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DECEMBER 2016 USDA EX-FARM BENCHMARK PRICE DOUBLES FROM NOVEMBER GENERATING A POSITIVE MARGIN.

  

Jan 13, 2017

    

 Introduction.

Comments supplementing the production summary tables for the latest series reflecting USDA December 2016 statistics and prices made available by the EIC on January 12th 2016, are tabulated together with comparison values from the previous December 8th 2016 posting.

  

EGG-CITE summarizes weekly USDA data on egg production and prices in each edition.

December 2016 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 December 2016 rose to 73.3 cents per dozen, 104 percent more than in November yielding a positive margin of 13.6 cents per dozen as delivered from the laying house. This is the first positive margin in eight consecutive months. The December 2016 value should be compared to 106.1 cents per dozen for the corresponding month in 2015 and 146.7 cents per dozen in December 2014. 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 the first four months of 2016 there was no material change in average feed price expressed as a component of the first-cycle production cost per dozen over the five regions monitored by the USDA. During May feed cost rose 10.3 percent over April to 35.75 cents per dozen and then by an additional 3.8 percent to 37.12 cents per dozen in June. The feed component of cost fell 1.3 percent from September to 30.90 cents per dozen in October. Average feed cost for 2016 attained 32.6 cents per dozen. 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 positive margin of 13.6 cents per dozen at farm level for flocks in December compared to a negative margin of -23.3 cents per dozen in November. The algebraic average margin for 2016 is -9.6 cents per dozen with losses experienced 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. During 2013, a monthly algebraic positive average margin of 15.3 cents per dozen was earned.
  • The simple average price of feed for December over 4-regions (no data posted for the Northeast this month) was $202.92, 1.3 percent higher than in November. The Southeast recorded the highest cost among four regions in December at $236.93 compared to the lowest region, the Midwest at $174.55 per ton. The average figure includes ingredients plus milling and delivery at approximately $10 per ton. The price of corn which increased by 2.0 percent to $150 per ton in December was a driver in the price increase. An increase of 0.7 percent in the price of soybean meal from $335 per ton in November to $338 per ton in December also contributed to the rise. There was a $68 per ton differential in corn price between the Midwest and the Southeast in December 2016. 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 the prevailing price of feed of $259.10 per ton for the five regions. 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.
  • The EIC-calculated the 6-Region total nest-run production cost in December to be 59.73 cents per dozen, 0.8 percent higher than 59.28 cents per dozen recorded in November. Production costs during December ranged from 54.66 cents per dozen in the Midwest up to 75.32 cents per dozen in California which was higher than the Midwest region by 20.7 cents per dozen. The differential in feed cost between the extremes, the Southeast and the Midwest regions was 9.8 cents per dozen in December.
  • Retail egg prices as determined by the Department of Commerce for November averaged 132.1 cents per dozen, down by 5.0 percent or 6.9 cents per dozen compared to October. During November 2015 and 2014 retail prices were 266.4 cents per dozen (post HPAI) and 203.2 cents per dozen respectively in the run-up to implementation of California Proposition #2. Over the past ten months retail prices have not declined in proportion to ex-farm prices allowing higher margins at retail which has depressed demand.
  

December 2016 Production Data

  • According to USDA data, the estimated average complement of U.S. hens in flocks over 30,000 during November 2016 amounted to 300.1 million, up 4.9 million from October. The total U.S. flock based on USDA data amounted to 309.7 million on November 1st 2016. The average annual flock sizes for 2012, 2013 and 2014 were 285.3, 289.1 and 303.0 million hens respectively. The emergence of HPAI with unprecedented mortality has complicated all models projecting future flock sizes and prices.
  • Pullet chick placements were down 3.6 percent in November to 21.2 million compared to the previous month. 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 decreased by 0.6 percent in December 2016 to 17.9 percent of the national flock compared to 18.5 percent in November and the 2015 average of 21.6 percent.
  • USDA statistics show an anticipated increase of 2.3 million started pullets to be housed during September 2016 through April 2017 compared to the corresponding months in 2015-2016. Pullet chicks hatched during 2016 (average of 22.7 million) exceeded the average monthly placements during the corresponding period in 2015 by 3.1 million pullets per month.

The large increases in pullet placements from February through June 2016 compared to corresponding months in 2015 is attributed to restocking after HPAI losses in 2015. Average monthly pullet chick placements for the first six months of 2016 amounted to 28.7 million compared to an average of 28.3 million for the second half of 2016, representing a 1.4 percent reduction.

  • 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 a monthly average of 3.0 million and 2.8 million breeder hens in production during the third and fourth quarters of 2016 respectively. With decreased demand parent flocks will be depleted earlier than planned. The hatchery supply flock will decline to 2.4 million hens in April 2017.
  • Slaughter of hens under USDA-FSIS inspection attained 4.7 million in November up 12.0 percent from October. This value is higher than the pre-HPAI monthly average of 5.8 million hens over the period extending from January through May 2015 and is also lower than the 6-year average of 4.2 million hens during the month of November. Depending on availability of housing, flocks were retained from June through December 2015 to take advantage of higher prices. Regular mortality and alternative methods of flock disposal including landfills, rendering and shipment of live hens to Canada, accounts for the majority of depletion amounting to an average of 12 to 13 million hens per month.
  • Average rate of lay attained 78.8 percent over the first eleven months of 2016 and increased to 80.1 percent in November as new pullets transferred in late September and early October 2016 achieved peak production.  Average production reflects the balance between placement 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.

November 2016 Export Data

  • According to USDA-FAS data, 292,000 cases of shell eggs were exported in November 2016 representing 1.4 percent of total production, this value should be compared to 330,000 cases in October. North America (24.1 percent, was 30.9 percent of exports in October), the Caribbean (22.5 percent), East Asia (36.5 percent, was 26.0 percent) and the Middle East (11.5 percent) comprised the major importing regions.
  • Exports of shell eggs during the third quarter of 2016 attained an average of 330.0 thousand cases per month compared to 349.7 thousand cases during the corresponding 3rd Quarter of 2015 and 495.1 thousand cases during the 1st Quarter of 2015 before the emergence of HPAI. Exports will depend on progress by regulators in controlling H5N6 HPAI in South Korea and Japan, possible future embargos if HPAI emerges in the U.S., availability of eggs, the value of U.S. currency, international competition and domestic prices.
  • Exports of egg products in November 2016 amounting to 400.9 million case-equivalents represented 1.9 percent of U.S. output. North America (42.0 percent), East Asia (29.2 percent) and the EU-28 (17.0 percent) comprised the principal importing regions. 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 the first eleven months of 2016 export volume was 15.5 percent lower than in 2015. 
  • Collectively, exports of shell eggs and products in November 2016 represented the equivalent of approximately eleven million hens in production during the month, attaining 694 thousand case-equivalents. This was a 27.7 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 3.4 percent of a nominal national flock of 308 million producing hens.
  • Future exports will rise due to the ongoing outbreak 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 this time the U.S. will compete with other suppliers including Spain and India (brown-shelled) and the Ukraine (white shelled) for the available market.

 

DECEMBER 2016 STATISTICS

COSTS & REVENUE                                                                                         

Parameter                                                                                           NOVEMBER 2016           DECEMBER 2016

5-Region Cost of Production ex farm (1st Cycle)                           59.28 c/doz                 59.73 c/doz

                Low                                                                                          54.32 c/doz (MW)      54.66c/doz  (MW)     

                High                                                                                         74.92 c/doz  (CA)        75.38 c/doz  (CA)         

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

                                                                        NOVEMBER 2016                           DECEMBER 2016

                Feed                                              31.46c/doz                                          31.86 c/doz

                Pullet depreciation                     10.67 c/doz                                         10.72 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 Nov. ‘15)              7.85 c/doz

Ex Farm Margin according to USDA values reflecting DECEMBER 2016:-

                                              73.3 cents per dozen1- 59.7 cents per dozen = +13.6 cents per dozen

       (November comparison 35.9 1 cents per dozen – 59.2 cents per dozen = -23.3 cents per dozen.)

Note 1:  USDA Blended egg price

 

                                                                                                                NOVEMBER 2016     DECEMBER 2016

USDA     ex-farm Price (Large)                                                                  35.9c/doz                73.3 c/doz               

                Warehouse/Dist. Center                                                           57.7c/doz                94.3 c/doz  

                Store delivered                                                                              63.2c/doz                99.8 c/doz

       

Dept. Commerce retail                                                                           139.0 c/doz (Oct.)   132.1c/doz (Nov.)

 

5-Region Layer Feed Cost 

Layer Feed Cost (Average)                                                                   $200.39/ton                 $202.92/ton

                High                                                                                           $217.77/ton (NW)       $236.93/ton (SE)*

                Low                                                                                           $172.65/ton (MW)      $174.55 /ton (MW)

               Differential                                                                            $  45.12/ton                  $  62.38/ton

                                                                                                                  (equivalent to 15.1 cents per dozen)

Pullet Cost   (19 weeks)                                                                            $3.68                                $3.73

*No data for Northwest Region

 

VOLUMES OF PRODUCTION                                                                           

Parameter                                                                               NOVEMBER 2016                 DECEMBER 2016

Egg-strain eggs in incubators                                                41.68 million   (Nov.)         46.2 million  (Dec.)

Pullet chicks hatched                                                             22.04 million   (Oct.)           21.3 million  (Nov.)   

Pullets to be housed in 5 months                                         19.30 million   (Mar.)         19.2 million  (Apr.)

National Flock in farms over 30,000                                   295.2 million   (Oct.)      300.1 million (Nov.)

National egg-producing flock                                               304.7 million   (Oct.)      309.6 million (Nov.)                              

 

Proportion of flock in molt or post-molt                                                      17.9%                   (Dec.)

Total of hens in 1st cycle (estimate)                                                              254.2 million       (Dec.)                              

5-Region proportion of in molt or molted hens                                     18.5%                                  17.9%           

                High                                                                                             (SE)  27.2%                         (SE)  26.6%        

                Low                                                                                               (NE)    3.2%                         (NE)   2.8%

Hens processed under FSIS inspection                                              4.2 million (Oct.)       4.7 million (Nov.)   

Eggs produced                                                                                       7.54 billion (Oct.)     7.44 billion  (Nov.)

 Table-egg hens in flocks over 30,000 (97.2% of total U.S.)           296.3 million (Oct.)        300.1 million (Nov.)

“Top-6” States hen population (USDA)                                      162.6 million  (Oct.)       167.3 million  (Nov.)

               

Proportion of U.S. Total by State, 2016                                                                   

*(over 30,000 hen flocks)

                   STATE                             OCTOBER 2016      NOVEMBER 2016            Proportion by region (NOVEMBER 2016.)

               Iowa                            17.7%                 17.8%                                              MW     52.9%

               Ohio                            10.3%                 10.3%                                               NE       11.1%

               Indiana                         9.4%                   9.8%                                                SE        10.6%                                                                                                                                                                    

               Pennsylvania               8.5%                   8.6%                                                SC        12.5%

               Texas                            5.5%                   5.5%                                                CA         3.7%    

               California                     3.7%                   3.7%                                               NW        3.0%  

               

                 (Values rounded to 0.1%)

Rate of Lay, weighted hen-week (USDA)                                                       79.5% (Oct.)      80.1% (Nov.)                                                                                                          

Actual USDA-ERS 2015 U.S. per capita annual egg consumption revised due to HPAI:-  253.0 eggs (-14.1 from 2014)

Projected USDA-ERS 2016 U.S. per capita annual egg consumption:-                                267.4 eggs (+14.5 from 2015)

Forecast USDA-ERS 2017 U.S. per capita annual egg consumption projected to be:-     267.5 eggs  (+0.1 from 2016)

Eggs broken under FSIS inspection (million cases)

                                                                            October 2016   6.636            NOVEMBER 2016 6,505                            

Cumulative proportion of total eggs                             31.6%                               31.6%

EXPORTS

Parameter                                                                                                             Quantity Exported 

Exports:-                             

Shell Eggs (thousand cases)                                          October 2016     331       NOVEMBER 2016  293

                                                                                               

Products (thousand case equivalents)                        October 2016     367       NOVEMBER 2016  401

                                                                                                                                               

Total       (thousand case equivalents)                         October 2016     698       NOVEMBER 2016  694

                                                                                                                               

  Representing 3.3 percent of National production in November 2016