Egg market crisis worsens

by Ron Sterk
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Breaking stock egg prices were record high last week, if they could be found, as were wholesale prices of graded eggs for the retail market.

As U.S. poultry losses topped 42.5 million birds from more than 187 cases of H5N2 highly pathogenic avian influenza, the initial shock of losing an estimated 25% of the nation’s processing egg supply and consequent record high egg prices began to reach beyond those directly involved in the poultry and food processing industries, as evidenced by coverage in the general press, including stories in The New York Times, The Wall Street Journal and on National Public Radio. But it still was the industry — from egg producers and processors to food manufacturers — that was hit hardest.

Breaking stock egg prices were record high last week, if they could be found, as were wholesale prices of graded eggs for the retail market. Processors scrambled to find breaking eggs, which have more than tripled in price since early May. Bakers and food manufacturers, dealing with egg products that have increased a minimum of 70% and as much as tripled (liquid whole eggs) since early May or in some cases aren’t available at any price, have had to reformulate with extenders or egg replacers when they could.

The U.S. Department of Agriculture said as of May 26 nearly 36 million chickens and 6.5 million turkeys from 187 detected cases in 15 states had died or been euthanized since the outbreak of A.I. was detected in the Pacific Northwest last December, with 18 cases still pending. Most of the losses have occurred since early March, when the virus was detected in the key Upper Midwest turkey and central chicken egg production regions. About 12% of the total (table and processing egg) laying flock of 296 million chickens as of May 1 has been lost to the worst outbreak of A.I. in U.S. history. Losses range from a few backyard birds to an Iowa flock of 5.7 million chickens.

But the total number, though dramatic, doesn’t tell the whole story because of the concentration of processing-type egg production in one state — Iowa — where about 90% of the state’s 55 million hen laying flock (as of April) produce eggs for processing, equal to about 20% of the nation’s total breaking stock supply. Iowa has lost more than 26.5 million chickens, equal to about 48% of its laying flock.

On a national scale, about 31% of all eggs produced in 2014 were further processed. Assuming it takes about the same percentage of chickens to produce those eggs, the national processing flock would be about 92 million hens as of April (31% of the total flock of 296 million). The losses of processing hens just in Iowa of about 23.9 million (90% of 26.5 million) would equal about 26% of the national processing egg total. Of course a number of other factors must be considered, such as processing chickens lost in other states, the fact retail eggs will be pulled into processing channels and imports likely will be increased, but the loss of about a fourth of the supply is staggering.

The nation’s largest producer of egg products, Michael Foods, Minnetonka, Minn., which is owned by Post Holdings, declared force majeure on May 14, which effectively renders the company unable to fully perform under its existing supply agreements with customers. Post said approximately 35% of the company’s volume commitments were affected after a third company-owned flock tested positive for A.I. in Nebraska. Trade sources a couple of weeks earlier said Michael Foods had informed its customers they would receive only 25% of their normal shipments for at least 90 days.

While retail egg supplies and prices certainly are being affected by the outbreak, most of the production plants of the largest U.S. producer of graded eggs for retail, Cal-Maine Foods, Inc., Jackson, Miss., are in the South and Southeast, out of the major A.I.-affected area.

With the rebuilding of flocks expected to take months, users of egg products are facing a daunting task to maintain production. There are numerous sources of egg replacers and extenders on the market, although some products, such as mayonnaise, must contain eggs to maintain product identity. In baked foods there is no one-to-one egg replacer, unless the product is made with a percentage of real egg; most egg products may be replaced only at 33% to 50%.

A list of egg replacement or extender sources includes, but is not limited to: Agropur; Arla Foods; Cain Food Industries; Corbion Caravan; Davisco Food International; DuPont; Fiberstar; Glanbia Nutritionals; Hampton Creek; Ingredion, (Penford); J&K Ingredients; Jones Laffin Co.; Kerry Group; Manildra; MGP Ingredients; Natural Products Inc. (Scotsman’s Mill); Solazyme; and Watson.

The American Bakers Association activated its Rise to Action Grassroots Action Center to encourage food manufacturers and bakers to urge the U.S.D.A. and Congress to allow increased imports of egg products and eggs to help offset rapidly decreasing supplies.

“Due to avian influenza, egg supplies are decreasing at an alarming rate,” said Robb MacKie, president and chief executive officer of the A.B.A. “The U.S.D.A. must act now to ensure that bakers can access necessary supplies to maintain current production. Government has the ability to bring in additional egg product imports to address supply concerns. We strongly urge the U.S.D.A. and other responsible agencies to act quickly to allow temporary imports from countries that can help fill urgent demand needs while maintaining adequate food safety standards.”

The World Organization for Animal Health (O.I.E.) last week said the outbreak was likely to be under control within four months as the United States stepped up measures to contain the virus and warmer summer temperatures slow its spread. The O.I.E. said the outbreak likely had peaked, but the losses still could rise to about 50 million birds. And the O.I.E. warned that Mexico was at high risk. A different strain of A.I. in 2012 and 2013 resulted in the loss of approximately 20 million birds in Mexico. Since the U.S. outbreak originated with migratory birds, ongoing control remains challenging.

The good news is the spread of the virus appears to be slowing. The H5N2 strain is said to begin to die around 70 degrees Fahrenheit and completely die at 85 degrees. The cool spring has slowed its demise, but warmer weather is coming. Losses will continue to increase for a while, and it will be months after A.I. is eradicated before flocks may be rebuilt.

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