The price of eggs in America cannot be explained
by inflation alone
You can’t make an omelette without breaking
antitrust laws
Mar 16th 2023 | WASHINGTON, DC
WHEN THE holiday-induced baking frenzy
passed and demand for snickerdoodles slowed, many thought egg prices would
fall. The cost of a dozen had surged by more than that of any other supermarket
item, from $1.79 to $4.25 in the year to December 2022. Could they get any
pricier? Indeed they could. When January came to a close, Joe Biden told
America that food inflation was cooling. But egg prices had risen by another
13.5%.The Department of Agriculture blamed last
year’s price spike on an avian-flu outbreak that killed 43m of America’s
egg-laying birds. Industry lobbyists say that the rising costs of feed, fuel
and labour further pushed up prices. Such problems tend to beget shortages,
but Cal-Maine Foods, which has 20% of the market and is the country’s biggest
egg producer, sold more eggs in 2022 than in 2021 (the company sells about 12bn
eggs a year). Though flocks in the industry overall were a tad smaller, the
Stakhanovite hens laid more. Ultimately inflation and flu brought a boon to Big
Egg. While the S&P 500 fell by 9% last year, Cal-Maine’s shares rose by
17%. The firm generated $800m in sales in the final quarter of 2022, a 110%
increase on the same period the previous year; gross profits increased
seven-fold.Farm Action, an advocacy group which supports
small farmers (and hates genetically modified crops), has accused Cal-Maine and
two other big egg companies of price gouging, arguing that the virus,
supply-chain disruptions and inflation together do not justify the price rises.
The firms, Farm Aid argued in a letter to the Federal Trade Commission, cite
these trends to hide unjustified price hikes. Together the three account for
close to 40% of eggs sold in America, an impressive (or worrying) amount of
market power.Cal-Maine rejects the accusations
levelled at it by Farm Action. “Regardless of market conditions, Cal-Maine
sells its eggs based on the pricing negotiated with each customer and has done
so consistently throughout our history, whether at a profit or a loss,” the
firm says.If the soaring profits were just a
reflection of normal market power, other food companies ought to have seen them
too. But there was no such bonanza in the meatpacking industry, which, run by a
handful of powerful firms, is often accused by farmers of acting like an oligopoly.
Pre-tax profits on beef, pork and prepared foods at Tyson Foods, one of the
biggest meatpackers in America, were down in the fourth quarter. Fast-food
firms did not do too well, either. Net income at PepsiCo, which sells snacks as
well as sugary drinks, was less than half what it was during the same period
the previous year.To the relief of the nation’s bakers,
scramblers and lovers of pisco sours, the price of eggs came down in February.
The cost of a dozen fell by 12.7%, to $4.21. But that is still more than double
last year’s price. If the price of eggs does not continue to fall in the coming
months, then Big Egg may find federal agencies in charge of things other than
interest rates and agriculture crack down on price rises. And when the feds get
involved, it is no yolk. ■