Picture: Associated Press
Nowhere is the ire over inflation more concentrated than in the price of a carton of eggs. According to the Office of Labor, a dozen eggs cost an average $4.25 last December compared to $1.78 a year ago. In some parts of the country, the average price is $9.73.
Most of the explanations thus far as to why eggs have increased in price assume the invisible hand of the market or blame “acts of god” like last year’s avian flu outbreak that took out 43 million birds. Goal in a letter to FTC chair Lina Khan, the advocacy group Farm Action points out that the math behind those explanations doesn’t add up. Rather, Farm Action’s legal counsel Basel Musharbash alleges “a collusive scheme among industry leaders to turn inflationary conditions and an avian flu outbreak into an opportunity to extract egregious profits reaching as high as 40 percent.”
“Contrary to industry narratives, the increase in the price of eggs has not been an ‘Act of God’—it has been simple profiteering,” the letter notes, adding that the industry’s profit margins have risen to “unprecedented” levels alongside egg price increases.
The story, according to the organization, is not one of egg prices going up because of a crisis, but one we’ve seen over and over again over the last year: Prices are increasing under the guise of uncontrollable “inflation” simply because companies can make more money if they raise prices. The trend applies to everything from breakfast cereal to rent.
The egg industry has previously come under scrutiny for such behavior: a group of egg buyers accused egg producers of engaging in anti-competitive behavior between 2004-2008, including slaughtering chickens to artificially induce scarcity.
Farm Action’s argument is basically that last year’s avian flu was a cover for the country’s largest egg distributor, Cal-Maine Foods, to boost prices, even when egg production should theoretically have returned to normal by now. With 20 percent of the egg market, Cal-Maine could set industry standard prices. Competitors, rather than trying to make their products cheaper, went with the higher prices, Farm Action argues.
“The real culprit behind this 138 percent hike in the price of a carton of eggs appears to be a collusive scheme among industry leaders to turn inflationary conditions and an avian flu outbreak into an opportunity to extract egregious profits reaching as high as 40 percent,” Farm Action wrote.
Avian flu outbreaks were discovered in February 2022 in Delaware and spread to 10 states. The worst impacts of the avian flu were over by that spring, but prices kept increasing. According to Farm Action, “No hen losses were reported after the beginning of June except due to sporadic outbreaks in September, October, and November.” The result was that the average flock size for egg-laying hens in any month in 2022 was “never more than 7-8 percent lower than it was a year prior—and in all but two months was never more than 6 percent lower.”
A burst of egg-laying rates throughout the year should also have blunted the impact of the avian flu. Even though there were slightly fewer hens, they were laying on average 1-4 percent more eggs than they did between 2017 and 2021. The result was that “the industry’s quarterly egg production experienced no substantial decline in 2022 compared to 2021.”
The USDA noted in May 2022 that price increases in eggs were larger than the decrease in production. The USDA believed that the industry would attempt to ramp up egg production to make up for losses, but by December noted that the industry was keeping production pared back, saying that “producers—despite the record-high wholesale prices—are taking a cautious approach to expanding production in the near-term.”
Feed and fuel costs also went up between 2021 and 2022 by about 22 percent, according to an investor call from Cal-Maine this month, but you would hardly know it from the company’s ten-fold increase in profits, which went from $50 million to $535 million in 2022. Its gross margins—the money leftover after paying for direct costs—likewise went up 40 percent.
Cal-Maine’s stock is finally starting to dip; after skyrocketing 50 percent in 2022, it finally fell 15 percent since December.
Farm Action wants the FTC to better regulate the food industry, which has a habit of price-gouging during periods of inflation and economic instability.
The result if they don’t, according to Farm Action, is that Cal-Maine and other egg producers will continue to “extort billions of dollars from the pockets of ordinary Americans through what amounts to a tax on a staple we all need: eggs .”