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Blame birds, not the supply chain, for high egg prices
I’m still in San Diego, just had breakfast and it occurred to me that, well, we’ve all been struggling with inflation for the last several months.
But if you’ve noticed that eggs are by far the highest price thing out there right now. Based on where you are in the country, a dozen is now between $5 and $9. The reason is not because there’s been a failure of the supply chain. The reason is not because there’s a shortage of imports. The reason quite simply, is flu.
The problem with maintaining chicken populations is that chickens are birds and birds can fly, but not the chickens that we raise for eating or for raising eggs, but other birds. And since birds are mobile, they carry their bugs with them, and they crap and the crap falls out of the sky and sometimes it hits a domesticated bird.
Anyway, we had an outbreak of avian flu about a year ago. And as it roared through the Midwest and took out a lot of chickens, a lot of chicken farmers had to go through and cull their herds to prevent it from infecting anyone. Now, from the point that you decide you want more chickens, you have to do two things. Number one, you have to hold some of the eggs back so you’re talking about a reduction in output between a quarter and a half based on how fast you’re trying to repopulate. And then you got to wait because you got to raise these things. And it takes about I mean intensive, it really varies greatly based on the species, but somewhere between two and six months to raise an adult chicken to the point that it can be laying its eggs itself.
So this process started about three-four months ago, meaning we have another two to three months to go before we really get that first huge additional generation assisting, and then we can start dealing with the backlog. So we are still looking at high egg prices for another three to four months.
Now, this sort of thing is pretty common in agriculture. People forget that… when we have a shortage in something like a car, because we can’t build a spark plug or a semiconductor. Once you get the new facility online, all of the other parts can be in place and you just go through the semi-finished cars, you plug in this last piece and you’re good to go. That doesn’t work with food. If you have a food shortage, it doesn’t matter what it is, you’ve got to wait for an entire production cycle to go through. And if you’re talking about plant-based agriculture, sometimes that’s another year.
Everything has to be in place. The pesticide at the right time, the seeds at the right time, the irrigation at the right time, the fertilizers at the right time, the harvest at the right time. And if you miss any one of those pieces, if you have a yield at all, it’s going to be paltry compared to what you’re used to. And you simply have to wait for the next growing season for things to begin.
One of the things that we’re seeing in the Ukraine War right now is that the Ukrainians have been favoring corn and seed oils in this food evacuation program that they basically have with the United Nations. Ships can come in and dock at Ukrainian ports. The Russians have promised not to bomb them. And so the Ukrainians had to choose what goes in. And as a rule, corn and oil seeds generate more income for them than wheat. So that’s what they’ve been favoring. Wheat output from Ukraine has basically stopped, whereas corn is more or less where it was before the war, maybe a touch higher.
Replacing that requires some other producer someplace else, crops switching to wheat in order to plug the gap, or bringing new land online. Regardless, it takes a year. And remember, we haven’t yet seen the real disruptions to the Ukraine War because the Russians haven’t specifically targeted the ports en mass enough to disrupt large-scale exports, or really in totality. But we’re probably going to see that really soon.
By the time we get to spring, it’s going to be a different kind of war. The Russians are going to be very clearly going for the throat. Instead of targeting civilian electrical infrastructure, they’re likely to go after food production and transport. And if they do achieve a breakthrough in the southern front, they’re absolutely coming for Odessa, because that’s where most of the commerce in and out of Ukraine transits.
We’re about to lose the world’s fifth largest exporter of wheat, fourth largest exporter of corn and top oil seeds exporter. And there’s no one in the world who has the scale or the spare capacity to replace that. And even if they did, you’re talking a year out. This is going to get a lot worse before it gets better, even if the Ukrainians actually win the spring offensive to come. Alright, until next time.
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