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

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

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On January 21, 2023, eggs are sold at higher prices in New York.

Fatih Aktas/Anadolu Agency via Getty Images)

Egg prices are set to soar to record highs in 2022 — and one group says the trend is due to something more nefarious than simple economics.

Average prices for all types of eggs jumped by 60% last year — among the largest percentage growth of any good or service in the USaccording to the consumer price index, a measure of inflation.

Large Class A eggs averaged $4.25 a dozen in December, up 138% from $1.79 a year earlier, according to the U.S. Bureau of Labor Statistics. data.

The industry narrative largely focuses on the historic outbreak of bird flu that killed tens of millions of laying hens. the main factor behind these higher prices.

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But Farm Action, a farmer-led advocacy group, says the “real culprit” is a “collusive scheme” between major egg producers to fix and drive down prices, according to a letter to the Federal Trade Commission.

This has helped manufacturers “earn staggering profits of up to 40%,” according to letterreleased Thursday asking FTC Chairwoman Lina Khan to investigate potential speculation and “foul play.”

An FTC spokesman declined to comment because of the agency’s general policy regarding letters, petitions and complaints received from third parties.

However, food economists are skeptical that the investigation will reveal violations.

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

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

Economy or “for profit”?

In 2022, the United States experienced the deadliest avian flu outbreak in history.

“Highly pathogenic bird flu” killed about 58 million birds in 47 states, respectively to the United States Department of Agriculture. There was a previous record set in 2015, 50.5 million birds died.

The disease, which is contagious and fatal, affects many species of birds, including laying hens.

In December, the average number of “laying birds” fell 5% from last year to 374 million birds, according to the USDA data published on Friday. The total production of edible eggs during the same period decreased by 6.6% to 652.2 million pieces.

Those industry numbers don’t seem to match the double- or triple-digit percentage jump in egg prices last year, Farm Action said.

“Contrary to industry narratives, there was no increase in egg pricesAct of God— it was just speculation,” the group said.

For example, the profits of Cal-Maine Foods — the nation’s largest egg producer and industry leader — “increased in line with the rise in egg prices every quarter of the year,” according to Farm Action. For example, the company reported a tenfold increase in profits for the 26-week period ended Nov. 26, according to Farm Action.

While other major producers do not report such information publicly, “Cal-Maine’s willingness to increase its prices — and profits — to such unprecedented levels suggests foul play,” Farm Action wrote.

Max Bowman, Cal-Maine’s vice president and chief financial officer, 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 supplies was the most notable factor, while demand for eggs remains strong, Bowman said in a written statement.

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

‘Compounding effect’ of bird flu on egg prices

Charlie Triballo | Afp | Getty Images

The pricing market is already post-holiday.

Amy Smith

vice president of Advanced Economic Solutions

According to Rubio, the dynamics is largely due to the “replenishment effect” of demand.

For example, suppose a large supermarket chain contracts to buy eggs from a producer at a wholesale price of $1 per dozen. But this egg supplier then suffers from an outbreak of bird flu. All supplies from this source are temporarily disabled. Therefore, the supermarket chain must purchase eggs from another supplier, increasing the demand for the other supplier’s eggs, which may end up selling the eggs to the supermarket at $1.05 or more per dozen.

Rubio said the farm likely won’t produce eggs for at least six months after the flu outbreak.

This dynamic is happening simultaneously on several farms and supermarkets. Avian flu also usually dissipates in the summer, but outbreaks started again last fall, around the time of peak demand during the winter holidays, Rubio said.

Good news ahead?

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

Fj Jimenez | Moment | Getty Images

However, some good news for consumers may lie ahead, economists say.

Rubio said wholesale egg prices fell to about $3.40 a dozen on Friday, down from a peak of $5.46 a dozen on Dec. 23. (Current wholesale prices are still nearly triple the “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 pricing market is already down after the holidays,” said Smith of Advanced Economic Solutions.

The Easter holiday is usually another period of high seasonal demand, but that means prices could remain high until March, provided the bird flu outbreak doesn’t worsen, economists say.

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