Easter, Exports and Ethanol

From time to time we like to post questions that can be answered using simple economic analysis.  Here's one:

Q: What do Easter, bird flu in Asia and increased demand for corn-based ethanol all have in common? 

See below the fold for the answer.

A: All result in higher U.S. egg prices.

Easter increases the demand for eggs--raising prices.  Bird flu in Asia increases the demand for U.S. eggs, increasing U.S. exports of eggs, raising domestic prices.  Increases in the deamnd for corn-based ethanol raises the price of corn, which raises the price of chicken feed, which raises the cost of raising chickens which decreases the supply of eggs, which raises price of eggs.

Here's the evidence:

Consumers who’ve been paying more for eggs recently could see another price increase soon.

Domestic egg producers have been exporting more than usual in the last few months, driven by demand for U.S. eggs after avian-influenza outbreaks in Asia. The lower egg supply in this country has led to higher prices.

...

Egg prices typically fall at this time of year after holiday baking demands have eased. Producers also take many hens out of the production cycle in January so they can be on hand for the Easter season, Sheats said. That leads to lower egg supplies.

...

"It’s all supply and demand," said Jim Chakeres, executive vice president of the Ohio Poultry Association. Producers likely are making a little more money as a result of the price increases, but it might not be as much of a windfall as it seems because of higher costs, he said.

Egg producers have been paying more for feed, as corn prices have been driven up by the demand for ethanol, a type of fuel made from corn and other renewable resources.

Yep, it’s all supply and demand. 

Comments

[Alan Dove]

Don't forget flu vaccine season. The current flu vaccine is grown in chicken eggs, so every year, egg production has to ramp up to produce the millions of eggs needed for the next batch of vaccine.

Economically, that means avian flu could boost egg prices even more if it makes the jump to humans: we'd need more eggs to produce a bigger-than-usual supply of vaccine, right at the time when the supply would be constricted by avian flu fears.