High egg prices due to a 'collusive scheme' by suppliers, group claims

High egg prices due to a ‘collusive scheme’ by suppliers, group claims

Eggs on the market at elevated prices in New York on Jan 21, 2023.

Fatih Aktas/Anadolu Agency through Getty Images)

Egg prices soared to traditionally excessive ranges in 2022 — and one group is alleging the development is due to one thing extra nefarious than easy economics.

Across all egg sorts, customers noticed common prices soar 60% final 12 months — among the largest percentage increases of any U.S. good or service, in accordance to the patron worth index, an inflation measure.

Large, Grade A eggs value $4.25 a dozen in December, on common — a 138% enhance from $1.79 a 12 months earlier, in accordance to U.S. Bureau of Labor Statistics data.

The trade narrative has largely centered on a historic outbreak of avian influenza — which has killed tens of thousands and thousands of egg-laying hens — because the primary driver of those higher prices.

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But Farm Action, a farmer-led advocacy group, claims the “actual offender” is a “collusive scheme” amongst main egg producers to repair and gouge prices, the group mentioned in a letter to the Federal Trade Commission.

Doing so has helped producers “extract egregious earnings reaching as excessive as 40%,” in accordance to the letter, issued Thursday, which asks FTC Chair Lina Khan to examine for potential profiteering and “foul play.”

An FTC spokesman declined to remark due to a normal company coverage concerning letters, petitions or complaints obtained from third events.

Here's why eggs cost so much

However, meals economists are skeptical an inquiry would uncover wrongdoing.

“I do not assume we have seen something that makes us assume that there is one thing there aside from regular economics taking place proper now,” mentioned Amy Smith, vice chairman at Advanced Economic Solutions.

“I feel it was simply type of a good storm of stuff that got here collectively,” she added.

Economics or ‘profiteering’?

The U.S. suffered its deadliest outbreak of chicken flu in historical past in 2022.

“Highly pathogenic avian influenza” killed about 58 million birds throughout 47 states, according to the U.S. Department of Agriculture. The prior report was set in 2015, when 50.5 million birds died.  

The illness, which is contagious and deadly, impacts many forms of birds, together with egg-laying hens.

In December, the typical variety of “layers” was down 5% from a 12 months earlier, at a whole 374 million birds, in accordance to USDA data revealed Friday. Overall manufacturing of desk eggs fell by 6.6% over the identical interval, to 652.2 million, information confirmed.

These trade figures do not appear to sq. with a two- or three-digit share spike in egg prices final 12 months, Farm Action claims.

“Contrary to trade narratives, the rise within the worth of eggs has not been an ‘Act of God‘ — it has been easy profiteering,” the group mentioned.

For instance, the earnings of Cal-Maine Foods — the nation’s largest egg producer and an trade bellwether — “elevated in lockstep with rising egg prices by each quarter of the 12 months,” Farm Action claimed. The firm reported a tenfold enhance in earnings over the 26-week interval ended Nov. 26, for instance, Farm Action mentioned.

While different main producers do not report such info publicly, “Cal-Maine’s willingness to enhance its prices — and revenue margins — to such unprecedented ranges suggests foul play,” Farm Action wrote.

Max Bowman, Cal-Maine’s vice chairman and chief monetary officer, denied the allegations, calling the U.S. egg market “intensely aggressive and extremely unstable even below regular circumstances.”

Bird flu’s vital affect on hen provide has been probably the most notable driver, whereas egg demand has remained sturdy, Bowman mentioned in a written assertion.

Expenses for feed, labor, gas and packaging have additionally “risen significantly,” feeding through to greater general manufacturing prices and, in the end, wholesale and retail egg prices, he mentioned. Cal-Maine additionally does not promote eggs instantly to customers or set retail prices, Bowman added.

A ‘compounding impact’ of chicken flu on egg prices

The pricing market is already coming down post-holiday.

Amy Smith

vice chairman at Advanced Economic Solutions

The dynamic is essentially due to a “compounding impact” of demand, Rubio mentioned.

For instance, as an instance a huge grocery store chain has a contract to purchase eggs from a producer at a wholesale worth of $1 per dozen. But that egg provider then suffers a bird-flu outbreak. All provide from that supply comes offline quickly. So, the grocery store chain should then procure eggs from one other provider — elevating demand for the opposite provider’s eggs, which could in the end promote eggs to the grocery store for $1.05 or extra a dozen.

Once a farm suffers a flu outbreak, it possible will not produce eggs once more for at the least six months, Rubio mentioned.

This dynamic is going on concurrently throughout a number of farms and supermarkets. Bird flu additionally usually dissipates in the summertime, however outbreaks started anew in final autumn heading into peak demand season across the winter holidays, Rubio mentioned.

Good information forward?