Egg Farmers Still Looking for a Break

The Lempert Report
June 12, 2015

Just as egg farmers breathe a sigh of relief, Bird Flu hits!

On January 28, 2015 egg farmers around the country were overjoyed. The 2015 Dietary Guidelines Advisory Committee submitted their scientific findings and recommendations – which included that cholesterol in the diet should “no longer be considered a nutrient of concern” and no longer be required to be reported on the Nutritional Facts panel on foods. The egg warning has been in place since in 1961, and as a result egg consumption dropped 30 percent.

But on April 14, 2015, rejoicing by egg famers took a turn as Bird Flu was discovered on the first commercial chicken farm with 200,000 birds in Jefferson County Wisconsin.  As of 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. 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.

As a result, expect to see a breakfast 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 4% drop in dollar sales and unit sales in the 52 weeks to December 28, 2014. 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 so it is unlikely either company will be able to raise prices as they continue their breakfast wars. We may well see some new breakfast offerings that contain less egg and more plentiful and affordable products like bacon being served up.

So what can we expect going forward? 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.