Egg markets in turmoil after recall
Processors frustrated at price hikes from ‘small’ number affected
BakingBusiness.com, August 31, 2010
by Ron Sterk

KANSAS CITY — Markets for one of the most basic protein sources and food ingredients — eggs and egg products — are in a major state of turmoil affecting prices and supplies after the recall of 550 million eggs due to Salmonella contamination.

The Salmonella instigated recall of eggs from two Iowa farms, Wright County Egg and Hillandale Farms of Iowa, which appears traced to chicken feed (see related below), has garnered significant press and sent prices for graded or shell eggs, those sold at retail, skyrocketing. But prices for breaking eggs, those used dried or liquid in food processing either whole, blended or separated into yolks and whites, also were affected as egg producers shifted breaking stock away from egg processors to retail channels to get in on the soaring prices.

“We’re selling shell eggs like crazy,” one Southeast integrated egg processor said, indicating they were shifting eggs to retail.

Another egg processor in the Midwest noted graded egg prices in some areas advanced 85c a dozen since the recall. The U.S. Department of Agriculture quoted New York large eggs at $1.37 a dozen this past week, up more than 70% since July 1. Prices for breaking eggs have risen much more modestly and were quoted at 51c a dozen last week, up 5c the past two weeks and 8c since July 30.

“But you can’t buy them for that,” the processor said. Typically when breaking egg supplies get tight, brokers still can secure eggs at a 10@20c premium over quoted prices, but not this time. The Midwest processor indicated he would have to pay full graded egg prices to get breaking stock, which then would make it unprofitable to make dried and liquid egg products. Instead, the processor trimmed hours, running his operation based on the amount of eggs he could get at reasonable prices, or the amount of liquid eggs he could buy for drying. The result was reduced production of egg products and 8% to 12% higher prices since Aug. 1. (See Egg Products on page 30 in Ingredient Market Trends.)

What frustrated processors was the recall, at 550 million eggs last week, was not that significant a number compared with total egg production, although it still may grow. They blamed general media reports, such as one touting “more than half a billion eggs” recalled in 22 states, which sounds massive to a consumer who is expected to eat an average of 247 eggs this year in all forms, according to the U.S.D.A.’s Aug. 12

World Agricultural Supply and Demand Estimates. The U.S.D.A. forecast total U.S. egg production this year at 91,344 million (7,612 million dozen) in its WASDE report.

But growers in the United States produced 7,688 million eggs (about 640 million dozen) in July, of which 6,579 million (about 548 million dozen) were table eggs (graded for retail sale), the U.S.D.A. said in its Aug. 23 Chickens and Eggs report. That’s 248 million total (212 million table) eggs daily, which means the recall affected about two to three days’ production.

The relatively small amount of eggs involved (less than 1% of annual production) in the recall does not justify the surge in graded egg prices, the processors contended.

The other significant factor in the egg recall is that none of the eggs are necessarily being destroyed because legally they may be processed. Heat from the pasteurization process effectively kills the Salmonella, which would allow the eggs to be sold as egg products and used by food manufacturers.

“They will all be consumed eventually,” the Midwest processor said.

But because of the public reaction, egg processors said they had been contacted by some of their buyers who requested they not receive any egg products made from the recalled eggs. Since it would be difficult for processors to prove which products did or did not contain eggs from the recall, most chose not to let any of the recalled eggs even enter their plants.

Putting the number of eggs involved in the recall into context is not meant to downplay the seriousness of the event, which is the largest since the 1970s and may be related to more than 1,000 Salmonella illnesses since May 1. But it does point out the lack of perspective much of the general public has concerning agriculture and the food processing industry. While egg and egg product prices likely will correct in a relatively short time, it may take a while longer to restore the public’s trust in the egg industry.