Egg Prices Are Up: Keep them on Your Shopping List; Remember Them When You Vote!
I received a dismayed email responding to my media interview on KTAR last week about high egg prices: “So, the gist of the article is why the price of eggs (and groceries) has increased so much. And yet, "to keep costs down," you pitch eggs at the very end of it. Rich, Julie!”
Well, at least he’s listening. The truth of it is, I was only telling part of the story last week because reporters were only asking about the main cause. In the famous words of Paul Harvey, I give you, “the rest of the story.”
The most recent U.S. Consumer Price Index lists eggs at a current level of 336.06, up from 328.42 last month and up from 225.39 one year ago. This is a change of 2.33% from last month (December) and 49.11% from one year ago. In fact, of all grocery food items, eggs have increased the most.
In the midst of all this, eggs remain one of the most economical, nutrient-dense animal proteins around. Of course, Arizona Farm Bureau advocates you consume the variety of animal proteins available to us in the grocery store, but eggs serve a special role in the mix of a planned menu because they are so versatile, can be eaten every meal, and are one of the few foods that provide natural Vitamin D. But that can be challenging when egg prices are through the proverbial roof.
A Multi-Factor Explanation
So why have eggs increased so much in relation to other food items? First, it’s important to note that the explanation has a whole lot of factors – and none of them are entirely within a farmer’s control.
Of course, we’re already starting at a disadvantage when it comes to inflation. It’s important to remember that, like all food products, eggs are the result of multiple inputs: water, feed for the animals, the electricity used to heat and cool barns, the sanitation materials used to keep them clean, the diesel used to ship the eggs to the store. When the prices of these inputs increase, so do the price of the end product itself.
The food supply chain is proof that every link in the chain counts, especially up the chain at the farm gate.
Tight Supply = No Flexibility
With this economic reality as a backdrop, we then must consider the current viral strain of Avian Influenza, also known as bird flu. It’s a virus that naturally spreads among wild aquatic birds worldwide and can infect domestic poultry and other bird and animal species (not usually humans, though sporadic human infections with bird flu viruses have occurred). The current strain present in U.S. flocks emerged in January 2022, detecting the HPAI strain in 5,552 wild birds, with detections also in songbirds. And while the virus can die off after warm weather moves in, this most recent strain remains more persistent than compared to the 2015 Bird flu strain.
The emergence of the virus has led to widespread depopulation of commercial egg-laying flocks across the nation. And while no commercial flocks in Arizona have been infected, the bird flu has hit some states extremely hard. In Colorado, for example, every large producer has now been affected after the spread of the outbreak in December. And when there are fewer hens across the nation, there are going to be fewer eggs.
Since Colorado and other states can’t feed their typical supply chain orders for eggs, other egg farmers may try to fill the gaps. But they can only go so far. One hen lays an egg a day on average. You can’t just ask her to step up production.
So, supplies get tight, and as Economics 101 has taught us, prices necessarily go up to accommodate the lack of flexibility in the market.
Arizona’s New Egg Rule (The Rest of the Story)
In Arizona, there may be another inflation-inducing culprit lurking in the corners. Under a rule proposed by the Arizona Department of Agriculture and approved by then-Governor Ducey, beginning January 1 of this year, all eggs purchased within the state of Arizona must come from cage-free egg producers. This means that it’s illegal for stores in Arizona to sell anything other than cage-free eggs. There is a phase-in period, but essentially, if I’m a buyer for a major grocery store, I now must purchase only eggs from cage-free producers.
For several years now, Arizona Farm Bureau has fought this restriction, which is against the policy established by our farmer and rancher delegation. And one of the main drivers of our opposition was the potential impact that production restrictions like this will have on Arizona’s ability to source affordable eggs.
When the cage-free egg rules were being debated before the Governor’s Regulatory Rulemaking Council, Arizona Farm Bureau warned of the potential supply and cost impacts that it could have. “In approving this rule, the State essentially sentenced Arizona’s families to more expensive, less accessible eggs,” said Chelsea McGuire, Government Relations Director at AZFB. “Other states who adopted similar rules experienced significant challenges sourcing eggs, and saw significant increases in egg prices,” McGuire explained. “We did not want Arizona to become a cautionary tale of a state that adopted food production policy without a basis in sound science or public health, to the detriment of our consumers and families.”
All Cost, No Benefit
The demand for cage-free eggs is one driven largely by consumer preference. There is no evidence that cage-free housing systems represent a superior housing system when compared to caged egg production. While all production methods have trade-offs in terms of resource use, animal health, employee safety, air quality, and more, no one system has been found to be objectively better, and, importantly, no commonly used system has been found to leave indications of undue stress on the birds who live in them. “The last thing we want to do is empower our elected officials or regulatory agencies to make production decisions on behalf of our farmers and ranchers when those decisions have no basis in science or consumer health,” McGuire added.
But what is objectively true is that cage-free production costs more, and the eggs that it produces are therefore more expensive. Moreover, there are fewer producers of cage-free eggs, and therefore a smaller supply and less flexible supply chain. That means that when shocks to the system occur, such as the avian influenza outbreak, it is more difficult for the market to respond without shocking the system and the wallet.
While it’s true that consumer demand for cage-free eggs has significantly increased over the past decade, this rule is a good example of the danger of turning a consumer preference into a consumer mandate. Not all consumers joined the demand for cage-free eggs because not all consumers could afford to do so. Now, in Arizona, they’re locked into that demand. And, as a result, they may be unable to find eggs at all, much less afford them when they do.
Hope on the Horizon
While it’s certainly discouraging to see states, including our own, locking themselves into supply chain challenges when it comes to critical food staples, the industry has not been sitting idly by. The National Pork Producers Council and the American Farm Bureau Federation have spearheaded a legal challenge to similar provisions contained in California’s Proposition 12. That ballot initiative, which was approved by California voters in 2018, mandates that all pork sold in California be raised in a cage-free manner. NPPC and AFBF’s challenge asserts that the provisions violate the Commerce Clause of the U.S. Constitution because it represents one state (California) mandating how other states (including Iowa, Minnesota, North Carolina, and all other top pork-producing states) must raise their hogs. The Supreme Court took the case and heard the argument in October. We expect a decision as early as March, and if the Court strikes down the law as unconstitutional, it will pave the way for other challenges to rules that impose these kinds of restrictions on agricultural production.
My email sender and I are nearly best friends now. In a back-and-forth exchange he said, “And what you just wrote is completely factual. I just wish that was also part of the takeaway of the article. Regards”
Ultimately, we know the bird flu helped raise the price of a carton of eggs. Not all the data is in yet, but Arizona’s egg rule may have caused us all to eye scarcity on the shelves as well. And, recent discussions with my contacts in a few of the grocery store chains report their food buyers are struggling to access the regular supply of eggs with the new cage-free egg rule hindering their ability to source effectively with a wide net. As a reporter working in the supply chain management space for more than 10 years for the Institute for Supply Management and Vulcan Publications before I came to Arizona Farm Bureau, I reported on the “chain reaction” one small change (positive or negative) could make to a supply chain. And today we all know about the devastation of big changes made in the supply chain during the 2020 pandemic.
For all of us, frustrations are truly high in this tough era of inflation. The new egg rule did not help any. Maybe this will be what helps consumers remember that their choices at the grocery store start with their decisions at the ballot box.
And that’s the rest of the story.