                                          37.32 c/doz

                Pullet depreciation                     10.80 c/doz                                           9.58 c/doz

                Labor                                              4.00 c/doz                                           4.00 c/doz

                Housing                                          5.30 c/doz                                           5.30 c/doz

                Miscellaneous and other            7.85 c/doz (adjusted March ‘15)           7.85 c/doz

 

Ex Farm Contribution according to USDA values reflecting costs for the 1st Cycle in May:-

                                              128.40 cents per dozen1- 61.02 cents per dozen = 67.38 cents per dozen                                   (March 124.07  cents per dozen – 64.05 cents per dozen =  60.02 cents per dozen.)

Note 1:  USDA Blended egg price

                                                                                                                     MAY 2015               MARCH 2015

USDA     ex-farm Price (Large)                                                                 128.4c/doz                124.1 c/doz               

                Warehouse/Dist. Center                                                          136.2c/doz                149.8 c/doz      

                Store delivered                                                                             141.7c/doz                154.7 c/doz

       

Dept. Commerce retail                                                                          206.5 c/doz  (April.)   208.8 c/doz (Feb.)

5-Region Layer Feed Cost 

Layer Feed Cost                (Average)                                                                   $212.69/ton                 $225.03/ton

                High                                                                                           $256.05/ton (SE.)        $266.93/ton (SE.)

                Low                                                                                               $186.48/ton (MW)      $195.37 /ton (MW)

               Differential                                                                            $  69.57/ton                  $  71.56/ton

                                                                                                                  (equivalent to 17.7 cents per dozen)

Pullet  Cost   (19 weeks)                                                                            $3.75                                $3.84


VOLUMES OF PRODUCTION                                                                           

Parameter                                                                                       MAY 2015                      MARCH 2015

Egg-strain eggs in incubators                                                 48.02 million  (May)          44.46 million (March)

Pullet chicks hatched                                                               24.82 million  (April)         21.39 million (Feb.)            

Pullets to be housed in 5 months                                         18.00* million (Sep.)         19.30 million (July)

Estimated National Flock, Total hens on 1st Month            295.5* million  (May)         304.7 million (Feb.)                              

Proportion of flock over 72 weeks                                                             21.7%            (April 2015)

No. of hens under 72 weeks                                                                     231*million      (April 2015)                               


5-Region proportion of molted hens                                                            20.3%                                20.4%                  

                High                                                                                          (CA.) 36.0%                        (CA)   35.0%     

                Low                                                                                             (NE)    1.1%                        (NE)      3.5%

 

Hens processed under FSIS inspection                                              6.0 million (April)       5.7 million (Feb.)    

 

Eggs produced                                                                                       7.11 billion (April)     6.61 billion  (Feb.)

 

 Table-egg hens in flocks over 30,000 (97.4% of total U.S.)           292.0* million (April)        297.5million (Feb.)

“Top-6”  States hen population (USDA)                                     162.1* million  (Jan.)       165.3 million (Feb.)

               

Proportion of U.S. Total by state, 2015*                                                                    

*(over 30,000 hen flocks)

                   STATE                            APRIL 2015          FEBRUARY 2015                                  Proportion by region (Feb. 2015.)

               Iowa                          18.8%                 19.7%                                              MW     53.2%

               Ohio                           10.6%                 10.1%                                             NE        10.4%

               Indiana                       8.6%                   8.7%                                               SE        11.0%

               Pennsylvania             8.%                   7.8%                                                 SC        10.1%

               California                   4.3%                   4.3%                                               CA        4.3%                     

                Texas                           5.0%                   5.0%                                              NW       3.1%

                 (Values rounded to 0.1%)

(It is possible that by mid June that Iowa is no longer the leading egg state by hen numbers)                                      

Rate of Lay, weighted hen-week (USDA)                                                       79.0% (April)      77.5% (Feb.)                                                                                                                  

Projected USDA-ERS 2014 U.S. per capita annual consumption revised due to HPAI         260.3*eggs

                                                                                                                         *(-3.0% increase from 2014 actual)                                                                                                                                                                      

*Subject to revision as a result of losses attributed to HPA

 

Eggs broken under FSIS inspection (million cases)     April 2015    6,061   February 2014  5,746                          

Cumulative proportion of total eggs                                                   30.8%                        31.6%

 

EXPORTS

Parameter                                                                                                            Quantity Exported 

 

Exports:-                             

Shell Eggs (thousand cases)                                                      April 2015        540        February 2015    491       

Products (thousand case equivalents)                                   April 2015         402       February 2015    436          

Total       (thousand case equivalents)                                    April 2015         942       February 2015   927

  *Representing 4.7% of National production in April 2015