Egg prices have become increasingly volatile and reached record-high levels in markets across the globe this year. This is greatly impacting consumers and players in the egg supply chain – from breeders and producers to customers in retail, foodservice, and food processing.
These changes are likely to require a rethink of industry value chains, from producers to customers, and how governments interact with the value chain, according to a new report from Rabobank.
While consumers face high prices and availability issues, suppliers struggle with disease, cost inflation, new regulations, government intervention, and changing consumer demand. This has resulted in supply chain disruptions, with considerable price volatility, high price peaks, and, in some cases, empty supermarket shelves.
Limited customer commitment has pushed high market risks through to producers and resulted in additional market volatility. Although prices have started to drop in some markets, like the US, global prices are expected to stay relatively high throughout 2023 and into 2024, albeit lower on average than the levels seen in Q1 2023 and with differences between countries.
The main exception is the US, where prices have started to drop significantly. “The key issue there is that consumers have reduced egg consumption at a time when farms are transitioning toward cage-free production while old capacity is still operational, leading to high production. Meanwhile, a sudden drop in the number of avian flu cases in commercial laying hen farms has resulted in more supply than expected. Prices are expected to recover later in the year when market balance returns,” said Nan-Dirk Mulder, senior analyst – animal protein at Rabobank.
“The US situation is expected to be an exception worldwide. Prices will stay especially high and increasingly volatile in markets heavily impacted by avian influenza, high costs, and regulatory changes. In other markets, prices will drop but not to pre-2021 levels, as lingering high input costs will keep prices elevated.”
A major concern related to high and volatile egg prices is the impact on low-income consumers, especially in emerging markets. For these consumers, eggs are a major staple food and an important source of proteins and nutrients like Vitamins B6, B12, and D, and they are widely distributed, as no cooling is needed. Eggs are positioned in these markets as one of the most affordable proteins. If eggs become more expensive or less widely available for these consumers, it could raise significant social and health risks.
Additionally, some governments have become worried about high food prices (including eggs) and have intervened in markets by imposing price ceilings (especially in Asia) and opening imports of eggs and egg products. This usually makes the operational context more challenging for local producers, who are not able to pass on high costs under these new circumstances, and consequently reduces production (as seen in Malaysia and more recently in Egypt), worsening availability and creating additional market volatility.
Market trends can quickly turn, as seen in the US market, revealing how important it is to rethink business models in the value chain. “In the longer term, a refocused and measured approach to better balance market supply and demand, pricing, and risks in the value chain is important. Such an approach should include the key tools of more customer commitment, more demand-driven value chain cooperation, strategies to reduce the impact of avian influenza and government interventions, and better access to finance for the sector,” said Mulder. “The egg industry, customers, governments, and other stakeholders will need to join efforts to optimise value chains and link these efforts to industry business models.”