America’s egg crisis is over.
Not only have shortages disappeared, but there are signs of an emerging glut. U.S. prices have tumbled 75 percent from a record in August, after the biggest bird-flu outbreak ever forced farmers to destroy flocks. Since then, the laying-hen population has rebounded faster than expected while demand languished from home chefs to food makers.
With supplies returning to normal, wholesale prices are near a five-year low. The cost of making everything from quiches to cakes is less than before avian influenza killed more than 35 million laying hens and the government spent $1 billion to prevent the disease from spreading.
Cheaper eggs are providing relief to buyers like Marybeth Flynn, the owner of Loretta’s Bake Shop & Cafe in Chicago, who wasn’t able to raise menu prices fast enough last year.
“I lost profits,” said Flynn, who uses more than 500 eggs a week at her shop in the city’s trendy West Loop area. Last summer, every case of 15 dozen cost $40, which was “much too high a price for my small business to absorb,” she said. Now, its as low as $13, less than before the outbreak. “We have since lowered some prices.”
The collapse was swift. While the outbreak last year killed about a 10th of U.S. egg-layers, farmers have since contained the highly contagious disease. They destroyed flocks, built fences to keep out sick birds and installed automatic car washes to disinfect their vehicles. For the first time, some processors in Iowa imported foreign supplies to fulfill contracts.
Much lower prices
After average prices paid by Midwest supermarkets more than doubled in three months, to a record $2.77 per dozen on Aug. 7, the industry set about cleaning up and started boosting production. It only takes about five months from the time a chick is hatched until it is big enough to start laying. As supply increased, a carton of 12 slid to 68 cents as of May 6, according to the U.S. Department of Agriculture, which has cut its 2016 forecast for average prices in New York seven times in as many months.
Production of table eggs, which account for more than 80 percent of supply, reached 613 million dozen in March, up 5.4 percent from December and the biggest increase to start a year since at least 1994, according to the most recent government data. In 2016, total output for all types of eggs will rise 4.5 percent to 8.34 billion dozen, the USDA said in a May 10 report.
Supply surprise
The availability of baby chicks and pullets to replace lost hens “surprised virtually everyone,” and the cleanup was faster than forecast, said Chad Gregory, president of United Egg Producers in Alpharetta, Georgia, a cooperative that accounts for 95 percent of the industry’s hens. There also was expansion in areas unaffected by the virus, where farmers saw their income surge along with prices, he said.
“It turned out to be one of the best years ever for the U.S. egg industry,” Gregory said.
Center Fresh Group in Sioux Center, Iowa, which lost about 5.5 million birds last year, began restoring its flock in November, according to J.T. Dean, the chief operating officer. The company has since recovered about half its capacity and expects to reach full production near the end of the year.
At the same time, demand has yet to recover. Importers who banned U.S. eggs have been slow to resume buying, and even domestic purchases are weak, which means the market may be headed for a surplus, said Brian Moscogiuri, who analyzes the market for Urner Barry, a food-industry researcher based in Bayville, New Jersey.
Lower exports
Exports this year will be the lowest since 2012, the USDA estimates. Shipments in the first three months of this year fell 34 percent from a year earlier with fewer sales to Japan, Mexico and the U.K., government data show.
Some buyers won’t come back, at least not for awhile, according to Rembrandt Enterprises Inc., the third-largest producer of table eggs. After bird flu emerged, demand from the food-ingredient industry dropped 25 percent, with customers modifying recipes to remove eggs and instead use substitutes, said Jonathan Spurway, vice president of marketing at the Spirit Lake, Iowa-based company. While business is recovering, sales two years from now may still be down by as much as 15 percent from before the outbreak, he said.
One such alternative for food makers is an algae-based powder made by TerraVia Holdings Inc., which was previously known as Solazyme Inc. The South San Francisco, California-based company saw sales increase as eggs became more expensive and hasn’t lost any customers now that prices are lower, said Mark Brooks, senior vice president of food ingredients.
Food deflation
Cheaper eggs is reducing costs for restaurants, including Jack in the Box Inc. Red Robin Gourmet Burgers Inc. resumed offering hard-boiled eggs on salads, and Panda Express reintroduced eggs in fried-rice dishes that had been using corn.
Only one U.S. case of highly pathogenic avian influenza has been confirmed this year, at a commercial turkey farm in Indiana. The flock of 62,000 birds, as well as more than 300,000 birds at 10 nearby poultry farms, was destroyed. In 2015, the majority of cases were detected in April and May.
“There is that ongoing risk that this could happen again,” said Knox Jones, a commodity analyst at Advanced Economic Solutions in Omaha. “Considering how traumatic it was, I think that’s still on the mind of end-users.”
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