Avian Flu Affects Market Prices
For the past couple of months, all eyes have been on the nation’s poultry due to the outbreak of a potentially fatal disease: avian influenza.
As the disease continues to spread, higher percentages of flocks are being lost. Smaller flocks can lead to lower production, which can lead to consumers paying higher prices at the store for poultry products.
According to the United States Department of Agriculture, Iowa has lost more than 29 million birds. The first detection of avian flu in Iowa was April 20 and the most recent detection in the state was last Thursday.
Iowa is one of the largest egg producers in the nation and exports to other states and countries. Egg prices have already increased in grocery stores and it is possible they will continue to rise.
“Iowa is definitely the major egg producer in the United States and a good chunk of the outbreak occurred in Iowa,” said USDA economist Alex Melton. “That’s impacted the rest of the country in lots of different ways. Obviously, Iowa is exporting eggs to different states and to different producers.”
Although the USDA does not have monthly or daily data on egg retail prices, Melton said they keep track of wholesale prices. According to him, wholesale prices have increased and that could affect retailers who choose to keep up with industry prices.
“I imagine that, given that we’ve seen an increase in wholesale prices, that retailers may pass on some of that, but that’s definitely up to the retailers, how they choose to respond to the current high prices,” Melton said.
Iowa is also a major producer of egg processing products such as liquid eggs or eggs used in ingredients for other products. The eggs used in these products are not graded such as those that are purchased in cartons at the grocery store; therefore, their cost tends to be lower.
“Another thing that’s definitely unique about Iowa is that a large share of the eggs produced there are going to the processing eggs market,” Melton said. “So, that is sort of the eggs that are broken and used for different food processors and at restaurants that use liquid eggs and things like that. So, the shortfall in production appears to have occurred more in the processing eggs market and that has led to pretty significant price increases. That is normally a lower cost product. The price was around 67 cents a dozen in April and the most recent daily-quoted prices are about $2.30. So, it’s definitely been a large increase.”
Melton also said the USDA do track the price of a certain egg, which can closely compare to prices in the rest of the country.
“One [price] we’re presently tracking is the New York Large Grade A egg price, which is sort of a good, national price,” Melton said. “And that has gone up pretty significantly. The current average price in New York in May is about $1.92, and that’s up from roughly $1.30 in April.”
As of press time Monday, a dozen large grade A eggs at Fareway in Red Oak was $2.79 and at Hy-Vee, the same type of eggs were on sale for $2.29 a dozen, regularly listed at $3.35 a dozen.
According to both the USDA and a special report released by the Egg Industry Center at Iowa State University, these steep price increases are most likely due to a panic caused by the threat of a product shortage.
In ISU’s special report, in some instances “consumers ‘over-purchase’ items in anticipation of a temporary shortage.” It is believed these situations can lead to false inflation and prices will become higher when it’s unnecessary.
“Under these uncertain times it’s very hard to project how the prices are going to move next,” said Maro Ibarburu, an associate scientist and business analyst that put together ISU’s report. “We don’t know yet how long the effect on the prices are going to last. We estimate it would take between one and two years to replace all the layers lost in this outbreak.”
Melton also said he cannot speak to how long the increased prices will last, but it’s possible that producers have other options and can work through the current outbreak. However, prices could stay high if the outbreak continues and the remaining flocks cannot keep up with demand for production.
“Those are pretty sharp increase of prices,” Melton said. “I can’t necessarily speak to how long those prices will last. It’s unclear if the sort of current quick rise in prices might have been incorporated into sort of a panic. Any time there’s a fear of any shock in production, people might buy quickly and demand might shoot up very fast and you may have artificially inflated prices. But, I think that it is reasonable to expect prices to stay high if production does turn out to be reduced significantly due to the outbreak.”
Although the egg industry has been largely affected, the broiler market has not seen much change. Most broiler flocks are raised and produced in the southeast, with Georgia as the leading state for production. Prices for poultry meat have stayed fairly steady as of now since no avian flu has been detected in the southeastern states.
With new cases of flocks with avian flu reported almost daily, the future of the egg market is unclear. Producers have options to continue production of eggs and poultry products such as keeping laying hens in production for longer periods of time.
Melton believes these methods could help, but in the long run, there will be a loss in production due to the large loss of birds. If this is the case, prices will remain high until the outbreak gets under control, flocks are rebuilt and production is higher.
“It’s just a matter of if we’re lucky, there won’t be any more outbreaks and the damage that’s been done will sort of resolve itself,” Melton said. “We don’t know that we will necessarily lose production equal to the amount of birds lost, but I do anticipate given there’s a large number of birds have been infected that there should be a loss in production.”