Scrambled egg market may be near bottom

by Ron Sterk
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Prices for retail eggs as well as breaking eggs used by processors have declined sharply in recent weeks due to ample supplies, pulling egg product prices lower in their wake and creating unease among users about when to buy as prices show signs they may have bottomed.

The U.S. average price for Grade A large eggs as of Jan. 20 had plunged about 55c a dozen, or more than 35%, since the end of December when values were the highest since March 2008, according to U.S. Department of Agriculture data.

“Demand for shell (retail) eggs has stabilized and is just below average as the recent sharp drop in wholesale prices has rekindled interest at retail,” the U.S.D.A. said in its Jan. 18 Shell Egg Demand Indicator. “History tells us to expect improved demand into early February. Time will tell if the trend holds true.”

But in its Jan. 25 report the U.S.D.A. said, “Shell egg demand continues to show improvement and has risen above average as the recent sharp drop in wholesale pricing has encouraged retailers to once again feature shell eggs in store circulars.”

When retail egg prices are rising, larger breaking stock eggs often are redirected to the retail sector, which was the case at the end of 2011. Conversely, when retail prices decline, more graded eggs may be offered to processors, pressuring breaking stock prices, as has been the case since the first of the year.

Prices for nest run breaking stock as of Jan. 13 had fallen about 13c a dozen, or 21%, since late December, but were down 34c, or 41%, from their three-year high of 81@84c in early November, according to U.S.D.A. and Food Business News data. Breaking stock prices have held steady the past two weeks.

Dried, frozen and liquid egg product values have followed suit. Prices for dried whole eggs and yolks declined about 15% from mid-November to mid-January, blends fell about 12% and whites lost 8%, according to Food Business News. Frozen whole eggs sank about 22%, yolks fell 15% and whites lost 6% during the period. Liquid whole egg values plunged 36%, whites 23% and yolks 18%.

Last week dried and frozen egg products were unchanged and liquid whole egg prices were 2c a lb higher, the first increase since mid-October 2011, according to Food Business News. Liquid products usually are the first to reflect changes in egg prices.

The market disruption began last summer when heat and drought adversely affected egg production, pushing prices higher. Oct. 1 values were up 90% from a year earlier. In the last quarter of 2011 retail egg supplies again were reduced in part by concerns over animal welfare at one of the nation’s largest egg producers. Several grocery and restaurant chains refused to sell their eggs, resulting in a scramble for supply just as demand was seasonally increasing. But other growers stepped up and by the end of 2011, both egg and egg product supplies were ample.

One processor suggested that as egg prices were rising in the final quarter of 2011, growers kept increasing production rather than preparing for the cutback through forced molting or culling that usually occurs around the first of the year.

“They rode the uptrend and waited too long to make adjustments,” the processor said.
At the same time, egg product stocks were ample in part because the eggs refused by retailers were channeled to processors. Stocks of frozen egg on Dec. 31, 2011, were up 42% from December 2010, the U.S.D.A. said in its latest Cold Storage report, with frozen whites up 57%, yolks up 85%, whole and mixed eggs up 58% and unclassified eggs up 31%.

In its Monthly Inventory of U.S. Dried Eggs, the U.S.D.A. said Dec. 31, 2011, stocks of whole dried eggs were up 4% from a year earlier, whites were up 20%, yolks were up 86% and blends were up 22%.
In its most recent Egg Products report, the U.S.D.A. said the total amount of edible liquid produced in November was 226 million lbs, down slightly from October but up 7% from November 2010.
In addition to the trend noted by the U.S.D.A., retail egg prices typically trend higher due to increased demand leading up to Easter, which this year is April 8. But processors are reluctant to assume the same will happen this year after the previous few weeks’ activity.

“Perspective is wonderful, but it’s not what it used to be,” the processor said. “There doesn’t seem to be a pattern to anything any more.”

In its January Livestock, Dairy and Poultry Outlook, the U.S.D.A. said retail egg production was expected to expand slightly less than 1% in 2012, similar to the increases in 2011, which should keep a lid on average prices for the year.

“Prices are not expected to be as strong, averaging $1.02@1.10 per dozen, about 8% lower than the previous year,” the U.S.D.A. said. New York Grade A large eggs averaged about $1.15 a dozen in 2011 and about $1.06 in 2010.
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