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Inflation, explained by eggs

Inflation is a tough egg to crack. We gave it a try anyway.

An illustrated image of an egg.
Eggs are more expensive now because basically everything’s more expensive.
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Emily Stewart covered business and economics for Vox and wrote the newsletter The Big Squeeze, examining the ways ordinary people are being squeezed under capitalism. Before joining Vox, she worked for TheStreet.

You may have noticed things are more expensive lately. And by “you may have noticed,” I mean you’ve definitely noticed, because they are, thanks to inflation. Plus, everyone’s talking about it, thanks to stress. From groceries to gas, prices are up on a multitude of items — including one particular consumer staple: eggs.

There’s a lot of chatter around exactly why inflation is relatively high, not only in the United States but globally. Some people blame the pandemic, others the supply chain, others government spending, others corporate greed. The truth of the matter is that there is a mix of factors in play, and there’s no one simple answer to how we got here — or solution to how to get out of this. To the average person, the whole thing can feel confusing. So we figured we’d take a crack at it by deciphering the case of the egg.

The Consumer Price Index, which measures the average change in prices paid for things like food, clothes, housing, and transportation, was up by 7.5 percent overall over the past year as of January. The price of eggs, according to the measure, was up by 13.1 percent. So what gives?

As Marc Dresner, director of integrated communications at the American Egg Board, put it, “It’s not like we have eggs sitting in tankers off the coast of Los Angeles.” But still, the egg industry, like every industry, is facing higher prices and challenges that are leading to costlier eggs for consumers overall.

According to USDA data provided by Urner Barry, which follows the food commodity market, the average year-to-date price on Grade A large eggs was $1.46 a dozen, which is up from $1.01 a dozen in 2021 and $1.00 a dozen in 2020. Because eggs are in so many food items, you can see how all of this could push prices up on other things, too.

“Eggs are also an ingredient,” said Karyn Rispoli, who covers the egg market for Urner Barry. “You don’t think about how pervasive it is.”

It’s expensive to feed chickens

The cause of the egg price increases we’re experiencing now is more of a production issue than a demand one, though both are in the mix. Egg prices depend in part on the chickens that lay the eggs — and currently, they’re more expensive to feed.

Sam Krouse, vice president of business development at MPS Egg Farms, which is headquartered in Indiana, told me that input and production prices for his operation are up “pretty dramatically” at the moment. “The cost of an egg is about 60 to 70 percent feed, and the cost of our feed has gone up 30 to 50 percent, depending on the mix, since the end of 2020,” he said. “A lot of that is corn and soybean meal, which has been going up pretty dramatically, but we also use a lot of different amino acids and vitamins.”

Increased labor costs are also a factor, though less so for eggs than, say, for beef or chicken, because of automation. Most egg farms are vertically integrated, explained Brian Moscogiuri, a global trade strategist at Eggs Unlimited, and the production process is pretty seamless. “It’s been transitioned toward robotics, and a lot of the time, an egg makes its way into a carton without being touched by a human,” he said.

Increased freight costs are contributing to higher prices as well. Trucks to get the eggs from point A to point B are more expensive, as is fuel (likely becoming even more so now, thanks to the Russian invasion in Ukraine and subsequent sanctions). Moscogiuri estimates that freight up 30 to 40 percent can translate into an extra 10 cents a dozen.

In a nutshell (or, for our purposes, an eggshell), it’s a cycle. Everything is getting more expensive because everything else is, including when it comes to eggs. “We hear from people that the carton companies are struggling to make deliveries,” Rispoli said. “Everybody’s raising their prices on everything, from cartons to corrugated boxes to the plastic wrap that goes around the eggs.”

A fun fact: In the ‘60s, amid concerns about inflation and rising prices, President Lyndon Johnson asked the US surgeon general to put out an alert about cholesterol in eggs, apparently trying to curb demand. It didn’t really help, because prices were up among a bunch of items, not just a few — which is also the scenario we find ourselves in now.

When the pandemic met the egg

Like it has all industries, the pandemic has shaped the story of the egg market over the past two years, and that story hasn’t been a linear one. When the pandemic hit, there was a big spike in demand for eggs. People were cooking more at home, and eggs are often an item people buy when they’re preparing to bunker down for a while.

“Eggs were up there with toilet paper, which was a little baffling to me, because they’re a perishable item,” Dresner said. “There was a period of time … where everybody was stress baking, and you’ve got to have eggs to bake.”

Demand for eggs was quite strong throughout 2020 and started to drop in 2021, Krouse said. This year, it has picked up again, which he said probably also contributes to higher prices. The US has recently seen a lot of winter storms, so consumers have been egg-buying.

Looking at the Consumer Price Index month to month, you can see how egg prices have bounced around during the Covid-19 outbreak. The CPI for eggs jumped by 15 percent in April 2020 and then fell in May, June, July, and August. The price drop is in part because the early days of the pandemic curbed demand for eggs and egg products from restaurants and fast food companies and food service operations, even while people were buying eggs at the store.

“That tanked the market because there was an oversupply of all the eggs that were feeding those channels, so that’s what created a relatively affordable egg market for the four, five months after the peak pandemic and really through much of the last year and a half,” Moscogiuri said. “We’re only really seeing egg prices start to escalate here more recently.”

There have been allegations of corporate funny business around egg prices during the pandemic. New York Attorney General Letitia James sued Hillandale Farms in 2020, accusing the egg producer and distributor of price gouging in March and April 2020. James alleged that Hillandale made an estimated $4 million from increasing the price of eggs in New York during that time. In April 2021, Hillandale and the state reached an agreement for the company to donate 1.2 million eggs to New York food banks and refrain from unlawful price increases in the future.

Hillandale is not an exception here. Some economists and politicians have flagged that a number of corporations have used inflation and current economic conditions as cover for increasing prices. “There’s absolutely, and it’s clear as day in the earnings calls, a larger sense that these companies are passing along higher costs and then some,” said Lindsay Owens, executive director of progressive think tank the Groundwork Collaborative. “They are pleasantly surprised that demand is not responsive, and what that says to them is hey, let’s go a little further still.”

High inflation overall may point consumers back toward eggs as they seek out value proteins to save money. “As economic uncertainty brings consumers back to watching what they spend, maybe not getting ribeye steaks every week and looking for other, more affordable choices of protein, eggs tend to be that for them,” Moscogiuri said.

It’s also worth noting that eggs are sometimes used as a loss leader, meaning grocery stores offer discounts on them to try to get people in the door assuming they’ll buy other things. Even so, you’ve probably seen higher prices on your shelves.

It’s expensive to be nice to chickens, too

In eggs, specifically, there are factors in play that have little to do with the pandemic or macroeconomic conditions or the supply chain. Namely, as corporations and states start to push for eggs from cage-free chickens, that is pushing prices up, too. Essentially, it’s pricey to be nicer to chickens.

In California, a law went into effect this year requiring that all eggs sold in the state be from cage-free hens. Massachusetts has a new law in place tightening standards around egg production as well. In the next few years, other states are expected to adopt similar measures, including Utah, Colorado, and Michigan. Some corporations are making cage-free commitments, too.

Krouse said that cage-free eggs are about 30 percent more expensive to produce, meaning higher prices on the shelves — and not just for cage-free eggs, but for all of them. Cage-free eggs being pulled into states like California makes the commodity market for eggs tighter, therefore increasing the prices of regular eggs, too.

Consumer demand for cage-free eggs has grown, though it’s not everyone’s priority. However, when regular eggs are more closely priced to cage-free and organic eggs, consumers start to opt for the slightly fancier option, Rispoli explained. “When you see the shelf prices converge between a specialty egg and your regular everyday egg, people feel like they’re getting something special, and they’ll spend the extra 10 or 20 cents for the cage-free egg or organic egg,” she said.

Cage-free trends could become less of an upward price pressure as producers adapt, but it will take time. “As the farms become more accustomed to the systems, as they improve their knowledge about cage-free layers and egg collection and the economics of scale grow, those costs should potentially come down, especially if feed prices also come down,” Moscogiuri said.

The chicken, the egg, and inflation

When I asked people in the egg space whether and when they expect prices to come down, the general response was a bit of a shrug — nobody really knows. To a certain extent, that’s what’s going on with inflation across the board right now. Most economists and policymakers expect it to cool down eventually, but there’s no clear consensus as to when. There’s not a strong consensus about what’s causing the current level of inflation in the US, either.

“There are different ways of thinking about the inflation issue, and economists by default tend to think about macroeconomic issues such as inflation in macroeconomic terms,” said Isabella Weber, an economist at UMass Amherst. “In this current situation that we are facing, we basically have very strong micro dynamics, that is dynamics on the level of specific sectors that translate into a more general kind of price pressure.”

Eggs don’t paint the full inflation picture in the US, but they do a part of it — it’s more expensive to feed chickens and move eggs around, so it’s more expensive to produce and move eggs, so it’s more expensive for consumers to buy eggs.

They also help highlight the difficulties of solving the inflation problem. The egg industry isn’t wildly concentrated, so there’s not really a singular Big Egg to lean on to bring prices down. It’s also not the case that consumers flush with cash have been pouring their stimulus checks into eggs.

Egg production is already domestic in the US, meaning onshoring more of the supply chain wouldn’t help. Still, there’s no way to be insulated from global macroeconomic trends, and if the price of corn and soybeans is up in the worldwide commodities market, so is the price of eggs.

“In the case of eggs, you have rapidly increasing market prices of corn or whatever it is that they eat, and that drives up the cost of feeding the chicken, which drives up the price of eggs, which drives up prices for American consumers,” Weber said. “If we take climate change seriously, then if anything, the fluctuations in these commodities will be increasing rather than decreasing.”

There are constant X-factors. Bird flu is again spreading in the US. The last time it hit, in 2015, it sent egg prices soaring. Then, once it passed, egg prices crashed. That’s not really an inflation (and subsequent deflation) story, but instead, it’s a look at how fragile each tiny element of the economy is, and how one development can throw an entire sector out of sync. In the current case of inflation in the US, there are a lot of elements that aren’t quite aligned with one another.

As much as we’d like a return to normalcy, as in the case of that famous mythical egg, it’s not clear how to put everything back together again.

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