'15 bird flu recovery leads to oversupply of eggs, lower prices

An oversupply of eggs nationwide has driven prices to levels not seen in 10 years, with some retailers in Arkansas offering a carton of a dozen eggs for less than a dollar.

Analysts are pointing to the avian "bird flu" epidemic in 2015, which wiped out millions of chickens and turkeys nationwide, for the sharp turnaround in the egg market. While large food companies are riding this season out with hopes for a market price rebound and increased 2018 exports, smaller farms aren't as fortunate.

Kim Kapity, owner and sole operator of Sycamore Valley Farm in Lincoln, said her poultry farm was not affected by the bird flu epidemic in 2015. She did, however, reap the benefits of selling a dozen eggs at a couple dollars more than the U.S. market's average that year.

At farmers' markets, Kapity said, "it was actually the first time I had been told my eggs were cheap. That was interesting."

Kapity's egg prices are now nearly five times the retail price at most grocery stores.

The dilemma Kapity and many other small poultry farmers face is related to a rebound in the supply of eggs spawned by the bird flu outbreak.

A reported 35 million layer hens and turkeys, or roughly 12 percent of the national inventory, were destroyed because of the highly contagious avian flu. It was the worst food-related outbreak in U.S. history, nearly three times the size of the previous worst outbreak in 1983.

Average egg prices in 2015 jumped from nearly $2 to $3 per dozen as production rates dropped by about 1.2 billion eggs, according to the U.S. Department of Agriculture.

In response, farmers nationwide quickly restocked their lost flocks. After two years, production has surpassed levels before the 2015 bird flu outbreak.

"Now that we've got production back a few more million than in 2014, we're outproducing what we're eating," said Bruce Tencleve, Arkansas Farm Bureau commodity and regulatory affairs poultry division coordinator.

Consumers have been reaping benefits this year with prices ranging from 65 cents to 72 cents per dozen, Tencleve said. Some Wal-Mart stores have been selling eggs as low as 48 cents for a dozen large Best Choice eggs.

Currently, egg production costs are higher than retail prices, negatively affecting large and small egg producers, said Hongwei Xin, director of the Egg Industry Center at Iowa State University.

"It's about $1.10 for the cost of production, so the industry is losing money -- large or small," Xin said. "It's rather unfortunate, but hopefully prices will come back."

Companies that don't solely rely on egg production for income can afford seasons of loss.

Larger food companies are "playing with house money, so to speak, and can ride it out," Tencleve said. "The forecast for 2018 is that exports are going to go up. So [ideally] companies will make it all up in 2018."

Egg export forecasts show a 6 percent increase for 2018, compared to last year, according to a USDA report released June 15.

Small farms are a different animal. They "can't ride those peaks and valleys" the same way large companies can, Tencleve said.

Some farmers could be locked into a contract with grocers to help weather the low seasons, he said.

However, farmers such as Kapity don't sell eggs in grocery stores and solely rely on direct-to-consumer markets for their primary income.

With record-low supermarket egg prices, constant mortgage bills and steadily increasing poultry feed prices, Kapity said she hasn't been turning a sustainable profit. Recently, she has taken a job at another farm to help pay bills.

Business on 07/11/2017

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