Egg market drowning in supply sends prices to lowest in a decade
IT DOESN’T matter if you like them hard-boiled, scrambled or soaked in heart- clogging hollandaise sauce: When eggs are this cheap, it’s a good time to get cracking.
Supplies in the US have surged so much in recent months that prices are the lowest for this time of year in at least a decade. It will probably take awhile for consumers to eat through the surplus inventory, so the government is predicting egg costs will drop more than any other food group in 2017.
The slump marks a sharp turnaround in the egg business. In 2015, an avian influenza outbreak forced farmers to destroy millions of birds and prices skyrocketed. Eager to take advantage of the rally, producers expanded flocks that were the biggest ever by the end of last year.
But demand hasn’t keep pace. While some farms have scaled back in recent months, hens have gotten more productive, keeping the market flush with supply.
“The market was temporarily starved for eggs, and now it’s drowning,” said Tom Elam, president of Carmel, Indianabased consulting firm FarmEcon LLC. “There’s just too many eggs out there.”
Retailers were charging US$ 1.414 on average for a dozen eggs in May, the lowest for the month since 2006, Bureau of Labor Statistics data show. Prices have plummeted 52 per cent from a record US$ 2.966 reached in September 2015. Costs are on track to fall by as much as six per cent this year, the U.S. Department of Agriculture forecasts. The decline comes even with overall food inflation projected at as much as two per cent.
Total egg supplies in the US will climb 1.3 per cent in 2017 to 8.829 billion dozen, the government said in a June 9 report. That’s the highest in data going back to 1992. Output is projected to rise again next year, with total supplies forecast at 8.957 billion dozen, the USDA estimates. The vast majority of supply is domestically produced.
The glut has been a drag on Cal-Maine Foods Inc., the nation’s largest egg company. Shares have slumped 12 per cent in 2017, the worst start to a year since 2009.
Adam Samuelson, an analyst at Goldman Sachs Group Inc., downgraded the recommendation on the stock to sell from neutral on June 16.
“Historically, the egg industry has experienced many boom and bust cycles with periods of overproduction disrupting the supply- demand balance,” CalMaine Chief Executive Officer Adolphus Baker said during a presentation earlier this month.
The current slump may not last, Baker suggested. “High prices cure high prices” by encouraging more supply, “but low prices also cure low prices” by forcing producers to cut back, he said. — WP-Bloomberg