BILL KNIGHT

Consolidating industries are apparently learning from other near-monopolies, and are using pretexts to boost prices — and profits — at the expense of consumers.

An ag advocacy group, Farm Action, this winter wrote the Federal Trade Commission asserting that despite business claims, rising prices for eggs isn’t due to bird flu or inflation, but outright price-gouging.

“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 an avian flu outbreak into an opportunity to extract egregious profits reaching as high as 40%,” reads the letter to the FTC from the group, based in Washington, D.C.

The average price for a dozen eggs increased from $1.79 in December 2021 to $4.25 in December 2022, according to the St. Louis Federal Reserve.

In greater Peoria, prices in February ranged from $2.39/dozen (Hy-Vee) to $5.99/dozen (County Market), with a dozen eggs selling for $4.69 at Kroger and $5.44 at Schnuck’s.

Bird flu in 2022 killed an estimated 43 million commercial egg-laying hens, the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service says. However, in 2015 the disease was deadlier but didn’t result in similar price hikes. That outbreak killed about 50 million egg-laying hens, according to the USDA’s Economic Research Service, and prices doubled from $1.29 to $2.61, USDA shows. Nevertheless, after the recent bird flu, egg prices have tripled on average.

Losses from bird flu largely subsided after early June, Farm Action says, noting that with hatched chicks maturing, the average size of egg-laying flocks was never more than 8% lower than the year before. Further, the USDA reported “record-high” lay rates throughout the year — between 1% and 4% higher than the average dating to 2017.

The price problem probably stems from an increased consolidation of egg production. The biz-talk euphemism is “vertically integrated industry,” mainly through mergers and acquisitions, so egg production is much more in the hands of fewer big corporations. The biggest is Cal-Maine Foods, with almost 47 million egg-laying hens, controlling about 20% of the egg market, Farm Action says.

Some increases in fuel and feed costs occurred but just 22% higher than last year, Cal-Maine conceded in a presentation to investors in January. Still, Cal-Maine’s gross profits were up 10-fold from a six-month period in 2021 to the same period last year, according to the corporation’s financial statement filed Dec. 28.

The market is less competitive and more tempting for any producer to hike prices.

“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, Farm Action’s senior policy advocate told the Center for Rural Strategies. “But instead what we see is all of them raising their prices.

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

Just as some other industries’ producers and suppliers used the pandemic supply-chain disruptions or Russia’s invasion of Ukraine as excuses to raise prices much more than the cost affected by such factors, bird flu or inflation became an invitation for smaller rivals to jump on the (chicken) gravy train in unspoken collusion.

“In the end, what Cal-Maine Foods and the other large egg producers did last year – and seem to be

intent on doing again this year – is extort billions of dollars from the pockets of ordinary Americans through what amounts to a tax on a staple we all need,” says Farm Action legal counsel Basel Musharbash.

Since there’s no real substitute for eggs, whether baking, brunching or any number of uses, what can be done?

Follow the law, says Musharbash, calling on the FTC to investigate Cal-Maine and the country’s other large egg producers for “anti-competitive arrangements that suppress competition among egg producers.

“We urge the FTC to examine the pricing and production behavior of dominant firms in the egg industry over the past 12 months,” he says.