In 2022, wholesale egg prices more than quadrupled as 40 million layers were euthanized in response to an avian flu (H5N1) outbreak. Since then, there have been two more outbreaks leading to egg price spikes in February and September of this year.
Egg prices remain about double their 2021 values; they’re up 80% if you adjust for inflation. Egg production remains down about 6% from 2021, which tells us that egg demand is pretty inelastic. An 80% real price increase from a 6% drop in supply implies a demand elasticity of 0.075.
This year, avian flu has spread to dairy cows. The first infected cow was discovered in Texas in March, and 282 dairy herds in the country have now been affected. The outbreak hit California in the last two months, with infected cows found in 82 dairy herds in the state. According to the California Department of Food and Agriculture (CDFA), the virus has been spread by wild birds, which were also the main vector for the outbreaks in laying hens.
California has about 1100 dairy farms, of which 700 have at least 500 cows. CDFA provides daily updates on disease spread, but it has not revealed the size or location of the 82 affected herds. They should provide this information; transparency is important. At this time we do not know what percentage of the state’s dairy cattle have been exposed.
Two dairy workers in Tulare County have been infected with bird flu, which means we know that at least two of the affected dairies are in that county. These workers almost certainly caught the virus from cattle. They apparently have “mild symptoms and are being treated with antiviral medications”.
Commercial chickens are euthanized when a member of their flock is infected, but infected cows are quarantined until they recover. Most recover within a couple of weeks, after which they may resume producing milk. Healthy cows in the dairy may continue producing milk for commercial sale, so the drop in milk production so far has been negligible.
Importantly, pasteurization kills the virus, which means that essentially any dairy product you can buy in a store is safe to consume. For this reason, and because affected cows are isolated while the rest of the herd continues producing, milk prices appear to have been unaffected by the outbreak. In fact, milk futures prices have declined somewhat in the past two weeks. We will learn more in the coming months as USDA releases milk production data; the latest available data are from prior to the California outbreak.
So, that’s the good news.
I made the graphs with this R code.