Soaring egg prices peaking, egg products still rising

by Ron Sterk
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Extremely hot weather across much of the country in July, including major egg production areas of the Midwest, East and Southeast, affected the number and size of eggs laid and resulted in dramatic price increases for eggs and egg products. Egg prices appear to be peaking with the advent of cooler weather, but egg product prices still are catching up. In addition, the East coast was dealing with Hurricane Irene and producers faced soaring feed costs.

The hot weather caused multiple problems for egg processors. Not only did hens lay fewer eggs, which affected both breaking and retail supplies, but the eggs also were smaller, resulting in less total liquid and less product to freeze or dry.

“Heat impacts separation,” said Robert Kellert of Bender Goodman Co., Inc., a Jersey City, N.J.-based egg product, dairy product and shortening supplier. He also noted costs were the same for breaking large or small eggs, but small eggs yielded less product.

In addition, the lack of larger eggs available to retail channels resulted in increased sales of larger breaking eggs into the graded or retail market, further reducing supplies available to processors. The average price of large Grade A eggs increased about 40c a dozen, or 50%, from late May lows to $1.19½@1.30½ the week ended Aug. 19, with about 75% of the increase coming in August, according to U.S. Department of Agriculture data.

Mr. Kellert noted the spread between graded large and extra-large eggs had widened to almost 20c a dozen, the most he could remember in the past 35 years, but currently had narrowed to around 11c, indicating better supplies of larger eggs.

Prices for nest run eggs broken by processors surged more than 40% from summer lows of 54@58c a dozen in late May and early June to 78@82c at the end of August. Some processors paid premiums of 2@3c a dozen above quoted levels to secure enough supply to keep operations running and fill orders. Egg prices in late August were more than 60% above values of a year ago, when prices were 50@53c a dozen in late May, fell to 38@41c in late June, then rose to 48@51c in late August before falling to four-year lows of 30@33c in late September of 2010.

Breaking stock prices edged up a few more cents a dozen early last week but began to ease late in the week. Processors indicated they could get supply at quoted prices rather than paying premiums as was the case a week earlier. Trade sources indicated chickens were eating more solid food, which should improve the size and number of eggs laid.

“Size is coming back up,” Mr. Kellert said.

Even though processors raised prices for egg products almost weekly to cover soaring egg costs, most of those increases failed to keep pace with the 40% increase in nest run egg prices since mid-July through late August. Since mid-July, dried whole egg values increased about 12%, dried blends and yolks about 10% and dried whites less than 5%. Frozen whole egg prices were up about 13% during the same time, frozen yolks were up 16% and whites were up only about 3%. Liquid egg products, which are the first to react to higher egg prices, saw whole and yolks up more than 20% but whites were up only 4% since mid-July. Yolks especially were in tight supply.

Traders expect egg product prices to increase a bit more in early September, reflecting the lag to higher egg prices.

Trade sources said processor inventories are tight or largely committed. Inventories were limited in part because they could barely get enough eggs to process in late July and early August, and because they did not want to be holding high-priced inventory when egg values eventually drop. Processors passed on price increases to some degree, but in some cases saw tighter or even negative profit margins, especially for dried products, as they were reluctant to raise prices enough or in advance of anticipated higher egg prices. One processor noted that while buyers tend to resist rising prices, they also want lower egg prices reflected quickly in product prices.

Rising egg product prices had a mixed effect on sales. In some cases, users increased orders in an attempt to beat the next price increase, processors said. But other buyers ordered only for immediate needs to keep high-priced inventory at a minimum. The result was mostly slow to moderate trading activity the past few weeks. Regular customers were most likely to get supplies at the best prices, one processor said, while new customers sometimes were turned away. Many large users already were booked through the end of the year, which meant processor supplies often were committed.

Typically, egg and egg product prices decline about this time of year as production increases. This year, trade sources expect some correction, but possibly not as much as usual because growers facing high feed costs are expected to keep production in check.

In addition, Hurricane Irene was expected to have a short-term impact as consumers swept eggs and other basic food products off store shelves along the East coast. People tend to make hard boiled eggs ahead of major storms so they have eggs in case of power failures.

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