Bird Flu Hits: Just As Eggs Finally Get A Break

Finally, the consumption of eggs (which some call “nature’s perfect food”) was vindicated. That was until April 14, 2015, when Bird Flu (HPAI H5) was discovered on the first commercial chicken farm with 200,000 birds in Jefferson County Wisconsin.

Originally published in Forbes.

On January 28, 2015 egg farmers around the country were overjoyed. In a letter to the U.S. Secretaries of Health and Human Services and Agriculture, the 2015 Dietary Guidelines Advisory Committee submitted their scientific findings and recommendations  – which included that cholesterol in the diet “no longer be considered a nutrient of concern” and should no longer be required to be reported on the Nutritional Facts panel on foods. In 1961, the egg warning appeared and egg consumption dropped 30 percent.

Finally, the consumption of eggs (which some call “nature’s perfect food”) was vindicated. That was until April 14, 2015, when Bird Flu (HPAI H5) was discovered on the first commercial chicken farm with 200,000 birds in Jefferson County Wisconsin. Prior to this date, the epidemic had been found only in wild and backyard flocks starting December 19, 1014.

As of this past Friday, May 21, the USDA’s National Veterinary Services Laboratories reports 179 detections and 40,721,073 birds have been affected. In 2014, according to USDA, there was a total of 358 million laying hens; basically we have lost about 10 percent to date. The fear is that it will continue to spread throughout the Midwest where one-third of laying hens are housed.

While BLS reports that the retail price of eggs has increased from $1.82 a dozen in March 2014 to $2.13 in March 2014, the worst is yet to come. If we compare egg production from December 2014 (41,072 million eggs) though April 2015 (41,651 million eggs), production reported by USDA’s National Agricultural Statistics Service (NASS) and Agricultural Statistics Board on May 22, 2015 was actually higher. While egg producers may be increasing retail prices to offset future loses, Goldman Sachs issues a forecast this past week that said consumers will pay about 75 percent more for eggs, which could total up to $8 billion dollars. Based on the time it will take to replace the lost hens, we will no doubt see shortages and higher prices even if no additional outbreaks occur.

From the time Bird Flu is discovered thru the approved process for disposal of euthanizing the birds through composting or carbon dioxide poisoning, burying them in a landfill or rendering them to produce pet/livestock feed, biofuel, soap or detergent, to disinfecting the facility it could take up to three months. The birds themselves (both turkeys and laying hens) can take up to four to five months to grow to full size.

Breakfast is about to change both at home and in fast food restaurants.

One breakfast sector however might see a turnaround as egg prices soar. U.S. retail sales of ready to eat breakfast cereal continued to fall in 2014, with multi-outlet data from Chicago-based market research firm IRI revealing a four percent drop in dollar sales and unit sales in the 52 weeks to December 28, 2014. The four major players all reported unit sales down in the same period: General Mills GIS -0.53% (-2.24%, Kellogg K -0.44% (-5.28%), Post (-1.79%) and MOM Brands down 10.16%.

According to research firm Technomic, fast food breakfast sales now total $34.5 billion per year. Taco Bell went on the breakfast attack with their new advertising and food offerings to challenge McDonald’s lead (whose breakfast revenue is reported to represent 25 percent of their total volume), so it is unlikely either company will be able to raise prices as they continue their breakfast wars; resulting in further profit declines at the Golden Arches. We may well see some new breakfast offerings that contain less egg and more plentiful and affordable products like bacon being served up.

And then there is Thanksgiving. While November may seem a long time away, there has been reports that up to five million turkeys have also been effected in Minnesota (where approximately 20 percent of turkeys are raised in the U.S.) and while that might not seem to have much impact on the 240 million turkeys raised annually in this country; of major concern is the time it takes to replace the birds. From the time Bird Flu is discovered thru the approved process disposal of euthanizing the birds through composting or carbon dioxide poisoning, burying them in a landfill or rendering them to produce pet/livestock feed, biofuel, soap or detergent, to disinfecting the facility it could take up to three months. The birds themselves (both turkeys and laying hens) can take up to 4 to 5 months to grow to full size. Thanksgiving is in seven months.

So what’s next? On Friday, three new outbreaks were discovered in Iowa, bringing the state’s total to 26,874,900 birds. No new outbreaks have been discovered in Minnesota since May 15th; offering some relief especially to those turkey farmers.

Expect U.S. egg shortages and price increases to continue at least through the end of 2015. Paleo, Atkins and other high protein diets remain among the most popular and as the Bird Flu epidemic continues look for other lower cost more readily available proteins – yogurt, bean, nut, and vegetable to become more mainstream and popular in the short term as we wait for the egg producers to get back their smiles.

For more, here’s my interview yesterday on The Willis Report.

P