Concern Grows Over Egg Ingredient Availability

June 15, 2015

Wholesale prices of liquid and powdered eggs have tripled in the last month, caused by the spread of H5N2 avian influenza (AI) that has forced the destruction of 35 million laying hens since May in several Midwestern states.

Grocery shoppers aren’t the only ones experiencing egg-price sticker shock. Retailers and foodservice accounts are howling over bumps in product prices as a result of egg-ingredient costs, but that may be the least of food processors’ concerns: the likelihood of a lack of liquid and powdered egg supplies could spell a long and uncomfortable summer, fall and winter for the industry.

Wholesale prices of liquid and powdered eggs have tripled in the last month, caused by the spread of H5N2 avian influenza (AI) that has forced the destruction of 35 million laying hens since May in several Midwestern states. Those hens represent 30 percent of the domestic inventory, resulting in a 30 percent reduction in egg supplies. While the recent price increases should help reconcile supply and demand, the longer term consequences on availability look grim. Rationing by suppliers already is underway.

It takes six months to raise pullets to maturity as laying hens, but that process cannot begin until a farm completes the remediation process for a USDA clean notice, and “anything can happen within those six months” to restart the process, points out John Howeth, senior vice president-foodservice & egg product marketing at Park Ridge, Ill.-based American Egg Board (AEB). As a result, a 12-18 month timeframe is likely for a return to normal supply levels since the egg-farm outbreak began.

That likely will strain production at food companies that rely on liquid and powdered eggs as an ingredient. Chief among them are bakeries. Bob Otolo, owner of Gillian’s Foods Inc. in Lynn, Mass., says his supplier alerted him to the likelihood of short orders within two months. His firm is testing various egg substitutes, but every substitute tested to date contained gluten. Gillian’s specializes in gluten-free baked goods, foreclosing those options.

The virulent H5N2 strain began to infect domestic turkey flocks in March, forcing growers to euthanize tens of millions of live birds. Migrating geese moving along the Mississippi flyway were believed to spread the virus to livestock through their feces. In April, the first confirmed cases in commercial chicken operations occurred in Wisconsin and Iowa. Current estimates put the total number of destroyed turkeys, broilers and laying hens at 47 million.

Among the hardest hit operations is Rembrandt Enterprises Inc., which closed its Rembrandt, Ia., egg operation May 1 and its Renville, Minn., plant May 19. The company laid off 288 employees at the two sites but has maintained operations in Thompson, Ia., under heightened biosecurity. Jonathan Spurway, vice president-marketing, says the company is half way through the cleaning and sanitation process in its barns and shell-breaking operations. After sanitation is completed, the farms must produce 21 consecutive days of AI-negative test results before USDA will permit it to resume the 17-week pullet repopulation process. Rembrandt estimates it lost 8 million laying hens.

Bakery operations, pasta manufacturers and other grain-based food processors account for the largest category of powdered egg consumption, followed by processors of sauces and dressings, according to AEB’s Howeth. Liquid eggs are commonly used by prepared food manufacturers, such as breakfast sandwich makers.

“This is the worst thing that’s ever happened to the egg industry,” Howeth adds. Rural areas are bearing the brunt of the pain, with feed operations, farmers and production workers impacted. Howeth cites the Iowa farmer who told him local residents were conducting prayer services. “He was very emotional about it,” he says.

Food processors may get some relief through a combination of increased egg imports and reduced exports. Suppliers in the Netherlands reactivated an earlier petition to import liquid eggs into the United States, and a license to do so was issued June 1. Canada, Israel and a few other countries are authorized to export shell eggs to the U.S.

When H5N2 AI was detected in turkeys, scores of countries introduced partial or total bans on imports of U.S. turkey meat, easing supply issues domestically. Similarly, countries that had been importing U.S. egg ingredients have barred them for now.

Warmer weather should grant some relief. The AI virus cannot survive at temperatures above 82° F. By the time cold weather returns, isolation policies for footwear, truck tires and other media that can carry the virus from an infected farm to other locations should be in place.

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