On average, a healthy hen can lay up to 250 eggs in a single year. California holds approximately 1.9 million egg laying hens that produce over 5 billion eggs and make close to $400 million dollars in revenue (CAPS). California is currently the 5th largest producer of eggs in the United States (CDFA). Eggs are currently ranked as California's 20th largest grossing commodity (CAPS). The United States produces 75 billion eggs per year, around 10% of the worlds supply. Of the 75 billion eggs, 60% are used by consumers, 9% go to the food industry and the remaining 31% are turned into egg products (CDFA).
Table 1: Egg Production and Value, 2000-2011 Year | Number of Eggs (millions) | Total Value ($1,000) | 2000 | 6,319 | 238,796 | 2001 | 6,082 | 238,951 | 2002 | 6,257 | 204,175 | 2003 | 5,454 | 283,219 | 2004 | 5,454 | 292,688 | 2005 | 5,271 | 187,965 | 2006 | 5,231 | 223,903 | 2007 | 5,290 | 346,426 | 2008 | 5,271 | 440,438 | 2009 | 5,304 | 319,805 | 2010 | 5,285 | 367,788 | 2011 | 5,287 | 391,578 |
*According to the CAPC page 103

Table 1 shows the number of eggs being laid per year is decreasing, while the price per dozen is increasing. It is a simple supply and demand situation. This table also shows the total value of of the eggs fluctuates tremendously, and that there is not a direct correlation between the number of eggs and the total value. Rather it is the cost per dozen and the total value that show correlations.

Figure 1: Leading Counties in Egg Production in California

*CDFA

As You can see in Figure 1, the top egg producing counties in California are San Diego, San Bernardino, Riverside, Merced, Stanislaus, and San Joaquin Valley. These counties are all located in the Central Valley and in Southern region of California. In northern California there is egg production in certain counties such as Petaluma, but their production level is not as large as the Central Valley and Southern counties. Table-2 shows that the average temperature of the top six counties are all within 10 degrees of each other. All of the monthly temperature averages for each county do not fluctuate by more the 15 degrees from any mouth (Western Region Climate Center). Therefor the hens are more comfortable and lay more eggs. When the weather changes and the temperature fluctuates to a large degree, it causes the hens to be stressed. When stressed, it causes the hens to lay less eggs.

Table 2: Average Temperature and Precipitation by County Name of County | Average Temperature (°F) | Average Precipitation (Inches) | San Diego | 64.1 | 12.74 | San Bernardino | 66.9 | 6.06 | Riverside | 70.0 | 6.35 | Merced | 61.1 | 16.22 | Stanislaus | 62.1 | 13.12 | San Joaquin | 61.5 | 18.58 |
*According to Western Region Climate Center

Climate does not play as big of a part in egg production as in other livestock products. This is because most layers are kept inside. Inside, they are kept at a constant temperature, which reduces stress from cold and hot weather as well as rain and snow. Taking climate out of the equation allows for the maximum production of eggs in a year (Effects of Proposed Restrictions on Egg Laying). In the Central Valley counties (Merced, Stanislaus, and San Joaquin), the average rainfall is much higher than the Southern counties. But, the egg production is higher in Southern California because of the method of raising the animals inside and controlling the amount of water that is given to the hens (Effects of Proposed Restrictions on Egg Laying). Raising layers inside is all around more efficient as well as less costly for the producer and allows for maximum profit to be maid.
Table 3: Layers and Egg Production, 2010-2011 Month of the Year | Average Number of Layers (1,000) | Total Egg Production (millions) | December | 19,307 | 454 | January | 19,113 | 439 | February | 18,918 | 401 | March | 19,006 | 455 | April | 19,150 | 431 | May | 19,045 | 440 | June | 19,081 | 433 | July | 19,008 | 444 | August | 19,144 | 454 | September | 19,345 | 442 | October | 19,310 | 453 | November | 19,406 | 437 |
*According to CAPC page 103

Table-3 shows that every month of the year has over 400 million eggs produced, even in the winter months. This is due to the indoor living for the layers (Effects of Proposed Restrictions on Egg Laying). Climate is no longer the largest factor that impacts the number of eggs produced, but the number of layers that is the largest factor in egg production (Effects of Proposed Restrictions on Egg Laying).
The term ‘commodity’ is commonly used in reference to basic agricultural products that are either in their original form or have undergone only primary processing. A related characteristic is that the production methods, post harvest treatments and/or primary processing to which they have been subjected, have not imparted any distinguishing characteristics or attributes. Agricultural commodities are generic, undifferentiated products that, since they have no other distinguishing and marketable characteristics, compete with one another on the basis of price (Egg Marketing) Table-4: Wholesale prices Eggs, grade A, large, per doz.

Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Annual | 2003 | 1.17 | 1.18 | 1.20 | 1.13 | 1.00 | 1.19 | 1.15 | 1.27 | 1.25 | 1.33 | 1.44 | 1.55 | | 2004 | 1.57 | 1.58 | 1.62 | 1.56 | 1.37 | 1.31 | 1.25 | 1.27 | 1.14 | 1.08 | 1.08 | 1.19 | | 2005 | 1.21 | 1.28 | 1.13 | 1.16 | 1.18 | 1.13 | 1.16 | 1.16 | 1.27 | 1.26 | 1.27 | 1.35 | | 2006 | 1.44 | 1.32 | 1.30 | 1.28 | 1.20 | 1.24 | 1.21 | 1.24 | 1.25 | 1.25 | 1.35 | 1.54 | | 2007 | 1.54 | 1.74 | 1.63 | 1.61 | 1.50 | 1.37 | 1.50 | 1.63 | 1.82 | 1.77 | 1.86 | 2.09 | | 2008 | 2.17 | 2.16 | 2.20 | 2.06 | 1.93 | 1.92 | 2.01 | 1.85 | 1.97 | 1.85 | 1.83 | 1.83 | | 2009 | 1.85 | 1.79 | 1.69 | 1.77 | 1.50 | 1.52 | 1.49 | 1.63 | 1.62 | 1.59 | 1.70 | 1.77 | | 2010 | 1.78 | 1.87 | 1.82 | 1.77 | 1.52 | 1.49 | 1.44 | 1.51 | 1.75 | 1.45 | 1.67 | 1.79 | | 2011 | 1.80 | 1.70 | 1.73 | 1.72 | 1.69 | 1.68 | 1.64 | 1.71 | 1.94 | 1.87 | 1.83 | 1.87 | | 2012 | 1.93 | 1.79 | 1.77 | 1.82 | 1.69 | 1.67 | 1.64 | 1.88 | 1.88 | 1.96 | 1.96 | 2.00 | | 2013 | 1.93 | 1.96 | 1.92 | 1.91 | 1.87 | 1.85 | 1.83 | 1.83 | 1.89 | | | | | *California Agriculture Statistics Review

The egg industry has exhibited the most dramatic change toward a more vertically integrated system, proportionately more than broiler and turkey production. As shown in Table-4, the current price for a dozen, wholesale, large, grade-A, eggs is $1.89. Over the past ten years the price per dozen has not fluctuated much. Although there is not much fluctuation, the price of eggs has been steadily increasing. In January of 2003 eggs were $1.17 per dozen and in January of 2013 the price of eggs was $1.93 per dozen. From the beginning of 2007 to the beginning of 2008 the price of eggs spiked from $1.54 to $2.20 per dozen. Prices have increased by 1.3 percent from August to September in 2013. Egg prices are among the most volatile food prices due to the relative lack of processing from farm product to retail product (Agricultural Marketing Research Center). Since eggs require little processing, a larger percentage of their price is dependent on commodity prices. Additionally, eggs are a fresh product with no frozen stocks available to manage changes in short-term supply and demand. This was the largest increase in price over the past ten years. In 2014 it is predicted that the average prize of eggs will increase 2.0-3.0% from 2012. (Agricultural Marketing Research Center)
Figure-1: Number of eggs export since 2008

*California Agriculture Statistics Review
Figure-2:Top five export countries of the U.S.

*California Agriculture Statistics Review
As shown Figure-1, in 2012 the United States exported double the amount of eggs they export in 2008. There are three possible reason for this: 1. The consumption of eggs inside the U.S. has decrease; 2. the production of eggs in the U.S. has increased; 3. The exporter of eggs see an opportunity to make money. Figure-2 shows the shift in the amount of eggs that have been exported since 2008. Japan is the single most important export market for U.S. Egg products. Eggs in Of the estimated 223.7 million cases of shell eggs produced in 2012. Of those 22.7 million cases 123.8 million cases (55.3%) went to retail, 71.3 million cases (31.9%) were further processed (for foodservice, manufacturing, retail and export), 20.1 million cases (9.0%) went for foodservice use, 8.5 million cases (3.8%) were exported (Agricultural Marketing Research Center).
The growth in egg consumption over the past decade occurred primarily in egg products, rather than in-shell eggs. The following table helps to illustrate the change in the way consumers are using eggs (Agricultural Marketing Research Center)
Table-5 : Eggs In-shell, processed and total farm weight, number per capita per year. Year | In-Shell | Processed | Total eggs | 1975 | 245.4 | 30.6 | 276.0 | 2009 | 172.9 | 73.2 | 246.1 |
* National Agricultural Statistics Service (NASS), USDA.

Table-5 shows the percentage of in-shell vs Processed eggs has significantly changed since 1975. The percent of in-shell eggs for processed was 89% to 11%, in 2009 the percentage of in-shell eggs vs processed is 70% to %30. That is almost a 20% increase in the amount of eggs we process and on the flip side of that we have almost decreased our consumption of in-shell eggs by 20%.
When talking about the price of eggs, there are two different prices. There is the wholesale price, which is the price that the producer sells the eggs at, and then there is the retail price, which is the amount that the consumer pays for a product. The retail price is much higher than the wholesale price because of something called “Value Added”. Value Added is the amount by which the value of an good is increased at each stage of its production. There are many stage of production for eggs, one of which is the transportation of eggs from one stage of production to another. In the United States the most common form of transportation for eggs is refrigerated cars, this is because on August 27, 1999, FSIS made effective a new rule requiring: 1. shell eggs packed for consumers be stored and transported under refrigeration at an ambient (surrounding) air temperature not to exceed 45 °F (7.2 °C); 2. all packed shell eggs be labeled to state that refrigeration is required; 3. any shell eggs imported into the United States, packed for consumer use, include a certification that they have been stored and transported at an ambient temperature of no greater than 45 °F (7.2 °C); and 4. FDA's Egg Safety Rule requires those transporting eggs to maintain an ambient temperature of 45 °F (7.2 °C) beginning 36 hours after laying of the eggs (FSIS).
The greater the distance between producer and consumer, a more complex marketing organization required to insure that the product will reach consumers in the form, place and time desired. Producers may decide to market their produce directly to consumers, (direct marketing) as shown in figure-3, or may choose from a variety of marketing organization that make up a marketing channel.
Figure-3: Direct marketing

*Marketing Organization for Eggs

The marketing channel for eggs is composed f a set of separate but interdependent organizations involved in the process of making eggs available to consumers. Although it is more convenient to work in a direct market, a marketing channel is more convenient when the producer does not have the time or the financial means to carry out a direct market. A typical Marketing channel is made up of: collectors, assembly merchants, wholesalers, and retailers. As you can see in figure-4, the product has the possibility to go threw a five company process. Where as in the direct market it is going straight from the producer to the consumer which is more desirable from a consumer standpoint.
Figure-4: Marketing channel

*Marketing Organization for Eggs
The cages that hold the layers are designed so that when an egg is laid, it either falls onto a conveyer belt or into a small channel and then hand collected. After the eggs have been collected they go through a machine that sorts the eggs by size. Once this has happened the eggs are graded by a USDA employee's, according to the U.S. Standards for interior and exterior quality factors, and are given a AA, A, or B grade (Feedstuff). For the eggs that or grade AA or A, the must be washed according to the USDA standards and then are packaged in cardboard trays.
The collectors, undertake the initial work of assembling the eggs from various producers of local country markets as well as large processing farms. They operate either on a commission basis or by purchasing on their own account. Assembly merchants can be divided into the following categories: local assembly market; independent processor-packer; and a cooperative processor-packer. All three all do the same task just on different levels, they basically get the product form the collector to the wholesaler and sometimes straight to the retailer. Wholesaling includes all the activities involved in selling goods to those who buy for resale or for business use. Wholesalers usually obtain the product from assembly merchants and collectors. The retailer sells the product to the consumer (Feedstuff).
The marketing systems differ widely according to the commodity, the systems of production, the culture and traditions of the producers and the level of development of both the particular country and the particular sector within that country. This being the case, the overview of the structure of the selected major commodities marketed, which follows, is both broad and general.
The egg marketing industry is one that has changed over the years. It has transformed from many smaller producers to one that is highly centralized and more specialized. Prior to World War Ⅱ, egg production came from flocks of less the 400 hens (USDA ERS). By the early 1960's, improved methods of farming and the development of new mechanical equipment led to a shift from small farm flocks to larger commercial operations. Now the majority of egg production comes from flocks of 75,000 layers and some have up to 5 million layers. This shift has increased the supply of egg in the United States and at the same time created an oligopoly market (USDA ERS).

According to the American Egg Board (2013), there are presently 59 egg-producing companies with 1 million plus layers and 16 companies with greater than 5 million layers. There are approximately 172 egg-producing companies with flocks of 75,000 hens or more. These companies represent about 95 percent of all layers in the United States (USDA ERS). Because the egg industry is dominated by so few producers it is clear that it is an oligopoly market. This also generates a large amount of competition, the decisions of one firm therefore influence and are influenced by the decisions of other firms. Strategic planning by oligopolists needs to take into account the likely responses of the other market participants.
In the egg industry, there is not just the producers of eggs, but also the processors of eggs. An example of a processing company is ConAgra Foods Inc. ConAgra Foods, Inc. is an American packaged foods company. ConAgra Foods is a public company with that employs over 34,000 people, and fills the refrigerators, freezers, and pantries of most households. The company makes and markets name-brand packaged and frozen foods that are sold in most retail outlets. Its most popular egg product is Egg Beaters, a pasteurized form of egg that is convenient while also taking out the calories, fat and cholesterol from the yolk. ConAgra was founded in 1919 by Frank Little and Alva Kinney, who brought together four grain mills as Nebraska Consolidated Mills. In 1971, Nebraska Consolidated Mills changed its name to ConAgra, which stands for Consolidated Agriculture. In 1970s brought the company to the brink of ruin as it lost money expanding into the fertilizer, catfish, and pet product industries and as commodity speculation wiped out ConAgra's margins on raw foods. In 1974, Michael Harper, an experienced food industry executive, took over the firm and brought it back from the brink of bankruptcy. In 1993 alone it purchased $500 million in smaller firms, and in 1998 it purchased another $480 million in brands from Nabisco. This is when ConAgra took off and became to monster cooperation it is today. In 2013 the net income is $773.9 million dollars and there are still two months left. The headquarters of ConAgra Foods is in Omaha, Nebraska, but has a branch located in Oakdale, California (Hoovers).
The level of demand for eggs is determined by the price, number of potential consumers, their purchasing power and by the extent to which they prefer to buy eggs rather than an alternative food source. From a supply point of view, a price must be high enough to cover production, storage, and transport costs. If the price remains below what is required to cover their costs, it is unlikely that the suppliers will continue to supply eggs. In the long run, market prices must be both low enough for consumers to purchase and high enough to ensure that producer will supply. Conceptually, if the price received by producers for eggs increases, and other factors remain unchanged, the producers would be willing to supply more eggs, if price was to decrease, the producer would supply less eggs.

Figure-5: Egg Production In U.S. Figure-6:Per Capita Egg Consumption

*USDA Statistics Published on the United Egg Producers' website
The largest supply and demand issue for the egg industry is its ability to balance production with demand. As shown in Figure-5 and in Figure-6 the production of eggs in the U.S. in 2006 is almost equal to the production in 2011. However, the per capita egg consumption has significantly decreased since 2006. This is causing a surplus that will result in a price slump that will eventually affect farmers. This is also why exportation of eggs has increased so much. Producers have to much supply and need somewhere to sell their product, so they send it to other countries (Feedstuff by Rod Smith). Table egg production is expected to continue above the previous year’s level in fourth-quarter 2013, with production expected at 1.8 billion dozen, an increase of 2.7 percent from the previous year. Overall table egg production in 2014 is expected to total 7 billion dozen, up 1.5 percent from 2013, as falling feed prices are expected to encourage producers to expand production (USDA ERS).
A large part of demand of a product has to do with the health benefits of the product. In general, consumers in the United States view eggs to be a healthy source of protein. However, since grade A shell eggs have been implicated as a major source of S. Enteritidis infections in humans in the United States, interventions have been introduced to reduce S. Enteritidis infection in poultry and eggs and the resulting illness in humans. These interventions include State Egg Quality Assurance Programs (EQAPs), which are voluntary programs that are based on Hazard Analysis Critical Control Point (HACCP) principles and designed around production, management, and monitoring practices to mitigate risk for S. Enteritidis contamination of eggs. Motivations for egg producers to adopt an EQAP may include scientific, public health, public relations, or marketing reasons . Initially, producers enrolled voluntarily into state- or industry-sponsored EQAPs. However, in some states, commercial egg producers are required to participate in EQAPs because egg processors, food commodity brokers, insurance companies, and integrated commercial companies are increasingly demanding producer participation in EQAPs as a condition of egg sales (Egg Quality Insurance Program). Its extremely important for producers and processors of eggs to pay close attention to these interventions in order to prevent out breaks of infections, large scale recalls, and law suites.
Given the fact that the consumption of eggs in the United States has been steadily declining in the past seven years, and the surplus of eggs that is overwhelming our markets, it would be an unwise decision for a new agribusiness to become involved in the egg industry. The price for eggs has only slightly increased in the past ten years, and is not projected to keep increasing. It is too large of a risk for not a large enough reword. Although there is promise on the processing end of the egg industry, it would also be unwise for a new agribusiness to become involved because of the large companies that already dominate the industry. Such a large industry that is dominated by such a small number of firms makes it extremely difficult to start a new business that could be successful. The one opening in the egg industry for a new agribusiness is in the exportation market. If a company was able to focus just on the exportation of the excess egg supply, they would be one of few companies that are doing so. Overall the egg industry has reached it's peak and has very little room for growth. All around it would be an unwise decision to start a new company in this industry.

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Eggs as a Commodity
Nico Giacomini
Ag Business 101-02 Row 1, Seat 5