AMES, Iowa — Established dynamics of the U.S. egg market make it too soon to determine any egg price impacts from the recent avian influenza outbreak, according to a report from the Egg Industry Center (EIC) at Iowa State University.

Highly pathogenic avian influenza (HPAI) has affected more than 33 million birds in the United States since December, including 22 million laying hens. The EIC report pegs the 7 percent loss in the U.S. laying flock as “perhaps the largest short-term change the U.S. egg market has ever experienced.”

But this short-term change does not automatically transfer to higher egg prices for at least two reasons, one reason on each side of the supply and demand equation. On the supply side, egg export market fundamentals are at work, while U.S. consumer behavior muddies egg price forecasting on the demand side.

Exports of animal products usually drop during disease outbreaks as foreign markets implement trade limitations. That means products intended for export may instead enter the domestic supply chain.

Canada and Mexico – the primary U.S. egg export markets – have banned poultry products from areas affected by HPAI. Egg exports to Canada declined in February, as the HPAI outbreak spread in Iowa and Minnesota. But egg exports to Mexico increased for February, as U.S. egg prices stayed comparatively low.

The increase to Mexico, in light of lower layer numbers, may be explained by egg prices that remained comparatively low, said Maro Ibarburu, EIC business analyst. “These (export) markets buy eggs when and where the price is low,” he said.

And the egg price spread, like other farm commodities, is not reflected in retail – and sometimes wholesale – egg price changes. According to the EIC, the U.S. average farm price for a dozen eggs increased 18 cents in February while the U.S. retail price declined 2.5 cents.

Another factor in the egg export puzzle is currency exchange rates. A stronger dollar makes U.S. eggs more expensive, and that could have as much or more impact on exports as lower production. According to USDA’s April Livestock, Dairy and Poultry Outlook, “As with other U.S. export products, the strength of the U.S. dollar is expected to slightly hamper growth,” in egg exports.

Ibarburu said that total mix of factors makes it too early to predict the impact of HPAI on egg exports. For customers, especially Mexico, “they will continue to buy U.S. eggs until the U.S. egg price increases enough for these countries to switch suppliers away from the U.S.,” he said.

Domestic consumers

If egg exports do decline more than pegged by present forecasts, that could put those eggs into the domestic market. That could help offset any lower egg supply from HPAI-affected flocks and could temper prices paid to egg farms.

On the demand side, changes in consumer egg purchasing habits are hard to crack. “Changes in prices don’t shy consumers away from the eggs,” said Ibarburu. “The demand for eggs is inelastic,” meaning an increase in price will not result in consumers buying fewer eggs.

But news can change consumer demand. “We do see egg consumers reacting to changes in information,” he explained. Consumers might react to HPAI news in two ways. They may decrease egg purchases, for a time, until HPAI is out of the news. But there is not yet any hard evidence that purchases are on the decline.

“Consumers do like their eggs,” said Ibarburu. “That makes retail price changes very hard to predict.”

Farm egg prices did increase during first quarter of 2015, according to Urner Barry’s price quotations by region. A price of 88.5 cents per dozen in January increased to $1.06 in February and $1.24 in March. But the usual post-Easter drop in farm price paid was larger than the EIC forecast, even with HPAI in the equation.

Further price changes may have a lot to do with how many more layers are affected and how fast layer populations recover.

For egg farms unaffected by HPAI, lower grain prices and higher egg prices should translate to potential gains, even with presumably higher biosecurity costs and vigilance. The price of eggs delivered to the retail store door stayed around $1.20 during April, before moving toward $1.40 during the first week of May, according to the EIC.

But it is yet unclear whether a rise in retail egg prices will follow. “It is simply too early to project the effect on retail egg price under a major (avian influenza) outbreak situation such as this,” said Ibarburu.