High egg prices due to ‘collusion scheme’ by suppliers, group claims
Eggs selling at a premium in New York on January 21, 2023.
Fatih Aktas/Anadolu Agency via Getty Images)
Egg prices soared to historic highs in 2022, but one group argues the trend is due to more sinister than simple economics.
Across all egg types, consumers saw average prices jump 60% last year — Among the largest increases in US goods or servicesaccording to the consumer price index, inflation indicators.
Large Grade A eggs averaged $4.25 per dozen in December, up 138% from $1.79 a year earlier, according to the US Bureau of Labor Statistics. data.
Industry narratives have largely focused on historical outbreaks of bird flu.It killed tens of millions of laying hens Key drivers of these price increases.
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But Farm Action, a farmer-led advocacy group, argues that the “real culprit” is a “collusion scheme” among major egg producers to fix prices and gouge out. The organization said in a letter to the Federal Trade Commission.
In doing so, producers were able to “earn huge profits, up to 40%.” letterissued Thursday, calls on FTC Chairman Rina Khan to investigate potential profit-making and “fraudulent activity.”
An FTC spokesman declined to comment due to general agency policy regarding letters, petitions, or complaints received from third parties.
But food economists are skeptical that the investigation will reveal fraud.
Amy Smith, vice president of Advanced Economic Solutions, said:
“I think it was kind of the perfect storm that came together,” she added.
Economics or “profiteering”?
In 2022, the United States will be hit by the worst bird flu epidemic ever.
Approximately 58 million birds died in 47 states due to “highly pathogenic avian influenza” according to to the U.S. Department of Agriculture. Previous records were Configuration 50.5 million birds died in 2015.
This contagious and deadly disease affects many types of birds, including laying hens.
According to the USDA, the average number of “layers” in December totaled 374 million birds, down 5% from the previous year. data Published on Friday. Overall production of table eggs fell by 6.6% to 652.2 million during the same period.
These industry numbers don’t seem to match last year’s double- or triple-digit jump in egg prices, Farm Action argues.
“Contrary to what the industry says, the rise in egg prices is”work of god‘ — it was a simple profit-making act, ‘the group said.
For example, the profits of Cal-Maine Foods, the largest egg producer in the United States and industry pioneer, “increased in line with rising egg prices each quarter of the year,” Farm Action claims. doing. For example, the company reported that profits increased tenfold over his 26-week period ending Nov. 26, Farm Action said.
Other major producers have not publicly reported such information, but “Cal-Maine’s attempt to raise its prices and profit margins to unprecedented levels suggests foul play. ,” wrote Farm Action.
Cal-Maine vice president and chief financial officer Max Bowman denied the allegations, saying the U.S. egg market was “highly competitive and highly volatile even under normal circumstances.”
Demand for eggs remains strong, Bowman said in a written statement, with the most notable factor being the impact of bird flu on chicken supplies.
The cost of feed, labor, fuel and packaging also “raised significantly”, flow Overall production costs will rise, ultimately driving up wholesale and retail prices for eggs, he said. Also, Cal-Maine does not sell eggs directly to consumers or set retail prices, Bowman added.
‘Combined effect’ of bird flu on egg prices
Charlie Tribarrow | Afp | Getty Images
Cal-Maine’s statement seems to be in line with the general outlook of food economists reached by CNBC.
“We have never seen [these prices]said Angel Rubio, a senior analyst at Arner Barry, a market research firm that specializes in the food wholesale industry. [avian flu] This happens month after month. ”
In economics, markets are rarely completely “elastic,” Rubio said. In this case he means that there is no one-to-one relationship between the supply of eggs or hens and the price of eggs.
During previous bird flu outbreaks in 2015, wholesale egg prices rose on average about 6% to 8% for each 1% decrease in the number of laying hens, Urner Barry found in a recent paper. . analysis.
According to Urner Barry, about 42.5 million layers (about 13%) have died since the 2022 outbreak. During that time, Rubio said, for every 1% drop in egg production on average, prices rose about 15%.
The pricing market has already fallen after the holidays.
Vice President, Advanced Economic Solutions
According to Rubio, this dynamic is largely due to the “combined effect” of demand.
For example, a large supermarket chain contracts to buy eggs from producers at a wholesale price of $1 per dozen. But the egg supplier is hit by an avian flu epidemic. All supplies from that source will be temporarily offline. So supermarket chains have to source eggs from different suppliers. Demand for eggs from other suppliers will increase, and may eventually sell to supermarkets for $1.05 or more per dozen.
Rubio said if a farm were hit by a flu epidemic, it would likely not produce eggs again for at least six months.
This dynamic is happening simultaneously across multiple farms and supermarkets. Bird flu also generally dissipates in the summer, but a new epidemic began last fall, entering peak demand season around the winter holidays, Rubio said.
Any good news?
Easter is usually another time of year when the demand for eggs is seasonally high.
FJ Jimenez | Moments | Getty Images
However, economists say it could be good news for consumers.
Rubio said wholesale egg prices had fallen from a peak of $5.46 a dozen on Dec. 23 to about $3.40 a dozen as of Friday. (Current wholesale prices are still nearly three times “normal” levels, Rubio said.)
On average, it takes about four weeks for wholesale price movements to be reflected in consumer retail markets, Rubio said.
Smith of Advanced Economic Solutions said:
The Easter holiday is usually another time of high seasonal demand, but economists say prices could continue to rise into March, assuming the bird flu outbreak doesn’t worsen.
https://www.cnbc.com/2023/01/23/high-egg-prices-due-to-a-collusive-scheme-by-suppliers-group-claims.html High egg prices due to ‘collusion scheme’ by suppliers, group claims