News

May 14, 2023

Why egg prices are high, and won't be going down soon

As some inflation-hiked food costs and supply chain woes have started to fall,

As some inflation-hiked food costs and supply chain woes have started to fall, eggs are one corner of the supermarket where prices have remained stubbornly high.

Egg prices hit historic peaks ahead of the December holidays, when egg demand is at its highest. But even slight decreases in recent weeks mean shoppers in the United States started the new year facing far higher than average costs. In California, the priciest market, shoppers were shelling out an average of $7.37 for a dozen Grade A large eggs, roughly three times the cost from a year earlier.

The egg industry is dealing with unresolved supply chain challenges kicked off by the coronavirus pandemic — including labor and building costs — as well as a devastating outbreak of highly pathogenic avian influenza (HPAI) that began in February. The outbreak drove up the price of Thanksgiving turkeys in November, but its impact continues to ripple in the egg industry. According to the Agriculture Department, the flu has wiped out more than 44 million egg-laying hens, or roughly 4 to 5 percent of production.

"The flu is the most important factor affecting egg prices," said Maro Ibarburu, a business analyst at the Egg Industry Center at Iowa State University. "This outbreak, in terms of egg-laying hens, we lost 10 million more egg-laying hens than the last outbreak in 2015."

The 2015 outbreak, according to the USDA, was "arguably the most significant animal health event in U.S. history." The outbreak spread to 21 states and affected more than 50 million birds, the majority of them egg-laying hens. It drove up prices for not just shelled eggs but liquid egg products, with prices more than doubling by midyear.

As consumers look to see where prices are headed in 2023, much will depend on how well avian flu is contained. That means the cost of eggs is expected to remain high, at least in the short term, according to Michael Swanson, the chief agricultural economist at Wells Fargo. Swanson said the immediate outlook is "wildly high" but that prices will come down as producers ramp up production.

The disruption takes place as consumers are coming off a roller coaster year for food, fuel and other goods. Businesses, particularly restaurants, are watching food prices as they seek to regain their footing after the lean early years of the coronavirus pandemic.

Taki Kastanis, CEO and founder of the Chicago-based restaurant chain Yolk, said egg prices cut deeply into the business's bottom line last year, even as customer volume approached pre-pandemic levels. Food costs were roughly four times higher than what the business had paid in previous years, he said.

"Eggs, on average, maybe five or six years ago were about $18 a case," or 15 dozen, Kastanis said. "Now we’re paying upward of $70 a case."

The price crunch is leading the restaurant, which has more than 16 locations throughout the Chicagoland area, Florida, Indiana and Texas, to get creative. Kastanis said Yolk may cut pricey options such as tuna, which is only featured on the lunch menu, and double down on less expensive offerings, including pancakes.

"The name's Yolk. We’re never going to get away from eggs or design a menu without eggs," he said.

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Industry analysts don't know whether the 99-cent carton of eggs will return, though many said higher prices have done little to slow demand. Ibarburu, the Iowa State analyst, said the focus will be on how well the industry manages the avian flu outbreak.

"We need to see if more birds are affected by influenza. In the event we get the outbreak under control, it will be better every month," he said of egg prices.

Since February, HPAI outbreaks have been reported in at least 47 states; Iowa, the largest egg producer in the United States, has been hit the hardest. The disease is transmitted by wild birds such as turkeys, ducks, geese and swans, and can easily infect backyard and commercial flocks alike, according to Abby Schuft, an educator focusing on poultry at the University of Minnesota Extension.

Infection slows a hen's egg production if it doesn't kill the bird first, and infected flocks are euthanized under practices approved by American Veterinary Medical Association to avoid further spread, Schuft said.

"This virus is very different — it's a much meaner beast than in 2015," Schuft said. "The 2022 virus has a bigger reach and affects more geographic locales, including backyard flocks."

Others in the egg industry see a reason to hope, including the fact that farmers have adjusted their practices since the 2015 outbreak.

"I don't think the industry was prepared for the level of outbreak we had then," said Emily Metz, president of the American Egg Board, which markets and promotes eggs and egg products. "The good news about where we are right now with bird flu compared to 2015 is that our farmers learned a lot of hard lessons."

Metz suggests another reason for optimism is that egg farmers are recovering more quickly from having a flock culled and a facility decontaminated.

"In 2015, it took farms about nine months to get flocks laying again; now it's taking about six months. Most farms affected in 2022 are already back to laying and supplying eggs again," Metz said.

While some states, such as Colorado and California, have seen egg shortages, Metz said those have been inconsistent and local. Both states are among those that have new laws that require egg production and import to meet cage-free specifications, a requirement that reduces the number of potential suppliers.

Post-holiday demand should also ease supply issues, at least until Easter — the egg industry's second-highest seasonal demand.

Egg production will eventually adjust in response to the HPAI, Schuft said, though it may never completely be eradicated from the U.S. poultry population.

"It's sort of like our covid," Schuft said. "Potentially, the major impact is probably done, but it's likely to mutate, linger, and we’ll have to learn how to manage it."