Reed: Industrial Egg Producers Price Hikes Are Suspiciously High & Federal Government Should Help Rein in Unfair Market Practices
Senator warns that unfairly elevated egg prices are unhealthy for the economy
JOHNSTON, RI -- As a fourth-generation family farmer in Johnston, Adam Baffoni understands the importance of sustainability, caring for the land and animals, and treating customers fairly. Today, U.S. Senator Jack Reed toured Baffoni’s Poultry Farm, which houses about 7,000 egg laying hens and over 1,000 turkeys on 80 acres, and learned how local family farmers like the Baffonis have kept egg prices relatively stable, despite the national trend of egg prices taking flight.
Senator Reed says industrial egg producers seem to be feeding the American public a phony narrative about why egg prices are so high and could be using anti-competitive pricing tactics to force consumers and retailers to shell out more for eggs.
Reed is taking action to help lower prices, and recently sent letters to the U.S. Department of Justice and Federal Trade Commission seeking a federal investigation into possible price gouging. Today, Reed urged federal regulators and Congress to prevent the egg market from becoming dominated by a few large corporations exerting significant control over the market and maintaining artificially high egg prices over the long-term.
The price of a dozen eggs jumped from an average of $1.78 in December 2021 to about $4.25 in December 2022. While egg prices are starting to come down, it would be rotten for consumers to be unfairly overcharged.
The dominant dozen egg producers and distributors that control about half the egg market nationwide insist that avian flu, supply-chain disruption, grain prices, and higher shipping costs have caused them to increase their prices. But Vital Farms CEO Russell Diez-Canseco, affirmed that the soaring price increases for eggs has been unjustifiable, stating: “All I would say is that it's a head scratcher for us. I don't see anything in my cost structure that would have led me to raise our prices by as much as you're reporting. We've taken just enough price to keep ourselves whole and continue to pay our farmers an appropriate profit for the work they do. I'm not suggesting anybody's price gouging. I'm just saying I can't explain why prices have gone as high as they have.”
Senator Reed noted that in addition to consumer harm, small and mid-sized egg producers may be unfairly hurt by anti-competitive behavior by the largest industry players in the egg industry.
“It’s time for Congress and federal regulators to crack open the real reason behind historically high egg prices. Despite industry squawking, increases in feed, energy, labor, and avian influenza don’t come close to adding up to justifiably charging consumers 138 percent more over the last year, especially when considering these big egg producers are reaping record profits and paying sky-high dividends to their shareholders,” said Senator Reed. “Avian flu is a real problem and yes, inflation has an impact on food prices. But the surge in egg prices simply doesn’t add up and industry-specific causes for these price hikes warrant closer scrutiny. One of the things we need to look at closely is whether consolidation in the agriculture industry is threatening serious supply chain vulnerabilities that could cause future price spikes.”
Reed points to publicly available data from the nation’s largest egg producer: Cal-Maine Foods — a publicly traded company that controls over twenty percent of U.S. egg production.
Cal-Maine reported its farm production costs were up 22 percent during the 13-week period ending on Nov. 26, 2022 compared to the same period the previous year. Meanwhile, the company sold about the same number of eggs year-over-year. Yet, rather than seeing higher costs plus flat production eat into their profit margins, Cal-Maine reported a tenfold year-over-year increase in gross profits. And rather than re-invest its record profits into expanding production, the company paid its second-highest dividend ever in the fourth quarter of 2023—lavishing its shareholders and top executives with a big payday.
“It’s natural for companies to want to control costs, but it’s a problem if a few big players might be manipulating the system to boost profits at the expense of consumers. Corporate earnings reports demonstrate that Cal-Maine and other major egg producers are incentivized to keep prices for consumers and retailers artificially high – it’s good for their business and is padding their bottom line. But is it fair? The federal government needs to step in and determine what’s really behind these outrageous price spikes. I have asked the Department of Justice and the Federal Trade Commission to investigate, and I think Congress needs to do its part to examine the state of the egg industry, which has consolidated considerably over the years, and see if there is anti-competitive behavior that needs to be changed.”
While the wholesale price of eggs is tied to the Urner-Barry index, the dozen largest egg producers have the ability to feed data into the index that could result in beneficial pricing for the industry.
CNBC reported that: “During the prior bird flu outbreak in 2015, wholesale egg prices rose about 6% to 8% for every 1% decrease in the number of egg-laying hens, on average, Urner Barry found in a recent analysis. About 42.5 million layers (about 13%) have died since the 2022 outbreak, according to Urner Barry. Prices have increased about 15% for every 1% decrease in egg layers over that time, on average, Rubio said.”
“The data suggests consumers are paying more for eggs than they should be and the largest egg producers are the largest profiteers from this trend. Congress should step in to ensure prices accurately reflect the laws of supply and demand, and that those who engage in anti-competitive price manipulation are held accountable,” said Reed. “If an industry can make record profits by charging consumers more than they should, then of course big corporations will take advantage. The federal government has a responsibility to ensure markets operate fairly and competitively.”
Reed also noted that while locally grown eggs produced on smaller family farms may cost more than those that come from industrial farms, the local eggs are fresher and high-quality and organic. Reed says buying local eggs has all sorts of benefits – and can be good for public health, the local economy, the environment, and for the hens themselves.