The bird flu that’s squeezing the nation’s egg supply is creating headaches for food companies all along the supply chain — from agribusiness colossus Cargill to small-town bakers.

Egg prices are rising, and shortages have occurred in some markets, particularly for liquefied or processed eggs. It’s so bad for Minnetonka-based Michael Foods, an egg giant, that parent company Post Holdings recently declared that some contracts can’t be fulfilled.

Meanwhile, bakers and others who rely on eggs as key ingredients for products are getting notices of big price increases that could soon find their way to consumers.

The bird flu has caused “perhaps the largest short-term change the U.S. egg market has ever experienced,” wrote Maro Ibarburu, a business analyst at Iowa State University’s Egg Industry Center, in a recent report.

The egg supply crunch could have longer-term effects, too.

Rebuilding lost egg-laying capacity could take a year or two, Ibarburu said in an interview. “It will be a gradual process … it will take some time.”

The H5N2 bird flu has claimed more than 36 million layer hens, almost all of them in the Upper Midwest. The loss equals about 12 percent of the nation’s egg-laying capacity. Iowa is the biggest U.S. egg-producing state, and the flu there alone has wiped out 24 million chickens, or 41 percent of its commercial hen population.

In Minnesota, the devastation of the turkey industry — the nation’s largest — has gotten the most attention. But the state also is the eighth-largest U.S. egg producer, and four hen farms have been stricken here, erasing 3.6 million birds, or 32 percent of the state’s egg-laying capacity. Overall in Minnesota, more than 100 farms have been hit, 90 of them turkey farms, wiping out 4.7 million birds or 10 percent of annual turkey production.

On the front lines, supermarkets — and, of course, consumers — are already seeing prices rise for shell eggs because of the Upper Midwest outbreaks.

“We have seen significant increase in our egg and turkey prices over this past week,” said Aaron Sorenson, a spokesman for Lunds & Byerlys, a prominent Twin Cities grocery chain.

Lunds & Byerlys and other local supermarket chains started experiencing supply interruptions three weeks ago; some stores are still short of eggs.

Sorenson said Lunds held the line on egg prices until this past week. “We initially absorbed the increases as much as we could,” he said.

But as supplies tightened, retailers have raised prices: A dozen eggs that cost $2 two weeks ago at Lunds & Byerlys is now going for $2.79, a 40 percent increase.

“Our costs have risen significantly,” Sorenson said.

Shell eggs aren’t the only problem for full-service grocers like Lunds & Byerlys.

“We are seeing [the supply crunch] in both eggs and egg-related products,” Sorenson said. Some of the grocer’s deli salads use mayonnaise, an egg-based product, while others include eggs. The chain’s bakery is also a big egg user.

Lunds has cut back on some of its salads due to the egg shortage, but so far it’s held prices steady on items that have eggs as ingredients, Sorenson said.

Essential ingredient short

Eggs are essential to cakes, doughnuts and pastries, and bakers are high on the list of businesses affected by the bird flu.

“My supplier called me yesterday and told me to expect an immediate price increase on eggs or anything that contains eggs,” said Robin DeWitt, owner of the Blue Egg Bakery in Elk River.

Eggs make up 10 to 15 percent of Blue Egg’s cost of goods sold.

“We use eggs in everything, and we go through a lot of eggs,” DeWitt said.

She’s hoping the egg price run-up will be like other commodity price spikes — survivable. “Some years it’s nuts, some years it’s chocolate, but you just try to barrel through it.”

Ibarburu said shell egg prices, based on quotes from commodity news service Urner Barry, were up 112 percent from May 1 through May 27. Prices for liquefied eggs — the basis for many egg industry contracts — rose 165 percent, he said.

“So far, [the bird flu] has taken more out of liquid eggs,” Ibarburu said. “This is the industry hit the most.”

The liquid egg business feeds the large market for processed products such as pre-made scrambled eggs or egg patties used on the breakfast sandwiches sold in convenience stores.

“We are seeing drastic cuts in processed egg items like scrambled eggs or omelets,” said Mariah Berg, digital marketing coordinator at Upper Lakes Foods, a Cloquet-based regional food distributor. Upper Lakes is experiencing supply chain reductions of 50 to 75 percent for goods like 10-pound bags of scrambled eggs.

Some big players in processed eggs are integrated, owning their chickens and making liquid, dried and frozen egg products. Iowa-based Rembrandt Foods is such a company, and at the end of 2014 was the nation’s third-largest egg producer with 14.5 million hens, according to Egg Industry magazine.

Rembrandt, owned by Star Tribune and Minnesota Timberwolves owner Glen Taylor, has been hit hard by the bird flu. At one farm in Renville, Minn., the company lost more than 2 million hens. The flu’s single largest casualty, an Iowa farm that lost 5.5 million birds, also was Rembrandt’s.

Michael Foods, the nation’s sixth-largest egg producer as ranked by Egg Industry, is another integrated operation that has been hammered. Three of its company-owned farms, including one in southern Minnesota, have been stricken by the flu, as have farms with which it contracts.

Post Holdings, which bought Michael Foods last year, disclosed Wednesday that about 35 percent of its supply commitments have been affected by the flu. Just over two weeks ago, the St. Louis-based firm declared a “force majeure event,” meaning forces outside its control have made Michael Foods “unable to fully perform under its existing supply agreements with customers.”

The company is also discontinuing some product lines and taking “appropriate pricing action” to offset reduced egg supplies.

Another major egg products supplier is Minnetonka-based Cargill, through its Cargill Kitchen Solutions. If you’re partial to McDonald’s Egg McMuffins, you’ve likely eaten a Cargill egg product.

Cargill doesn’t own hens, instead buying its eggs. But three of its four U.S. egg operations — one in Mason City, Iowa, and one each in Monticello and Big Lake in Minnesota — are in the middle of the bird flu zone.

The company said that the bird flu has affected several of its egg suppliers but declined to comment further.