Dive Brief:
- Egg production could struggle to meet seasonal demand in the face of the highly pathogenic avian influenza (HPAI) outbreak ahead of Easter, according to an analysis by CoBank. The avian influenza has spread to 24 states and affected nearly 18 million commercial table egg layer hens, according to the USDA’s Animal and Plant Health Inspection Service.
- Based on inventory currently on hand, the CoBank report said “it seems obvious that egg availability heading into Easter is sure to be hampered” due to the HPAI outbreaks.
- HPAI has complicated the industry’s efforts to optimize supply as it also reacts to consumer demand shifts from the pandemic and a transition toward cage-free production. But some egg producers are finding growth opportunity in the disruption.
Dive Insight:
While the industry typically tries to keep the table egg layer flock in line with consumer demand — rising ahead of Easter and then shrinking during the summer — the CoBank analysis found that it has been unable to stay ahead of target growth since 2019.
The U.S. flock has shrunken from a record of more than 340 million in April 2019 to about 322 million as the industry transitions in the wake of California’s Prop 12, a state law requiring all eggs sold in the state to come from cage-free hens beginning in 2022, according to CoBank. Beyond California’s law, major restaurant chains such as McDonald’s have driven the shift by embracing targets to use cage-free eggs. At the end of 2020, 28% of all hens were raised in a cage-free environment, according to United Egg Producers, up from only 4% in 2010.
Meanwhile, as the pandemic rapidly shifted demand from foodservice to the home, the industry’s supply chain stumbled responding quickly, resulting in higher prices and shortages, which eroded demand. The HPAI outbreak is only compounding the industry’s supply issues.
However, some egg producers have found opportunity during these transitionary times. At Mississippi-based Cal-Maine Foods, sales of specialty eggs — which include cage-free and organic options — hit $182.9 million in its fiscal third quarter 2022, making up more than 39% of its total shell egg revenue. Specialty eggs as a percentage of dozens sold rose to 33.1% in the third quarter, up about 6 points from prior year.
“Specialty egg sales remain an integral part of our growth strategy,” Cal-Maine CEO Dolph Baker said in a statement. “Consumer preference for specialty eggs, including cage-free eggs, continues to expand with more consumers willing to pay premium prices for these products.” Indeed, demand has risen even as the net average selling price for specialty eggs in the third quarter rose 1.5% to $1.923 per dozen compared to the same period a year ago.
In its analysis, CoBank noted consumers’ willingness to assume higher costs for eggs in the current environment.
“With supplies potentially spiraling, and stress on conversion to more expensive cage-free-type eggs, consumers appear likely to bear at least a portion of the brunt of higher prices for eggs tendered in 2022, at a time when they are actively seeking low-priced protein items as they grapple with overall inflation,” the analysis states.
The same week that Cal-Maine reported its third-quarter earnings, the company announced it would invest $82 million to expand its cage-free production capabilities at facilities in Utah and Kentucky.
Meanwhile, although poultry processors such as Tyson and Hormel have reported incidences of HPAI, Cal-Maine noted that it had not yet recorded any positive tests at its owned or contracted production facilities.
Source: supplychaindive.com