US Eggs Running on an 8-Year Low

Spend Matters welcomes this guest post from Emma Jayne Smith, of Mintec.

It may be time to get cracking, as egg prices have fallen from their recent record highs. Prices reached record levels in 2015, as production fell following an outbreak of avian flu, but then tumbled to at least an eight-year low in May 2016, down sharply by 65% year-over-year.

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Following the 2015 avian flu outbreaks in the U.S., China, Russia, South Korea, South Africa and Cuba put import bans in place. Prices have fallen since, as gradual recovery of domestic production and loss of some exports created an excess of supply.

Egg supply is higher than a year ago, as the trade restrictions are still in place due to fears of avian flu spread. South Korea, an important destination of the U.S. dried and liquid egg imports, lifted the ban on U.S. poultry products on Nov. 19, 2015, after no new cases of avian flu were reported since May 2015. This enabled prices to rise at the beginning of January 2016. However, a new case of avian flu was recorded on Jan. 15, 2016, affecting turkey flocks in Indiana. Following this news, South Korea reintroduced the ban on Jan. 18.

Although avian flu hit in 2015 and forced farmers to destroy their flocks, the laying hen population has recovered faster than anticipated, increasing egg production in 2016. While U.S. egg production is still below pre-outbreak level, it is forecast to gradually increase throughout 2016, to reach a total of 7.2 billion dozen, a 4% increase y-o-y.

In addition, Easter demand was below seasonal this year, and this, combined with ample supply, reduced prices further. Egg prices typically go up toward Easter and producers hold supply in anticipation of increased demand.

The U.S. has also continued importing eggs from the E.U., which are from barn or free-range hens. After California introduced legislation against caged hens in January 2015, the majority of U.S. egg producers can no longer sell eggs in California; only a third of eggs consumed in California come from domestic supply. Although no legislation has been introduced in other states, there is a growing trend among consumers to use free-range eggs, which increases demand for E.U. imports generally perceived as more ethically produced.

As for the prices, they will probably bottom out eventually this year, but with all of the uncertainty that marred the market in recent months, predicting when is a thankless job.

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