Egg prices continue to fall from record highs

by Ron Sterk
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Breaking egg prices have fallen below the cost of production to five-year lows, and egg product prices have tumbled from record highs last summer that resulted from the massive loss of laying hens caused by an outbreak of highly pathogenic avian influenza that was spreading fast about this time last year.

Breaking stock eggs were under 35c to 40c a dozen in the Central region last week, down 85% from a record high of $2.35 to $2.45 a dozen in early August 2015. Liquid, frozen and dried egg product prices, meanwhile, have declined about 65% to 80% from record highs posted between mid-July and early September of last year.

Prices for many egg products were at or near their lows for the year to date in late April 2015, coming down from price increases in March that had been driven by improved export sales and retail orders for eggs ahead of Easter, which was on April 5 that year. The market at the time was dealing with a new law in California requiring larger cages for laying hens that limited supplies, boosted prices and slowed retail sales there, and with declining egg white prices that still were correcting from (then) record highs in August 2014 resulting from a surge in demand as many restaurants featured egg white-only breakfast entrees. Breaking stock egg prices around 65c to 70c a dozen during much of April 2015 had “collapsed” from late March, and producers were talking about reducing output to stop the slide.

Industrial demand is down compared to this time last year when avian influenza was detected in the United States.

It was in mid-April last year that concern began growing about the detection of A.I. in Iowa, the nation’s leading egg producing state, especially for processing eggs. By mid-June, more than 42 million chickens, mostly laying hens, had died or been euthanized, egg supplies were shrinking and egg and egg product prices were headed to record highs. As the summer morphed into fall, the industry implemented new bio-sanitary procedures and repopulation of flocks was under way. Concern about another outbreak of A.I. during the fall migratory bird season never came to fruition, and the market appeared headed to some form of normalcy.

The industry again was on edge this spring, but with the exception of one case in Indiana, there have been no fresh reports of A.I. detected in commercial flocks. Still, it appears pre-A.I. normalcy may be elusive as egg breaking remains down sharply from a year ago, but prices still are falling.

The U.S.D.A.’s Egg Products report showed eggs broken in 2015 at 2,104 million dozen, down 7% from 2014. After starting last year up 13% in January, production was down 12% or more in six months of 2015. Eggs broken in January 2016 still were down 15% from a year ago.

In its latest Chickens and Eggs report, the U.S.D.A. said total egg production in Iowa was 73.7 million dozen in January, down 38% from a year earlier, while total U.S. production was 679.3 million dozen, down only 5%. Production in February was down 27% from a year ago in Iowa but up 13% for the total U.S., but February 2016 had an extra work day due to Leap Year. Iowa accounted for 11% of total U.S. egg production in January 2016 compared with 17% in January 2015. Production in top-producing Iowa appears still far from the pre-A.I. level.

Also of note were frozen egg stocks. The U.S.D.A. in its latest Cold Storage report said total frozen egg supplies on Feb. 29 were 37.2 million lbs, up 4% from Feb. 28, 2015, with whites up 14%, whole and mixed up 23%, yolks down 13% and unclassified down 11%.

Also somewhat of an anomaly this year was the lack of an “Easter spike” in prices. Typically, prices run up ahead of Easter as producers hold some supply off the market in anticipation of increased demand over the holiday period. This year, egg supplies, both retail and breaking stock, were ample to heavy and prices continued to decline.

Some in the trade note with concern that eggs broken remain well below year-ago levels (corroborated by Iowa’s lower production, since that state was the main supplier of breaking eggs), some stocks in freezers are above year-ago levels and prices keep falling, indicating demand may not be where it was before A.I.

A key question is how much damage was done to egg and egg product demand from shortages and record high prices caused by last year’s A.I. outbreak. Some market observers suggest a portion of demand may have been taken by egg replacers, which were critically needed during the peak of the shortages. Because of the cost of changing labels and reformulating, some food manufacturers may have been slow to change back to eggs at least until they know for sure A.I. won’t reappear this spring. Others suggest some demand may have been permanently lost due to reformulating with smaller portions or other ingredients.

In the meantime, producers again are talking about how to reduce egg output to get prices back above cost of production, even as others still are repopulating flocks from A.I. losses.

The impact on demand and where egg and egg product prices will find stability may be weeks away as the market continues to seek some equilibrium in still uncharted waters.

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