Assessing the Impact of Highly Pathogenic Avian Influenza (HPAI) Outbreak Intensity on Price Transmission in the U.S. Egg Market

This study examines whether the severity of Highly Pathogenic Avian Influenza (HPAI) outbreaks differentially affects price transmission between wholesale and retail markets in the U.S. egg industry. Using weekly data for Grade A large egg prices and commercial bird losses from 2014 to 2024, the analysis investigates how pricing behavior shifts during periods of biological disruption. First, a Vector Error Correction Model (VECM) is used to assess both long-run equilibrium and short-run adjustments across market segments over the entire period. Results reveal a clear asymmetry in adjustment behavior. Retail prices serve as the main correction channel, adjusting approximately 39% towards the long-run equilibrium in response to prior deviations. This responsiveness likely reflects the pressures of consumer-facing pricing and the need for retail competitiveness. In contrast, wholesale prices show no evidence of correction, suggesting structural rigidities such as internal transfer pricing or long planning horizons may hinder upstream responsiveness. To assess whether outbreak severity influences pricing dynamics, weekly observations are classified into three regimes—no outbreak, moderate outbreak, and high outbreak using a grid search procedure to determine the threshold point. Regime-specific descriptive statistics reveal notable differences. Retail prices rise sharply during moderate outbreaks but decline slightly during high outbreaks, while wholesale prices rise steadily with increasing outbreak severity. A bootstrap likelihood ratio test is used to compare results from the conventional VECM with a three-regime Threshold Vector Error Correction Model (TVECM) to pricing evaluate whether price transmission varies depending on the scale of biological disruptions in the market. Overall, findings point to nonlinear, regime-sensitive market dynamics in the presence of HPAI shocks. Recognizing these distinctions will be critical for developing responsive market interventions, particularly in managing the vulnerabilities of perishable commodity supply chains during disease-driven crises.