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Avian-flu outbreak hits egg industry, but Ohio unscathed

ASSOCIATED PRESS

Avian-flu outbreak hits egg industry, but Ohio unscathed

Ohio’s chicken farmers are lucky ducks, so far. The state’s egg consumers, well, not so much.

A wave of avian influenza this year had forced the slaughter of more than 48 million chickens and turkeys as of last week and disrupted egg production in Iowa, by far the largest egg-producing state.

That has meant higher egg prices for everyone, from consumers to restaurants and industrial users.

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“I’ve never seen anything like this before,” said Rick Brown, executive vice president at Urner Barry, a food-market information company. Brown has covered the egg market for 30 years.

Ohio, the second-largest egg-producing state, has avoided a flu outbreak, even though it has hit neighboring Indiana, Kentucky and Michigan.

Record-high prices will actually be a short-term benefit for egg operations that stay clear of the flu.

“Ultimately, the long-term view is it isn’t good for anyone,” Brown said. “The egg industry was doing very well. The egg has become a health food. Consumption was up. You don’t want any hiccups or bumps in the road.

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“If you’re not in Iowa, you’re having a good year, but no one knows if overall consumption will come back. That’s always a danger when you get a high, high price.”

The outbreak has hit suppliers of liquid-egg products — used widely in food processing and food service — the hardest. More than 30 percent of the liquid-egg industry’s birds are dead, Brown said.

The cost of a dozen liquid eggs jumped from 63 cents at the end of April to $2.35 at the end of May.

The explosion of liquid-egg prices also has spread to table eggs — the kind that people buy in cartons — even though table-egg production has taken a much smaller hit.

“A higher market floats all ships,” Brown said.

As of June 15, the average wholesale price of a dozen grade A white eggs in the Midwest was $2.31 to $2.34, more than double what it was a year ago, according to the Egg Market News Report, published by the U.S. Department of Agriculture.

Retail prices have not swung as hard.

It takes weeks for changes in wholesale prices to be reflected at the grocery store, Brown said, but demand has already dropped, applying downward pressure. The price of a dozen Grade A eggs hit a record high of $2.21 in December and has slid since.

“We’re definitely coming down,” Brown said. “How long it will last is anyone’s guess. We hadn’t lost a flock in a couple of weeks, but then Tuesday, we lost another million birds.”

The last time American eggs saw such a hike in prices was when an avian flu spread through Pennsylvania’s flocks in 1983 and ’84. It took the market two years to recover, Brown said.

This time, the flu swept from California to Michigan this winter into spring, and it has lodged itself in Iowa’s egg-laying farms. There, 75 cases had claimed more than 31 million birds through Wednesday. If one chicken in a barn tests positive for the flu, every bird in the barn must be destroyed.

The egg industry in this country is a big deal.

Egg-production numbers are staggering. The U.S. flock of more than 300 million laying chickens produces more than 86 billion table eggs a year and was on pace to beat last year’s production before the flu visited Iowa in April. Last week, the USDA cut its forecast for table-egg production in 2015 by 334 million dozen, or 4 billion eggs.

The news isn’t all bad.

As a result of the nation’s flu outbreak, countries around the globe have banned American chicken, which has meant an increase in U.S. markets in the number of whole birds and chicken legs, a top export. Because supplies are plentiful, the USDA forecasts downward pressure on chicken prices the rest of this year.

Bob Evans Farms, based in New Albany, is one of the companies keeping an eye on the price of one of its important commodities. It reported on Wednesday that eggs make up 4 percent of its food costs, and it projects a rise in prices through the rest of this year. One thing that might help is a move to fresh eggs, instead of liquid, for much of the chain’s breakfast lineup. There is less of a supply crunch for fresh eggs.

“We are closely monitoring the impact of the avian-flu outbreak,” said Mark Hood, chief financial officer for Bob Evans, during a conference call with analysts last week. “We’ve investigated a number of options if egg prices remain elevated.”

Options include using egg substitutes in baked goods and other products where the absence of real eggs is less noticeable. A bakery told Brown that it moved to an alternative product due to a lack of liquid eggs.

Lancaster Colony, based in Columbus, uses eggs in a number of its dressings, pastas and frozen breads.

“You can’t really buy forward, as far as pricing on egg products,” said Dale Ganobsik, director of investor relations at Lancaster Colony, whose brands include Marzetti dressings and New York Texas toast. “We are making sure we have supply.”

The company doesn’t buy its eggs from Iowa, Ganobsik said. Lancaster Colony does expect profit margins to tighten as the flu persists.

“As far as pricing and cost, we expect that there will be an impact,” he said. “We do have plans to offset those costs through pricing on products, but it won’t be a full recovery.”

First Published June 22, 2015, 4:00 a.m.

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