Avian Flu Continues to Affect US Poultry & Egg Sector

28 May 2015 --- US packaged goods holdings company Post Holdings, which supplies much of the US food industry with eggs, has announced that a third company-owned chicken flock has tested positive for the avian flu infection that is sweeping through the American Mid West.

The worst-affected states continue to be Minnesota and Iowa, with up to 41m birds being killed there in an effort to halt progress of the flu. However, Nebraska has now reported four cases of the disease, which was first reported in the US in December 2014.

The flu is starting to affect business in the States as egg suppliers cannot fulfil their supply agreements. Post Holdings is a case in point, as the spread of the disease brings the total affected supply to approximately 35% of the Company's volume commitments as determined prior to the recognition of force majeure.

Post management has determined that the ongoing avian flu outbreak constitutes a force majeure event with respect to its Michael Foods egg business, the effect of which renders Michael Foods unable to fully perform under its existing supply agreements with customers.

Michael Foods continues to take various effective measures to partially mitigate the financial impact, including discontinuation of certain product lines and appropriate pricing actions.

The scale of the egg crisis in the US is so great that there are reports that egg suppliers are looking to Europe for eggs that will fulfil their requirements. Reports suggest that Canada has been buying from the US for some time due to an egg crisis and Mexico has its own problems with avian flu, which means that Europe is the next viable option.

Some major food ingredients suppliers have also reported that food producers are looking for alternatives to eggs for their foods, in order for production to continue.

There has been a sharp increase in the wholesale price of eggs, up from around 0.63 cents/dozen in April to $1.83/dozen within the last week. Consumers are also expected to bear the brunt of the costs, with one analyst suggesting that the crisis will cost the consumer $8bn this year.

Aside from the implications for the food industry, pharmaceutical companies are keeping a very close eye on the situation, as many, including Merck and Glaxo, use eggs for production of various vaccines. They are said to be providing the highest level of protection for their flocks currently.