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By P.J. Huffstutter and Bill Berkrot
CHICAGO and NEW YORK, May 22 (Reuters) - As a virulent avianinfluenza outbreak continues to spread across the MidwesternUnited States, some egg-dependent companies are contemplatingdrastic steps: importing eggs from overseas or looking to eggalternatives.
A spokeswoman for grain giant Archer Daniels Midland Co said that, as egg supplies have tightened and pricesrisen, the company has received numerous inquiries frommanufacturers about the plant-based egg substitutes it makes.
And with a strong dollar bolstering the buying power of U.S.importers, some companies are scouting for egg supplies abroad.
"The U.S. has never imported any significant amount of eggs,because we've always been a very low-cost producer," said TomElam of FarmEcon, an agricultural consulting company. "Now,that's no longer the case."
Still, companies wanting to import eggs may have to look farafield.
"Canada is short on eggs and has been buying heavily fromthe U.S. for the last several years," said Rick Brown, a seniorvice-president of Urner Barry, a commodity market analysis firm."Mexico has been dealing with its own outbreaks of avianinfluenza, so they're banned from importing into the U.S. Thelogical place people will be looking now would be Europe."
Avril, a farmer-controlled agri-food group that ownsFrance's largest egg brand, Matines, said it has seen anincrease recently in demand from the United States and elsewherein the Americas and plans to start making shipments in June.
ECONOMIC BITE
Meanwhile, companies sticking with egg suppliers closer tohome are facing sharply higher prices as a result of theoutbreak, which has so far affected some 39 million birds.Nearly one-quarter of the hens that lay "breaker eggs" - whichinclude liquid, dried or frozen eggs used by food manufacturers- have either died or are slated to be euthanized.
The outbreak has led to a sharp uptick in the wholesaleprice of such eggs, from 63-cents a dozen in late April, whenthe first egg-laying flock was reported infected, to $1.83 adozen this week, Brown said.
The wholesale price of "shell eggs," typically sold incartons at grocery stores, has also risen, from $1.19 a dozen inlate April to $2.03 a dozen this week, Brown said.
Nevertheless, some food makers are turning to the moreexpensive shell eggs to supplement supplies, although that meansan additional cost to send the eggs to a breaking facility thatwill crack the shells, Elam said.
Analysts at Goldman Sachs predict consumers will ultimatelyspend an additional $7.5 billion to $8 billion because of theegg supply squeeze.
Nestlé SA - which uses eggs for some of itsDreyer's, Edy's and Häagen-Dazs ice cream products - said it isbraced for shortages and working with suppliers to help protecthens.
Dunkin' Brands Group Inc told Reuters it will leaveit up to franchisees to decide whether to swallow the cost hikesthey're seeing or pass them on to consumers.
A MATTER OF LIFE OR DEATH
For some companies, having an adequate supply of fertilizedeggs can be a matter of life or death. Some vaccine makers,including Merck & Co Inc, maintain their own hen flocksto produce eggs used for incubating vaccines that protectagainst diseases such as measles and mumps.
Merck said it is taking no chances with its chicken flocksas avian influenza continues to spread: Security is tight aroundthe birds, and the health of the hens is continuously monitored.
Sanofi Pasteur, the vaccines division of Sanofi, said it,too, is keeping close tabs on the outbreak - particularly withthe state agriculture department in Pennsylvania, home to someof its suppliers and the U.S.'s fourth largest egg-laying flock.So far, no avian influenza cases have been identified there.
"We continue to maintain preventive measures for our eggsupply system, including biosecurity and physical securityprocedures, to provide our suppliers with protection from beingaffected by this or any avian outbreak," the company toldReuters in a statement.
And GlaxoSmithKline PLC told Reuters it isreinforcing biosafety standards at more than 30 Canadianegg-laying farms that are dedicated to producing eggs for thecompany's human flu vaccines.
The company has more egg supplies than it needs for its fluvaccine production in Canada and Germany, a spokeswoman said.
But as the bird flu outbreak spreads in the U.S., she added,"we are monitoring the current situation closely and havealerted all of our supply farms." (Reporting By P.J. Huffstutter in Chicago and Bill Berkrot inNew York. Additional reporting by Karl Plume in Chicago, LisaBaertlein in Los Angeles, Anjali Athavaley in New York, Sybillede La Hamaide in Bazancourt, France and Gus Trompiz in Paris.Editing by Jo Winterbottom and Sue Horton)
