Tuesday’s Consumer Price Index (CPI) for January showed egg prices are up 70.1% year-over-year, but it seems egg prices could be on the way back down. That’s as the cost of eggs is rising at a slower rate than last month, up 8.5% month-over-month.
Eggs are a perfect example of an inelastic product – one barely sensitive to price.
People buy eggs and gasoline, for examples, in almost the same amount regardless of price. Eggs, because even at their recent peak, weren’t a grocery budget buster. Gasoline because you need the same amount to get around despite the price. At the other end, we don’t buy twice as much if the price drops in half either.
One driver of the egg spike wasn’t just avian flu losses, but shelf-life limits on any buffer supply. It’s not like corn in a bin. Inventory declines like 2022 also mean eggs may not be exactly where they are needed all the time. The widely circulated numbers of chickens culled because of disease – around 50 million – was never compared to total layer population of about 390 million. It was a devastating blow to individual producers, and a significant portion of the flock, but the effect was spread out over the year, and continually countered by growers.
Per capita egg consumption has been creeping up, but too many graphics were designed to exaggerate more than explain.
Compare these two, for example, showing the same information. During 2022 the layer flock decreased 6%, and it was enough during the Christmas baking season to create spot shortages and those headline prices. The “50 million” headlines never point out avian flu is worse in older hens, about a third of which are replaced each year anyway due to age.
Eggs take about 5 months to use a chicken to make another egg, so flock numbers can be replenished quickly. In fact, the eggs hatched for replacement are up sharply over last year. Eggs in inventory dropped to low levels because egg producers balance on a knife edge since consumers will buy about the same even if eggs go back to a dollar a dozen.
During all the uproar, sales dropped about 5% last year. Such markets also can turn on a dime so to speak. As of January 30, that appears to be the case with eggs.
From the high of over $5 a dozen, they have dropped to $3 range, and could drop further as inventory continues to rise. The test will be the Easter season, but it’s important not to count those eggs until they are hatched.
Read More:
What’s Really Driving Egg Prices 138% Higher in a Year?
