Eggs for sale at high prices in New York on January 21, 2023.
Fatih Aktas / Anadolu Agency via Getty Images)
Egg prices are set to reach a historically high level in 2022 – and one group alleges the trend is driven by something more nefarious than simple economics.
Across all types of eggs, consumers saw an average price increase of 60% last year. Among the largest percentage increases of any US commodity or serviceAccording to the Consumer Price Index, an inflation measure.
According to the US Bureau of Labor Statistics, the cost of large, Grade A eggs averaged $4.25 per dozen in December – a 138% increase from $1.79 a year earlier statistics,
Industry narrative has largely focused on a historic outbreak of avian influenza—which killed millions of egg-laying hens—as the primary driver of those higher prices,
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But Farm Action, a farmer-led advocacy group, claims the “real culprit” is a “collusive scheme” among major egg producers to fix and inflate prices, the group said in a letter to the Federal Trade Commission. Is.
Doing so has helped producers “extract exorbitant profits of up to 40%,” according to letterissued Thursday, which calls on FTC Chairwoman Leena Khan to investigate possible profiteering and “foul play.”
A spokeswoman for the FTC declined to comment because of a general agency policy regarding letters, petitions or complaints received from third parties.
However, food economists are skeptical that the investigation will uncover wrongdoing.
“I don’t think we’ve seen anything that makes us think anything other than normal economics is happening,” said Amy Smith, vice president at Advanced Economic Solutions.
“I think it was a perfect storm of stuff that came together,” she said.
In 2022, America had to face the deadliest outbreak of bird flu in history.
The disease, which is contagious and fatal, affects many types of birds, including egg-laying chickens.
In December, the average number of “layers” was down 5% from a year earlier, totaling 374 million birds, according to the USDA. statistics Published Friday. The data shows that the total production of table eggs fell by 6.6% to 652.2 million in the same period.
Farm Action claims that these industry figures do not seem to line up with the double or triple digit percentage increases in egg prices last year.
“Contrary to industry narrative, the increase in the price of eggs is a ‘Act of God‘ – this is simple profiteering,” the group said.
For example, the profits of Cal-Maine Foods—the nation’s largest egg producer and an industry bellwether—”increased in lockstep with rising egg prices every quarter of the year,” Farm Action claimed. The company reported a tenfold increase in profits in the 26-week period ending Nov. 26, for example, Farm Action said.
While other major producers do not publicly report such information, “Cal-Maine’s willingness to increase prices – and profit margins – to such unprecedented levels reveals dishonesty,” wrote Farm Action. .
Max Bowman, Cal-Maine’s vice president and chief financial officer, denied the allegations, calling the US egg market “highly competitive and highly volatile even under normal circumstances”.
The significant impact of bird flu on poultry supply has been the most notable driver, while demand for eggs remains strong, Bowman said in a written statement.
The cost of feed, labor, fuel and packaging has also “increased significantly,” feed through to higher overall production costs and, ultimately, wholesale and retail egg prices, he said. Bowman said Cal-Maine does not sell eggs directly to consumers or set retail prices.
Charlie Triblew | AFP | Getty Images
Cal-Maine’s statement seems to square with the general view of food economists reached by CNBC.
“We’ve never seen [these prices]”But we haven’t seen either,” said Angel Rubio, senior analyst at Urner Barry, a market research firm specializing in the bulk food industry. [avian flu] This is how the outbreak spreads month after month.”
In economics, markets are almost never perfectly “elastic,” Rubio said. In this case, it means that there is usually no 1:1 relationship between the supply of eggs or poultry and the prices of eggs.
During prior bird-flu outbreaks in 2015, wholesale egg prices increased by about 6% to 8% for an average 1% decrease in the number of egg-laying hens, Urner Barry recently found. Analysis,
According to Urner Barry, approximately 42.5 million layers (about 13%) have died since the 2022 outbreak. Rubio said prices have increased by about 15% for an average 1% decrease in egg layers over that time.
Rubio said the dynamic is largely due to a “mixed effect” of demand.
For example, let’s say a large supermarket chain has a contract to buy eggs from a producer at a wholesale price of $1 per dozen. But that egg supplier has to face an outbreak of bird-flu. All supplies from that source come temporarily offline. Therefore, the supermarket chain must then purchase eggs from another supplier—increasing demand for the other supplier’s eggs, which may eventually sell eggs to the supermarket for $1.05 or more a dozen.
Rubio said that once a farm has had a flu outbreak, it will not produce eggs again for at least six months.
This dynamic is happening simultaneously on many farms and in supermarkets. Bird flu also typically abates in the summer, Rubio said, but tends to renew outbreaks last autumn, a season of peak demand around the winter holidays.
Easter is typically another period of high seasonal demand for eggs.
FJ Jimenez | moments | Getty Images
However, economists said there could be some good news for consumers.
Rubio said wholesale egg prices had dropped to about $3.40 a dozen on Friday, down from a high of $5.46 a dozen on Dec. 23. (Current wholesale prices are still about triple their “normal” levels, Rubio said.)
On average, it takes about four weeks for wholesale price movements in the retail market to appear for consumers, Rubio said.
“The post-holiday pricing market is already bottoming out,” said Smith at Advanced Economic Solutions.
Economists said the Easter holiday is another period of typically high seasonal demand, however, which means prices could remain elevated through March, assuming the bird-flu outbreak doesn’t worsen.