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Researchers explore COVID-19 egg supply chain impact

Working through future disruptions depends on understanding barriers that prevented flow of goods.

To learn more about how agricultural supply chains were affected by the COVID-19 pandemic, researchers from Michigan State University explored specifically how the shift from consuming "food away from home" to "food at home" affected the egg industry.

What they found was that the onset of the pandemic increased retail and farm-gate prices for table eggs by approximately 141% and 182%, respectively. In contrast, prices for breaking stock eggs, which are used primarily in foodservice and restaurants, fell by 67%.

The researchers also discovered that premiums paid for specialty eggs, including cage-free, vegetarian-fed and organic eggs, were reduced by as much as 34%. Further, the premiums did not fully recover following the return to more “normal” price dynamics, which the researchers suggest may signal that consumer "willingness to pay" for products that emphasize animal welfare and environmental sustainability attributes may have fallen as consumers sought to meet their basic needs.

The study found that prior to the pandemic, consumers spent 54% of their food budget away from home, or an estimated one-third of food quantity sales. Throughout March, U.S. dining-out expenditures were 51% below March 2019 levels, and by April, nearly three-quarters of food expenditures went to at-home consumption.

The researchers said while it may have been expected that the food supply would transition easily and food prices would fall to accommodate the shifts, what actually transpired was that grocery store prices experienced their highest monthly increases since the 1970s as a result of “significant frictions” in the food supply chain that prevented the free flow of some commodity food products away from foodservice channels toward supermarkets and grocery stores.

For the egg industry, the Food & Drug Administration responded to the challenge by issuing temporary exemptions from certain food safety standards for breaking stock egg producers seeking to sell into the retail table egg market. This regulatory change, the researchers reported, rapidly pushed retail, farm-gate and breaking stock prices towards their long-run pre-pandemic equilibrium dynamics. Further, they suggested that the policy changes served as a natural experiment to determine the extent to which regulatory frictions contributed to the inflexibility of moving product between retail and foodservice supply chains.

Finally, in spite of widespread claims of price gouging and even some lawsuits filed, the researchers said they found no evidence that the pandemic, or the subsequent FDA regulatory changes, had a meaningful impact on the marketing margin for table eggs sold at grocery stores.

“Policy implications are self-evident,” they noted. “The success of ongoing efforts to create a food supply chain more resilient to future disruptions hinges on an understanding of the barriers that prevented the flow of goods between foodservice and retail industries at the onset of the COVID-19 pandemic.”

They continued, “While some barriers, such as the fixed costs of infrastructure technology, are difficult to quickly remove, we show that temporary suspension of regulatory constraints can have a substantial impact at allowing arbitrage across markets.”

TAGS: Business
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