The Egg Crisis in the U.S.: Impact on the food sector

By Ion Jauregui - ActivTrades Analyst
The United States is in the midst of an unprecedented crisis in the poultry sector. The rapid spread of avian flu has resulted in the death of more than 20 million laying hens, which has drastically reduced egg production. This scenario has led to acute shortages and a marked increase in prices: some supermarket chains have imposed purchase limits, and the price per dozen has reached record levels.

Evolution of the Avian Crisis
The outbreak began in February 2022, but as the virus spread exponentially, its impact became increasingly noticeable. With each week, the number of affected hens increases, and it takes, on average, half a year for farms to return to normal production. This drop in production has altered market supply, generating strong upward pressure on prices and forcing the sector's players to rethink their strategies.

Impact on the Supply Chain and Prices
The crisis has generated chain effects that affect both primary production and product distribution:
- Falling production: The massive loss of hens jeopardizes the ability to replenish supply in the short term.
- Increased costs: High biosecurity and animal replacement expenses raise operating costs, which translates into higher prices for the end consumer.
- Chain disruptions: Shortages affect the entire supply chain, from producer to retailers, increasing market volatility.

Listed Companies Directly Affected
The egg crisis directly impacts companies operating in the poultry sector. Among the most relevant are:
- Cal-Maine Foods, Inc (NASDAQ: CALM): As the largest egg producer in the United States, Cal-Maine is at the epicenter of the crisis. The drastic reduction in production and rising costs to restore its production capacity may put pressure on its margins and generate volatility in its financial results.
- Tyson Foods, Inc. (NYSE: TSN): Recognized primarily for its meat production, Tyson Foods also operates in the poultry sector and in the egg products supply chain. Raw material shortages and high operating costs may negatively impact the company's profitability.
- Pilgrim's Pride Corporation (NASDAQ: PPC): Another large player in the industry, Pilgrim's Pride, faces similar challenges. The crisis translates into higher biosafety costs and a disruption in production, which may affect its stock market performance.

Indirectly Affected Listed Companies
In addition to companies directly involved in egg and chicken production, other companies could be indirectly affected due to effects on the supply chain and food prices:
- Sysco Corporation (NYSE: SYY): As a major food distributor to the foodservice and hospitality industry, Sysco could face margin pressures due to rising input prices, including eggs, impacting its commercial agreements and customer contracts.
- Darden Restaurants, Inc (NYSE: DRI): This restaurant group, which owns well-known brands, is being forced to adjust its menus and prices in response to rising commodity prices. Egg-containing dishes could suffer cost changes, affecting the restaurant industry's profitability.
- Kroger Co (NYSE: KR): As one of the largest food retailers in the United States, Kroger faces pressure to manage an increase in commodity prices. Egg shortages may lead to higher restocking costs and adjustments in pricing strategies, which could affect its profit margins.

Corn and Animal Feed
- Poultry feed: Corn is the basis of the diet of laying hens. When a crisis, such as avian flu, drastically reduces the poultry population and thus egg production, the demand for corn to feed these birds tends to decrease.
- Impact on the supply chain: Lower egg production can lead to farms purchasing less corn, which in principle could reduce pressure on the grain market. However, this effect is influenced by other factors.
Factors Driving Corn Prices.
- Supply constraints: Adverse weather conditions, such as droughts in key production regions, have depressed crop yields. Water shortages and other agronomic problems have limited production, reducing available supply and putting upward pressure on the price.
- Global increase in demand: Although the egg crisis may reduce demand in the poultry sector, global demand for corn remains high due to its use in biofuel production (such as ethanol) and in the food industry. This robust global demand contributes to sustaining high prices.
- Input and logistics costs: The increase in the price of fertilizers, fuels and other inputs makes corn production more expensive. In addition, disruptions in the supply chain and high logistics costs are passed on to the final price of the grain.
- Geopolitical factors and speculation: Trade tensions and volatility in international markets, along with speculation in futures markets, have contributed to corn prices remaining at peak levels, despite fluctuations in poultry demand.
The interrelationship between the egg crisis and corn prices illustrates how, despite a possible decrease in demand in the poultry sector, external and structural factors have prevailed to boost corn prices. In this context, the reduction in poultry consumption is offset (or even outweighed) by reduced supply, increased global demand and higher production and logistics costs, which has driven corn to record highs during the year.

Corn Analysis (AT Ticker: CORN)
- Price Evolution: During this year, corn has shown a strong performance, starting the year up 11.14%. Its price range has been moving from support at $471.75 (recorded on February 3) to record highs of $498 per bushel that same week. The current bullish channel does not seem to have been broken but consolidated, the current momentum seems to be looking to test new support zones at $484.25 to test the current high. RSI indicates oversold at 40.18%. The control point (POC) seems to be marking the price around $490. Looking at the average crosses, there have been a number of average crosses this month in different directionalities. In the Asian day there has been a crossover of averages in which the 50 has surpassed the 100 and the 200, and the 100 is moving in the same bearish direction, so there could be a correction that sends the price to the minimum range.
- Balance between demand and supply: While the egg crisis could suggest a reduction in demand for feed corn, the other factors - supply constraints, high global demand, rising costs and geopolitical factors - have exerted a dominant pressure driving prices to record highs. This crisis may now be correcting the price of corn in a more profound way than is at first glance considered, as a matter of supply and demand.

Conclusions
The egg crisis in the United States, driven by the rapid spread of avian flu, has generated a critical imbalance in the market: the drastic reduction in the poultry population has caused a historic shortage of eggs and a significant rise in their prices, directly affecting companies in the sector such as Cal-Maine Foods, Tyson Foods and Pilgrim's Pride. At the same time, this situation indirectly affects the food supply chain, impacting distributors and retailers (Sysco, Darden Restaurants, Kroger), which face increased costs, operational uncertainty and volatility throughout the supply chain, affecting the end consumer. I
n this complex scenario, the price of corn plays a determining role. Although corn is an essential input for chicken feed, the decrease in poultry demand could suggest a drop in consumption; however, external factors -such as supply restrictions due to adverse weather conditions, a robust increase in global demand (also destined for biofuels and other industries), higher input prices and geopolitical volatility- have driven corn prices to record highs. With an initial rise of 11.14% and support movements from US$ 471.75 to US$ 498 per bushel, the bullish channel has consolidated, although there are technical signs of a possible correction that could test new support levels.
In short, the interaction between the egg crisis and the corn market illustrates how multiple factors - both internal to the poultry sector and external in the global economy - converge to shape a highly volatile scenario and significant challenges for the actors involved. This conjuncture will force companies to rethink their strategies and investors to act with caution, in an environment marked by uncertainty and interdependence of food and agricultural markets.





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