Accusations of price gouging as US egg profits soar

The Farm Action organisation in the US has attributed record-breaking increases in the price of eggs not to inflation or avian influenza (bird flu), as claimed by egg companies, but to price collusion among that country’s top egg producers.

Accusations of price gouging as US egg profits soar
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In a letter sent to the US Federal Trade Commission (FTC), the organisation said: “The real culprit behind this 138% hike in the price of a carton of eggs appears to be a collusive scheme among industry leaders to turn inflationary conditions and a [bird] flu outbreak into an opportunity to extract egregious profits reaching as high as 40%”.

According to data from the US Department of Agriculture (USDA), the average price of a dozen eggs increased from US$1,79 (about R30,73) in December 2021 to US$4,25 (R72,97) in December 2022.

In an attempt to justify the unprecedented price increases, industry leaders in the US pointed to the increases in the inflation rate, along with the bird flu outbreak, which began in February last year and had so far resulted in the deaths of more than 43 million commercial egg-laying hens across the US.

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The USDA’s Economic Research Service (ERS), said in a recent statement that the bird flu outbreak in 2015 was deadlier, but it did not result in similar price spikes.

The Successful Farming website reported that the 2015 outbreak killed about 12% of the egg-laying hens in the US, with most of the 50 million birds that died being egg-laying hens and turkeys.

During the 2015 outbreak, the average price of a dozen Grade A eggs doubled, from US$1,29 (R22,15) to US$2,61 (R44,81), the ERS said.

However, average egg prices had nearly tripled during the current bird flu outbreak.

Over the past 45 years, egg production in the US had become a more vertically integrated industry, which meant different companies had merged to control multiple stages of the egg production process, according to the Agricultural Marketing Resource Center.

Researchers at this USDA-funded programme based at Iowa State University, said in this way, the largest egg producer in the US, Cal-Maine Foods had come to dominate the egg industry through the acquisition of other egg farms across the country.

Vertical integration was making the egg market less competitive, which was allowing large companies to coordinate their pricing, critics of this price model said.

“If our market was truly competitive and working the way it’s supposed to work, then if one dominant firm tries to raise their price, another firm should try to take their market share,” said Sarah Carden, senior policy advocate at Farm Action, in an interview with local news service, the Daily Yonder.

“But instead, what we see is all of them raising their prices,” Carden said.

According to the company’s most recent quarterly financial statement, Cal-Maine’s gross profit increased 10-fold during one 26-week period in 2021 compared with the same period in 2022,

“For the 26-week fiscal period ending in November 2021, gross profits were US$50,4 million (R865.36 million). In 2022 for the same period, gross profits were US$535,3 million (R9,2 billion),” the statement said.

“To increase your gross margins by 345% from the year before while consumers are looking at least doubled egg prices, I mean, that’s just theft,” Carden said.

The company also sold more eggs during the last 26-week period of 2022 than in the same period of 2021: 559.4 million dozen eggs sold compared with 524,2 million dozen eggs.

A spokesperson for the American Egg Board said egg prices were the result of supply and demand and were not set by farmers.