High egg prices due to supplier ‘collusion scheme’, group claims

Eggs for sale at high prices in New York on January 21, 2023.

Fatih Aktas/Anadolu Agency via Getty Images)

Egg prices hit historic highs in 2022 – and one group says the trend is due to something more nefarious than simple economics.

Across all types of eggs, consumers saw average prices jump 60% last year — among the largest percentage increases of any U.S. good or serviceaccording to the consumer price index, a measure of inflation.

Large Grade A eggs cost an average of $4.25 per dozen in December, up 138% from $1.79 the previous year, according to the U.S. Bureau of Labor Statistics. Data.

The industry narrative has largely focused on a historic outbreak of bird flu – which killed tens of millions of laying hens – as the main driver of these higher prices.

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But Farm Action, a farmer-led advocacy group, says the ‘real culprit’ is a ‘collusive scheme’ among major egg producers to fix and gouge prices, the group said in a letter to the Federal Trade Commission.

This has helped growers “extract huge profits of up to 40%,” according to the letterreleased Thursday, which asks FTC Chairwoman Lina Khan to investigate potential profiteering and “foul play.”

An FTC spokesperson declined to comment because of a general agency policy regarding letters, petitions or complaints received from third parties.

Here's why eggs are so expensive

However, food economists are skeptical that an investigation would reveal wrongdoing.

“I don’t think we’ve seen anything that makes us think anything other than the normal economy is going on right now,” said Amy Smith, vice president of Advanced Economic Solutions. .

“I think it was just kind of a perfect storm of things coming together,” she added.

Economy or “profit”?

The United States suffered its deadliest bird flu epidemic in its history in 2022.

‘Highly pathogenic bird flu’ has killed an estimated 58 million birds in 47 states, according to at the United States Department of Agriculture. The previous record was Position in 2015, when 50.5 million birds died.

The disease, contagious and deadly, affects many types of birds, including laying hens.

In December, the average number of “layers” was down 5% from the previous year, with a total of 374 million birds, according to the USDA Data released on Friday. Overall table egg production fell 6.6% over the same period, to 652.2 million, the data showed.

Those industry numbers don’t appear to match a double- or triple-digit spike in egg prices last year, Farm Action says.

“Contrary to industry narratives, the egg price increase has not been a ‘act of god‘ – it was just a profit,” the band said.

For example, earnings at Cal-Maine Foods — the nation’s largest egg producer and an industry bellwether — “rose as egg prices rose through every quarter of the year.” , said Farm Action. The company reported a tenfold increase in profits in the 26 weeks to Nov. 26, for example, Farm Action said.

While other major growers do not report this information publicly, “Cal-Maine’s drive to increase prices – and profit margins – to unprecedented levels suggests foul play,” Farm Action wrote.

Max Bowman, vice president and chief financial officer of Cal-Maine, denied the allegations, calling the U.S. egg market “intensely competitive and highly volatile, even under normal circumstances.”

The significant impact of bird flu on chicken supply was the most notable driver, while demand for eggs remained strong, Bowman said in a written statement.

Expenses for food, labor, fuel and packaging have also ‘increased significantly’ feed through to higher overall production costs and ultimately to wholesale and retail egg prices, he said. Cal-Maine also does not sell eggs directly to consumers or set retail prices, Bowman added.

A “cumulative effect” of avian flu on the price of eggs

Charly Triballeau | AFP | Getty Images

The price market is already falling after the holidays.

Amy Smith

Vice President at Advanced Economic Solutions

The momentum is largely due to a “cumulative effect” of demand, Rubio said.

For example, suppose a large supermarket chain has a contract to buy eggs from a producer at a wholesale price of $1 per dozen. But this egg supplier then suffered an epidemic of bird flu. All supplies from this source are temporarily offline. So the supermarket chain then has to source eggs from another supplier, which increases the demand for eggs from the other supplier, who could end up selling eggs to the supermarket for $1.05 or more per dozen. .

Once a farm experiences a flu outbreak, it likely won’t produce eggs for at least six months, Rubio said.

This dynamic is happening simultaneously in several farms and supermarkets. Bird flu also typically clears up in the summer, but outbreaks started again last fall ahead of the peak demand season around the winter holidays, Rubio said.

Good news to come?

Easter is usually another time of high seasonal demand for eggs.

Fj Jimenez | time | Getty Images

However, good news for consumers could be ahead, economists said.

Wholesale egg prices had fallen to around $3.40 per dozen on Friday from a high of $5.46 per dozen on Dec. 23, Rubio said. (Current wholesale prices are still nearly triple their “normal” level, Rubio said.)

On average, it takes about four weeks for wholesale price movements to be reflected in the retail market for consumers, Rubio said.

“The price market is already falling after the holidays,” said Smith of Advanced Economic Solutions.

However, the Easter holiday is usually another period of high seasonal demand, which means prices can remain high until March, assuming the bird flu epidemic does not worsen, economists said.

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