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FEBRUARY 2017 USDA EX-FARM BENCHMARK PRICE DECLINES 22 PERCENT FROM JANUARY, NEGATIVE MARGINS PERSIST.

  

Mar 17, 2017

    

Introduction.

Comments supplementing the production summary tables for the latest series reflecting USDA February 2017 statistics and prices made available by the EIC on March 13th 2017, are tabulated together with comparison values from the previous January 12th 2017 posting.

  

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

February 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 January 2017 fell 22 percent to 37.7 cents per dozen, compared to January yielding a negative margin of 23.5 cents per dozen as delivered from the laying house. The February 2017 value should be compared to 92.8 cents per dozen for the corresponding month in 2016 and 106 cents per dozen in February 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 February 2017 feed price averaged 33.1 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 negative margin of 23.5 cents per dozen at farm level for flocks in February compared to a negative margin of 12.1 cents per dozen in January. The algebraic average margin for 2016 was -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.
  • The simple average price of feed for February 2017 over 5-regions was $211.04, 2.3 percent higher than January. The Southeast recorded the highest cost among five regions at $244.59 compared to the lowest region, the Midwest at $180.21 per ton. The average figure includes ingredients plus milling and delivery at approximately $10 per ton. The price of corn was $179.9 per ton in February, up 2.3 percent from January. An increase of 0.9 percent in the price of soybean meal from $361 per ton in January to $364 per ton in February also contributed to the rise in the cost of feed There was a $64 per ton differential in corn price between the Midwest and the Southeast in February. 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 February to be 61.18 cents per dozen, 1.4 percent higher than 60.33 cents per dozen recorded in January. Production costs during February ranged from 55.68 cents per dozen in the Midwest up to 76.86 cents per dozen in California which was higher than the Midwest region by 21.2 cents per dozen. The differential in feed cost between the extremes, the Southeast and the Midwest regions was 10.1 cents per dozen in February.
  • Retail egg prices as determined by the Department of Commerce for January 2017 averaged 159.9 cents per dozen, up by an unjustified 15.6 percent or 22 cents per dozen compared to December 2016. During January 2015 and 2014 retail prices were 232.8 cents per dozen (post HPAI) and 211.2 cents per dozen respectively in the run-up to implementation of California Proposition #2. During 2016 retail prices did not decline in proportion to ex-farm prices allowing higher margins at retail thereby depressing demand.

  

February 2017 Production Data

  • According to USDA data, the estimated average complement of U.S. hens in flocks over 30,000 during February 2017 amounted to 309.0 million, up 4.6 million from January 2016. The total U.S. flock based on USDA data amounted to 318.4 million on February 1st 2016. The average end of year flock sizes over the past five years were:- 2012 (299 million); 2013 (308 million); 2014 (311 million); 2015 (291 million) and 2016 (318 million). The emergence of HPAI with unprecedented mortality has complicated all models projecting future flock sizes and prices.
  • Pullet chick placements were down 4.9 percent in January to 21.7 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 attained 17.5 percent of the national flock in February compared to 17.4 percent in January and the 2016 average of 20.8 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. Pullet placements for the 1st and 2nd Quarters of 2017 are projected to average 19.7 million and 19.5 million respectively unless cancellations occur.
  • 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 hold at 2.6 million from March through August 2017.
  • Average rate of lay attained 78.9 percent during 2017 and increased to 80.0 percent in December 2016 as new pullets transferred in late October and early November 2016 achieved peak production.  Average production in January attained 80.2 percent reflecting 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.

January 2017 Export Data

  • According to USDA-FAS data, 272,300 cases of shell eggs were exported in January 2017 representing 1.2 percent of total production. This value should be compared to 340,200 cases in December 2016. North America (35.7 percent of exports), the Caribbean (23.7 percent), East Asia (33.1 percent, was 26.0 percent) and the Middle East (2.6 percent, was 8.8 percent) 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 495.1 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 January 2017 amounting to 169.9 million case-equivalents represented 0.8 percent of U.S. output. North America (45.6 percent), East Asia (25.4 percent) and the EU-28 (21.0 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 2016 export volume was 12.0 percent lower than in 2015. 
  • Collectively, exports of shell eggs and products in January 2017 represented the equivalent of approximately seven million hens in production during the month, attaining 442,100 case-equivalents. This was a 54.0 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 2.0 percent of a nominal national flock of 309 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. Unless South Korea adopts regionalization this market will be closed to U.S. shell eggs. There is no scientific reason why any nation should embargo pasteurized egg products from an approved plant based on avian influenza.

FEBRUARY 2017 STATISTICS

COSTS & REVENUE                                                                                         

Parameter                                                                     JANUARY 2017           FEBRUARY 2017

5-Region Cost of Production ex farm (1st Cycle)              60.33 c/doz                 60.18 c/doz

                Low                                                                  54.88 c/doz (MW)      55.68c/doz  (MW)     

                High                                                                 76.26 c/doz  (CA)        76.80 c/doz  (CA)         

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

                                                                        JANUARY 2017                           FEBRUARY 2017

                Feed                                              32.39c/doz                                          33.13 c/doz

                Pullet depreciation                     10.79 c/doz                                         10.90 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 FEBRUARY 2017:-

37.7 cents per dozen1- 61.2 cents per dozen = -23.5 cents per dozen

(January comparison 48.2 1 cents per dozen – 60.3 cents per dozen = -12.1 cents per dozen.)

Note 1:  USDA Blended egg price

 

                                                                                            JANUARY 2017     FEBRUARY 2017

USDA     ex-farm Price (Large)                                                   48.2c/doz                37.7c/doz               

                Warehouse/Dist. Center                                           83.0c/doz                71.1 c/doz  

                Store delivered (estimate)                                           88.0c/doz                76.0 c/doz

       

Dept. Commerce retail                                                       138.3 c/doz (Dec.)   159.9c/doz (Jan.)

 

5-Region Layer Feed Cost 

Layer Feed Cost (Average)                                         $206.30/ton                 $211.04/ton

                High                                                              $238.44/ton (NW)       $244.59/ton (SE)

                Low                                                                $175.77/ton (MW)      $180.21 /ton (MW)

               Differential                                                       $  62.67/ton                  $  64.38/ton

                                                              (equivalent to 21.5 cents per dozen)

Pullet Cost   (19 weeks)                                                                            $3.72                                $3.76


VOLUMES OF PRODUCTION                                                                           

Parameter                                                                               JANUARY 2017                 FEBRUARY 2017

Egg-strain eggs in incubators                                                40.24 million   (Jan.)          48.0 million  (Feb.)

Pullet chicks hatched                                                             23.11 million   (Dec.)           21.7 million (Jan.)   

Pullets to be housed in 5 months                                         20.90 million   (May.)         18.9 million  (June)

National Flock in farms over 30,000                                   304.4 million   (Dec.)      309.0 million (Nov.)

National egg-producing flock                                               313.9 million   (Dec.)      318.4 million (Nov.)                             

 

Proportion of flock in molt or post-molt                                                      17.1%                   (Jan.)

Total of hens in flocks over 30,000, 1st cycle (estimate)                           255.0 million       (Jan.)

Inventories 1st Month                                                             January                      February                 March

Shell eggs  (millions)                                                                 542.4                           561.6                     604.3

Frozen egg products (million egg equivalents)                   305.4                            316.2                        -

Dried egg (million egg equivalents)                                      1,243                            1,272                    1,290                             

 

Eggs produced                                                                                       7.84 billion (Dec.)     7.91 billion  (Jan.)

 Table-egg hens in flocks over 30,000 (97% of total U.S.)           304.4 million (Dec.)        309 million (Jan.)

“Top-6” States hen population (USDA)                                      170.3 million  (Dec.)       167.3 million  (Nov.)

               

Proportion of U.S. Total by State, 2016                                                                   

*(over 30,000 hen flocks)

                   STATE                             DECEMBER 2016 JANUARY 2017            Proportion by region (JANUARY 2017)

               Iowa                            17.7%                 17.6%                                              MW     52.2%

               Ohio                            10.1%                   9.8%                                               NE       10.8%

               Indiana                        10.3%                10.2%                                               SE        10.2%                                                                                                                                                                    

               Pennsylvania               8.5%                   8.2%                                                SC       12.4%

               Texas                            5.5%                   5.5%                                                CA         3.8%    

               California                     3.8%                   3.8%                                               NW        3.0%  

               

                 (Values rounded to 0.1%)

Rate of Lay, weighted hen-week (USDA)              80.6% (Dec.)      80.2% (JAN.)                                                                                                          

Actual USDA-ERS 2015 U.S. per capita annual egg consumption revised due to HPAI:-  252.9 eggs (-14.1 from 2014)

Projected USDA-ERS 2016 U.S. per capita annual egg consumption:-                                267.5 eggs (+14.6 from 2015)

Forecast USDA-ERS 2017 U.S. per capita annual egg consumption projected to be:-     266.8 eggs  (-0.7 from 2016)

Eggs broken under FSIS inspection (million cases)

                                                                            DECEMBER  2016   6.518         JANUARY 6.539                          

Cumulative proportion of total eggs                             31.4%                               29.8%

EXPORTS

Parameter                                                                                                             Quantity Exported 

Exports:-                             

Shell Eggs (thousand cases)                                          DECEMBER 2016     340       JANUARY    2017  272

                                                                                               

Products (thousand case equivalents)                        DECEMBER 2016     409       JANUARY    2017  170

                                                                                                                                               

Total       (thousand case equivalents)                         DECEMBER 2016     749       JANUARY    2017   442 

  Representing 2.0 percent of National production in JANUARY 2017