Avian influenza impact on egg prices unpredictable

Will hen losses due to avian influenza lead to higher egg prices, or will demand weaken to offset the reduced egg production? 
A special report, released by Maro Ibarburu, business analyst, Iowa State University, on May 8, adressed the question posed by numerous individuals and groups, including Egg Industry magazine: “What impact will hen losses resulting from the avian influenza outbreak have on U.S. whole sale egg prices?” 
The answer given is that it is too early to tell.
At the time the report was prepared, the U.S. layer flock had been reduced by 22 million hens as a result of the outbreak. Commenting on the hen losses in the report, Ibarburu said: “This results in a significant reduction in the egg supply and perhaps the largest short-term change the U.S. egg market has ever experienced.”
The report then states that “it is too early to tell” what the impact will be on egg prices and then explains why the center believes it is too early. “While the U.S. continues to lose egg supply in this situation, there are factors in play that may also shift the demand for eggs. These include both domestic and export market considerations counter the supply impact on price,” Ibarburu said.
The Egg Industry Center, which is hosted by Iowa State University, prepares monthly cost estimates and analysis for the U.S. egg industry. These analyses also project future wholesale egg prices based on USDA data for hen inventories, replacement chick hatching data, and historical egg price information.


Egg demand variables
Demand for eggs by U.S. consumers could be negatively impacted by the avian influenza situation if fear is created around the consumption of eggs, according to the report. Government agencies and universities have initiated programs to help educate consumers regarding avian influenza and consumer health. This type of depression in demand for poultry products has been seen in other countries affected by avian influenza, particularly in Asia.
Ibarburu also puts forth the possibility that demand for eggs could actually increase in response to fears of shortages, along the lines of the disappearance of staples like milk and break from stores when storms threaten to disrupt consumers’’ access to stores.
On the export side, the length of any bans on importation of eggs and egg products produce either in the U.S. as a whole or in regions of the U.S. actually impacted by the outbreak can play a somewhat unpredictable role in how much export volume is curtailed. Any reduction in export volumes for eggs and egg products will help to mitigate the loss in domestic supply caused by the laying farm depopulations.


The egg price model
Ibarburu said: “The Egg Industry Center model used in the production of the monthly market reports is built to project prices that are related to small fluctuations in the market. Even when dealing with small fluctuations, there can be a degree of uncertainty around the projected values. A large fluctuation such as the loss of millions of laying hens was never considered in the design of the model that is currently in use. As a result, the accuracy of any projection would likely be grossly inaccurate.”

Tamil Nadu egg prices up eight times in four weeks

Wholesale egg prices in the Indian state of Tamil Nadu have increased eight times since July 21, according to the National Egg Coordination Committee, from the set minimum price of Rs 2.72 (US$0.05) per egg to the current Rs 3.25 (US$0.06) per egg.
The current price represents only the third time it has ever passed the Rs 3 mark. The increases are due to a renewed demand for eggs after the end of Shravan (the austere period; the fifth month of the Hindu year) in north India, or the end of Aadi in Tamil Nadu, said committee chairman P Selvaraj.

But in spite of the increases, farmers are still losing money, according to Tamil Nadu Poultry Farmers Association President R Nallathambi. "The price revision has only reduced the losses suffered by farmers," said Nallathambi. Since traders deduct 25–35 paise towards packing and handling charges, farmers get only around Rs 2.79–2.89 (US$0.05) per egg. "We are incurring losses, as the cost of production is Rs 2.95 per egg," he said.

India egg producers in Tamil Nadu see prices rise

Egg prices in the Indian state of Tamil Nadu gained 4 percent in the first week of June on increased demand, rising to Rs 2.95 (US$0.05) per egg, according to the state's National Egg Coordination Committee.
Increasing demand, growing input costs and pricey fish and vegetables have resulted in the increase. “End of austere seasons, summer and the re-opening of schools have brought us some cheer,” said a poultry-unit owner. The start of the school year in particular will add 7 million eggs to Tamil Nadu's consumption, according to reports.
Prices of layer birds have also increased, to Rs 48/kg (US$0.87/kg), while broilers have held steady at Rs 76/kg (US$1.37/kg).

India egg prices drop due to Oman ban

Wholesale egg prices in India may drop due to an Oman ban on Indian poultry products, which went into effect on March 27 and will remain until three months after India has declared itself free of bird flu, according to reports.
So far, the ban has caused a backlog of 15 million to 20 million eggs per day, as Oman is the source of one-third of India's poultry exports. Wholesale egg prices have dropped to Rs 2.30 (US$0.04) per egg in the first week of April. “With table eggs and other poultry products going off the menu in many Gulf nations, we turned our focus towards new markets such as Afghanistan, Sri Lanka [and] West African countries such as Monrovia, Angola and Free Town," said an exporter. "But with this ban we are now very doubtful of our fortunes.”
The National Egg Coordination Committee had been cutting egg prices to help offset the challenge and avoid building up inventories as the summer season approaches.  

Hungary poultry prices up, egg prices down in February over 2010 numbers

Hungary's poultry prices for February were up 16.2% from 2010 and fresh egg prices dropped 6.5%, according to the country's latest farm gate prices report from the Central Statistics Office.
Overall farm gate prices rose 47.5% year-over-year in February 2011, faster than the 39.6% twelve-month increase in January. The increase was from a low base as farm gate prices rose just 0.3% year-over-year in February 2010 after a 2% rise that January. The prices fell in the rest of the first half of 2010 before double-digit growth started in July 2010.
Farm gate prices rose 16.8% for the full year of 2010 after a 9.5% decrease in 2009. Livestock and animal products prices rose 1.8% in 2010 after declining 4.6% in 2009.

USDA: Poultry prices up, egg prices down in February

According to the U.S. Department of Agriculture's latest report on the 2011 food price outlook, U.S. poultry prices rose slightly and egg prices dropped slightly in February when compared to the same time period in 2009.
Poultry prices increased 0.5% in February and are 2% above prices last year at this time, with chicken prices up 1.3% and other poultry prices, including turkey, up 5.1%. Egg prices decreased 1.9% in February, following a 1% drop in January. Due to two months of sharp increases in November and December 2010, egg prices are now just 0.1% above the February 2010 level.
Overall, the Consumer Price Index for all food is projected to increase 3% to 4% in 2011. According to the report, although food price inflation was relatively weak for most of 2009 and 2010, cost pressures on wholesale and retail food prices due to higher energy and food commodity prices, along with strengthening global food demand, have pushed inflation projections for 2011 upward.

China's domestic egg prices soar

China's domestic egg prices have been rising since June, according to reports.
A full one-third of the country is experiencing egg retail prices over RMB10 (US$1.49) per kilogram. While prices may drop slightly after the holidays, breeding and feed costs are expected to remain high, influencing egg numbers. A shortage of supply, hot weather (which decreased egg production in China by as much as 30%), flooding in south and northeast China and rising transportation costs have also contributed to the rise in egg prices.

China commodity prices up across the board

China's major meat and feed commodity prices were up across the board for August from a month earlier, according to the Ministry of Agriculture.
Pork prices have been rising for two straight months, up 10% in August from July at 19.30 yuan per kilogram. Egg prices came in at an 8.4% increase from a month earlier to 8.66 yuan per kilogram, while dressed chicken rose 4% to 14.73 yuan. Beef and mutton showed small growth, 0.8%, to 33.55 and 34.61 yuan per kilogram, respectively.
Average corn prices in August rose 0.5% from the previous month and 17.9% year-on-year to 2.11 yuan per kilogram, while soybean meal prices grew 3.9% to 3.45 yuan per kilogram.

Flock size, price projections

Don Bell of the University of California in association with the Egg Industry Center at the University of Iowa has released a summary of flock size and egg price projections dated August 2. The table below shows the respective values for hen numbers and Urner-Barry Midwest large grade for September 2010 through May 2011. Values are based on an upgraded model which is revised monthly.
The estimates for flock size during the remainder of 2010 denote a higher number of replacement pullets and reduced molting. Values for replacements are based on a five-year rate from 2005-2010, averaging 5.8% of the national flock per month. Depletion over the same period is calculated on a 1.85% per month average and the value for “dead and missing” for 2010 and 2011 was set at 4.32% per month. Yearly average counts for hens producing table eggs were 280.2 million for 2008 and 280.4 million in 2009. The June 2010 average for the number of laying hens was 280.0 million, an increase of 3.0 million birds over the 2009 value of 277.0 million.
In comparing the actual and estimated egg prices from January 2010 onwards, it is noted that there is a close correspondence between the actual monthly average egg price and the forecasts developed during the three preceding months. Projections as much as seven months in advance have tended to overstate prices.
Although the August projection of egg prices denotes an increase in revenue, it is not expected that margins will improve since there is an obvious trend in escalation of feed prices. This is in part associated with an increase in the cost of corn which exceeded $4.00 per bushel at the beginning of August. A number of factors are influencing the price of corn including the USDA revision in the 2010 harvest, fall in the value of the U.S. dollar, a delay in planting due to unseasonably wet weather in Argentina.
The severe drought in the Russian Federation will markedly reduce wheat yield, resulting in the need to import grain. Demand by consumers in China and India will also have an effect on the balance between world supply of grains and oilseeds and demand for these ingredients. Diversion of one-third of the U.S. corn crop to ethanol production may be tolerable in a year of bountiful production and stability in world supply but the impact of the Renewable Fuels Initiative will become more evident in a year in which international demand for grain increases.
Flock Size & Price Projections Chart

Egg production, price forecast up

The Egg Industry Center at Iowa State University has issued its mid-June flock projections based on revised models. By refining the procedures developed over the years by Don Bell at the University of California, Riverside, a fairly close approximation of future prices can now be obtained. This takes into account pullet placement, size of the national flock and historical relationships between seasonal price and flock level.
The first of the month estimates of the size of the U.S. table egg population predicts an increase from 279.2 million in June to 291.8 in December 2010. Thereafter population rises in 2011 from 291.8 million hens in January to a total of 300.5 million hens in December of that year.
The U-B Large grade Midwest quote is projected to increase from 96 cents per dozen in June 2010 to peak at 120 cents per dozen in December of this year. Thereafter prices will follow the traditional first quarter pattern with a drop to 94.7 cents.
Maro Ibarburu has developed a new format for projected prices, involving a monthly egg price coefficient which relates monthly cost to an eight-year pattern. Evaluation of results for 2010 shows a fairly close approximation for two months ahead, but estimates made before April for subsequent months were optimistic, and did not take into account the severe drop after Easter. May projections covering the remainder of 2010 and for the first quarter of 2011 appear conservative and are in all probability realistic for commodity eggs.
The challenge facing the Egg Industry Center will be to reconcile hen population with demand. To date, projections of price have been based on production and have assumed consumption values as forecast by USDA using their econometric models. Reconciling demand with supply will provide a more accurate indication of future price and can be used by the industry to implement placement and depletion programs which can avoid large swings in profitability.

USDA 2010 egg projections

The March edition of the U.S. Department of Agriculture’s Livestock, Dairy and Poultry Outlook projects 2010 egg production at 6.495 billion dozen, representing a 0.45% increase over 2009.
According to the projections, New York egg prices will range from $0.96 to $1.04 per dozen in the third quarter to $1.15 to $1.25 per dozen in the fourth quarter. The USDA projects exports of 220 million dozen in 2010, which would be a decline of 9% from 2009.

Egg production drops in India’s Northern Plains

Egg producers in the Northern Plains region of India have suffered this winter as wholesale prices have dropped from Rs300 per 100 in November 2009 to about Rs215 per 100 currently, according to The Indian Express.
Pramod Singla, president of the Haryana Poultry Farm Association, said the cold weather has led older hens to stop laying, so farmers are selling them for meat at about Rs15 per kilogram. Singla added that northern farmers face heavy competition from egg producers in India’s south.

Thailand’s egg prices fall below production cost

Thailand’s commerce ministry estimates a daily national oversupply of 1 million to 2 million eggs, leading to falling wholesale prices that are lower than the average production cost, according to The Nation, a Thai newspaper. Production totaled 9.9 billion eggs in 2009, fewer than 1% of which were exported, and is expected to rise even higher this year to 10.2 billion.
Currently, the farm gate price for eggs is ฿2, while production costs average ฿2.30. The retail price averaged ฿2.71 in 2009, according to the newspaper.
Small-scale farmers, who are responsible for about 30% of production but make of 90% of egg producers, say competition from large-scale producers and high feed costs could destroy their businesses. “Large enterprises can sell their eggs below the market price as they have lower production costs, while small farmers face higher costs of production but low selling prices in the market,” said Manoch Chootubtim, president of the Hen-Egg Farmers Association.
Porntiva Nakasai, Thailand’s commerce minister, said her ministry is calling on government agencies to encourage egg consumption and will be meeting with large egg feed producers to discuss a solution to the price drop.

Retail food prices continue to drop

Retail prices for staple foods have fallen for the fifth quarter in a row and are significantly lower than one year ago, according to the latest American Farm Bureau Federation Marketbasket Survey.
In fourth quarter of 2009, the average price for boneless chicken breasts fell $0.37 to $2.71 per pound, or 22%, from the previous quarter. The price of sliced deli ham fell $0.40 to $4.35 per pound and the price of bacon fell $0.37 to $3.00 per pound. Egg prices rose 11 cents to $1.55 per dozen, but were 13% lower than they were a year ago.
Stefphanie Gambrell, an economist with the federation, said that “sluggish consumer demand, particularly for meats and dairy products,” contributed to the decrease in prices.
Survey shoppers found that the average price for “cage-free” eggs was $2.77 per dozen in the fourth quarter of 2009, about 80% higher than the price of regular eggs. That price is 9% lower than the price for “cage-free” eggs reported in the fourth quarter of 2008.
The American Farm Bureau Federation has conducted its informal quarterly marketbasket survey of retail food price trends since 1989.

Ukraine egg prices rise

Medium and large-sized agricultural enterprises in Ukraine saw sales prices for their eggs rise steadily during 2009, with the average price rising to UAH388 (US$48.7) per thousand in the first eleven months of the year.
The highest sales price of eggs during the period, UAH419 (US$52.6) per thousand, was recorded in the Kherson oblast (region), with the lowest price recorded in the Zakarpattya oblast. In comparison, the average price per thousand eggs in the first half of this year was only UAH344 (US$43.2), and in the first eleven months of 2008, UAH366 (US$45.9) per thousand.

Overview of 2009 US egg statistics

University of California Poultry Memo, Number 82, covering 2009 through August, has been circulated by Don Bell, poultry specialist emeritus, University of California-Riverside.
The following key values were presented:
*155 million pullet chicks have been hatched to date representing a 2.6% decline over the corresponding period in 2008.
*The 24-month previous hatch through August 2009 amounted to 459 million pullets, representing an increase of 8.3 million pullets over the 24-month cumulative hatch through August 2008. It is noted that this parameter is correlated strongly to the Urner-Barry (U-B) Midwest egg price.
*The average monthly transfer of pullets to layer houses is projected to attain 16.4 million for 2009 representing a 1.7% increase over the corresponding value for 2008.
*As of August 2009 the producing flock comprised 276.6 million hens. The average flock size to date is 280.3 million hens, relatively unchanged compared to the first eight months of 2008.
*Total egg production through the first eight months of 2009 amounted to 51.343 billion eggs a 0.9% increase over the first eight months of 2008. Pullet transfers, hen numbers and egg production data suggest restraint in expansion consistent with U-B egg prices prevailing in 2009.
*An average of 24.4% of the national flock has been molted, relatively unchanged from 2008 but an approximately 12% reduction from 2007. This has resulted in a decrease in weighted average flock age.
*44 million hens were depleted through August 2008, representing a 9% decrease over 2008 but a 13% reduction from the corresponding eight month period in 2007.
*44.4 million cases were consigned to breakers or processed in in-line units during the first eight months of 2009, a 2.2% reduction over January–August 2008. Approximately 31% of total U.S. domestic consumption is now further-processed.
*The nine-month average U-B Midwest, Large price is 101 cents/dozen. This is a 32% decrease over the nine-month average of 2008. The months of May–September were below 100 cents per dozen offsetting the higher revenues through the first 4 months of this year.
*Average U-B Midwest breaker egg price for the first 9-months of 2009 was 42.6 cents/dozen, a 45% decrease from the 87.8 cents/dozen in 2008. Unit revenue for breaking eggs has declined as a proportion of production cost and is now close to 64% of calculated nest-run production cost. It is noted that breaker egg prices peaked at 114 cents/dozen in March 2008 with a prevailing U-B price of 165.6 cents per dozen.
*Nine-month average production cost in 2009 is 59 cents/dozen, ranging from a high of 63.7 cents/dozen in June to a low of 57 cents/dozen in September. The approximately 9% reduction in production cost over the 68 cents/dozen recorded in 2008 is attributed to lower ingredient costs. Production costs peaked in June and July of 2008 at 73 cents/dozen.