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Easter Sales and Future Prospects. Are we Flying Blind?

07/11/2019

Anne L. Alonzo, president and CEO of the American Egg Board recently commented on sales volume and prices of eggs in an article published in the Summer 2019 edition of the Urner Barry Report. Ms. Alonzo emphasized the importance of Easter as the egg holiday with demand increased by home baking and entertaining. The importance of eggs during the Easter holiday is highlighted by the annual White House Egg Roll, which generates favorable publicity for the egg- producing industry.

Ms. Alonzo contrasted sales volume and prices for Easter periods from 2015 through 2019. Over the Easter period March 11th through April 7th in 2018, 242.5 dozen equivalent shell eggs were sold generating a revenue at retail of $511.4 million with a unit price of $2.10 per dozen. For Easter 2019 extending from March 31st through April 27th, 242.0 dozen equivalents were sold at a combined retail value of $424 million corresponding to a unit price of  $1.75 per dozen, a reduction of 17 percent.

Nielsen data suggests that including eggs in a shopping basket contributes to a tab of $33 per trip if generic eggs are included. This is compared to $49 per basket if cage-free, organic or other specialty eggs are purchased. This denotes that the demographic purchasing more expensive specialty, cage-free or organic eggs tend to purchase either more items per trip or tolerate higher unit prices due to perceived value of attributes. Eggs are obviously inelastic with regard to demand. Reducing the price of eggs may increase purchases slightly, but there is a limit to the quantity a consumer will purchase given perishability and a fairly constant use pattern.

Retail prices do not directly correlate with wholesale values. Prices paid to packers and integrators are a function of supply which in turn is influenced by flock size. Injudiciously high placement of pullet chicks reflects in lower wholesale prices 24 weeks later. The impact of the 2015 HPAI epornitic which occurred after the Easter period of that year resulted in a sharp increase in wholesale price following depletion of 40 million hens or 12 percent of the laying flock with replacement pullets although disproportionately affecting in-line breaking complexes. The effect of reduced flock size continued through 2016 in proportion to the level of rebuilding the hen population.

From the perspective of producers of shell eggs, supply is the important determinant of wholesale price. A comprehensive economic analysis is required to relate volume of production to wholesale and retail prices and the interaction of the shell and liquid segments of the industry. The impact of the 2015 HPAI epornitic, overproduction in 2019 and other factors influencing the egg industry represents a real-world exercise for agricultural economists. Determining the price elasticity for shell eggs and liquid and their interaction would be a valuable contribution to the industry with respect to forward planning and placement.

EGG-NEWS has advocated for such a study since 2015, and it is hoped that an industry initiative could fund a comprehensive study. This is especially important given the transition of the industry from caged housing to alternative systems including aviaries and floor-barns. Given the immense capital required to erect a complex of one to two million hens comprising pullet and layer housing, a feed mill and packing plant with appropriate biosecurity and other infrastructure demonstrates the need for quantifiable data to guide the industry going forward to 2025.