Market shocks and egg prices
The egg market has experienced significant supply and demand swings over the past few years. From the COVID-induced demand spike in 2020 as the pandemic forced many to prepare a greater proportion of meals at home to the supply cuts caused by the loss of layers to High Pathogenic Avian Influenza (HPAI) in both 2015 and 2022, egg pricing and availability have been more volatile. To provide some guidance on the potential path forward for both the industry and consumers, we have examined a few key historical relationships and utilized those relationships to project future movements within the egg market.
Over the past 10 years, monthly egg prices have topped $1.50 per dozen for four periods. Two of those periods were demand-driven, the 2018 spike was related to strong domestic demand (along with a HPAI outbreak in international markets) and the 2020 run associated with COVID. Two of those periods were supply-driven, the 2014-15 surge and the 2022 market, with both heavily influenced by the HPAI outbreaks in the United States. Figure 1 displays the relationship between the price of eggs and the ratio of table eggs to total eggs in the industry. As the graph shows, egg prices tend to return to more normal levels much quicker after a demand shock than a supply shock.
Typically, 86-87.5% of the eggs produced within a month are consumed and 12.5-14% of the eggs are hatched to add birds to the flock. The demand shocks tend to be short-lived and often can be handled within the normal seasonal movements of the industry. For example, both the 2018 and 2020 price spikes dissipated within two months and the industry was able to maintain the ratio of table eggs to total eggs within the typical range.
The supply shocks tend to have impacts that extend for multiple months and force significant changes for both producers and consumers. The loss of birds due to diseases like HPAI can be significant to the industry, as producers must devote more eggs to rebuilding their flocks, reducing the ratio of eggs headed to consumption. When the ratio falls below 86%, egg prices move higher and tend to remain elevated until the ratio once again exceeds 86%. That was the challenge in 2015 and 2022, as the reoccurrence of HPAI in the US in the fall of 2022 has forced the retention of more eggs for flock development. While the ratio has not surpassed 86%, the seasonal swings (or lack thereof) in the ratio have shifted to enhance egg production and lower egg prices. This shift can be better seen in Figure 2.
Figure 2 displays the seasonal pattern within the egg ratio. This graph, along with the two following it, contain the five-year average pattern for the variable (the black line), last year’s pattern (the blue line), this year’s projection based on beginning of year (January) data and the five-year average (the orange line), and this year’s actual data (the red line). As the ratio data shows, the trend over the past couple of years was for a smaller table-to-total egg ratio, meaning more eggs were retained to increase flock size. There is a consistent pattern of retained more eggs during the summer and less in the winter. And while the 2022 HPAI event definitely induced more egg retention than usual, the seasonal pattern was still maintained. However, in 2023, egg producers deviated from the usual pattern. Rather than shifting a greater percentage of eggs to hatching this spring, the industry maintained a stable percentage of egg to consumers. This provided a relative boost to egg supplies this spring.
Figure 3 displays the monthly swings within table egg supply. And again, the general pattern is very consistent across the years. But the 2022 HPAI event reduced egg supplies by roughly 300 million by April 2022 and the industry was slowly closing the gap until the reoccurrence in November. The stabilization of the ratio throughout 2023 has allowed table egg supplies to return to normal levels.
Thus, supplies have recovered and prices have dropped significantly. The historical data suggests that egg prices are still volatile and will be until the egg ratio reaches back consistently above 86%. While egg pricing is back to normal levels, the egg supply chain is still healing from the impact of the 2022 HPAI outbreaks. The experience of the past five years shows that the egg industry is fairly resilient when it comes to dealing with demand shocks. The strong shift to at-home egg consumption due to COVID led to a very short temporary spike in prices. However, shocks to the supply chain, such as HPAI, can have a much stronger and longer effect on the egg market.
Acknowledgments: This work is funded by the USDA National Institute of Food and Agriculture (NIFA) Rapid Response to Novel Coronavirus (SARS-CoV-2) Impacts Across Food and Agricultural Systems Award 2020-68006-32790. The contents are solely the responsibility of the authors and do not necessarily represent the official views of the USDA or NIFA.
Chad E. Hart, extension economist, 515-294-9911, email@example.com