Egg Price Spike: Price Gouging or Price Collusion?
A farmer-advocacy organization, Farm Action, has accused the country’s top egg producers of price collusion, as the average price of a dozen eggs rose from $1.79 in December 2021 to $4.25 in December 2022. The egg industry has been blaming the hike on inflation and the avian flu outbreak, which has killed more than 43 million commercial egg-laying hens. However, according to Farm Action, the real cause behind the 138% increase in egg prices appears to be a scheme among industry leaders to profit excessively from the current market conditions.
In a letter sent to the Federal Trade Commission (FTC), Farm Action alleges that the nation’s dominant egg producers have been scheming to raise prices, exploiting inflationary conditions and the avian flu outbreak to extract profits as high as 40%. The organization is now urging the FTC to investigate the egg producers for anti-competitive arrangements that suppress competition among egg producers.
The 2015 avian flu outbreak was deadlier than the current one, but it did not result in price spikes as high as those seen in 2022. During the 2015 outbreak, the average price of a dozen Grade A eggs doubled, from $1.29 to $2.61, according to the U.S. Department of Agriculture’s Economic Research Service (ERS). This time, however, average egg prices have nearly tripled, prompting suspicions of price manipulation.
The egg production industry has become more vertically integrated over the past 45 years, with different companies merging to control multiple stages of the egg production process. The largest egg producer in the United States, Cal-Maine Foods, has dominated the egg industry by acquiring other egg farms across the country, a trend criticized for reducing competition in the egg market.
Sarah Carden, Senior Policy Advocate at Farm Action, believes that vertical integration has allowed big companies to coordinate pricing, as all firms raise their prices instead of one firm taking market share from another. Cal-Maine’s gross profit rose tenfold from one 26-week period in 2021 to the same period in 2022, according to the company’s most recent quarterly financial statement. The company’s margins grew more than threefold from the first quarter of 2022 to the last, leading Farm Action to label the increase as “theft”.
Cal-Maine sold more eggs in the last 26-week period of 2022 compared to the same period of 2021, selling 559.4 million eggs by the dozen compared to 524.2 million eggs by the dozen. However, Sarah Carden argues that there has not been a substantial decrease in egg supply, despite the big agriculture industry’s claims of avian flu and supply chain issues.
A spokesperson for the American Egg Board dismissed Farm Action’s allegations, stating that supply and demand set egg prices, not farmers. The representative argued that eggs are bought and sold on the commodity market, where farmers do not set the price of eggs, and the market does.