In his recent press conference, Fed Chair Jerome Powell used the term “disinflation” 12 times. Yahoo Finance called it out as the “Key Word”. https://finance.yahoo.com/news/stocks-love-fed-powell-disinflation-morning-brief-110013322.html. Jay Powell wasn’t talking about omelets.
A few folks noted my reference to the high price of eggs in the Sunday, January 22, commentary, “50 Years of Inflation & the Fed” (https://www.cumber.com/market-commentary/50-years-inflation-fed). We thank them for their comments.
A Philadelphia-based reader sent this link to a relevant story. "Pennsylvania has 4.6 million fewer egg-laying hens due to avian flu,"
https://www.inquirer.com/business/egg-prices-avian-flu-lancaster-county-pennsylvania-poultry-20230127.html
Cumberland’s original founders (Shep Goldberg and David Kotok) each have some history of watching bird flu outbreaks during Cumberland’s 50 years and even before the firm was founded. Please remember that Cumberland’s original headquarters were in Vineland, NJ, about 45 minutes’ drive from Philadelphia. A half century ago, the Vineland-centric region of NJ was known for its eggs and poultry.
Many who escaped the Nazis in Europe were able to find a new life raising poultry in the region. Here’s the story, as told by Stockton University in NJ: “Project Tells Stories of Holocaust Survivor-Owned Businesses,” https://stockton.edu/news/2022/holocaust-survivor-owned-businesses-project.html. The Vineland Poultry laboratories were world famous for their development of vaccines to prevent chicken illnesses and deaths.
My personal history with this subject never stopped. With my then GIC colleague Sharon Javie, I was part of the organizing committee to structure a major national conference on bird flu in conjunction with the Philadelphia College of Physicians and the Global Interdependence Center. That was many years ago.
The bird flu issue remains a significant concern today as the US is seeing its largest-ever outbreak of H5N1 among birds. Avian flu, along with rising costs for poultry feed and supplies, is the primary reason behind the high price of eggs.
Here’s a link to Katelyn Jetelina’s excellent discussion of the current status of bird flu in the United States. Her January 24 post at Your Local Epidemiologist answers most of the questions we received.
“Why are there no eggs? Avian flu and keeping human risk low,”
https://yourlocalepidemiologist.substack.com/p/why-are-there-no-eggs-avian-flu-and .
We must note that egg prices vary considerably around the country. Grocery shoppers in some states are seeing significantly higher prices while others wonder what the complaining is about. A recent Business Insider article maps the variation in prices: "If you live in one of these states, you’re spending way too much on eggs,"
https://www.businessinsider.com/these-states-have-seen-the-highest-increases-in-egg-prices-2023-1. With migratory birds on the move and H5N1 with them, it’s hard to say where poultry farms, backyard flocks, and shoppers may feel the pain next.
There are some financial market implications when shocks occur in the agriculture sector and food prices spike as a result. Most central banks try to ignore these shocks because they view them as transitory (there’s that word again). Yet higher food prices do impact households’ budgets, and they do alter consumer’s economic behaviors, and they do trigger a demand for substitutes when substitutes are available. Thus, there are what economists call “spillover effects” from these transient economic shocks.
Right now we are seeing this happen with poultry and eggs. I wonder if Jay Powell likes omelets?
David R. Kotok
Chairman & Chief Investment Officer
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