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Making the Egg Business Less Fragile

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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I eat a lot of eggs. This proclivity is inherited from my father, who was unimpressed by the 1970s medical consensus that eating egg yolks led to heart disease. “There’s no evidence,” he would say in those days, “that the cholesterol in eggs has anything to do with the cholesterol in your bloodstream.” No evidence ever was forthcoming, and the medical establishment has since come around to my dad’s reasoning. Eggs are great, my dad is smart and I hope he will now forgive me for implying last month that he eats cereal with too much sugar in it.

Anyway: eggs. My wife and I buy all of ours at the farmer’s market a couple blocks from our apartment, because that’s the kind of insufferable people we are and the kind of insufferable neighborhood we live in. The price is generally $4.50 or $5 a dozen, although you can pay $8 for the extra-special pastel-colored eggs from Millport Dairy in Lancaster, Pennsylvania (which we do only at Easter).

I’ve never been able to detect any difference in flavor between the farmer’s market eggs and store-bought. But I like the idea of buying from somebody I sort of know, and having some assurance that the chickens involved were having fun when they weren’t giving up potential offspring for my delectation. Also, even at $5 a dozen, eggs are a pretty cheap source of nutrition. My omelet this morning, made of two eggs, a scallion, two cherry tomatoes, a little butter and a little salt, cost me about $1.

After breakfast I went to the farmer’s market, where everything looked good on the egg front. The usual vendors had lots of eggs, at the usual prices. This was the non-extra-special-egg display at Millport Dairy:

photographer: justin fox/bloomberg view

The mass market for eggs in the U.S. is another story. The U.S. Department of Agriculture reported that prices for Grade A large eggs delivered to stores in the Midwest hit a record $2.77 a dozen Aug. 7. This is still a lot less than the $4.50 or more I pay at the farmer’s market, but a year ago the price was $1.11.

This price rise has had an especially big impact on low-margin fast-food outlets. As Bloomberg’s Leslie Patton wrote last week:

Denny’s Corp. is pushing burgers instead of omelets, while Dunkin’ Donuts is advertising smoothies and iced coffees. Panda Express has swapped in corn for the eggs in its fried rice.

The culprit is avian influenza. Several different viruses are making the rounds, including a variant of the notorious H5N1, source of repeated pandemic fears in the past, but the Centers for Disease Control deem the risk to the general public to be low. The risk to chickens and turkeys, though, has been quite high, with more than 48 million birds destroyed because they were infected or exposed.

The great majority of these ex-birds -- 34 million of them -- are in one state. That would be Iowa, our nation’s leading egg producer, with 16.4 billion eggs laid last year, according to the USDA. Ohio came in second at 8.7 billion. And, really, you want a top-10 list, don’t you?

To produce that many eggs, you’ve got to go big. Take it from the American Egg Board:

In the major egg producing states, flocks of 100,000 laying hens are not unusual and some flocks number more than 1 million. Each of the roughly 280 million laying birds in the U.S. produces from 250 to 300 eggs a year. In total, the U.S. produces about 75 billion eggs a year, about 10 percent of the world supply.

People in agriculture hate the phrase “factory farming,” but I don’t know what else to call this. These are giant, indoor egg-laying factories. It is these industrial operations, not the people who sell at my farmer’s market, that have been hammered by avian flu.

This is a little weird, given that avian flu was thought to be spread by wild waterfowl -- who you would think would be a lot more likely to come in contact with chickens running around a small-farmer’s pasture than those cloistered behind the walls of a “biosecure” egg factory.  Small-farmer/journalist Tom Philpott looked into this in May for Mother Jones magazine, and found it to be something of a mystery, although he had his suspicions about the sanitary conditions in those gigantic Iowa farms.

In any case, once avian flu hits a million-bird farm, all those birds have to go. And the heavy concentration of such farms in one state surely makes it more likely that such outbreaks will spread.

There’s no denying that producing eggs at such massive scale is efficient. To cite the American Egg Board again:

Using highly sophisticated technology, egg producers have kept prices low. While other food costs have skyrocketed, eggs continue to be one of nature’s best bargains among high-quality protein foods.

But as Nassim Nicholas Taleb tells us, efficiency can breed fragility. Mass-scale modern agriculture definitely has its fragile side, what with bird flus, salmonella outbreaks, E. coli outbreaks, spinach contaminated with listeria and that fungus that may wipe out most of the world’s bananas.

I don’t want to make too much of this. Farmers have always struggled with blights and famines, and the outbreaks and recalls of recent years haven’t added up to a major threat to the U.S. food supply. Also, the bird flu outbreak has been waning, although it could come back when the weather gets colder. But egg-laying chickens can be raised pretty much anywhere, and the efficiencies gained by concentrating production in huge farms in a few states come with costs and risks, too. So I like to think that I’m not just being pretentious when I pay $5 for a dozen eggs at the farmer’s market. I’m also doing my part to ensure the stability and security of our food supply. 

  1. This is a paraphrase. I was not taking notes.

  2. The data series used in the chart starts in 2009, but Bureau of Labor Statistics inflation numbers going back to 1980 also show the current price to be an all-time high.

  3. It was actually 99.8 billion in 2014, according to the USDA.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net