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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 2: I'm Tracy Allaway and.

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Speaker 3: I'm Joe whisenth Thal.

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Speaker 2: So Joe, just a few months ago, you will remember,

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Speaker 2: I'm sure egg prices were a really big deal, and

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Speaker 2: we had all these headlines about eggs costing like ten

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Speaker 2: dollars a dozen and shortages of eggs at supermarkets or

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Speaker 2: eggs being rationed, and it even became a sort of

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Speaker 2: political touchstone. It featured in the elections. And fast forward

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Speaker 2: to today and it feels like no one's really talking

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Speaker 2: about egg prices anymore. Egg price is paid to be

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Speaker 2: at West Producers. They've gone from like eight dollars twenty

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Speaker 2: four cents to something like three dollars forty four cents.

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Speaker 2: So we've seen a really dramatic decline. We're recording this,

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Speaker 2: by the way, on June third, which happens to be

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Speaker 2: National Egg Day.

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Speaker 3: When you look at the price, you can see why

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Speaker 3: I know how to talk about it anymore. Right, There

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Speaker 3: are certain charts in the world that we only talk

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Speaker 3: about when they're going.

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Speaker 2: On they're parallel.

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Speaker 3: There's others that we only talk about when they're going

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Speaker 3: down prices for things like certain food items we tend

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Speaker 3: to only talk about on the way up.

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Speaker 2: Yeah, but here's my big question. As far as I

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Speaker 2: can tell, bird flu is still very much wet. Yes,

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Speaker 2: so you know the thing that caused egg prices to

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Speaker 2: spike in the first place, And so I'm very curious

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Speaker 2: why prices have come down. How much of it is

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Speaker 2: just people who stopped buying eggs because they were so expensive,

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Speaker 2: versus how much of it is maybe the poultry supply

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Speaker 2: got built back up. And I'm happy to say we

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Speaker 2: have the perfect guest to discuss all of this, although

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Speaker 2: the context in which we're talking is actually very sad.

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Speaker 2: We're going to be speaking with Glenn Hickman. He is

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Speaker 2: the president of Hickman's Egg in Arizona, one of the

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Speaker 2: largest egg producers in the US. And you might remember

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Speaker 2: Glenn from our special three part series Beat Capitalism, in

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Speaker 2: which we talked about soaring egg prices and Avian flu.

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Speaker 2: And unfortunately, there's been a pretty dramatic development for the

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Speaker 2: egg ranch since then, and they have just lost ninety

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Speaker 2: five percent of their chickens to the flu.

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Speaker 3: Yeah, I mean, it's an absolutely staggering number one thing

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Speaker 3: before we get into the conversation that I think is

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Speaker 3: really striking is that you mentioned that prices have come

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Speaker 3: down by basically any measure, And I'm looking at that

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Speaker 3: Midwest delivery number that's gone from over eight hundred to

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Speaker 3: three forty four, I mean compared to years before it.

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Speaker 3: I mean that was below one hundred for a long time.

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Speaker 3: So even though prices have come down from that recent spike,

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Speaker 3: eggs are just they're very expensive these days. And so

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Speaker 3: there's clearly this like persistent issue and something has changed,

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Speaker 3: maybe it's bird flu, something else that continues to put

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Speaker 3: sustained upward price on eggs.

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Speaker 2: Yeah, so we need to talk about all of this.

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Speaker 2: So Glenn, welcome back to the show. I wish it

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Speaker 2: were under better circumstances.

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Speaker 4: Well, thank you for having me.

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Speaker 2: So why don't you go ahead and tell us what

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Speaker 2: exactly is going on, Like what's the situation over at

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Speaker 2: the egg ranch.

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Speaker 5: Sure, we have four laying farms here in the state

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Speaker 5: of Arizona. Our farm down south in the city of Maricolo,

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Speaker 5: but got sick with bird flu in November, and then

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Speaker 5: was when we tried to refill the farm in January,

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Speaker 5: it got reinfected again, so that farm is still just

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Speaker 5: barely populated. They've got three hundred and forty thousand chickens

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Speaker 5: down there. But two weeks ago, on Friday, our biggest

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Speaker 5: farm in Tona Pie, Arizona, got sick with bird flu.

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Speaker 5: And subsequent to that, our two other farms in Arlington,

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Speaker 5: Arizona have gotten bird flu, and virtually all of our

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Speaker 5: replacement bullets have gotten bird flu. So right now today

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Speaker 5: we've got a total infection of about six million birds

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Speaker 5: that we're in the process of depopulating.

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Speaker 3: Bird Flu comes and goes from time to time in

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Speaker 3: the US. Can you talk a little bit about this

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Speaker 3: current what seems to be a sustained wave, And of course,

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Speaker 3: the first time we talked to I think was either

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Speaker 3: in late twenty twenty two or.

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Speaker 6: Late twenty two, late twenty.

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Speaker 3: Twenty two, and then that went away and then it

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Speaker 3: came back. Do you have an explanation of what is

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Speaker 3: going on big picture that this is a sustained, persistent

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Speaker 3: problem in bird health.

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Speaker 5: Sure, when this round of bird flu started on the

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Speaker 5: East Coast in February twenty twenty two, it was still

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Speaker 5: thought to be a seasonal challenge that was carried by

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Speaker 5: a migratory waterfowl. Now, I wouldn't say that it's gone

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Speaker 5: away and came back. I'd say it's more a little

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Speaker 5: bit joe that we've never ever since those first flocks

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Speaker 5: got sick in twenty twenty two, we have not been

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Speaker 5: able to fully rebuild our nation's laying flock before the

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Speaker 5: next wave of bird flu starts. So right now, what

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Speaker 5: we know to be true is it's endemic in several environments.

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Speaker 5: We know that we've had wildlife services out trapping sparrows

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Speaker 5: and pigeons and vermin and ground squirrels, those kind of things,

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Speaker 5: and it's all testing positive for bird flu. So it's

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Speaker 5: now endemic in our environment, and it's something that you know,

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Speaker 5: the pressure to get inside the barns where the chickens

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Speaker 5: are is the twenty four to seven three sixty five pressure.

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Speaker 2: So on this note, this is basically my question. Egg

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Speaker 2: prices have come down a lot. Why exactly is that

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Speaker 2: if bird flu is still with us, if we haven't

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Speaker 2: really rebuilt the nation's chicken supply, is it down to

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Speaker 2: demand destruction and eggs just getting too expensive or is

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Speaker 2: it all the eggs we started importing? What exactly accounts

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Speaker 2: for the big fallen.

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Speaker 5: Price Tracy, I'm not an economist, but I will tell

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Speaker 5: you that the high prices did cause some people to

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Speaker 5: seek alternatives for breakfast, whether it's yogurt and berries or

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Speaker 5: you know, peanut butter on some toast. And we've also

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Speaker 5: had eggs allowed in from other countries that have taken

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Speaker 5: over some of the industrial needs. And so we also

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Speaker 5: traditionally in the summertime, egg prices are softer because of

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Speaker 5: a lessing in demand. People just don't have the same

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Speaker 5: routines in the summertime where they get up and eat

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Speaker 5: a hot breakfast before heading out the door.

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Speaker 3: I have to say, I just find this to be

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Speaker 3: a very disturbing, like a deeply disturbing story about the

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Speaker 3: US economy or something about the US, which is that

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Speaker 3: you look at this chart and I extended it going

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Speaker 3: back further, and you just have this very quiet, sideways

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Speaker 3: line in egg prices that moves around very little bit.

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Speaker 3: There are a couple of modest spikes, and then in

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Speaker 3: the last few years there's been the surge. And so

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Speaker 3: even with this big price drop has come down and

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Speaker 3: you mentioned that it's become endemic, Like is it a

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Speaker 3: policy failure? Is there something we could substantively do different?

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Speaker 3: And in your view, is there any prospect for like

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Speaker 3: a twenty thirteen style supply and demand equation.

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Speaker 4: Joe, We'd like to have nothing better.

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Speaker 5: We can protect our flocks, and I'm just going to

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Speaker 5: say we're very, very frustrated right now. Today, our country

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Speaker 5: manufactures vaccine for poultry to protect them against avian flu,

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Speaker 5: and we ship it.

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Speaker 4: To countries in Europe and other places.

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Speaker 5: So we're making the vaccine here every day, and we're

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Speaker 5: protecting flocks in other countries. We've been unable to access

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Speaker 5: that same vaccine. I think we have it caught up

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Speaker 5: in some kind of bureaucratic merry go round, and we

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Speaker 5: just can't seem to get it pushed over the fence line.

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Speaker 5: I know that we have industry officials meeting with the USDA,

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Speaker 5: but I think it's going to come down to President

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Speaker 5: Trump is going to have to say, we want this

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Speaker 5: nonsense to stop and we want to start vaccining these flocks.

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Speaker 2: Has the Trump administration done anything in terms of bird flu,

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Speaker 2: because I know Trump has talked about vices and taking

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Speaker 2: credit for it, but I've been having difficulty identifying specific

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Speaker 2: policies or changes that they've actually done since January.

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Speaker 5: Yes, very much. They've become involved. They allocated I think

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Speaker 5: it was eight hundred million dollars towards different mitigation, you know,

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Speaker 5: biosecurity programs, research and such like that. But there needs

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Speaker 5: to be no more research on vaccine. It's available right now,

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Speaker 5: and basically it's being held up because of the meat

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Speaker 5: bird industry that doesn't want to vaccinate their flocks.

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Speaker 2: Right because then they can't export them to certain countries

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Speaker 2: that don't allow vaccinated birds.

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Speaker 5: Yeah, they cannot export their surpluses to other countries if

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Speaker 5: they were locked out of those markets because they were

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Speaker 5: vaccinating their birds.

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Speaker 3: This is such an amazing example of some of the

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Speaker 3: pickles of international trade. It's like we sell vaccines abroad

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Speaker 3: so that other countries can you avoid the bird flu

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Speaker 3: for eggs, and then we don't want to use it,

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Speaker 3: not because the eggs, but because those countries don't want

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Speaker 3: to take vaccinated chicken. Before we get into what happens

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Speaker 3: now in terms of rebuilding the flock, can you just

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Speaker 3: walk us through a little bit more the last several weeks,

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Speaker 3: like when did you realize, Like what is the moment

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Speaker 3: where you realize you have to do a massive call in.

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Speaker 4: What's that like.

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Speaker 5: Well, we started to see a few sak chickens on

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Speaker 5: May fourteenth, and you know, it wasn't a big increase,

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Speaker 5: and so we didn't think too much about it. On

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Speaker 5: May fifteenth, we saw a bigger increase. We took swabs

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Speaker 5: of the sak chickens down to the University of Arizona.

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Speaker 5: Their lab detected bird flu on the sixteenth, and then

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Speaker 5: we've been in a massive operation to depopulate our farms

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Speaker 5: ever since then.

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Speaker 2: Do you have any idea of how the flu got

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Speaker 2: in because I know you had a lot of protective

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Speaker 2: measures in place, including laser beams to scare away wild

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Speaker 2: birds and things like that. What's your theory for how

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Speaker 2: the chickens got thick?

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Speaker 4: Tracy?

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Speaker 5: I don't know why the government wants to say this

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Speaker 5: virus is not airborne. But it is airborne. We didn't

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Speaker 5: track this in on someone's shoe. We didn't have a

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Speaker 5: wild bird that was sick get into one of the barns.

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Speaker 5: That's just not happening. What happens is it's airborne. It

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Speaker 5: rides in on a dust particle, and you know these

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Speaker 5: barns we have to ventilate and we have to bring

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Speaker 5: in fresh air for the birds to breathe, and there's

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Speaker 5: just no way to filter that kind of volume at

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Speaker 5: that kind of filtration level.

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Speaker 4: So that's why we need a vaccine.

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Speaker 5: There's no mechanical ways left that our industry has not

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Speaker 5: tried to keep the virus on the outside.

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Speaker 3: Talk to us about the process of rebuilding a flock

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Speaker 3: step by step, what do you actually have to do

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Speaker 3: and how long does that take?

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Speaker 5: Well, generally speaking, our replacement flocks are geared to replace

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Speaker 5: our flock every twenty months. So for us, it's roughly

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Speaker 5: three hundred thousand birds a month that we bring in

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Speaker 5: and we grow to adult size to put in the

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Speaker 5: in the layer barns. That's a staggered five percent per

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Speaker 5: month for twenty months.

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Speaker 4: To get our flosh replaced.

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Speaker 5: So when we've lost everything basically within a two week

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Speaker 5: time span, it's still going to take us twenty months

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Speaker 5: totally rebuild that flock. We're going to be suffering through

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Speaker 5: this for quite a while.

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Speaker 2: Okay, So I believe you get compensated for chickens that

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Speaker 2: you have to call, although maybe it changes when we're talking.

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Speaker 2: You know, six million chickens versus one hundred thousand or

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Speaker 2: something like that. And I know that you've said that

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Speaker 2: you're not going to be able to fulfill your contracts

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Speaker 2: with customers going forward because of all of this. Talk

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Speaker 2: to us about the financial position that this leaves you in.

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Speaker 5: Well, we're part of an egg marketing cooperative, so we

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Speaker 5: do have access to some of our other members' eggs,

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Speaker 5: and that's what we're doing right now and bringing those

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Speaker 5: eggs in and making sure that the store shelves stay full.

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Speaker 5: With regards to the compensation from the government, we get paid,

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Speaker 5: not just we, but anyone in our industry gets paid

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Speaker 5: to depopulate the flock, clean the facilities, eliminate the virus,

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Speaker 5: and they approximate the costs of the chicken to repopulate

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Speaker 5: that they don't compensate you for the loss of income.

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Speaker 4: Like again, in our instance.

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Speaker 5: We will be below full production for the next better

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Speaker 5: part of two years.

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Speaker 3: Well, how are you going to as a business? What

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Speaker 3: is that going to mean when you think about the

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Speaker 3: future of the business. But the short term to have

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Speaker 3: so many months of lost income.

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Speaker 5: Now, well, thankfully we have you know, we have good

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Speaker 5: relations with our banks, We have some resources of our

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Speaker 5: own and so we feel like we're going to be

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Speaker 5: able to to take the time.

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Speaker 4: To rebuild those flocks and such.

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Speaker 5: But you know, I think the challenge that we're going

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Speaker 5: to have is rehiring the people that we need that

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Speaker 5: have been trained. Some of them been with us as

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Speaker 5: long as I've been here, and so that loss of

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Speaker 5: institutional knowledge is well, we're going to have the hardest

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Speaker 5: thing to try to replace.

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Speaker 2: So I know you're not an economist and you're not

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Speaker 2: in the business of making price forecasts, but do you

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Speaker 2: have a sense of what's going to happen to egg

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Speaker 2: prices from here? Not just because of the loss of

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Speaker 2: you know, your millions of chickens, but also because it

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Speaker 2: really seems like bird flu is, as you said, becoming

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Speaker 2: endemic in the US.

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Speaker 5: Well, there's two things. I mean, there's supply and there's demand.

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Speaker 5: And so we are bringing eggs in from other countries.

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Speaker 5: That's helping on the supply side of things. You know.

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Speaker 5: As kind of an interesting point, we are bringing eggs

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Speaker 5: in from Mexico where they routinely do vaccinate their flocks,

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Speaker 5: and we're bringing those eggs in. So that's one of

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Speaker 5: the ways we're going to be able to address this.

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Speaker 5: But frankly, you guys, we're not going to have a

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Speaker 5: steady supply of eggs that we've enjoyed, you know, for

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Speaker 5: the past one hundred years if we don't stop the

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Speaker 5: spread of bird flu. And so the only way to

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Speaker 5: do that now that this has become you know, something

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Speaker 5: we live with all the time, is to vaccinate our

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Speaker 5: flocks so we can protect them.

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Speaker 3: Does everyone else in the world use chicken vaccines at

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Speaker 3: this point?

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Speaker 5: No, I don't think everyone does. I know that there's

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Speaker 5: several European countries that do. I know that Mexico vaccinates

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Speaker 5: their flocks, and I think it's gaining wider and wider

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Speaker 5: spread acceptance every place.

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Speaker 3: Okay, you have you know, now there are sort of

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Speaker 3: multiple years of this, and even the re establishing of

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Speaker 3: the flock feels like it's going to be a risky process,

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Speaker 3: right because you're going to spend you know, maybe twenty

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Speaker 3: months or close to two years getting back to full capacity,

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Speaker 3: but then of course the flu could strike again. Do

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Speaker 3: you think that, like, when we think about the sort

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Speaker 3: of sustained stay rate of where egg prices are going

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Speaker 3: to go, maybe it's not you because you have scale

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Speaker 3: and you have money, and you have good access to capital.

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Speaker 3: But that essentially you see farmers sort of depart the

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Speaker 3: egg game, depart the egg industry because it appears and

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Speaker 3: maybe accurately, to be higher risk than it used to

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Speaker 3: be due to the disease being endemic, and then they's

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Speaker 3: just sort of, you know, less competitive pressure, and you know,

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Speaker 3: competitive pressure drives prices lower.

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Speaker 5: Well, so I think we're seeing it already. There's been

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Speaker 5: lots of farms in the last three years that have

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Speaker 5: sold out to companies that want to continue to shoulder

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Speaker 5: this kind of risk, and I think that we're going

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Speaker 5: to continue to see that happen. You know, the egg

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Speaker 5: industry by and large are all family owned farms, and

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Speaker 5: so you know, it does test one's commitment when you

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Speaker 5: know we cannot control our future.

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Speaker 2: All right, Glenn, we're going to leave it there, But

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Speaker 2: thank you so much for coming on all thoughts again,

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Speaker 2: and as I said, I wish it were under better circumstances,

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Speaker 2: but we appreciate you explaining everything.

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Speaker 4: That's happened, Tracy.

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Speaker 5: I appreciate being able to kind of tell our story

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Speaker 5: and try to keep this in the public eye.

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Speaker 4: We do need a solution.

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Speaker 2: Thank you, Glenn. That was great as always, and as

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Speaker 2: I said, really appreciate you taking the time given everything.

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Speaker 6: That's going on.

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Speaker 5: Okay, Hey, thanks, guys, have a good day.

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Speaker 2: So Joe obviously appreciate getting that update around the business

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Speaker 2: from Glenn, because, as I said, eggs and bird flu

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Speaker 2: have to some extent fallen out of the headlines, but

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Speaker 2: like they're still going on in the background, and it's

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Speaker 2: still a really interesting case study in industry economics. As

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Speaker 2: you pointed out, prices are just more volatile than they've

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Speaker 2: been for much of history. And this is something that

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Speaker 2: you find, I think increasingly, and especially in agriculture, where

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Speaker 2: you have these big one off shocks, it's really really

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Speaker 2: difficult for the market to recalibrate itself.

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Speaker 3: Yeah, it seems very plausible to me that this could

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Speaker 3: just be the end of cheap eggs, right because you know,

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Speaker 3: you have this consolidation, you have this persistent added cost

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Speaker 3: because of the risk, et cetera. So even when we

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Speaker 3: get this decline, there's still much more expensive than they

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Speaker 3: used to be, you have less competitive pressure, et cetera.

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Speaker 3: And I find this to be like deeply disturbing, Like

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Speaker 3: this to me seems like a very crystal clear example

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Speaker 3: of sort of society going backwards. And the reason I

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Speaker 3: think eggs are important is because arguably sort of cheaper

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Speaker 3: and cheaper protein is the hallmark of a sort of

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Speaker 3: rising standard of living. This really feels to me like

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Speaker 3: we're going backwards as a society when this is happening.

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Speaker 2: Well, and when this happens, it also becomes harder and

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Speaker 2: harder to, I guess, gauge the future of the business

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Speaker 2: and figure out how much you're supposed to invest in it. Right,

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Speaker 2: if you're getting these wild swings in prices, and then

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Speaker 2: the risk is you know, you have overcapacity and then

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Speaker 2: under capacity and then over capacity, and it just keeps

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Speaker 2: oscillating forever.

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Speaker 3: And like the essence of like things getting cheaper over

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Speaker 3: time is like sustained competitive pressure. Everyone wants to invest

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Speaker 3: and everyone wants to eat each other's margin, right, And

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Speaker 3: that's like, you know, when capitalism is working at the best,

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Speaker 3: and you're not going to get that at a time

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Speaker 3: when you have fewer and fewer participants and more and

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Speaker 3: more reasons just not to even take the risk of

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Speaker 3: the first place. And it clearly is one of these situations,

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Speaker 3: as Glenn was emphasizing, where you have to have a quote,

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Speaker 3: you know, a public health response, and the market isn't

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Speaker 3: going to do it on its own in terms of

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Speaker 3: either eliminating bird flu or eliminating the risk of bird flu,

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Speaker 3: and so you need to have that centralizing force, and

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Speaker 3: right now it doesn't seem like it's there.

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Speaker 2: My analog for all of this is swine fever in China.

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Speaker 2: There was a really big outbreak there. Did you know

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Speaker 2: that China lost thirty millions small to medium sized pig

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Speaker 2: farms between two thousand and seven and late twenty twenty four.

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Speaker 3: They probably had like half a billion of them, right like, no, yeah, yeah, yeah, no.

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Speaker 4: It is a really.

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Speaker 2: Illustrate it's the point about the big getting bigger. And

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Speaker 2: in fact, the share of small pig farmers in the

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Speaker 2: market went from like seventy four percent in two thousand

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Speaker 2: and seven to less than a third in twenty twenty three.

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Speaker 3: It does seem in the on the flip side, it

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Speaker 3: does seem like this is the story with agriculture period.

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Speaker 3: And I recall our conversation with the Lentil King talking

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Speaker 3: about how like, you know, even what we might think

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Speaker 3: of as a quote family farm unquote in Canada might

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Speaker 3: have you know, hundreds of thousands of acres at this point.

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Speaker 6: I think it's a little different in China.

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Speaker 2: But you see the point I'm making.

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Speaker 3: Yeah, yeah, No, I definitely see the point that you're making.

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Speaker 3: It just seems like there's so many forces that are

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Speaker 3: conspiring towards this, the big getting bigger within agriculture, and

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Speaker 3: when you look at the pricing and anyway, I find

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Speaker 3: it like deeply worrying. Its like the trajectory of society

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Speaker 3: that we can't get this under control.

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Speaker 2: Well, happy note, shall we leave it there?

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Speaker 4: Let's leave it there.

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Speaker 2: This has been another episode of the Oud Lots podcast.

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Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

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Speaker 3: And I'm Jill Wisenthal. You can follow me at the Stalwart.

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Speaker 4: In