A glut of eggs is putting pressure on suppliers and farmers who are struggling to win back business two years after the worst bout of avian influenza in U.S. history devastated the egg-laying flock.
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Poultry farms in the U.S. have fully restocked and rebuilt egg supplies since the outbreak but demand hasn't kept up. Some buyers who moved to alternative options during the outbreak haven't returned. Egg prices are near a decade low, a situation that cheers shoppers in grocery aisles but is spurring losses for industry giants and farmers alike.
"We do not expect to see any meaningful improvement until there is a better balance of supply and demand," said Dolph Baker, the chief executive of Cal-Maine Foods Inc., the largest U.S. egg supplier by sales. The company on Monday blamed the egg glut for its first annual loss in more than a decade, adding that the average price of eggs sold to its customers dropped 42% over the past year.
Large shell eggs, the type sold at the grocery store, last week cost 98 cents a dozen at wholesale in the Midwest, a 62% drop over the past two years, according to market-research firm Urner Barry. Wholesale prices reported by the firm fell to 10-year lows in 2016 and haven't averaged over $1 a dozen on a weekly basis all year. The average price U.S. consumers paid for a dozen eggs last month fell to $1.33, down 48% from two years ago, according to federal data.
"This is historic," said Brian Moscogiuri, an analyst who tracks the egg market for Urner Barry.
Earlier in the decade, the egg market had seen a strong run thanks to consumers' growing appetite for protein and all-day breakfast offerings at restaurant chains. But bird flu led to the destruction of 34 million egg-laying hens as it struck farms in 2015.
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The resulting egg shortfalls and record prices drove producers to quickly refill their barns, bringing the nation's egg-laying hen population to an all-time high of 319 million in December 2016, according to the U.S. Department of Agriculture. The U.S. flock overall has shrunk since then, but egg production in June still totaled about 7.5 billion, close to the record 8 billion reached late last year.
Demand for U.S. eggs hasn't rebounded nearly as quickly.
U.S. egg exports have picked up this year, but they remain below levels seen before the onset of bird flu as buyers such as Mexico and Canada import eggs from alternative suppliers or increase production themselves. According to the USDA, the U.S. exported the equivalent of 170 million dozen eggs last year, or 55% less than the 375 million dozen shipped overseas in 2014.
Some U.S. food makers like bakeries and other companies that use egg products also have been slow to embrace eggs again. High prices compelled some to reformulate their recipes, substituting in ingredients like soy or whey protein instead, or simply making do with fewer eggs.
Recent bird flu outbreaks on farms across Europe and Asia have given food companies further cause to stick with egg alternatives rather than risking another supply disruption, along with the time and expense of changing their labels back to include eggs, industry officials say.
"A couple of years ago, people were sometimes pretty desperate to make changes," said Mark Matlock, head of food research for Archer Daniels Midland Co., which makes grain- and soy-based egg alternatives for products like cakes, cookies and pasta. Though egg prices have dropped, "there's a cost associated with changing back."
Stockpiles of dried eggs, an egg product used in goods like cake mixes, topped 30 million pounds earlier this year, the highest level in a decade, according to Urner Barry's Mr. Moscogiuri.
Cal-Maine said higher supplies have pressured prices for both commodity eggs and premium varieties, such as cage-free, that Cal-Maine has prioritized in recent years.
Post Holdings Inc. in May reported a $4.2 million quarterly loss after profit from its Michael Foods subsidiary, which sells precooked eggs and liquid egg whites to restaurants and grocery stores, declined by nearly half.
Even in the boom-and-bust prone egg business, "this is pretty severe," said Bob Krouse, chief executive of Indiana-based Midwest Poultry Services LP. The company raises about 10 million birds and says it is one of the 10 biggest U.S. egg producers. Mr. Krouse said he is trying to rein in costs, though many of his company's expenses are related to animal health and welfare and can't be pared back.
For producers able to weather a prolonged period of losses, some see relief in sight, with low egg prices triggering an increase in export demand from some markets. U.S. grocery chains, locked in a fierce battle for shoppers, also are discounting eggs as a way to get shoppers through the door.
Mr. Krouse said he recently saw eggs on sale for $0.49 cents a dozen at discount grocery chain Aldi, adding: "Eggs as a value item at stores are moving quite well."
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