Dynamics of the Economic Impact Associated with the 2015 Avian Flu Virus in the United States

In 2015, the U.S. poultry industry was impacted by an outbreak of avian influenza, resulting in fewer hens and increased egg prices. Various estimates of the economic costs of this outbreak have been reported in the extant literature; however, it is unclear how these estimates were derived. Therefore, in this study, we will estimate the economic impact, in terms of revenue loss, of the recent avian flu virus outbreak in the United States on the shell egg industry using established and cutting-edge econometric tools & methods. We estimated a vector autoregression (VAR) model using RATS and variables found in a wholesale egg price model from Chavez & Johnson’s paper in 1981. From this we generated forecast error decompositions and impulse response functions which provided insight into how the variables interact and their elasticity. The revenue impact of the 2015 avian influenza outbreak on wholesale producers will be estimated using the observed and counterfactual egg production and price change due to the hen depopulation. Once this is determined, losses will be translated to the farm and consumer level using elasticities. Preliminary results from forecast error decompositions show that variability in egg price is primarily due to itself, then egg production, hens, and soybean meal price. The impulse response functions indicate that egg price is inelastic, which is expected.