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Is there a plot so that the eggs have become more expensive by 60%? A farmer advocacy group thinks so


The industry defends that the worst outbreak of avian flu suffered in 2022 shot up prices. But the organization Farm Action asked the regulatory commission for an investigation.

By Greg Iacurci -


The price of eggs shot up to historically high levels in 2022, a situation that is not exclusively due to the economic situation, in which hundreds of products have become more expensive due to inflation.

According to a company in the sector, there is another explanation.

Across all types of eggs on the market, the median price rose 60% last year, one of the largest percentage increases of all American goods and services, according to the Consumer Price Index (CPI), which measures inflation.

In December, large Category A eggs cost $4.25 a dozen, up 138% from $1.79 a year earlier, according to data from the government's Bureau of Labor Statistics.

A woman shops for eggs at a supermarket in Houston, Texas. Brandon Bell / Getty Images

The industry has focused on repeating that this rise is largely due to a historic outbreak of bird flu, which has killed tens of millions of laying hens.

But Farm Action, an advocacy group for farmers, claims that "the real culprit" is a "collusive scheme" by major egg producers to fix and speculate on prices, the organization alleged in a letter sent Thursday to the Federal Trade Commission.

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In his opinion, this has helped the producers to "obtain egregious profits reaching up to 40%", for which he asked the president of the FTC, Lina Khan, to investigate possible speculation and "foul play".

A spokesman for the agency declined to comment.

However, food economists are skeptical about the possibility of an investigation discovering whether irregularities have actually been committed.

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“I don't think we've seen anything that makes us think there's more than business as usual,” said Amy Smith, vice president of Advanced Economic Solutions.

“I think it's been kind of a perfect storm,” she noted.

Economics or “speculation”?

The United States suffered in 2022 the deadliest outbreak of bird flu in its history.

“Highly pathogenic avian flu” killed an estimated 58 million birds in 47 states, according to the USDS.

The previous record was set in 2015, when 50.5 million died.

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

The average number of "layers" in December fell by 5% compared to the previous year, with a total of 374 million birds, according to government data published on Friday.

Total egg production decreased by 6.6% in the same period, to 652.2 million.

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But for Farm Action, these numbers don't square with a double- or triple-digit percentage increase in egg prices last year.

Contrary to what the industry claims, the increase in the price of eggs has not been an “act of God”, but simple speculation”, the organization maintains.

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For example, the profits of Cal-Maine Foods, the largest producer of eggs in the country and one of the benchmarks in the sector, "increased at the same rate as egg prices during all quarters of the year" and profits of the company increased tenfold over the 26 weeks to Nov. 26, Farm Action said.

While other big growers don't offer this kind of information, "Cal-Maine's willingness to raise its prices -- and profit margins -- to unprecedented levels suggests foul play," Farm Action wrote.

Max Bowman, Cal-Maine's vice president and chief financial officer, denied the allegations, calling the US egg market "intensely competitive and highly volatile, even under normal circumstances."

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The significant impact of bird flu has been the most driving factor, while demand has remained strong, Bowman argued in a written statement.

Expenditures on feed, labour, fuel and packaging have also “increased considerably”, resulting in increased overall production costs and ultimately wholesale and retail prices for feed. eggs.

Cal-Maine also does not sell eggs directly to consumers or set the prices that the customer pays, Bowman added.

Chickens on a farm in Austin, Texas, on Jan. 23, 2023. Brandon Bell / Getty Images

An “aggravating effect” of bird flu on the price of eggs

Cal-Maine's explanation is in line with the vision of specialized economists in the food sector consulted by CNBC.

“We've never seen” these prices,” acknowledged Angel Rubio, a senior analyst at Urner Barry, a market research firm specializing in the wholesale food industry. “But we haven't seen [bird flu] outbreaks month after month after month either. like this".

In economics, markets are almost never perfectly "elastic," Rubio noted.

In this case, that means that there is generally not a 1:1 relationship between the supply of eggs or chickens and the prices of the product.

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During the previous avian flu outbreak in 2015, wholesale value rose 6-8% for every 1% decrease in the number of laying hens, on average, Urner Barry found in a recent analysis.

Some 42.5 million layers, about 13%, have died since the 2022 outbreak, according to Urner Barry.

Prices have risen about 15% for every 1% fewer egg layers during that time, on average, Rubio explained.

The dynamics are largely due to a “compound effect” of demand, the expert said.

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For example, suppose a large supermarket chain has a contract to buy eggs from a producer at a wholesale price of $1 a dozen.

But that supplier has an outbreak of bird flu.

All supply from that source is temporarily shut off.

The supermarket chain is forced to source eggs from another supplier, increasing demand for eggs from the latter, which could sell them to the supermarket for $1.05 or more per dozen.

When a farm experiences a flu outbreak, it is likely that it will not produce eggs again for at least six months, according to Rubio.

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This dynamic occurs simultaneously in multiple farms and supermarkets.

Bird flu usually subsides in the summer as well, but outbreaks started again last fall ahead of the peak demand season around the winter holidays, the analyst noted.

Good news?

However, economists say there is good news for consumers.

Wholesale egg prices had dipped to as low as $3.40 a dozen on Friday, from a peak of $5.46 a dozen hit on Dec. 23, Rubio said.

Still, current wholesale prices remain almost triple their "normal" level.

In general, wholesale prices take about four weeks to be reflected in the retail market for consumers, Rubio recalled.

A customer checks a dozen eggs before buying them at a grocery store in Glenview, Ill., Tuesday, Jan. 10, 2023. Nam Y. Huh / AP

"The price market is already going down after the holidays," confirmed Smith of Advanced Economic Solutions.

However, Easter is often another period of high seasonal demand, which means prices can stay high until March, assuming the bird flu outbreak doesn't worsen, economists warned.

Source: telemundo

All news articles on 2023-01-29

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