The Egg Solution - What is Going On?

The short term seems to be improving.

This looks promising. The price might have peaked and be on the way down.

But, egg demand has decreased due to high prices. So it is difficult to assess if the decline in price is stable.

Let’s look at the health situation of poultry specifically chickens. (LINK)

Looking at the last 90 days:

That looks really bad.

But the last 30 days look much more promising.

Here is additional information:

So this looks pretty good. But will it last?

There is a good weekly report issued by USDA that one can access HERE It has a very good discussion and many useful graphs.

Why is Price Elasticity so High?

I wanted to dig deeper. Having useful graphs to present is a challenge. Much of the work is done for USDA by Cornell University. I assume they do a good job. Only rarely do they provide graphs that show historical trends. USDA also is not big on showing trends for this sector. Some of the industry trade associations do but I do not have permission to use their graphics and getting that permission is a lengthy process and I do not routinely write about poultry. So they do not know me.

So I am presenting some graphics that I found from USDA even though they are not exactly what I would prefer to show.

“Disappearance” simply means it moves out of stocks i.e. it gets shipped to market both in the U.S. or export markets or is hatched. I had a better graphic but I can’t find it again. The point is the industry has shifted somewhat from selling red meat to selling chicken and eggs. Certain welfare programs may have rescued the red meat part of the market. But eggs continued to become increasingly popular until a few years ago.

The graphic I lost seemed to show that the growth in the number of chickens is slow compared to the growth in the egg market. What has happened is the rate of laying eggs per hen has increased. I will not go into detail on how they achieve it. As an aside, we used to raise chickens on our small farm so I know something about this subject. We like chickens (not so much roosters as they can be dangerous) and we had a very high survival rate of chicks which is something not often discussed. We had close to 100% survival but that requires a lot of attention that a commercial operation can not afford. Without explanation, I will just say that “pasting” is a problem and a commercial operator is not likely to be able to deal with that for each chick if the hen does not take care of it herself.

I think this shows that the price increases due to the reduction of supply resulting from dealing with disease worked to the benefit of the producers or at least that is how I interpret this graphic. Culling hens that lay more eggs per hen exaggerates the impact.

I experienced something like this when I was in the mining industry. There was a supply shortage of a byproduct metal that we produced and we did not cut off the foreign customers but simply raised the price to them. There is more to it than I want to put in writing. Let’s just say that in agriculture those who have to cull their flocks suffer but the other producers prosper. They want to supply their export customers or risk losing them. So the domestic supply takes the cut.

This only goes through 2023 but you can see that after 1998 egg production increased dramatically but then plateued. I believe that in recent years the market has gotten tight so a relatively small impact on production results in a very large increase in prices.

And one last graphic.

There are three major categories of producers: Commercial and backyard. Commercial is broken into cage-free and confined (CAFO). Our operation was a combination of a hen house (we had two of them) and a fully protected outdoor area where they could play and even fly - yes normal chickens can fly. USDA probably has only partial data on the backyard operations. We fill out the survey for our sheep and it is a pain partly because the questions often do not make sense for a small operation such as ours.

The above complicated graphic shows that over time the share of the cage-free operations increased (right axis) and the lay rate for the cage-free has also increased but both seem to have plateaued at about one egg per hen for the part of the year that hens lay eggs but from other data I have seen it is about 300 eggs per year per hen.

So if the demand for eggs has increased and the demand for chicken meat has declined one can see that those who raise poultry are not likely to have more chickens that need to supply the egg market and having to cull flocks to fight a disease will lead to a spike in prices.

Vaccines are a possibility. You can read about this HERE. HPAI and the supposedly less problematic LPAI are both complex much like COVID so this may not be as easy as one might hope for.

I hope you found this article interesting and useful.