The country’s worst-ever avian flu outbreak is sending prices skyrocketing.
The most severe outbreak of avian flu to hit U.S. soil has a cavalcade of businesses scrambling to cope with a severe egg shortage and experts warning of record-high egg prices later this year.
The U.S. Department of Agriculture estimates the ongoing avian flu outbreak plaguing much of the nation’s Midwest has affected more than 47 million birds. The domestic egg and poultry industries have been hit hard, as entire flocks are being wiped out either by the sickness itself or agriculture workers desperately trying to prevent its spread.
“It’s not discriminating against who’s being affected by it. Certainly the losses are greater when you have more birds,” says Brigid Tuck, senior economic impact analyst at the University of Minnesota Extension, noting that outfits large and small have been equally impacted by the disease’s spread. “A smaller operation may lose fewer birds, but that may have been their [owners’] whole livelihood. That could be just as devastating as the bigger operations.”
According to the USDA, avian flu cases have been reported this year in 15 states. Iowa, America’s largest egg-producing state, and Minnesota, the country’s second-largest turkey producer, have been particularly afflicted.
“In Minnesota, the number of lost turkeys represents about 11 percent of our total turkey production. … Of the chickens we’ve lost that are laying eggs, 32 percent of our layers have been affected by this,” Tuck says. “Iowa has experienced much worse than this, not to downplay what has happened in our state here at all.”
In Iowa, more than 29 million birds are thought to have been affected by avian flu, according to the state’s Department of Agriculture. About 40 percent of the state’s egg-laying chickens and 11 percent of its turkeys have been impacted.
“Before the outbreak, we had 303 million birds [raised for the purpose of laying eggs] nationally. So we’ve lost about 35 million birds, plus or minus,” says Rick Brown, senior vice president at Urner Barry, a food commodity research and analysis firm.
Those massive losses are wreaking havoc on egg prices. The USDA predicted Wednesday that a dozen large Grade A eggs in New York would cost between $1.60 and $1.66 on average in 2015 – well above the $1.30 to $1.36 price range predicted just last month. It would also be an uptick from last year’s record-setting $1.42 per carton price.
“Admittedly, there are inherent fluctuations within the egg industry. Under normal circumstances, you’d still have fluctuations,” Hongwei Xin, a professor and director of the Egg Industry Center at Iowa State University, said in an interview last month on Iowa Public Television’s “Iowa Press.” “But this sort of magnitude, we think, is definitely an impact by the avian influenza outbreak.”
Consumers haven’t felt the pinch too much just yet, but they are unlikely to emerge with their pocketbooks unscathed, Brown says. He says two-thirds of all eggs produced in the U.S. remain in a shell, many of which are placed in cartons and sold in grocery stores. This stock of eggs has been hit significantly less by the avian flu outbreak than those used in the egg products industry, which Brown says encompasses “everything from mayonnaise to salad dressings to cake mixes to pasta to bread.”
“I mean you name it,” he says. “In that industry, we’ve probably lost about 33 million birds. So you’ve lost over 30 percent in that one sector, and that’s had a huge impact on price. They’ve lost a third of their production, and we’re seeing shortages.”
As an example, wholesale prices for breaker eggs – which are cracked open and then typically liquefied, dried or frozen and used as ingredients in other products – ballooned 273 percent from April 20 to June 8, Brown says.
“The market advanced so quickly that the retailer didn’t have time to pass it along to the consumer on the shelf. It’s only the last 10 days that nationally you’re seeing higher prices on the retail shelf,” Brown says. “Anything that egg is the primary ingredient in is going to be higher [in terms of price].”
Flu-related concerns indeed have touched a smorgasbord of food products and their parent companies. Packaged food and cereal giant Post Holdings last month announced that a third company-owned chicken flock in Nebraska had been impacted by the ongoing avian flu outbreak, and that “risks and uncertainties” it faces going forward include “our ability to continue to compete in our product markets and our ability to retain market position.”
Earlier this month, a Texas-based grocery store giant, H-E-B, limited customers at its stores to purchasing only three egg cartons at a time.
“H-E-B is committed to ensuring Texas families and households have access to eggs,” a statement from the company said, according to Houston Press. “We are asking our customers to limit their purchase to three cartons per purchase. The signs placed on our shelves last week are to deter commercial users from buying eggs in bulk.”
Even the fast-food industry is feeling the pressure. Whataburger outlets have limited the service of eggs to between 5 a.m. and 11 a.m., despite full breakfast hours ranging from 11 p.m. to 11 a.m.
“Most major U.S. egg producers have been affected by the recent outbreak of avian influenza and are experiencing product shortages. This is impacting restaurants and grocers across the country, including Whataburger,” the company said in a statement last week. “We do not know how long it will take to fill the current gap in our supply, but we will do everything in our power to get eggs back into all of our restaurants as soon as possible.”
The U.S. in a normal year is a primary exporter of about 30 million dozen eggs in a given month, but soon will begin importing eggs from the Netherlands to help fill the void left by the millions of chickens lost to the outbreak.
“Through a rigorous process of verification by [the USDA’s Food Safety and Inspection Service] of The Netherlands government inspection system, FSIS has determined that the country’s food safety system continues to be equivalent to that of the U.S., which ensures that product is safe, wholesome and properly labeled,” the USDA said in a statement earlier this month.
The U.S. has not imported eggs from a European market since 2002, and a rise in imports could create further price volatility. What’s more, with a host of international markets restricting poultry and egg imports from the U.S., an increase in foreign product coming into the country and a drop-off in exports going out of it will ultimately drag on U.S. gross domestic product.
Still, with domestic supplies considerably slashed, the U.S. would face a crunching shortage otherwise.
“We’re losing about 28 million eggs a day, and when you do the math further on that, that’s the equivalent of about 100 loads of shell-eggs a day,” Brown says. “To get that automatically to come back to the United States is difficult.”
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- The article describes shortage disequilibrium. Notably, the article describes the shortage of eggs following the outbreak of avian flu which has led to death of birds.
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Supply curve 1: Supply of eggs drop from Q to Q1
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- Soergel, Andrew. “Egg Shortage Scrambles U.S. Food Industries.” June 12, 2015.