Question:  

Can you explain why the cost of eggs has gone up more than other groceries?

Answer: 

Beyond the unfortunate impact of avian influenza, there are additional factors to consider. In 2022, approximately 60 million chickens were lost to the avian flu outbreak reducing the supply of eggs. On top of this, there is the impact of higher costs for fertilizer, seeds, and energy. The Russia-Ukraine war that began in February 2022 continues to influence costs to farmers for agricultural products.  

Inflation, and specifically eggflation, is a phenomenon that illustrates various economic concepts. As outlined above, inflation isn’t just what happens to the price of one good in the food chain. Prices of some items are more important than others because they make up a larger share of total expenses. For instance, if the price of window shades increases it’s less impactful than if the price of housing or gasoline increases too much. We can substitute curtains for window shades but need housing and transportation. 

Egg prices aren’t as intriguing as gasoline prices unless you’re the Easter Bunny, run a bakery, or a breakfast establishment. If egg prices are very high, we can substitute eggs for something else. If gas prices are high, we can reduce nonessential driving to some degree, but still need to fill up the tank and get to work. Housing is another necessity and represents a large percentage of most households’ expenses. Reducing consumption of eggs wouldn’t have a detrimental impact in the short-term for most of us. However, bakeries can’t substitute eggs for similar ingredients and will likely pass along the higher prices to consumers of the final product. Those with special diets may be able to substitute another protein source for high price eggs. These are examples of price elasticity and the substitution effect. 

Whether or not you consume an unusually high number of eggs, you’ve likely noticed that the price for a dozen eggs has increased by triple digits over the past year. According to the U.S. Bureau of Labor Statistics, the average cost of a dozen grade A large eggs has increased by 138% moving up to $4.25 in December 2022, from $1.79 one year earlier. My husband and research analyst extraordinaire, Pete, checked the local grocery store app and reported that a dozen eggs are $5.55 per dozen here on the island. 

Agricultural products like food are typically non-durable and can experience volatile price changes for several reasons including weather, droughts, floods, and epidemics. In fact, food prices since 1958 have been on average 1.5 times more volatile than the broader core prices (prices excluding food and energy), but egg prices have been 12 times more volatile than broader core prices over that time.   

This isn’t the first time the egg prices have gone up more than 25 percent year-over-year. This was the case in 1973 and 2005 because of higher feed prices, again in 1989 due to adverse weather, and in 2015 and 2022 with avian influenza being a factor. Today’s perfect storm of higher costs for fertilizer, feed, and energy with the reduced supply of chicken all contributed to the higher cost of eggs. The good news is that prices of eggs haven’t stayed high after spiking. 

According to the U.S. Department of Agriculture, 58 million egg laying chickens have been lost to avian flu. The outbreak hasn’t affected “broilers” or chicken raised for meat, only the egg-laying birds are impacted. If farms must continue to dispose of their egg laying flocks, prices of eggs will remain at these higher levels. The bird flu is the main reason for higher egg prices, but inflation in other areas plays into this as well. Packaging, labor, and interest rate costs all contribute to the price of eggs. Because eggs are a staple, many grocers are trying to keep prices as competitive as possible. 

The rhetorical question, “what does that have to do with the cost of eggs?” comes to mind. In this case, the question about the cost of eggs brings with it a discussion of economic, geopolitical, and agricultural events. We’ve talked about supply, demand, the substitution effect, and price elasticity all because of the price of eggs.  Stay focused and plan accordingly.