Egg prices rise again, with laying hen "supply gap" as an important driver

"The previous climb in egg prices was mainly driven by high temperatures." Zhu Binglin, vice president of Shanxi Jinlong Group, explained to reporters that high temperatures caused a rise in the proportion of laying hens "resting in summer," reducing egg supply. With both laying rate and egg weight declining, the national egg supply fell by 5%-10%. In addition, the increase in the number of culled hens and the decrease in the number of laying hens over the past two months were also important drivers of the price rise. It is understood that from June to July this year, egg prices fell as low as 3 yuan/jin; with feed costs plus labor costs, egg sales lost 0.5 yuan/jin. By this calculation, every 1,000 hens lost 80 yuan per day, leaving farmers with no choice but to cull laying hens.

At the same time, with the decline in the number of breeding sows, pig prices recovered from March, and by August, live pig prices had approached 10 yuan/jin. The "takeoff" in pig prices also drove up the prices of broiler chickens, culled hens and eggs. Among them, the culled hen market was strong, with prices the most firm. The price gap between culled hens and eggs continued to widen, farmers culled large numbers of hens, and laying hens decreased substantially. Under the combined effect of the above factors, egg supply continued to shrink, contributing to the "soaring" egg prices in July-August.

Regarding future egg prices, Zhu Binglin believes that March and April this year were the peak period for placing chicks, and these chickens will start laying in September. The release of egg supply will cause egg prices to fall to around 3.8 yuan/jin from late September to early October. And this will also become the lowest point in the second half of this year.

However, in the long term, egg price increases are still expected. After January 2016, egg prices in major national production areas are expected to rebound to 4.3-4.5 yuan/jin.

This is because, although the economic downward pressure in 2015 was enormous, for eggs, the current market price has fully absorbed the consumption shrinkage caused by the economic downturn. Data show that in July, the number of laying hens increased by only 1.6% year-on-year, while on July 31 last year the egg price in the Yuncheng production area was 4.75 yuan/jin, and on July 31 this year it was 3.55 yuan/jin, a decline of 25%. In the future, egg consumption is unlikely to see major changes affecting the overall trend of egg prices. On the supply side, based on data held by Shanxi Jinlong Group, Zhu Binglin expects the reduction in the number of laying hens in the coming period may reach as high as 10%. He explained that from May to August, the number of chicks added to flocks was half or even less than the same period last year. Five months later, that is, from October 2015 to January 2016, the number of newly laying hens will gradually decrease.

Data show that in terms of the age structure of laying hens, in July, the proportion of 90-120 day old chicks increased significantly, while the proportion of old hens over 450 days old was only 6.54%. According to Yang Xiaolei, poultry and egg research manager at Zhihua Data, in August, laying hen farming profits were relatively good, farmers did not engage in large-scale culling, and the inventory of laying hens will continue to increase. At the same time, with the end of high temperatures, the laying rate of hens will rebound, and egg supply will increase. "But it is worth noting that in July, the proportion of 0-60 day old chicks decreased significantly, while the proportion of 400-450 day old hens increased, so the culling situation of old hens in September-October is a key focus." Yang Xiaolei added that if in September and October high culled hen prices stimulate farmers to cull laying hens on a large scale, and if newly laying hens clearly decrease in the coming period, the inventory of laying hens will enter a "supply gap period," and at that time, egg prices will "set sail" again.