eFeedLink Mobile

 


December 2, 2020

 

US, Chinese egg farms take different paths to the same strong outcome

 

Despite their radically different economic circumstances, eastern and western egg producers performed equally well in the COVID-19 recession, with the best yet to come.

 

By Eric J. Brooks

 

An eFeedLink Hot Topic

 

 


Hardy eggs endured COVID-19 better than most commodities: Their output (layer and non-layer) stayed flat at just over 85 million tonnes, while revenues fell from a ResearchandMarkets.com estimated US$200.8 billion in 2019 to a projected US$198.4 billion in 2020.

 

Nevertheless, keeping production constant and prices steady in the face of this year's deep recession required not just flexibility but a wide range of adaptive responses to this year's crisis. As the accompanying graph shows, COVID-19 lockdowns made Chinese egg prices fall by 30% while US egg prices jumped by more than 100% --but once the lockdowns ended, prices in both nations returned to normal levels.

 

The different US and Chinese market responses to COVID-19 reflects the unique characteristics of each nation's domestic market. China's two-month lockdown commenced near Lunar New Year –this is a time of year when meat consumption and prices go into a two-month cyclical decline. Because a large proportion of Chinese egg consumption occurs in state schools, hotels, and factory canteens, their lockdown closure greatly reduced egg demand.

 

That caused strong deflation but China's economic recovery from COVID-19 lockdowns was also faster than that of any other nation. The subsequent rapid re-opening of factories and schools quickly re-opened egg distribution channels.

 

Moreover, China's COVID-19 recession coincided with its ongoing African swine fever (ASF) epidemic. With ASF inducing a near tripling of pork prices and broiler meat also becoming expensive, many Chinese consumers substituted eggs in place of pork and poultry. This lifted prices back to normal levels and is encouraging farms to produce 3.1% more eggs in 2020 than in 2019.

 

In the US, COVID-19 lockdowns paradoxically both created and destroyed egg demand. On one hand, with a large proportion of US food consumption occurring in fast-food restaurants, their closure should have deflated egg prices. On the other hand, COVID-19 panic buying quickly made supermarkets run out of eggs and made their prices enter a brief period of hyperinflation.

 

Greg Hinton, vice-president of sales for Rose Acre Farms, states COVID-19 lockdowns induced panic buying of eggs across the United States. The resulting 200% jump in retail sales volumes resulted in very high egg prices and rationing.

 

While retail egg shortages eased, retail demand did not: With restaurants closed, millions working from home stepped up the number of eggs they buy and cook at home. With America's unemployment rate jumping from 3.5% to 25% in less than two months, retail egg demand was further boosted by tens of millions of unemployed Americans, who reduced their meat consumption and substituted inexpensive eggs in its place. The resulting change in eating habits means that the increase in US per capita egg consumption will probably be permanent.

 

On the other hand, ferocious demand for retail eggs was counterbalanced by an 80% fall in orders for loosely packed eggs destined for hotels, restaurants, and food processors. Fortunately, by quickly shifting deliveries from their closed food-service corporate customers to supermarkets, the egg supply-demand balance was quickly restored in the US and Canada.

 

With so many loose eggs re-packed into retail cartons and diverted to supermarkets, "The shifting of loose eggs to retail has depleted all the inventory of cartons from all carton manufacturers. Our lead-in time on cartons has been pushed from 3 to 4 weeks to 7 to 8 weeks."

 

Going forward, Hinton predicts that "Retail egg sales will continue to remain strong due to more people cooking more eggs at home. Demand will pick up quickly at drive-through eateries but demand at full-service restaurants may take a year or 2 to go back to pre-COVID-19 levels."

 

A tectonic market shift from institutional to retail customers also occurred in Europe. British consumers traditionally prefer to buy brown eggs, while white eggs were usually used by food processors and restaurant chains.

 

With retail eggs suddenly in short supply, The Guardian newspaper reported "Unfashionable white eggs normally used in McDonald's breakfast McMuffins are making a surprise comeback on the shelves of Tesco – the first time the supermarket has sold them for more than 40 years." It added that "With more people cooking and eating at home alongside a home-baking boom since the pandemic started, Tesco [supermarket] has seen demand for eggs rocket by 30% year on year."

 

According to UK-based Noble Foods managing director Veli Moluluo, Britain has experienced "an unprecedented" 100% to 150% increase in customer demand for carton packed shell eggs destined for supermarkets which have continued unabated. This coincided with "a significant drop off in the egg product business from customers such as Hilton Hotel Group and McDonalds which dropped off overnight." 

 

Believing the current substitution of eggs and working from home trend can permanently boost and transform British egg consumption patterns, Noble stepped up the TV advertising campaign for its Happy Egg brand. 

 

Noble's aggressive egg marketing is justified by studies that show egg revenues and volumes growing at average rates of 8% and 3% to 4% respectively from now through to 2025. Boosted by demographic changes in wealthy nations, growing demand in developing countries, and innovative changes in their nutritional profile, eggs have a bright future across all sectors of the world economy.
 


All rights reserved. No part of the report may be reproduced without permission from eFeedLink.

Share this article on FacebookShare this article on TwitterPrint this articleForward this article
ABOUT US
ENQUIRY
GENERAL
Copyright ©2021 eFeedLink. All rights reserved
Switch to Full Website