The Egg Industry Center at Iowa State University has released a new report estimating the extent to which COVID-19 is currently affecting the U.S. egg industry.
“We have so many people who are confused about how egg farmers can be losing during this pandemic,” said Maro Ibarburu, associate scientist and business analyst for the Egg Industry Center. “It was widely covered that prices for shell eggs hit record highs, but it was less known that other types of eggs (liquid) have hit record lows and can't find a market for their product. We hope that the report explains some of the dynamics that are occurring.”
The special report, titled "Preliminary Estimation of the Impact of COVID-19 on Egg Prices & Producers' Revenue," explains that while eggs are in demand at the grocery store, the demand for eggs used in restaurants and other hospitality venues like hotels has nearly come to a halt. The makeup of the farms that supply each of these markets is very different and affects the ability of the industry to adjust.
The U.S. Department of Agriculture’s latest “Livestock, Dairy & Poultry Outlook” relayed that as fast as shell egg prices increased in March, they decreased nearly as fast in April. Wholesale shell egg prices (New York, Grade A large) fell from $3.07 to $1.05/doz. toward the end of April, for a monthly average of $1.80/doz., an increase of 136.5% year over year. This large increase, USDA said, can be attributed to high wholesale prices at the beginning of the month as well as to the low base price, as prices in April 2019 were depressed due to excess supplies.
USDA reported that egg prices remained flat at $1.05/doz. for 22 weeks before beginning to decrease slowly in early May. Based on higher-than-expected prices in April, USDA raised its third-quarter price forecast to $1.30/doz. and increased the fourth-quarter price to $1.35 cents on expectations for continued strong demand at retail. Overall, USDA’s 2020 egg price forecast is $1.295/doz., up 38% year over year.
The Egg Industry Center said the U.S. liquid egg industry is currently more than $110 million below the 10-year historical April average, while the shell egg market experienced a surge in demand that resulted in a very high but short-lived spike in prices.
The report noted that prices for liquid eggs are as low as 8 cents/lb., which is cheaper than a gallon jug of retail purified water (priced at 9.6 cents/lb. during the same time frame).
“These prices mean egg farmers can't cover the expense of feed for the hens and can't find a home for their product that keeps coming each day,” the authors explained.
Independent of the low liquid egg prices, the report relayed that farmers are struggling to find a market for their liquid eggs, even at these historically low prices. As a consequence, some farmers are sending birds through a reduce production period called a molt. Other farmers are culling flocks earlier than planned, which will result in a decreased number of laying hens in the U.S. It will likely take several months to replenish what has been lost, which the report suggested will have a “ripple effect on the demand for labor, other inputs of production and services such as trucking.”
Some farmers have been able to donate to their local food banks, but the report explained that the food bank system is not well equipped for refrigeration or to handle large quantities of items that cannot be subdivided. It further noted that egg farmers are also seeking out export opportunities as well as contacting other livestock farmers to see if the excess product can be used in feed rations.
“Unfortunately, if the problem persists, some farmers may have to resort to what the dairy industry has had to do and destroy perfectly edible product simply because there is no market for it,” the Iowa report said.
Like with other commodities, the COVID-19 event follows a year of low prices for egg farmers, and while some farms are large and diversified, others are not. Additionally, some operations produce shell eggs, and others produce liquid eggs.
“Farmers producing liquid egg for the general marketplace without contracts that cover their basic production costs or in cases where customers are no longer taking delivery will most likely be devastated by this pandemic if restaurant and hospitality industry continue to persist in their present state,” the authors said.