Production costs remain virtually unchanged

Two dozen points of interest from current statistics indicate basic industry stability.

May 20, 2010

Maro Ibarburu, recently appointed program manager for the Egg Industry Center located at Iowa State University, has revised the format and presentation of monthly statistics previously issued by Don Bell of the University of California. Despite his retirement, Bell is still actively associated with the program and has provided valuable guidance in establishing the Egg Industry Center and has assisted Ibarburu in his endeavors.

See corresponding charts.

Highlights from the current report include:

The U.S. estimated cost of production for April 2010 is 56.6 cents ex-farm. The four-month average production cost was 58 cents per dozen, virtually unchanged from the 58.3 cents per dozen recorded during the first four months of 2009.
The April ex-farm egg price estimated by the USDA-NASS was 59.9 cents per dozen for April, compared to 106.0 cents per dozen for March and a four-month average of 83.5 cents per dozen for 2010. The egg price for April was 17.2 cents per dozen less than the comparable month in 2009. The margin represented by “income minus cost” for April is 3.3 cents per dozen, very close to breakeven. For the four months the average margin was 25.5 cents per dozen and the April margin was 45.3 cents below March 2010 and 15.2 cents below April 2009.
In evaluating the low margin for April it was noted that feed cost was 33.6 cents per dozen, pullet depreciation at 8.3 cents per dozen with other fixed and variable costs of 14.7 cents per dozen. These values remained virtually unchanged through the first four months of 2010. Contribution per hen, based on April figures amounted to 6.2 cents which was a fraction of the 92.9 cents recorded in March and contributed to a cumulative four-month hen contribution of 190.8 cents.
The Urner Barry (UB) simple average price for six U.S. regions, assuming 80% large eggs, was 56.9 cents per dozen for April compared to 95.6 cents per dozen in March. The four-month simple average UB price was 81.4 cents per dozen.
In reviewing retail prices for table eggs, the Bureau of Labor Statistics and the Department of Commerce estimated a March average of 182.2 cents per dozen slightly higher than the March 2009 value of 169.3 cents per dozen.
The USDA-AMS calculated the April spread from farm to store to be 29.09 cents per dozen with a 23.59 cent per dozen spread from farm to warehouse.
Large to Medium white egg price spread over six regions was 9.2 cents in April compared to 20.5 cents in March with an average of 19.3 cents per dozen for the first four months of 2010. Regional spreads ranged from 7.0 cents per dozen in the Northwest to 10.4 cents per dozen in the South Central region.
In April 2010, layer feed averaged $197.20 per ton, which is slightly lower than the four month average of $201.40 cents per ton based on data from six regions. During April the price range among regions was $173.60 per ton in the Midwest up to $218.80 per ton in California.
The differential in feed price contributed to a spread of 9.1 cents per dozen in production cost, incorporating a standard value of 14.7 cents per dozen for labor interest and miscellaneous inputs. The Midwest produced at 52.8 cents per dozen compared to the California production cost of 61.9 cents per dozen, amounting to a difference of 17.1 cents per dozen. The simple average of the six U.S regions in April was 57.5 cents per dozen.
For the first three months of 2010, commercial-layer eggs in incubators and straight run hatch have shown an increase over corresponding months in 2009. As of April 1, egg-type pullet hatch increased by 8.2% over March 2009 to 22.57 million.
Pullets to be housed in future months based on the five month-previous hatch and incorporating a 5% mortality factor, projects an increase in placements from 15.75 million pullets in April to 20.37 million pullets in August 2010. The August 2010 value is approximately 2 million pullets greater than the monthly average of the years 2005 through 2009.
In March 2010 the USDA-NASS estimated the national flock at 282.5 million, which is 1.5 million more than in February 2010 but 1.0 million less than in March 2009. Table egg layers represented 82% of all hens in production as of March 2010.
Applying the University of California model based on USDA-NASS data for chickens and eggs it is estimated that the August 2010 flock will attain 216.5 million hens aged less than 72 weeks. This is based on the assumption of 9% mortality from 20 through 72 weeks of age. As at the end of March 2010, 26% of the national flock was over 72 weeks of age. This has been a fairly constant figure through 2009 and during the first quarter of 2010. In 2008, 32.9% of the national flock was over 72 weeks of age.
Six regions reported a simple average of 22.2% molted hens reflecting all states reporting to the USDA-NASS. Within the U.S., regions vary widely in molting practices ranging from 7.4% molted hens in the Northeast to 34.8% in the Northwest. The average of 27.45 molted hens is a reflection of production costs, revenue, and the realization for spent hens.
The actual national table egg flock for March was 283.3 million hens. This number is expected to increase from 281.4 million in July to 290.3 million in December, given current projections of price which reflects supply and demand. Prolonged depression in price beyond current estimates will inevitably result in a decrease in hen numbers as flocks are depleted at a rate faster than projected.
In reviewing projected and actual flock numbers, producers housed approximately 1.9 million hens more than anticipated during April 2010.
The top six states representing 277.98 million hens represent 57.1% of the total national flock. In descending order these states are Iowa - 19.2%, Ohio - 9.8%, Indiana - 8.3%, Pennsylvania - 8.1%, California - 6.9%, and Texas - 4.8%. States reporting to the USDA-NASS represent 98.2% of all hens producing table eggs.
Rate of lay for the first three months of 2010 attained 75.8%. This corresponds closely to 2009 during which an average of 75.0% was recorded with a range of 74.5% in February to 77.2% in November, reflecting seasonal placement patterns.
During March 2010, 5.5 million cases of eggs were broken under Federal inspection, which is approximately 2.7% more than the corresponding month in 2009. For the first quarter, egg breaking was up by 0.6% over March 2009. For the year to date, 29.5% of the 53.44 million cases produced have been broken compared to 30.8% for the entire year of 2009. It is noted that the proportion of eggs broken has steadily declined from the 2005 high of 35.1% to a projected value of 30% for 2010.
Domestic consumption in 2010 is projected to be 246.1 eggs per capita, 1.8% lower than the 247.9 eggs per capita in 2009. Over the past seven years the highest per capita consumption was recorded in 2006 at 257.8 eggs per capita.
According to the USDA Foreign Agricultural Service 269,000 cases of shell eggs were exported during the first two months of 2010 with Hong Kong - 40%, Canada - 18% and China - 12% representing the most significant importers.
Export of shell eggs for the first two months of 2010 represented 0.78% of production.
Exports of egg products and shell equivalents represented 700,000 cases for the first two months of 2010, averaging 2.02% of total production.
Combining shell eggs and egg products total exports represented the equivalent of 968.5 million cases or 2.8% of U.S. production.