What a difference a year makes. Exactly a year ago this column noted an oversupply of eggs had pushed egg and most egg product prices to multi-year if not record lows during the summer of 2016. Prices firmed slightly last December only to decline, although holding above summer lows, during the first quarter of 2017. Last week breaking egg prices were as much as six times the lows set in the summer of 2016, and graded eggs were as much as four times their summer lows of a year ago after surging the past three months.
Nest run breaking egg prices fell below 20c a dozen (breakeven around 50c) from June through November 2016, climbed to around 40c a dozen (low side of price range) in August 2017 then exploded to around 95c a dozen in late November, up about 150% from August. Grade A large eggs quoted by the U.S. Department of Agriculture saw wider price swings in 2016 and through the summer of 2017 before also surging nearly 140% from August to December 2017.
A year ago the egg laying industry had fully recovered in numbers from a massive loss of laying hens to avian influenza in 2015. The rapid recovery, coupled with a faster-than-expected move into cage free egg production — without a like reduction in the conventional laying flock — amplified and prolonged the oversupply of eggs and kept prices below breakeven costs for many producers. But the industry was slower than normal to reduce flock sizes needed to correct the oversupply, in part, some surmised, because much of the flock was young from rebuilding and at the height of production with investments not yet recouped. Also a factor was relatively low feed costs due to bumper corn and soybean (soybean meal) crops in 2016. At the same time, some demand had been lost to egg replacers or other ingredients due to shortages caused by A.I. losses.
Though well above historic lows a year earlier, both graded egg and breaking stock prices remained low through the summer of 2017. Total monthly table egg production held above same month year-earlier levels through August, although the gap was narrowing and production in September and October finally fell below year-earlier levels. U.S. table egg production in December 2016 was 662,533,100 dozen, up 68,815,900 dozen, or 11.6%, from December 2015, according to U.S.D.A. data. By October, production of 639,408,600 dozen was down 3,241,300 dozen, or 0.5%, from a year earlier. It should be noted that egg production in the three largest producing states, which account for 36% of U.S. table egg output (Iowa 17%, Indiana 10% and Pennsylvania 9%), still was up a combined 5,183,900 dozen, or 2.3%, from a year ago in October. The declines were in several smaller producing states, led by Florida, down 2,066,700 dozen, or 13%.
A contributing factor to lower egg production this fall was the increased level of forced molt (hens temporarily taken out of production to be later brought back with the ability to increase and prolong production), with 3.5% of the total laying flock being molted as of Sept. 1 (2.7% a year earlier) and 3% as of Oct. 1 (2.1%). Molt was below year-earlier levels in all prior months of 2017 except for March, and again fell below the prior year as of Nov. 1.
Meanwhile, cage-free egg production has soared in 2017 and still is increasing. There were 49,400,000 cage-free layers (organic and non-organic combined) producing 21,612,510 dozen eggs weekly in November, up 11,800,000 hens, or 31.3%, from November 2016, with egg production up 30.1%. Cage-free hens made up more than 15% of the total laying flock in October.
At the same time, demand for egg products has been strong. Domestic demand has exceeded expectations while export demand also has been higher due to avian influenza in several parts of the globe and discovery of fipronil, an insecticide banned from human food products, on eggs from some European producers, including top-producer The Netherlands. U.S. processors in some cases have had to turn away export business and delay or split shipments to domestic buyers.
Dried whole egg prices have more than doubled since August, while dried yolk was up about 85% and dried white was up 55%, with values also up sharply from a year ago.
While egg industry sources expect a correction in egg and product prices from the rapid run-up, the egg market has been anything but predictable in recent years.