Share via Email

 
* Email To:      (Separate multiple addresses with a semicolon)
* Email From:    (Your IP Address is 54.162.232.51 )
* Email Subject:    (personalize your message)
* Required:  
ID=5387  
Email Body:   
 

JULY MARGINS HOLD FOLLOWING MIDWEST FLOCK DEPLETIONS

  

Aug 12, 2015

    

Comments supplementing the production summary tables for the latest series reflecting June and July statistics and prices made available by the EIC on August 7th 2015 are tabulated together with comparison values from the July 15th posting on EGG-CITE.

EGG-CITE has reported on USDA data documenting egg prices each week concurrent with the recovery from outbreaks which impacted flocks in Iowa, Nebraska, Wisconsin and Minnesota, producing mainly for the egg-liquid segment of the Industry.

As of July 17th 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 no longer in production, principally in large in-line breaking complexes. States with confirmed cases in large (over 300,000 hen) egg-producing flocks comprised Iowa (7 complexes); 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 from May onwards. This has complicated comparisons with previous data which aggregated all egg production irrespective of cycle. There were no outstanding differences in variable costs for 1st and 2nd cycle flocks. 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 July 2015 at 175.2 cents per dozen, was 3.1 cents per dozen higher than in June 2015 and 94.8 cents per dozen higher than in April, reflecting the impact of depletions due to HPAI. The July value should be compared to 80.0 cents per dozen for the corresponding month in 2014.
  • There was a 7.1 percent increase in feed cost expressed as a component of the first cycle production cost per dozen over the 5-regions monitored by the USDA, attaining 36.1 cents per dozen in July compared to 33.7 cents per dozen in June. Year-to-date feed cost amounted to 34.89 cents per dozen for the first cycle. Taking both cycles into consideration weighted average feed cost was calculated to be 38.99 cents per dozen in July. 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 EIC (formerly the University of California) , producers recorded a positive margin of 110.77 cents per dozen at farm level for first cycle flocks in July 2015 compared to an equivalent value of 67.33 cents per dozen in May 2015 before the onset of mortality. Farm profit for the first seven months of 2015 amounted to a monthly average of 61.85 cents per dozen. For 2014, average ex-farm contribution was 33.9 cents per dozen with all months positive. During 2013, a monthly algebraic average of 15.3 cents per dozen was attained.
  • The simple average price of feed over the 5-regions increased by 7.1 percent in July compared to June. The July 2015, EIC 5-Region value attained $232.10 per ton. The Southeast recorded the highest cost among regions at $265.65 per ton. The average figure includes ingredients plus milling ($10/ton) and delivery ($3/ton).  An 11.7 percent increase in the price of soybean meal from $364.51 per ton in June to $402.48 per ton in July was a contributory factor resulting in a higher feed cost. This escalation was exacerbated by a 5.4 percent increase in the cost of corn from $161.87 per ton in June to $170.68 per ton in July. There was a $68.08 per ton differential in corn price between the Midwest and the Southeast in July. Average feed cost during 2012 was $315.80 per ton compared to $300.80 for 2013.  Average feed cost per dozen during 2014 was 43.1 cents per dozen with an average cost of 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 July 2015 for 6-regions was 64.89 cents per dozen.  Production costs during July ranged from 59.17 cents per dozen in the Midwest up to 81.44 cents per dozen in California which was higher than the Midwest region by 22.3 cents per dozen. The differential in feed cost between the traditional high (West) and low-cost (Midwest) regions attained 10.4 cents per dozen in July.
  • Retail egg prices as determined by the Department of Commerce for June 2015 averaged 257.0 cents per dozen, up 60.8 cents per dozen or 31.0 percent from seasonally lower values in May 2015. Shelf prices as determined in June reflected the mortality which commenced in mid-April and the differential between wholesale and retail prices in June was no longer buffered by inventory. Although mortality was initially confined mainly to in-line breaking complexes the total availability of eggs to meet both shell egg and liquid markets was constrained. The current situation in the supply chain for table eggs is influenced by price with diversion to breaking. This is reflected in the disparity between total demand for liquid and table eggs compared to the production capacity which has been reduced by 10 to 12 percent. When previously the liquid and shell egg markets existed as separate entities with approximately 100 million and 200 million hens respectively, price of shell eggs as driven by post-HPAI demand has effectively merged all egg production into a single market. The retail values for commodity eggs at 257.0 cents per dozen in June2015 should be compared with a monthly average of 194.8 cents per dozen in 2014 and 191.0 cents per dozen in 2013.
  • According to USDA-NASS data, the estimate for flocks above 30,000 hens, representing 97.3 percent of the U.S. total, amounted to 261.9 million hens on July 1st 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 complicated all models projecting future flock sizes and prices. The EIC estimates a flock size of 290 million hens in December 2015 based on pullet chick placements.
  • The total in-molt and post-molt population of hens in the 5-Regions monitored by the USDA remained fairly constant at 19.7 percent in July 2015 compared to the previous three months. It is possible that some Midwest producers who reduced stocking density to conform to California cage requirements may revert to 67 inches2 per hen using second cycle flocks to satisfy demand at high prices justifying this strategy. This situation is expected to change as there will be an increased demand for pullets to replace over 40 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. USDA statistics show an actual reduction in the number of egg-strain eggs in incubators from 49 million in April 2015 to 44 million in July. It is hoped that the multipliers have increased the placements of parent flocks using molting, leased housing and other improvisations to maximize output over the short term. The hatchery supply flock is only scheduled to increase from 2.6 million hens in April to 2.9 million hens in November
  • Slaughter of hens under USDA-FSIS inspection attained 4.3 million in June, a reduction of 0.6 million from May as flocks were retained to take advantage of higher prices. Regular mortality and alternative methods of flock  disposal including landfills,  rendering and shipment of live hens to Canada from approved states, 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 77.8 percent in June as new pullets transferred in late April and early May 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 more molting of older flocks.
  • According to USDA-FAS data, 322 thousand cases of shell eggs were exported in June 2015 representing 1.8 percent of total production.  North America (83.1 percent of exports) and East Asia (12.6 percent), comprised the major importing regions.

Reports from Mexico confirm that HPAI continues to be efficiently suppressed applying vaccination, contributing to an adequate domestic supply, supplemented from the U.S. Ironically Mexico will ship breaking-stock eggs from four states declared by SENASICA to be free of END to the U.S. Both Canada and Mexico have imposed embargos on U.S. states with confirmed HPAI.

  • Exports of egg products in June 2015 represented 1.1 percent of U.S. output with North America (48.5 percent of exports, was 39.5 in May), Asia (30.8 percent) and the EU (14.9 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 will allow importation of pasteurized liquid from the Netherlands and shell eggs from this nation and from Mexico and Canada to compensate for deficiencies in supply to bakeries and food service customers.
  • Collectively, exports of shell eggs and products in June 2015 represented the equivalent of approximately 6.9 million hens (was 9.9 million in May) in production during the month, attaining 517 thousand case-equivalents. This was a 29.9 percent decrease compared to 737 thousand case equivalents shipped in May 2015.
  • Further declines in exports are anticipated. The net export volume (if any) will become apparent at the beginning of September when values for July trades are released.

 

JULY 2015 STATISTICS

COSTS & REVENUE                                                                                         

Parameter                                                                                                JULY 2015                     JUNE 2015

6-Region Cost of Production ex farm (1st Cycle)                          64.46 c/doz                62.05 c/doz

                Low                                                                                          59.17c/doz (MW)      56.23c/doz  (MW)

                High                                                                                          81.44 c/doz  (CA)       79.23 c/doz (CA)         

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

                                                                       JULY 2015                                          JUNE 2015.

                Feed                                              36.09c/doz                                          33.70 c/doz

                Pullet depreciation                     11.22 c/doz                                         10.89 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 JULY:-

                                              175.23 cents per dozen1- 64.46 cents per dozen = 110.77 cents per dozen                                                (June 172.1  cents per dozen – 61.74 cents per dozen =  110.36 cents per dozen.)

Note 1:  USDA Blended egg price

 

 

                                                                                                                    JULY 2015                  JUNE 2015

USDA     ex-farm Price (Large)                                                                 175.3c/doz                172.1 c/doz               

                Warehouse/Dist. Center                                                          206.6c/doz                223.8 c/doz      

                Store delivered                                                                             212.1c/doz                229.3 c/doz

       

Dept. Commerce retail                                                                          257.0 c/doz  (June)   196.2 c/doz (May)

 

 

5-Region Layer Feed Cost 

Layer Feed Cost                (Average)                                                                   $232.10/ton                 $216.74/ton

                High                                                                                           $265.55/ton (SE.)        $250.19/ton (SE.)

                Low                                                                                               $201.11/ton (MW)      $186.14 /ton (MW)

               Differential                                                                            $  64.54/ton                  $  64.05/ton

                                                                                                                  (equivalent to 15.1 cents per dozen)

 

Pullet  Cost   (19 weeks)                                                                            $3.89                                $3.78

                

 

VOLUMES OF PRODUCTION                                                                           

 

Parameter                                                                                     JULY 2015                        JUNE 2015

 

Egg-strain eggs in incubators                                                 43.80 million  (July)          47.48 million (June)

Pullet chicks hatched                                                               23.43 million  (June)        23.82 million (May)            

Pullets to be housed in 5 months                                         21.1* million  (Nov.)         20.5 million   (Oct.)

 

Estimated National Flock, Total hens on 1st Month            269.7* million  (July)         270.6*million (June.)                              

 

 

Proportion of flock over 72 weeks                                                               21.7%            ( 2015)

No. of hens under 72 weeks                                                                     235*million      (April 2015)                               

 

5-Region proportion of molted hens                                                            19.7%                                19.9%                  

                High                                                                                          (CA.) 32.5%                        (CA)   33.5%     

                Low                                                                                            (NE)    3.1%                        (NE)      2.8%

 

Hens processed under FSIS inspection                                              4.3 million (June)       4.9 million (May)    

 

Eggs produced                                                                                       6.30 billion (June)     6.86 billion  (May)

 

 Table-egg hens in flocks over 30,000 (97.3% of total U.S.)           261.9* million (June)       275.2*million (May)

“Top-6”  States hen population (USDA)                                     140.9* million (June)       150.5*million (May)

               

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

*(over 30,000 hen flocks)

                   STATE                            JUNE 2015                MAY 2015                                  Proportion by region (June 2015.)

               Iowa                           12.7%                 15.6%                                              MW     47.8%

               Ohio                           11.7%                11.2%                                                NE       11.6%

               Indiana                        9.8%                    9.3%                                               SE        12.2%

               Pennsylvania              9.0%                    8.5%                                               SC        11.0%

               California                    4.9%                    4.6%                                               CA         5.0%                     

                Texas                           5.7%                    5.4%                                                NW        3.5%

                 (Values rounded to 0.1%)

 

Rate of Lay, weighted hen-week (USDA)                                                       77.8% (June)      78.1% (May)                                                                                                                  

 

Projected USDA-ERS 2014 U.S. per capita annual consumption revised due to HPAI         248.5*eggs

                                                                                                                         *(14.8% decrease from 2014 actual)                                                                                                                                                                     

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

 

Eggs broken under FSIS inspection (million cases)           June 2015  6,408      May 2014  5,533                          

Cumulative proportion of total eggs                                                31.4%                   30.0%

 

EXPORTS

 

Parameter                                                                                                               Quantity Exported 

 

Exports:-                             

 

Shell Eggs (thousand cases)                                                      June 2015        322        May 2015    353       

                                                                                               

Products (thousand case equivalents)                                   June 2015         195        May 2015    385          

                                                                                                                                                 

Total       (thousand case equivalents)                                    June 2015         517        May 2015   738

  *Representing 4.4% of National production in June 2015