WASHINGTON, June 14 (Reuters) - U.S. wholesale egg prices increased a record 41.6 percent in May, driven by an avian flu outbreak in Mexico that boosted U.S. egg exports to that country.
The jump in egg prices, which followed a 13.1 percent decline in April, accounted more than 60 percent of a 0.6 percent increase in U.S. wholesale food prices last month, the Labor Department said on Friday. The food price gain helped push up overall producer prices by 0.5 percent.
Sheldon Garvida, a poultry and dairy industry analyst with the department’s Bureau of Labor Statistics, said Mexico has struggled to combat an outbreak of the highly contagious avian virus that has infected millions of chickens.
“That’s aggravated by the fact that Mexicans are the world’s number one egg consumers per capita,” said Garvida.
Mexico has culled 4.2 million chickens this year in an attempt to contain the outbreak. The World Organization for Animal Health reported several newly infected farms in central Mexico beginning in April and May.
U.S. egg exports to Mexico for the first four months of the year reached 12.9 million dozen, almost 27 times greater than the amount exported during the same period last year.
“Mexico is an important trade partner, and the avian flu crisis represents an additional squeeze,” said Nathan Kauffman, an agricultural economist at the Kansas City Federal Reserve Bank. Expectations that the avian flu crisis will continue may put additional pressure on prices, he said.
The BLS, however, cautioned against reading too much into the outsized price jump, noting that the combination of low domestic supply and high export demand for eggs occurred in a month when prices typically fell.
This threw off the model that the BLS uses to smooth out seasonal fluctuations in data.
“There is a large seasonal component to that number,” Joseph Kowal, an economist with the BLS.
Unadjusted for seasonal variations, wholesale prices rose a more-moderate 15.9 percent. Kowal said this was the increase that producers pass along to shoppers at the grocery store.
Prices were also pushed up by the forced molting of hens, which temporarily depressed supply, according to Garvida, the poultry and dairy analyst.
During the molting “rejuvenation process” hens are fed less, causing them to loose their feathers. They do not lay eggs during this time, but afterward the hens lay larger eggs faster.