Industry analysts say consumers should not expect egg prices to return to lower levels anytime soon due to the sustained impact of the highly pathogenic avian influenza outbreak, which is proving worse than the one experienced in 2014-15.
Rising input costs and diminished egg supplies have both contributed to higher prices, which were reported 59% higher year-over-year in last week's Consumer Price Index. USDA's Economic Research Service has forecast continued increases in 2023 of another 4-5%.
The national average price for a dozen eggs hit $4.25 in December, up from $1.79 a year earlier, according to the Bureau of Labor Statistics. Regionally, prices have been much higher, while in the Midwest some grocery stores have struggled to even keep eggs on the shelf.
Ric Herrera, CEO of the newly formed ProEgg cooperative, projected egg demand will be up 7% for 2023 thanks to continued growth that builds off COVID-induced home cooking habits.
Meanwhile, Herrera said, overall U.S. egg supplies are down 5% as nearly 58 million birds (including turkeys) have been depopulated due to the current bird flu outbreak, with egg layers impacted the most.
Supply and demand continue to drive egg prices, and even if supplies ease after softening following a strong holiday demand period, the 5% flock reduction makes it difficult to quickly resolve high prices.
“You need a massive drop in demand to see the market go back down to where it was before,” Herrera said. “I do expect egg prices to recede, and the new normal level will be set.” Assuming HPAI does not continue to adversely affect the repopulation of flocks, prices could begin to settle and eventually fall 20 to 25% yet this year.
He says finding the right equilibrium of where egg prices will settle will depend on how long the HPAI outbreak continues, as well as how egg producers can manage those rising input costs. The high cost of feed, labor, fuel and electricity and interest rates all drive the cost of production higher for egg producers, and Herrera doesn’t anticipate those costs dropping soon.
Bernt Nelson, American Farm Bureau FederationBernt Nelson, American Farm Bureau Federation economist, told Agri-Pulse the outbreak has not slowed down enough to provide producers the time to allow pullets, or young chickens, to grow to maturity. “We’ve had pullet placement up around 13% year-over-year, but we haven’t been seeing a break enough in the outbreak of avian influenza to allow those pullets to really make their way through the system,” he said.
As of Dec. 27, approximately 43.3 million commercial layer hens and 1 million pullets had been depopulated due to HPAI in 2022, USDA's Animal and Plant Health Inspection Service reported. Layer hen numbers reported by USDA as of Dec. 1 were 308 million, a decrease of 5.8% compared with the layer hen inventory a year prior.
Herrera said this bird flu strain is a global issue, continuing to impact flocks in Canada and Mexico and decimating the egg and poultry industry in Europe. Domestically, Iowa has been the hardest hit with nearly 16 million birds impacted, followed by Nebraska and Colorado, each with over 6 million, and Minnesota and South Dakota each with roughly 4 million birds depopulated.
APHIS reported that so far, 307 commercial flocks have been infected domestically. Although the total number of farms did not go down significantly from October to December, the total number of birds depopulated did soften from the peak of the outbreak when it was at 6 million birds per month.
Before the outbreak started in February 2022, the layer hen flock size had a five-year average from 2017 through 2021 of about 328 million hens. According to a Dec. 8 LEAP Market Analytics report, the layer hen inventory is not projected to exceed that number again until December 2023.
Economist Mark Jordan, LEAP Market analytics executive director, said since HPAI was active last fall, it will continue to have a spillover effect on the egg industry and delay how fast the industry can rebuild inventories in the short term.
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Jordan forecasts a roughly 2% increase in table egg production overall for 2023, and a 1-2% increase in domestic per capita availability of eggs after accounting for net trade flows and population growth. “Increases, however, are heavily tilted toward the middle and especially latter part of the year,” Jordan shared with Agri-Pulse.
“We won't really be able to have confidence about what kind of additional impacts HPAI might have on egg or broiler/chicken supplies this year until we get through February-March and see if there's another big flare-up or cases are still ebbing,” Jordan added.
Nelson, the AFBF economist, explained the current outbreak started earlier than the 2015 event, with cases beginning in February 2022. “We really hope to see this outbreak slow down a little bit in the months of January and February, and hopefully start to diminish off as we go through the early months of March and April,” he told Agri-Pulse.
The pandemic revealed supply chain constraints in the egg industry that brought eight of the major egg farms to the table to create ProEgg, a new farmer cooperative to serve 13 Western states that formally launched in December. The co-op's goals include helping stabilize the shell egg supply in this period of high egg demand. The cooperative involves approximately 7-8% of the total egg supply, and companies can initially choose how much of their production to pool together and market through the cooperative, Herrera explained.
Many of today’s egg farmers are fragmented and remain family-run operations. As retail chains get bigger, the cooperative allows egg producers to pool together to help market larger orders and smooth out some of the supply chain issues. It also allows producers to help make decisions on different egg offerings including cage-free, organic or free-range, he added.
“There's no way that the small individual farmer or producer can continue to move forward unless they have long-term contracts, access to bigger customers, access to capital, and an overall better price relationship in order to continue and hand down their operations to the next generation,” Herrera said.
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