Maro Ibarburu, program manager for the Egg Industry Center (EIC) located at Iowa State University, released the September-October Statistical Report on November 9 prepared with the collaboration of Don Bell of the University of California Riverside.
There have been major changes in industry parameters attributed directly to the SE recall of August 14. The major trends over the past three months are summarized in Table 1, which highlights the changes in price, flock size and production cost with special reference to September and October.
The current report as distributed by the EIC is summarized for readers of Egg Industry. It is emphasized that data generated using models which are appropriate in times of relative stability lose validity during short-term turmoil.
- The U.S. estimated (6-Region) cost of production for October 2010 was 65.4 cents per dozen ex-farm, 3.1 cents per dozen or 5% more than in September. The range in production costs among regions extended from 60.6 cents per dozen in the Midwest to 69.8 cents per dozen in California.
- The margin represented by “income minus cost” for October attained breakeven compared to the negative margin of -17.7 cents per dozen in September. This more favorable situation is due to the concurrent 13.5% increase in production cost and a 23.9% increase in Urner-Barry (UB) price. For the first ten months of 2010 the average margin was 5.5 cents per dozen.
- In evaluating the breakeven margin for October it was noted that feed cost was 41.3 cents per dozen, with pullet depreciation at 9.4 cents per dozen and other fixed and variable costs of 14.7 cents per dozen, applying the standard cost factors used by the EIC. These cost values other than feed and pullets remained unchanged through the first ten months of 2010.
- Producers attained a breakeven contribution per hen, based on October costs and revenue compared to a loss of -32.7 cents per bird in September which incorporated the fallout from the recall. The cumulative ten-month contribution per hen still stands at 103.4 cents.
- The UB simple average producer price for six U.S. regions, assuming 76% large eggs, was 61.6 cents per dozen for October compared to 49.7 cents per dozen in September 2010. The ten-month cumulative simple average UB price was 64.6 cents per dozen.
- The USDA-AMS determined an ex-farm price of 66.1 cents per dozen for October compared to 58.95 cents per dozen in Septembert. Corresponding warehouse/distribution center and DSD prices were 72.55 cents per dozen and 83.05 cents per dozen respectively. The farm to store spread was 16.95 cents per dozen which was appreciably lower than the value of 29.71 cents per dozen in September.
- In reviewing retail prices for table eggs, the Bureau of Labor Statistics and the Department of Commerce estimated a September average of 175.3 cents per dozen, 15.0% higher than the September 2010 value of 151.9 cents per dozen. The simple average retail egg price for the first nine months of 2010 was 166.6 cents per dozen.
- The large- to medium-grade white egg price spread over six regions was 20.2 cents per dozen in October compared to 22.8 cents per dozen in September with an average spread of 19.8 cents per dozen during the first ten months of 2010. Regional spreads ranged from 19.1 cents per dozen in the North West to 22.0 cents per dozen in the South Central and South East regions, a 10% narrowing widening compared to values for September.
- During October 2010, layer feed averaged $241.41 per ton, which is 15.4% higher than the ten-month average of $209.20 per ton based on six regions. During October the price range among regions was $217.20 per ton in the Midwest rising to $263.10 per ton in California. The differential of $45.60 per ton is equivalent to approximately 8.0 cents per dozen applying realistic industry production parameters.
- For the first ten months of 2010, commercial-egg strain eggs in incubators have remained almost constant at an average of 38.86 million with a range of 33.4 million in August to 42.9 million in April. The value for the first ten months of 2010 was 38.87 million compared to 36.51 million in 2009.
- Straight run hatch for September attained 40.3 million with an average for the first nine months of 2010 at 41.41 million.
- Projections for pullets to be housed in future months based on the five months-previous hatch and incorporating a 5% mortality factor, include a range in the increase in placements from 15.75 million pullets in April to 21.44 million pullets in September 2010. The 12-month average of 18.21 million pullets per month for 2010 is 5.5% greater (1.0 million pullets) than the 12-month average of 17.26 million per month for 2009. The 2006 to 2010 monthly average was 16.30 million pullets placed each month. January and February 2011 placements will be 16.7 million and 18.2 million, respectively.
- For September 2010, the USDA-NASS estimated the national flock at 280.8 million hens, which is 1.0 million more than in August 2010, following seasonal trends. Applying the University of California model based on USDA-NASS data for chickens and eggs, it is estimated that the December 2010 flock will attain 283.6 million hens (283.3 million as per the USDA estimate) which is a 2.4% reduction attributed to slaughter of SE positive flocks.
- The University of California estimated the national flock at 278.8 million for October, down 4.5 million (1.6%) from September 2010. This is the largest month-to-month decline in ten years and is attributed to depletion of SE positive flocks.
- As of the end of September 2010, 23.2% of the national flock was over 72 weeks of age. With the exception of March 2010, which was an aberration at 26.0%, the seasonal pattern of a decline in molted flocks from January through April appears to be holding although this may be affected by depletion of SE positive flocks in the Midwest. For the entire year of 2009, an average of 24.7% of the national flock had been molted compared to 31.7% in 2008.
- During September 2010, USDA-FSIS data indicated that 6.1 million hens were processed compared to a pre-recall projection of 4.9 million hens and a nine month average of 5.88 million hens. The value for September should quantify the extent of slaughter of SE-positive flocks in Iowa.
- Six regions reported a simple average of 25.8% molted hens in October, up 8.9% from September 2010 and reflecting all states surveyed by the USDA-NASS. The actual proportion of molted hens in the U.S. varies widely, from 9.8% in the Northeast to 37.3% in the Northwest. The ten-month average of 23.9% molted hens in the U.S. flock and differences among regions reflect production costs, revenue for eggs and realization value for spent hens. The upward trend is assumed to reflect retention of SE negative flocks which had been scheduled for depletion.
- According to the projections developed by the University of California, the most recent estimate of the national table-egg flock for October 2010 is 278.7 million hens. This number is expected to increase steadily to 283.6 million in December 2010. Given current surveillance programs as mandated by the FDA, national flock size could be trimmed further by depletion following evidence of SE infection or if consumer demand is depressed following additional recalls. Compensatory increased retention of known SE-negative flocks may occur in regions or for specialty product subject to available capacity including re-caging. Although UB prices during November have been restored to previous projections a depression in price following additional recalls and consequential publicity will inevitably result in a decrease in hen numbers since flocks will be depleted at a rate faster than projected.
- In August, the University of California projected an UB large Midwest price of 117.3 cents/dozen for September, which was depressed to 89.7 cents per dozen as a result of the SE recall. A rapid rise occurred during October to achieve an average of 101.9 cents per dozen. The July projections of 140 cents per dozen for November and December have been revised to 126 cents per dozen. This projected value will only be exceeded if the current trends in flock depletion and consumer demand continue. It is reiterated that each 10 cents per dozen difference between forecast and actual UB price as a result of SE recalls with negative publicity will cost the industry $30 million per month over 165 million hens producing generic eggs. The prospect for a rise depends on there being no further substantial recalls reinforced by positive media reports projecting that the problem of SE is contained and is not a general reflection on the industry and the safety of our product.
- In September, the top six egg-producing states with 159.3 million hens (160.7 million in August) represented 57.7% of the total national flock of 276.35 million hens. In descending order these states are Iowa (19.4% of total), Ohio (9.9%), Indiana (8.2%), Pennsylvania (8.2%), California (7.1%), and Texas (4.9%). States reporting to the USDA-NASS represent 98.4% of all hens producing table eggs. It is evident that a disproportionate cull of SE-positive hens occurred in Iowa since the State total decreased by 0.48 million. The value for October will reveal the extent of depletion estimated by some industry observers at over 4 million hens.
- The rate of lay for the first nine months of 2010 attained 76.4%. This is higher than in 2009 during which an average of 75.8% was recorded. The positive difference of 0.6% in production level is equivalent to a daily volume approaching 4,800 cases. Average rate of lay is a function of weighted flock age and is also influenced by climatic conditions.
- During September 2010, 6,582 million cases of eggs were broken under federal inspection, which is 11.9% more than in August and 16.1% more than in September 2009. During September 28.3% of shell eggs produced were broken compared to 32.1% during October. For the first nine months of 2010, egg breaking was up by 3.6% over the corresponding period in 2009. For the year to date, 32.0% of the 162.04 million cases produced were broken compared to 30.8% for the entire year of 2009. It is noted that on a year-to-year basis the proportion of eggs broken has shown a steady decline from the 2005 high of 35.1% to a projected value of 30% for 2010. Values should remain at a high level until affected flocks are depleted prematurely as unit breaking revenue has declined precipitously for this class of eggs
- The revised egg consumption value for 2010 is projected by the USDA-ERS to be 248.5 per capita, almost 0.3%, higher than the 247.7 eggs per capita recorded in 2009. Over the past seven years the highest per capita consumption of 257.8 eggs was recorded in 2006. Values for the third quarter of 2010, presently estimated at 62.2 eggs per capita were revised upward to 64.1 per capita but may have to be revised downward in response to the adverse publicity associated with the SE recall during mid to late August and carrying over to September. The projected value for the fourth quarter is acceptable provided that there are no additional substantial recalls.
- During August 2010 the USDA-FAS recorded exports of 219,000 cases of shell eggs contributing to an eight-month total of 1,466,000 cases representing 1.0% of U.S. production. Major importers during 2010 to date were Hong Kong/PRC at 39.3% and Canada (28.4%) of shipments.
- Exports of egg products expressed as shell-egg equivalents attained 3,041,000 cases for the first eight months of 2010 representing 2.1% of U.S. production. The cumulative export of products has been 33% higher in 2010 to date compared to the corresponding period in 2009. Major importers in 2010 have been Japan (24.7%), Germany (21.6%), Canada (11.2%) and Mexico (4.6%).