The high price of eggs is due to the “collusion scheme” of the supplier, the group claims

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January 21, 2023 Eggs sold at high prices in New York.

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 sinister than simple economics.

Across all types of eggs, consumers saw average prices rise 60% last year — the largest percentage increase for any U.S. good or service, according to the Consumer Price Index, which measures inflation.

According to the US Bureau of Labor Statistics, the average price of a large A grade egg in December was $4.25, up 138% from $1.79 last year.

Industry talk has largely focused on the historic outbreak of bird flu — which has killed tens of millions of laying hens — as the main driver of these high prices.

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But the farmer-led advocacy group Farm Action says the “real culprit” is a “concerted scheme” to fix and lower prices among egg producers, the group said in a letter to the Federal Trade Commission.

This has helped manufacturers “make huge profits of up to 40%,” according to a letter released Thursday, which asks FTC Chairwoman Lina Han to investigate potential profits and “unfair practices.” .

A spokeswoman for the FTC declined to comment due to the agency’s general policy regarding letters, requests or complaints received from third parties.

However, food economists are skeptical that irregularities will be discovered during the investigation.

“I don’t think we’ve seen anything that makes us think there’s anything but a normal economy,” said Amy Smith, vice president of Advanced Economic Solutions. .

“I think it was just a perfect storm coming together,” he added.

Economy or “profit”?

In 2022, the United States faced the worst bird flu epidemic in its history.

According to the US Department of Agriculture, “highly pathogenic avian influenza” has killed an estimated 58 million birds in 47 states. The previous record was set in 2015 when 50.5 million birds died.

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

The average number of “layers” in December fell 5% from a year earlier, totaling 374 million birds, according to USDA data released Friday. According to the data, the total production of table eggs decreased by 6.6% in this period and reached 652.2 million.

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

“Contrary to industry talk, the rise in egg prices is not an ‘act of God,’ it just happened,” the group said.

For example, Cal-Maine Foods, the nation’s largest egg producer and industry leader, “increased as egg prices rose in each quarter of the year.” , said Farm Action. The company reported a tenfold increase in profits in the 26 weeks to November 26, according to Farm Action.

While other major growers have not disclosed this information, “Cal-Maine’s drive to push prices and profit margins to unprecedented levels suggests foul play,” Farm Action wrote.

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

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

Costs for food, labor, fuel, and packaging also “increased dramatically,” increasing overall production costs and ultimately wholesale and retail prices. eggs, he said. Cal-Maine also does not sell eggs directly to consumers or set retail prices, Bowman added.

The “cumulative effect” of bird flu on egg prices.

Charlie Triballo | AFP | Getty Images

Cal-Man’s statement appears to be in line with the general outlook of food economists reached by CNBC.

“We’ve never seen one [these prices]” said Angel Rubio, principal analyst at Urner Barry, a market research firm specializing in the wholesale food industry. “But we didn’t see either [avian flu] thus the epidemic will increase every month.

Markets are almost never “elastic” in economics, Rubio said. In this case, it means that there is generally no 1:1 relationship between the supply of eggs or chickens and the price of eggs.

During the previous bird flu outbreak in 2015, for every 1% reduction in the number of laying hens, wholesale egg prices increased by about 6% to 8%, a recent analysis by Urner Barry found. .

According to Urner Barry, an estimated 42.5 million layers (about 13%) have died since the 2022 outbreak. For every 1% drop in floors during that period, prices rose an average of 15%, Rubio said.

After the holidays, the price market is already down.

Amy Smith

Vice President of Advanced Economic Solutions

That momentum is largely due to the “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 $10. But this egg supplier was later hit by an epidemic of bird flu. All equipment from this source is temporarily offline. Thus, the supermarket chain must source the eggs from another supplier, which increases the demand for eggs from the other supplier, which may sell the eggs to the supermarket for $1.05 or more for $10. .

Rubio said when a farm gets sick with the flu, it won’t produce eggs for at least six months.

This dynamic is happening simultaneously in several farms and supermarkets. Bird flu also usually goes away in the summer, but outbreaks started again last fall before the peak demand season around the winter holidays, Rubio said.

Any good news coming?

Easter is another time of high seasonal demand for eggs.

Fj Jimenez | time | Getty Images

However, good news for consumers may be ahead, economists say.

Wholesale egg prices fell from $5.46 on Dec. 23 to $3.40 a dozen on Friday, Rubio said. (Current wholesale prices are still nearly three times “normal,” Rubio said.)

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

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

However, the Easter holiday is usually another period of seasonal demand, meaning prices could remain high until March unless the bird flu outbreak worsens, economists said.

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