Bird flu is back - should you be worried? Here's what it means for grocery prices and for your health.

By Zoe Han

Memories of higher egg prices during the last avian-influenza outbreak are still fresh in consumers' minds

Bird flu, which pushed egg prices up by more than 40% last year, is back again. But this time, it's not only affecting hens, but also herds of dairy cows and even a dairy worker. Should you be worried?

Cal-Maine Foods Inc. (CALM), the largest egg producer in the U.S., said Tuesday that it had detected avian influenza, also known as bird flu, at one of its Texas facilities. As a result, the company destroyed 1.6 million egg-laying hens and 337,000 younger hens. It also found cases in a Kansas facility earlier this year, "resulting in depopulation" of approximately 1.5 million hens, the egg producer said in its earnings report.

Cal-Maine's announcement followed the U.S. Department of Agriculture confirming in March that about half a dozen herds of dairy cows had also tested positive for the disease. Bird flu has been detected in cattle in Texas, Kansas, Michigan and New Mexico, the USDA said. One person in the U.S., who was exposed to dairy cattle in Texas, has tested positive for bird flu, the U.S. Centers for Disease Control and Prevention said April 1.

Also read: Cal-Maine sells more eggs than ever, and the stock rallies

"While the more recent outbreaks of HPAI have also affected supply and caused market prices to move higher, the overall market impact has not been as severe," Sherman Miller, president and chief executive officer of Cal-Maine Foods, said in a statement Tuesday. (HPAI refers to highly pathogenic avian influenza, the category of bird flu that Cal-Maine found in its hens.)

Cal-Maine did not respond to MarketWatch's request for comment.

It's a rare and relatively new development that bird flu is impacting mammals, especially dairy cows, according to agriculture and animal-disease experts. As a result, Google search interest in "bird flu" has surged in the past week, and is at the highest it's been in the last two years, the search giant (GOOGL) (GOOG) said.

But experts - including agriculture analysts and government agencies - say the impacts of the current bird-flu outbreak are not yet going to be felt much by the average consumer. It's relatively easy to kill avian influenza by exposing it to high temperatures, and the confirmed cases have affected a relatively small group of animals, analysts told MarketWatch.

"I don't think a 'domino effect' is right ahead of us," said agriculture economist Adam Speck. While Cal-Maine said the impacted hens in Texas were about 3.6% of the company's total flock, that's a small number compared to the 377 million egg-laying hens in the country as of February 2024, he noted.

Avian influenza is usually most active in the spring and dies down when temperatures increase, Speck said. And with the colder months now coming to an end, the case number is still small, he added.

Another piece of good news is that, after the last outbreak of bird flu subsided, egg producers recovered the total hen level to a healthy point by the beginning of this year, Speck told MarketWatch. The bird-flu resurgence likely will cause a short-term bump to the wholesale price of eggs, but it's not going to show up much for consumers when they shop for eggs at grocery stores, he noted.

Egg prices fell in late 2023, and rose again in recent months. If the disease does not become too widespread this year, the volatility in egg prices will ease - but it's unlikely prices will go back to their 2021 levels before inflation and bird flu, said Brian Earnest, protein-industry analyst at agriculture lender CoBank. Cal-Maine's recent Texas depopulation will likely impact local producers and farmers more than national ones, he said.

However, that was not the case a year ago. First detected in the spring of 2022, the last bird-flu outbreak in commercial flocks lasted more than a year, into late 2023. About 82 million chickens, turkeys and other birds had been impacted by the disease as of April 3 of this year, according to government data, with 30,000 birds impacted in the past 30 days. About 57 million hens have been killed since the outbreak began in 2022.

Egg prices were down 8% from the previous year during the week of March 24, according to the Grocery Price Index from Datasembly. When egg prices were soaring in January 2023, they rose by 91% year over year.

A dozen Grade-A large eggs cost $4.80 on average in January 2023, according to government data, before declining to near $2.00 in late 2023. The price was up to $2.90 in February.

"A new territory"

Bird flu among dairy cows is a newer development that analysts have not seen. "This is a new territory for dairy cows," Speck said.

The strain of avian influenza that's been detected recently in herds of dairy cows is different from the ones detected in birds before the current outbreak, said Gary Flory, an international agricultural-emergency consultant and owner of G.A. Flory Consulting LLC, based in Virginia. While other strains have mostly only affected birds, mammals including seals, horses and sea lions were also found with the virus in the past few years, he said.

The USDA confirmed that the strain affecting dairy cows, H5N1, is the same one that has been affecting commercial poultry flocks recently. The same strain was also found among minks on a farm in Spain in 2022, and in mammals such as bears in Alaska, Nebraska and Montana, according to the CDC.

"We don't know a lot about it because it's so new to us," Flory told MarketWatch. But based on what's been observed from the affected dairy farms, the disease can impact the quality and quantity of cows' milk production, Flory said - though "the cows are not dying," he noted. It can also result in symptoms such as lethargy and a loss of appetite, according to the World Organization of Animal Health.

As a result, the impacts on dairy cows could be short term. For those cows, "they are going to get sick, they recover, they are going to go back to production," Flory said. "I don't see [it] having a financial impact at this point in the industry." Individual cattle raisers will have a difficult time, but the industry might not see much disruption and neither will consumers shopping for milk, he added.

Many things remain to be seen with the development of the virus, including how it might potentially mutate, but analysts told MarketWatch that the number of impacted dairy-cattle herds is small compared to the total number of herds in the U.S.

"It's too soon to say if this will have larger impacts in the future should the virus spread, but it should not affect dairy production at this time," said Dr. Cliff Shelton, an agricultural economist with agriculture lender AgAmerica, in an email to MarketWatch.

The Animal and Plant Health Inspection Service, which is under USDA, also doesn't see impacts on consumer prices or milk supply given the current levels of bird flu in the U.S. "Markets continue to reflect normal movements," said the government agency in a fact sheet on avian influenza detected in dairy cows. USDA also said that the nation's beef supply is safe.

Live cattle futures (LCM24) fell around 4.55% this week after the CDC confirmed that the dairy worker contracted bird flu. It was the largest one-week decline for the most-active contract since November, according to Dow Jones Market Data. Analysts attributed the decline in part to fears that demand for U.S. beef could be undercut if the disease continues to spread.

There are no signs that beef cattle have been impacted, Shelton said. Dairy cows have sometimes been used to supplement beef production in the past few years because of low beef stock, but with the current situation, it's unlikely affected farms will transfer their cows in the near future, Shelton added.

Should people worry about bird flu affecting them, or their eggs or milk?

The CDC said the overall risk posed by the bird flu to public health remains low. The average consumer shouldn't be too concerned, as long as they heat their food properly and drink pasteurized milk, experts said. Farmers will also remove the impacted milk from their supply, according to Flory.

There has been no sustained human-to-human spread of the virus yet, and the H5N1 strain that emerged in 2021 has a much lower mortality rate than an earlier strain, Flory said. But there is a need to continue to monitor the virus because it mutates often, he told MarketWatch.

One other point to keep in mind for the average beachgoer: Take caution when you see dead seals or sea lions washed up on the shore, because bird flu has been detected in these animals in recent years, Flory said. "Don't touch the dead animal, that's the consideration there," he noted.

-Zoe Han

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04-06-24 0630ET

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