Ag Industry Leaders, Watchdogs Disagree About Cause of High Egg Prices

Eggs are seen at a grocery store in Washington on Jan. 19, 2023. Stefani Reynolds/AFP via Getty Images

With the price of a dozen eggs climbing to never before seen heights, one agriculture watchdog group and at least one U.S. senator are crying “fowl” about price gouging, but an agricultural expert says the reasons are much less nefarious.

Florida Commissioner of Agriculture Wilton Simpson has been in the egg business for most of his life.

Simpson, a former state senator who also served as Florida Senate president, owns a large-scale egg-laying operation in Pasco County, Florida, and the eggs are distributed by Cal-Maine Foods, based in Ridgeland, Mississippi.

As Simpson explained, there are essentially three things that affect the price of eggs: the stock market, the avian flu, and the factor of supply and demand.

‘Eggs Are a Commodity’

“First, eggs are a commodity,” Simpson told The Epoch Times. “Eggs are quoted on the New York Stock Exchange under the Urner Barry market as a commodity. When a producer sells eggs to commercial outlets they sell them based on the market quote of the commodity itself.”

Florida Commissioner of Agriculture Wilton Simpson. Courtesy of Wilton Simpson

Urner Berry’s Jan. 30 report shows that the price of a dozen eggs fell from $4.67 on Dec. 19 to $2.33 by Jan. 30.

“When someone purchases eggs, be it at a supermarket, a convenience store, or in a restaurant, they’re doing it based on a market rate,” Simpson said, adding that once a producer sells the eggs to a retailer, the retailer adds their markup.

When the stock value of eggs falls, “that should be reflective in the stores,” Simpson said. “If not, that should be looked at.”

Simpson also noted that the cost of producing those eggs also went up substantially last year due to inflation. Feed costs, fertilizer costs to grow the feed, and the cost of diesel to deliver the products are also factors that affect the price.

“When you add up the inflationary costs, the effects of the bird flu, and the shortage of eggs, that’s the problem we believe spiked the market,” Simpson said.

Bird Flu and Egg Prices

An outbreak of Highly Pathogenic Avian Influenza (HPAI), also known as the avian flu or bird flu, hit the United States last year.

The U.S. Department of Agriculture (USDA) defines HPAI as a serious disease that “requires rapid response because it is highly contagious and often fatal to chickens.” HPAI is spread globally by wild and migratory birds.

“Avian flu hits periodically. It is a naturally occurring thing,” Simpson explained, noting that the last major outbreak was in 2014–2015.

A USDA report (pdf) regarding the effect of the 2014–2015 HPAI outbreak says “more than 50 million chickens and turkeys” died in the United States “or were destroyed to stop the spread of the disease.”

In December, the USDA reported a 29 percent drop in egg inventories nationwide as over 43 million egg-laying hens died from HPAI or were killed to prevent the further spread of the disease.

When that many chickens are taken out of the laying population, Simpson said, “the price of that commodity is going to be driven up.”

A Jan. 6 report by the USDA said egg prices grew at the fastest rate (32.2 percent) after an outbreak of HPAI throughout 2022, and eggs contributed to a 13 percent price increase for cereals and bakery products.

Recent data released by the Bureau of Labor Statistics showed that the average price of a dozen eggs jumped from $1.79 in December 2021 to $4.25 per dozen in December 2022, an increase of 137 percent.

The USDA also reported that U.S. egg inventories were 29 percent lower in the final week of December 2022 compared to the beginning of the year.

But Farm Action is questioning that narrative.

A shopper reads an egg purchase limit sign at a grocery store in Irvine, Calif., on Jan. 11, 2023. John Fredricks/The Epoch Times

‘The Real Culprit’

While HPAI is cited as the reason for the high price of eggs, Basel Musharbash, legal counsel for Farm Action, says “the primary contributor to skyrocketing egg prices is skyrocketing profits at the largest producers of eggs.”

Farm Action describes itself as a nonprofit organization that “exposes the devious ways monopoly corporations maintain control over our food system.”

Basel Musharbash, legal counsel for Farm Action. Courtesy of Basel Musharbash

In a Jan. 19 letter to Lina Khan, chair of the Federal Trade Commission, Musharbash posited that while “industry-aligned consultants and leading egg producers” have blamed the dramatic price increases on supply disruption and “act of God” type of events, Farm Action contends “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.”

“Moreover, the effect of the loss of egg-laying hens on production was itself blunted by ’record-high' lay rates observed among remaining hens throughout the year,” the letter stated.

Musharbash told The Epoch Times that the avian flu had no substantial effect on egg production.

“At a company like Cal-Maine Foods, we know they didn’t have a single case of avian flu in their facilities throughout the year,” Musharbash told The Epoch Times. “So we know the avian flu did not have a substantial effect on their production.”

Cal-Maine Foods

Cal-Maine Foods describes itself as “the largest producer and distributor of shell eggs in the United States.”

In a September announcement, the company reported “record quarterly net sales of $658.3 million,” a 103 percent increase over the same quarter in 2021. Cal-Maine attributed the historic profits to record egg prices and steady consumer demand.

The company also confirmed in the announcement that there had been no positive tests for HPAI in any Cal-Maine Foods production facilities.

Map showing detections of bird flue outbreaks across the United States affecting commercial and backyard flocks as of Feb. 1, 2023. Centers for Disease Control and Prevention

Simpson suggests the reason Cal-Maine wasn’t hit by HPAI is because the company implemented extensive and successful biosecurity measures to keep the virus out of its facilities. Companies like Rembrandt Foods in Iowa and Cold Spring Egg Farm in Wisconsin did not fare as well, and both had to cull their flocks due to outbreaks.

Simpson then drew attention to the retailers, noting that the prices are not determined by the commodities market.

“They can set whatever price they want on them,” Simpson explained. “If they were paying $5.50 wholesale a few weeks ago, people got used to paying a higher price. But today they’re only paying $2.82. If they don’t reduce their price by $1.70, they are the ones making all the money.”

‘Avian Flu Is Going to Gappen’

One U.S. senator is also questioning Cal-Maine’s profits.

In a Jan. 24 letter to the FTC (pdf), Sen. Jack Reed (D-R.I.) urged the FTC to open an investigation into “potential price gouging and other deceptive practices by the country’s largest egg companies” that appeared to be contributing to higher prices for consumers.

“Many in the egg industry have pointed to last year’s avian flu outbreak as the reason behind these substantial price increases,” Reed said in the letter. “However, as early as May 2022 the U.S. Department of Agriculture’s (USDA) Economic Research Service found that ’the price increase‘ observed in the egg sector was ’much larger than the decreases in production’ caused by the avian flu.”

In a Jan. 24 statement in response to price-gouging allegations, Cal-Maine blamed HPAI and other market conditions such as inflation for the higher prices and said the company “does not sell eggs directly to consumers or set retail egg prices.”

Musharbash took issue with the company’s arguments.

“If you look at the statement they put out, they try to rehash the talking point that the avian flu had this massive, disruptive effect,” Musharbash noted. “But then they say the total size of their flocks was only 6 percent lower than it was a year earlier. They are admitting that the avian flu didn’t have such a massive effect on the production to justify their increase in prices.”

Musharbash said he wants to know how the egg industry was able to increase prices when there wasn’t an underlying egg shortage, and how it sustained those prices for more than a year.

“That’s why we want the FTC to investigate,” he said. “Because they, and the other anti-trust enforcers, have the authority to dig into the industry and see what’s facilitating this type of profiteering.”

However, Simpson posits a reminder that whether any one supplier loses birds to HPAI, it doesn’t affect the value of the commodity.

Commodity prices are set according to supply and demand of the product available on the market, not by the number of eggs produced by a specific company, Simpson said.

Cal-Maine should not be castigated for having successfully prevented an HPAI outbreak at its facilities, which enabled them to benefit from the high price of their eggs set by the commodities market, he said.

“I’m telling you, as an [agriculture] commissioner, we know avian flu is going to happen from time to time,” Simpson said. “What we have to do as a government is to make sure we don’t add any additional weights on the back of these farmers because, even though they might make a lot of profit this year, they lose a tremendous amount of dollars in bad years, and they have to have the capital to get through that.”

Simpson again pointed to retailers.

“The fact that prices are going down means that retailers have to adjust their prices in real-time if they’re going to be consumer friendly,” he said. “That’s part of this story. That’s part of the equation.”