Cal-Maine Soars as Egg Profits Boil Over
US - Cal Maine Foos Inc. have recently reportd a five-fold increase in the last year due to a cracking egg market.Higher egg prices to continue into 2008
Tight supplies and robust demand have pushed up egg prices in recent times. According to the egg market news report from the U.S. Department of Agriculture (USDA | news | PowerRating | PR Charts ), large eggs cost $1.48 per dozen on Jan. 4, in the Midwest region, more than double the price of 69 cents a dozen last year. What spurred the demand? Although U.S. population grew by some 3 million in 2007, the number of layers or chickens raised for egg production, decreased by 4 million.
The output of table eggs or eggs available for human consumption declined 1.3% in 2007, pushing prices higher. Also fueling demand was a strong export market for eggs, thanks to a weak dollar. U.S. export of shell eggs and products measured in shell-egg equivalent totaled about 251 million dozen in 2007, the highest since 1996, with shipments to the EU-27 more than doubling.
Inventory levels are down, as egg producers continue working towards increasing cage space to house fewer hens in facilities. This is in compliance with the United Egg Producers (UEP | news | PowerRating | PR Charts ) Certified Animal Welfare program. A reduction in the backlog of stored processed dried eggs also helped the demand. According to the USDA's Cold Storage report, total frozen egg stocks as of Jan. 31 declined 19% from year-ago levels and also down 4% from December 2007. Cal-Maine Foods, which provides over 15% of the total U.S. egg consumption, was decidedly a beneficiary from the strong demand that boosted egg prices.
Can the high egg prices be sustained this year?
Many of the factors that helped the demand in 2007 are expected to continue into 2008. Scott Beyer, the Poultry specialist with Kansas State University Research and Extension, does not expect egg supplies to increase any time soon. He believes the downturn in the economy and high regulatory compliance costs should make egg producers wary of adding new facilities and even if they are ready, it may take two years to get a new facility ready to pack eggs. USDA livestock and poultry analyst Joel Greene expects Table egg output to be up by a modest 1.2% in 2008 and expects New York wholesale prices to remain relatively strong, between $1.07 and $1.14/dozen. Rising corn demand may also help sustain higher egg prices this year. Corn, which has become somewhat of a celebrity crop in recent years amid the evolution of bio fuels like ethanol, constitutes about 70% of the feed ration for a hen. So, egg prices are affected by swings in corn prices. High feed costs with more corn going into ethanol production, may make egg producers reluctant to increase their flock size, which in turn will reduce egg inventories, boosting demand and thereby prices. However, UEP forecasts that flock inventory or number of birds producing eggs will increase about 3-5% this year.