Several factors led to the recent price spike
By David B. Strickland
Poultry Times editor
GAINESVILLE, Ga. — At the beginning of the COVID-19 pandemic, several factors were already affecting the nation’s egg producers, which were amplified by the amount of panic buying by grocery shoppers looking to stock up on items for quick and affordable meals during quarantine.
Looking at the U.S. egg industry as a whole, it’s a current story of both highs and lows.
The shell egg market is experiencing different strains than those affecting the egg products market. Because of consumer demand, shell egg cartons approximately tripled in price in March. However, egg products such as dried and liquid eggs that supply foodservice, restaurants and hotels saw tremendous decreases from lack of demand from these industries that were experiencing shutdowns.
In a new report by the Egg Industry Center at Iowa State University, it says, “The impact of COVID-19 has been very different for shell eggs vs. egg products markets. While the shell egg market experienced an increased demand and higher prices from more people buying eggs at supermarkets, the liquid egg market experienced a decreased demand from foodservice operators such as restaurants and hotels.”
Shell egg producers must comply with the U.S. Food & Drug Administration’s Shell Egg Safety Rule to supply product. In early April, the FDA made a temporary change to the rule that would allow egg product producers to supply to the table egg market. A problem to this market solution is that the two industry segments require different equipment and packaging. The companies that supply egg products do not have the equipment needed to carton eggs.
The Egg Industry Center report notes that, “Some companies may have the capacity to put eggs in flats to send them to packaging facilities, but they might need new equipment or additional labor to do so. While the egg product producing farms were working to overcome the challenge of labor and infrastructure, shell egg packagers were working at capacity to fill orders and their concern about the availability of equipment and packaging materials limits their ability to accept diverted supplies from farms that generally produce egg products.”
The higher table egg prices and lack of product due to panic buying created what could be viewed as a temporary problem, but the low prices and lack of market for liquid egg products could have a longer and lasting impact on the egg market.
The EIC report notes that farmers who produce liquid product are not able to cover even their feed costs at current price levels. With this struggle to find markets, many producers are sending birds into molt to reduce the production period, and many are culling birds earlier than they otherwise would, which will have an effect on the number of laying hens available.
“This decreased production will have a ripple effect on the demand for labor, other inputs of production and services such as trucking,” the report said.
The EIC report added that, “while liquid egg is a necessity for the foodservice, hospitality and baking industries, it presents challenges to those who are not used to working with it on a regular basis. Although pasteurized to ensure food safety, the majority is packaged in large containers that are not easily used by individual consumers. Some farmers have donated to their local food banks, but the food bank system is not well equipped to handle refrigerated food or larger quantities of items that can’t be sub-divided.”
“Unfortunately, if the problem persists some farmers may have to resort to what the dairy industry has had to do and destroy perfectly edible product simply because there is no market for it,” the Egg Industry Center added.
Another potential impact on the recent spike in egg prices was the Easter holiday. The holiday annually brings about a seasonal increase in needs and price increases resulting from demand. This year’s Easter holiday also occurred right in the midst of the COVID-19 outbreak.
“In general shell egg prices typically increased during the six weeks prior to Easter and reach a maximum price on Easter week,” said Maro Ibarburu, associate scientist and business analyst with the Egg Industry Center. “Prices then fall abruptly over the two weeks following Easter to a level close to what they were eight weeks prior.”
“However, there is a wide range of market reactions throughout the years regarding egg prices around Easter time,” Ibarburu added. “Even though the shell egg price increase was higher this year before Easter, it is very hard to isolate the effect of Easter from the effect of COVID-19 on egg prices.”
Another aspect affecting egg supplies was the need for more packaging products and egg cartons.
“There has also been a disruption in the supply of cartons,” said Dr. Kenneth Koelkebeck, a professor with the University of Illinois’ College of Agricultural, Consumer and Environmental Sciences, who specializes in poultry production. “Demand was so high and there’s only two or three companies that make these cartons. They couldn’t keep up.”
“Egg plants are highly automated and need fewer workers, so they haven’t had issues with shutdowns like pork and beef plants. With dozen-sized cartons in short supply, eggs are stockpiled at plants on 30-count flats, which usually go to restaurants. Now, some eggs may be sold in generic, unlabeled cartons,” he said.
Stemming from the high egg prices, the nation’s largest egg distributor, Cal-Maine Foods, in April was part of lawsuit announced by Texas Attorney General Ken Paxton claiming price-gouging on eggs.
Wire reports noted that the state is seeking $100,000 in damages and that Cal-Maine, by controlling almost 20 percent of the nation’s egg sales, was creating huge profit potential for itself. The Texas AG is also seeking a price-gouging suit against a medical supply company regarding pricing for medical supplies.
In a statement, Cal-Maine Foods said that it, “has not exploited this tragic national pandemic for gain . . . There has always been great volatility in the egg pricing market. The COVID-19 pandemic caused a massive disruption in every sector of the economy, including the egg industry. Retail demand for eggs reached historically high levels and egg prices increased significantly in line with those demand trends. However, egg prices since declined quickly to pre-COVID-19 levels.”
“The domestic egg market is intensely competitive and highly volatile even under normal market circumstances,” Cal-Maine added. “For decades, like other egg producers, Cal-Maine Foods has priced egg sales based on a model utilizing independent, third-party market quotes published by Urner Barry . . . The recent increase in the price of eggs is directly related to unprecedented retail demand, which also occurred during the peak Easter season when demand for eggs is typically high, not the result of price-gouging nor any other improper conduct by Cal-Maine Foods. The company does not sell eggs directly to consumers or set retail egg prices.”
In reference to the egg price spike and the current trend to stabilization, Urner Barry noted the typical price for a dozen Large Grade A eggs on Feb. 27, 2020, at $1.13; Mar. 26, 2020, at $3.18; and for Apr. 22, 2020, at $1.16.