The Egg Industry Center

OUTBREAK 2015

INCREDIBLE UPDATE  

• Any estimates depend heavily on the length of time the farms are sitting empty. These figures use a best-case scenario for the re-stocking timeframe.

Using this approach, Iowa’s economic data estimates are:

• 20 million out of 59 million egg-laying hens lost

• 5.6 billion eggs lost valued at $600 million

• 1,300 direct jobs affected

• As many as 3,000 total jobs affected (includes direct and indirect jobs that help support the industry like feed truck drivers, veterinary service providers, maintenance contractors, etc.)

• Net (value-added) economic impact to Iowa of $260 million

AI ECONOMIC IMPACT: In 2012, Iowa State University conducted a study sponsored by the Iowa Poultry Association to determine the economic impact of Iowa’s egg industry on the state’s economy. Although the study was published in early 2013, it used 2011 industry data due to a lag time in industry data reporting. One result of this study was an economic model that allowed the economic impact of Iowa’s egg industry to be calculated.

Maro Ibarburu, Associate Scientist-Business Analyst of the Egg Industry Center and several colleagues in the ISU economics department used the original model and populated it with 2014 egg industry data. This effort yielded some estimates on the impact to Iowa’s economy resulting from the current AI outbreak affecting the egg industry. The figures reported consider the following:

• The egg industry is characterized by large price fluctuations even during “normal” market periods (can be 0 to 20% within two weeks). This makes it harder to make conclusions about this market than other industries because it is hard to define a “normal” fluctuation vs. a direct result of something like an AI outbreak.

All price changes reported include standard egg market fluctuations and any changes resulting from avian influenza. April 29 is used as a base date because it allows the seasonal effect of Easter to be eliminated. Price changes are calculated using Urner Berry midwest large white shell eggs and liquid whole unpasteurized egg (i.e. prices paid to producers).

The Egg Industry Center

What is Net (value-added) economic impact? The best way to ensure an understanding of a number is to understand the beginning and end point that generates the number. For instance, EIC is reporting Net or value-added economic impact. In the example of eggs, this means that input costs such as corn or soybeans are not included. While they are needed inputs for egg production, value-added figures only consider the value actually added to an input in the making of a said product (the egg in this case). Egg production starts when the hen consumes feed, so this would begin the value-added cycle for eggs. For eggs, the first processing point (i.e. either a washed shell egg in a carton or a broken egg delivered to the next stage in the supply chain) indicates an end point for the egg.

Why is liquid egg price changing so differently than shell egg price? Affected facilities have a different number of hens and sell different egg products to market. Iowa has a large liquid and powered egg product market. Due to the concentration of affected farms in Iowa, we estimate that approximately 20% of the facilities dedicated nationwide to breaking (production of liquid and powered eggs) were affected. In comparison, the estimate of nationwide facilities affected that sold shell eggs was only five percent.

AI ECONOMIC IMPACT: The number of egg-laying hens affected nationally is 1.5 times that of Iowa. Using the model produced from Iowa, 1.5 can act as a multiplier to get rough estimates. Unfortunately, this approach contains some degree of uncertainty because it assumes the jobs affected, eggs produced, etc. in those regions (MN, WI, NE, SD) is the same as Iowa. However, without the background data of those economies, the best estimate at this time is:

• 8.4 billion eggs lost at a value of $900 million

• 1,950 direct jobs impacted

• Nearly 4,500 total jobs impacted

• Net (value-added) economic impact to the U.S. of $390 million

The Egg Industry Center encourages each state to do an economic analysis of their egg industry to ensure a more accurate reflection of the state’s industry infrastructure can be represented in any national economic reporting.

OTHER ECONOMIC Q & A

How long until these facilities can recover? Farms must start with a 19-week process that raises day-old chicks to mature egg-laying hens. In this phase, the birds are called pullets. The industry has a finite capacity to grow pullets unless additional facilities are built or converted. As a result, it could take one to two years for some of the egg producers to be fully operational. This emphasizes why it is important for the producers to have an idea when they can start re-stocking their egg-laying facilities. Without a head start, the egg production facilities can sit empty longer than it needs to while everyone waits on birds to mature. This can delay the egg

INCREDIBLE UPDATE  

The Egg Industry Center is administered by the College of Agriculture and Life Sciences at Iowa State University. Incredible Update is

distributed, on an as-needed basis, to those who are interested. For questions on EIC or this update call 515.294.4037.