Food supply to catch up to demand soon

Analysts expect high prices to level off in near future

Egg and chicken prices have gone topsy-turvy during the coronavirus pandemic, after shoppers flocked to supermarkets in March and emptied the shelves.

Wholesale eggs, which sold for less than $1 a dozen at the start of the year, have more than tripled as coronavirus took hold of the country, according to the U.S. Department of Agriculture. Chicken wings, breasts and tenders, which sell like hotcakes for sporting events, like the NCAA basketball tournament, went the other way.

“We are in an environment that we have never experienced before,” said Russ Whitman, senior vice president of market data analyst Urner Barry, in a call with analysts Thursday. Shoppers began bulk buying in response to the virus as restaurants were ordered to close or switch to takeout only, altering the food economy.

Each year Tyson Foods, JBS USA and other meat companies have a methodical production approach that is tied to consumer spending habits. For example — Americans often buy more meat during the spring and summer months to grill or entertain while on vacation, experts say. Some meats peak at different times of the year such as turkey on Thanksgiving or hams at Christmas.

In the case of chicken wings, suppliers increase production for the Super Bowl and the NCAA basketball tournament. However, with restaurants shuttered and March Madness canceled, there is an excess of chicken wings on the market, pushing average prices down to $1.23 per pound last week, 14% lower than the previous week. Prices stood at $1.60 per pound last month.

To offset this, Whitman said chicken processors are weighing all their options to curtail production: whether that be limiting shifts at the plants, reducing flocks or breaking eggs. Other producers stuck with a surplus of food that they cannot sell are dumping thousands of gallons of milk and rendering pork bellies into lard instead of bacon, the Wall Street Journal reported. Part of the puzzle is the difficulty producers have shifting products bound for restaurants into the appropriate sizes, packages and labels necessary for sale at supermarkets.

Whitman said he expects chicken prices to rebound, but that “will continue to be a challenge until we get the food service component back.” Restaurants, hotels and cafeterias, when open, account for about half of all food expenditures.

Last year, companies sold about 1.42 million pounds of chicken wings during the week of the NCAA basketball tournament, USDA data show. Last week, they sold only 433,000 pounds.

Eggs are a different story. For years America has dealt with overproduction, resulting in wholesale egg prices going for less than $1 a dozen at the start of the year. Enter coronavirus and essential items such as bread, milk and eggs became scarce at grocery stores, said Brian Moscogiuri, market analyst with Urner Barry.

“They’ve essentially tripled,” he said Thursday when egg prices were $3.09. They stood at $1.40 per dozen in March and in the past week climbed nearly 30%,

USDA data show. Grocery stores, in turn, are absorbing the initial shock to keep retail prices low.

If trade disputes, export bans and other competitive scenarios are the typical landmines that food companies navigate each year to maintain profitability, coronavirus is a variable that no analyst saw coming. After decades of somewhat predictable market activity, Whitman said “the rules got changed in about 10 days.”

In a recent blog post, Jayson Lusk, a food and agriculture economist with Purdue University, said the number of trips to grocery stores jumped 39% for the week ended March 22 from last year. Shoppers also bought 12% more items and spent 60% more, mainly on fresh meats and frozen foods.

What made this surge unlike others was its scope. Whitman said the virus essentially affected every American all at once, creating a demand-pull for retailers from coast to coast.

Wholesale meat and egg prices reacted, rising around the time President Donald Trump declared covid-19 a national emergency. However, Lusk said those prices have since “started to subside.”

Fewer people are “stocking-up” and exports have declined, he said. If the packing plants remain open, shoppers can expect more inexpensive products “that were mainly sold in restaurants like bacon and chicken wings.”

Retail demand, in general, has softened after Walmart, Kroger and other stores established rules that limit the amount of shoppers inside stores. Signs that limit the number of essential items such as canned goods and toilet paper are also posted.

“The typical shopper is likely to see fuller shelves in the near future, though not quite a ‘return to normal,’” Lusk said.