What’s Really Behind Eggflation?
We're cracking the case behind the soaring prices.
Hosted by June Xie
June Xie: Eggs. A typically unremarkable grocery list staple for most Americans became a point of financial stress and confusion over the course of a single year.
Between January 2022 and January 2023, the average price consumers were paying for a carton of eggs shot up by 150%, hitting an all-time high of $4.82 a dozen.
[Clip from Call Me By Your Name]:
Amira Casar: Have another egg.
Armie Hammer: No, no, no.
Egg companies sold their eggs to grocery stores at unparalleled prices — peaking from about $1.20 a dozen to $5.20 a dozen within 12 months. As a result, grocery stores were forced to hike up their egg prices to turn a profit.
To make matters even more confusing, egg prices for retailers started to plummet at the start of 2023, dropping by at least $2.90 a dozen, out of nowhere.
To explain the dramatic swing in wholesale prices, big egg companies like Cal-Maine Foods pointed their fingers at two factors: a rampant flu that plagued their chickens, and, you guessed it, inflation.
These companies want consumers to believe that the ridiculous sticker prices we saw in 2022 and early 2023 were necessary to make up for sick hens and rising feed costs.
But here’s where the numbers don’t add up: dominant egg producers not only made up for lower supply and increased costs, they profited off of them, big time.
Just look at Cal-Maine Foods’ gross profit margin. Gross profit margin measures how much money a company earned after accounting for production costs.
Cal-Maine Foods more than quadrupled its gross profit margin after raising the price of its eggs.
If Cal-Maine fairly raised prices to offset inflation and the avian flu, its gross profit margin would stay about the same.
Instead, in November of 2022, the company recorded a four-fold increase in gross profit margin compared to pre-pandemic times.
So to figure out what’s really going on with egg prices, we talked to one of the leading experts on food monopolies.
Angela Huffman: I’m Angela Huffman, I’m the co-founder and vice president of Farm Action,
a farmer-led nonprofit taking on corporate consolidation in the food system.
Contrary to the narrative of these industry leaders, these price increases are not due to an act of God. It’s just plain profiteering
June Xie: So what’s the true story behind those sky high egg prices, and who’s to blame? And what can we do to make sure this never happens again?
I’m June and this is More Perfect Union. Now let’s get cracking.
[Clip of The Sopranos]: You know what, maybe I will have some eggs. Toast?
Since Cal-Maine Foods is the largest egg producer and distributor in the U.S., we’re gonna keep our focus there.
Cal-Maine’s CEO, Sherman Miller, recently celebrated his company’s “record sales and net income for the second quarter of fiscal 2023” .
The company made over $300 million in the second half of 2022, while the price of eggs was skyrocketing.
Millions of Americans were paying record prices for eggs while Cal-Maine got rich, so of course they needed a defense for raising prices.
And this brings us to our first claim, the bird flu.
In the company’s December earnings report, Cal-Maine’s CEO attributed the company’s “record average selling prices for conventional eggs” to a “reduced supply related to the outbreak in the U.S. of highly pathogenic avian influenza.”
It’s true that last year, avian flu outbreaks resulted in the loss of 43 million egg-laying hens.
But here’s the catch.
In the same breath, CEO Sherman Miller says, “There have been no positive tests” for this bird flu “at any of Cal-Maine Foods’ owned or contracted production facilities as of December 28, 2022.”
Not a single Cal-Maine hen died from bird flu. Zero.
Now obviously other egg producers were impacted by the bird flu. So one might reason that with supply down nationwide, grocery chains would understandably run to Cal-Maine to secure their egg stock for upcoming months, and would be willing to pay a pretty penny to do so.
And Cal-Maine Foods being the massive corporation that it is—one that controls 20% of the egg market—would of course welcome and encourage all of those pretty pennies, happily.
Now that would all make sense if the “highly pathogenic avian influenza” did in fact reduce supply in the way CEOs like Sherman Miller describe.
But once we looked into it, we realized that the numbers aren’t as black and white as they appear.
Angela Huffman: The egg industry experienced no substantial decline in egg production in the last quarter of 2022 compared to 2021.
June Xie: The number of egg-laying flocks, on average, only dropped 6% from the year prior, according to the U.S. Department of Agriculture.
Angela Huffman: In addition to that that number was even further blunted by record high lay rates, meaning the existing egg laying hens laid even more eggs than the year before.
June Xie: So as it turns out, the hit to egg supply wasn’t as dramatic as companies like Cal-Maine want you to believe.
The bird flu outbreak for sure doesn’t account for the 150.5% increase in the net average price for a dozen of Cal-Maine’s conventional eggs from one year to the next.
Now, back to that other excuse corporations love to deploy when justifying price hikes: inflation.
Although we might disagree on the factors causing inflation, we can all agree that it’s happening. Costs are up across the board, and the egg industry is not exempt.
However, according to its own presentation to investors, Cal-Maine’s total farm production and feed costs in 2022 were just 22% higher than they were in 2021. (Remember, the price you paid for eggs went up 150% in this time and Cal-Maine’s profit margins quadrupled).
So while a price increase is expected to keep up with rising production costs, no narrative that the egg industry pushed seems to explain why dominant egg producers more than quadrupled their wholesale prices.
Angela Huffman: There’s no other supply chain excuse that would justify this increase in egg prices.
The fact that Cal Maine is both raising its prices and raising its profit margins so grossly at the same time without any reasonable business justification for that, suggest that it’s foul play.
June Xie: If a bird flu epidemic and inflation can’t fully explain why egg prices soared over the last year, then what can?
One clue is in the suspicious lack of price competition in the egg industry at-large. Back in August, the USDA expected companies to start purchasing more chicks and increasing production while feed costs were moderating and egg prices were soaring.
Angela Huffman: So in a competitive and, um, normally functioning market, we would expect that one of these companies would lower their prices so that they could swoop in and take that market share.
June Xie: You’d expect competition to start driving prices down. But for some strange reason, production didn’t increase, and prices kept rising.
Angela Huffman: There seems to be a collusive scheme among industry leaders to turn inflationary conditions and an avian flu into an excuse to extract egregious profits as high as 40%.
Why produce more if you can make more money producing less?
June Xie: you might be thinking, well, didn’t you say that these big egg companies recently dropped their wholesale prices pretty significantly after all?
So maybe there really was something exceptional going on behind the scenes that required some once-in-a-lifetime price increases…
To be completely honest…we’re also confused by the latest numbers.
June Xie: Angela, have you seen the drop in egg wholesale prices?
Angela Huffman: Yeah! It’s pretty crazy, right?
June Xie: But where did that drop come from? And why now?
Angela Huffman: Well, we’re not seeing any real changes in the market that would explain these lower prices…just like there wasn’t a substantial change to justify the massive price increases we talked about before. There isn’t a sudden increase in egg supply to bring down the prices or anything like that to easily explain this.
June Xie: So, these companies dropped their wholesale prices…randomly?
Angela Huffman: Well, the USDA says that consumer demand for eggs is down due to “resistance to record high prices in grocery outlets.” In a recent report, the USDA actually pointed to the negative media attention on the issue of egg prices as a factor for why consumers are holding back.
It wouldn’t be the first time a corporation quickly lowered its prices after being called out for price gouging in the news. Anything to divert attention elsewhere, especially with Easter coming up.
June Xie: Yeah, I forgot about Easter…
Angela Huffman: Yeah, well egg companies haven’t. They’re desperate to win back consumers in time for the holiday.
June Xie: Just so they can increase prices again?
Angela Huffman: Well, an increase in egg prices is the normal response to Easter every year, that’s to be expected. But we are keeping an eye on it because it shouldn’t be used as an opportunity to price-gouge. Seasonal patterns shouldn’t obscure the fact that we’re paying more overall. There seems to be a new normal price for eggs and the reason for that isn’t a flu or inflation or a holiday, it’s corporate greed.
What Cal-Maine Foods and the other large egg producers did last year is extort billions of dollars from the pockets of American consumers by placing a tax on an essential good that everybody needs, plain and simple.
June Xie: Is there anything that can be done to stop this from happening over and over again?
Angela Huffman: We need to hold these companies accountable. We at Farm Action wrote a letter to the FTC calling on them to investigate these egg companies, prosecute any violations of the anti-trust laws that they would find, and ultimately get the American people their money back by seeking financial restitution for these abuses.
Some prominent members of Congress are also on the case. Senator Jack Reed sent a letter to the FTC urging an investigation, and Senator Elizabeth Warren and Representative Katie Porter followed suit and sent letters to the top five egg producers in the U.S. asking for answers.
Believe me, this isn’t over until somebody investigates.
June Xie: So there you have it. Not the most satisfying of stories…yet.
There’s work to be done.
Now it’s on the Federal Trade Commission to work in coordination with the Department of Justice and USDA to crack down on corporations that use their monopoly power to price gouge the American people.
On behalf of all Americans writing their grocery lists and planning their Easters, it’s time for some answers.