'More hens, less income!' So said the United Egg Producer economist Donald Bell in 1994. The industry has gotten more consolidated ever since. And avian flu is just the latest excuse to hike prices.
It is written by antitrust lawyer Basel Musharbash, based in part on a report he authored for Farm Action.
Via BIG, from Matt Stoller
In recent months, egg prices have attracted a lot of attention from Journalists , a congressional antitrust hearing, a DOJ antitrust investigation, even Thrump brought the issue up in his recent speech to a joint session in Congress, putting his agricultural secretary, Brooke Rollins on notice. The egg industry blames high egg prices on the outbreaks of avian flu and the necessary culling of 155 million hens. But, some things just don’t add up in the industry’s version of events.
To be sure, 115 million hens is a lot of hens, but all those hens weren’t lost all at once. This culling has only been going on for the last three years and there has consistently been around 300 million hens, not subject to culling, that are doing their job of laying eggs, plus a continuous pipeline of 120 to 130 million female chicks (pullets) in the process of being raised to replace those being culled or aging out of egg production. As a result, the decline in egg production has been, while not insignificant, relatively small compared to egg production in 2021(down 3-5%). Couple this with the decline in demand (According to a private report by the Egg Industry Center, Americans went from consuming an average of 210 eggs each in 2021 to less than 190 in 2024 — a ~10-percent drop), along with the fact that many countries have closed their markets to American eggs, due to the avian flu, has resulted in egg exports falling by almost 50% since 2021-2022 and have remained at that level ever since. The combination of these forces have shaved aggregate demand for American egg by about 2.5%.
Since Americans are eating 10% fewer eggs and exports have fallen off a cliff, the reports of egg shortages are greatly exaggerated. Nevertheless, prices and profits have jumped to new highs.
Cal-Maine Foods — the largest egg producer and the only one that publishes its financial data as a publicly traded company — has been making more money than ever. It’s annual gross profits in the past three years have floated between 3 and 6 times what it used to earn before the avian flu epidemic started — breaking $1 billion for the first time in the company’s history. All of this extra profit is coming from higher selling prices, which have been earning Cal-Maine unprecedented 50-170 percent margins over farm production costs per dozen. Taking Cal-Maine as the “bellwether” for the industry’s largest firms — as people in the egg business do — we can be pretty confident that the other large egg producers are also raking in profits off the relatively small dip in egg production.
Avian flu outbreaks have been with us since the 1800’s, they used be called ‘Fowl Plagues’, and historically, egg producers have responded to them by quickly rebuilding and expanding their flocks as they did when epidemics struck in 1983-1984 and in 2015, which checks the price increases and returned prices to pre-epidemic levels. In their 2007 annual report to the SEC, Cal-Maine explained that “In the past, during periods of high profitability, shell egg producers have tended to increase the number of layers in production with a resulting increase in the supply of shell eggs, which generally has caused a drop in shell egg prices until supply and demand return to balance.”
That’s not happening this time around.
Hatcheries are throttling the pipeline of hens instead of expanding it.
According to the Egg Industry Center, the size of the flock of “parent” hens — the hens used by hatcheries to produce layer chicks for egg producers — plummeted from 3.1 million hens in 2021, to 2.9 million in 2022, to 2.5 million hens in 2023 and 2024.
Hatcheries are hatching far fewer parent chicks to replace the ones aging and becoming less productive (down about 12% in 2022) and greater declines in 2023 & 2024. Although hatcheries are also reporting to the USDA that they are producing between 125 to 200 million more fertilized eggs compared to 2021, they are putting fewer fertilized eggs into incubators and the number of chicks hatched has either declined or remained about steady with 2021 levels. The problem is exasperated by the egg producers themselves by putting 5 to 20 million fewer pullets into egg production.
As the USDA observed with some astonishment at the end of 2022, “producers—despite the record-high wholesale price [of eggs]—are taking a cautious approach to expanding production[.]” The following month, it pared down its table-egg production forecast for the entirety of 2023 on account of “the industry’s [persisting] cautious approach to expanding production.”
In short, the only thing that the egg producing industry has expanded in response to the avian flu outbreak were windfall profits, amounting to more than 15 billion dollars since the epidemic began, and spending it on stock buybacks, dividends and the acquisition of rival firms instead of rebuilding flocks and expanding flocks as they did in the past.
When an industry starts profiting more from *not* producing than from producing, it’s a sign that something isn’t right. It could be an innocent (i.e. temporary) bottleneck. But when it lasts for three years on end with no relief in sight, it's usually a sign of something else that’s pervasive in America — monopolization.
