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Rob Heidrick

Egg Shortage Drives Up Food Manufacturing Costs

by Rob Heidrick | Dun & Bradstreet Editor

June 16, 2015 | No Comments »

Egg-carton-empty_1100pxA nationwide egg shortage caused by the worst avian influenza outbreak in US history is driving up costs for food manufacturers and disrupting operations for companies throughout the food supply chain.

About 47 million birds — including more than 10% of the country’s laying hens — have died as a result of the disease as of mid-June, according to the US Department of Agriculture. Iowa, the country’s leading egg-producing state, was hit especially hard as the virus swept through major commercial egg farms that house millions of chickens in close quarters.

The price of breaker eggs — eggs sold in liquid form to food industry customers — nearly quadrupled from May to June, reaching a record high of $2.35, research firm Urner Barry reports. The shortage is raising manufacturing costs for products such as bread, pasta, ice cream, cookies, and mayonnaise. Executives at Post Holdings said in May that the avian flu outbreak had reduced the company’s cash flow by more than $20 million.

Some food manufacturers have lost as much as 25% of their egg stocks in recent months, forcing them to seek out alternate suppliers and use substitute ingredients to fulfill their contractual obligations to customers, The New York Times reports. General Mills has purchased thousands of pounds of powdered egg substitutes that will temporarily replace liquid eggs in products like cake mixes and refrigerated cookie doughs.

To help alleviate the shortfall, the American Bakers Association successfully lobbied the USDA and Congress to allow egg imports from the Netherlands, which will be only the second country after Canada permitted to export eggs to the US, according to NPR. Industry analysts estimate that it could take up to two years to fully replenish US flocks of laying hens.

Food manufacturers may need to adjust prices and discontinue certain products while egg supplies are limited. Demand for egg substitutes and egg-free products is rising sharply and should remain high until outbreaks are contained and flocks begin to rebound. Read more about food manufacturing trends in the First Research industry profile.

Rob Heidrick is an industry editor on the First Research team. He covers food and beverage manufacturing, hospitality, and recreation, as well as the government and education sectors. Rob is also on the First Research social media team and an editor for Bizmology.

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