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Saturday, April 23, 2011

Egg Producers Feel the Pinch as Demand, Prices Fall, Costs Rise

That Easter egg hunt many are planning this weekend likely won't cost as much as last year.

The average retail price of eggs was $1.73 a dozen in March, down 5% from a year ago, according to the U.S. Department of Agriculture.

Meanwhile, the wholesale price of $1.28 a dozen in the week leading into Easter is down seven cents from a year ago and 10 cents from two years ago.

Prices are likely to fall further once the increase in holiday demand ends, analysts said.

Roughly twice the normal consumption of eggs takes place in the week before Easter. While it remains a key period for egg producers, the increase in demand is less pronounced than it used to be, industry observers said. Easter is the third-busiest time of the year for the egg industry, outpaced by Thanksgiving and Christmas.

There isn't any data that track Easter-related egg demand specifically. However, consumption around the holiday appears to be on the decline, said Bill Neuwirth, owner of Aptos Foods, a wholesale egg distributor operating mostly in California.

The prospect of disappointing sales this Easter could portend a tough year for egg producers. Producers have been losing money for three consecutive months, a rarity for this time of year and the first time that has happened since 2005, according to Iowa State University's Egg Industry Center.

"If they are not making money now, I don't see how they are going to make money for the next three or four months," said Maro Ibarburu, an analyst at the center.

Lower Easter sales aren't the only challenge facing egg producers, be they small family-owned farms or sprawling complexes with millions of chickens. Consumption is down broadly from levels early last decade, according to the USDA. The USDA recently projected per-capita egg consumption this year to be 247.7 eggs a person, essentially flat with the prior year.

Egg consumption has declined every year since 2006, according to the USDA.

Meanwhile, prices for most other agricultural commodities are surging, so costs for feed ingredients such as corn are going up. The cost of feed to produce a dozen eggs is up 14 to 18 cents from a year ago, according to Urner Barry, a Toms River, N.J., publication that tracks egg prices.

Some analysts suggest concerns linger over a highly publicized salmonella outbreak at two Iowa egg farms in August.

In addition to higher feed costs, rising energy and transportation costs also are a concern for producers, said Jim Chakeres, executive vice president for the Ohio Poultry Association.

Passing on those costs to the retail level is difficult for egg producers. More so than beef, pork or chicken producers, the egg industry is fragmented, with many companies competing for business.

Egg production was up 1.2% nationally in the first two months, hitting a pace that would see the U.S. produce 7.7 billion dozen eggs this year. Assuming that trend continued in March, that could be weighing on prices, USDA economist David Harvey said.

With little hope that feed costs will substantially weaken this year, Mr. Harvey said the typical cutback in production after Easter could be more pronounced this year, as farmers look to cull their flocks of less productive birds.

posted by CASFS 2006 @ 7:36 PM


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