Milling & Baking News - March 27, 2018 - 28

Egg Update

28 / March 27, 2018

Milling & Baking News

expansion plans in the United States.
The more-established chain, Aldi, has
had a U.S. presence since 1976, but doubled its U.S. store count since 2002. The
150 locations opened in 2017 bring the total above 1,750. Lidl, a competitor of Aldi
in Europe for decades, opened 10 U.S. locations in the summer of 2017. Bringing
their rivalry to America had repercussions
within larger chains as well. Walmart began cutting prices on staple ingredients,
which put pressure on Kroger and other
major grocery companies. An increase in
grocery locations increased graded egg
demand, pulling eggs to retail that might

Egg product prices

(dried egg yolks vs. dried egg whites)
$5
Dried egg yolks
$4
per lb

riven in part by a larger U.S. profile for discount European grocery chains and lower everyday
prices at some mega-retailers, increased
demand for graded eggs has prices on an
upward trajectory and puts egg breakers
in a bind as they look to retain profitability while competing for eggs to process.
Egg breakers often are reluctant to adjust prices too quickly due to the volatility of shell egg prices. But a run-up in the
price of breaking stock eggs has forced
some processors to implement steady
increases for the dried, frozen and liquid
egg products they supply.
Prices of nest run eggs in the week ended March 16 were $1.15 to $1.20 a dozen,
a 121% increase since mid-January when
prices began to rise. Prices are now more
than four times higher than a year ago.
Egg product prices have followed
breaking eggs higher, initially for yolks
and then for whites. Dried egg yolk
increased $1.90 a lb over the last four
months of 2017, an 84% increase, before
descending, though they remain 66%
higher than a year ago. From September
to November, frozen yolks rose nearly $1
a lb, a 100% increase.
After remaining steady for much of
that period, egg white prices dipped
briefly before beginning weekly increases
exceeding other egg product categories.
Liquid white prices have more than doubled in 2018. Frozen whites at 75c to 78c a
lb in the week ended March 16 were 63%
higher than late-January levels. Dried
whites were up 95c a lb, or 30%, since Jan.
19 and were up 62% from a year ago.
To meet steadily rising demand, U.S.
egg production has increased. Although
the U.S. Department of Agriculture lowered its 2018 egg production forecast by
10 million dozen - a 0.1% decrease to
8,935 million dozen - in its latest World
Agricultural Supply and Demand Estimates report, the figure still represents a
1.4% increase from a year ago and a 4.2%
increase from 2016.
Changes in the retail scene have increased the demand for table eggs,
an industry source said. Two German
discount grocers have launched rapid

$3
Dried egg whites
$2
Aug. Sept. Oct. Nov. Dec. Jan. Feb. March
2017
2018

have otherwise gone to egg breakers, according to trade sources.
"Featuring eggs as a loss leader to
increase foot traffic is not new, but retail chains using everyday low prices to
compete for consumers is," said Richard
Broad, vice-president, Bender Goodman
Co., Inc. "As a result, there has been an
increase in cartoned egg sales this year
(per U.S.D.A.)."
Meanwhile, interest in cage-free eggs
has increased. But some analysts say
cage-free production is getting ahead of
the curve, ramping up beyond demand
and without taking out a commensurate
number of traditionally-housed chickens.
Cage-free flocks could increase this
year along the lines of a recent trend. In
its March cage-free shell egg report, the
U.S.D.A. estimated the cage-free laying
flock at 51,857,000. That's up 4,057,000
layers, or 8.5%, from October. Weekly

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Retail demand seen
driving egg prices higher
cage-free egg production of 22,611,810
dozen in the March report is up 1,699,320
dozen, or 8%, from October.
McDonald's, Taco Bell, Walmart, PepsiCo and numerous other restaurants,
retailers and food processors have each
made cage-free pledges. In a rush to take
advantage of the opportunity to get into
new markets, some companies are producing cage-free eggs without contracts
in place that would guarantee a premium
to traditionally-produced eggs.
But as cage-free egg production now
exceeds demand, some companies have
adjusted ambitious plans. Cal-Maine
Foods committed significant resources to
cage-free production but announced in
October it was scaling back.
"The higher price gap between conventional eggs and specialty eggs has
resulted in reduced demand for specialty
eggs," Dolph Baker, chief executive officer of Cal-Maine, explained at the time.
"We have adjusted our production levels
in line with current customer demand
for cage-free eggs, and we are well-positioned to increase our capacity when demand trends change."
Despite the recent increase in egg and
egg product demand, egg replacers continue to claim a larger share of the egg
product market than a few years ago, and
newer plant-based egg alternatives also
are coming on the market. Following the
massive U.S. avian influenza outbreak of
2015, many food producers pulled eggs
out of formulas due to high prices and
short supplies. Even though flocks have
recovered and prices have stabilized,
many have kept their new formulations.
"I don't know of many companies that
have decided to increase egg usage to the
prior, higher levels now that prices have
dropped," Mr. Broad said. "Though driven by price, reducing or eliminating eggs
has served for some as an opportunity to
address animal welfare issues, sustainability and, in addition, a growing interest in vegan foods."
Mr. Broad will present an egg market
outlook at the annual Sosland Publishing
Purchasing Seminar in June. MBN
- Matt Noltemeyer
bakingbusiness.com / world-grain.com

http://STOCK.ADOBE.COM http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - March 27, 2018

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