As inflation fears begin to ease in the face of last week’s relatively positive consumer price index report (CPI), one household favorite is soaring in price: eggs. Egg prices are more than double the price from the same time last year. Why is the cost of eggs rising?
Well, according to most analysts, the current egg inflation is the result of major supply disruptions this year. Indeed, bird flu is one of the primary culprits behind the price spike, and for good reason. The Centers for Disease Control and Prevention (CDC) reported that more than 57 million turkeys and chickens have died from avian influenza since the virus was first uncovered early last year, this represents the deadliest outbreak of avian flu in U.S. history.
Avian flu is both deadly, (90%+ lethality rate among affected birds), and extremely contagious. In accordance with U.S. federal laws, upon detection of the virus, farms are required to cull all their remaining livestock to prevent further spread.
Food remains one of the more elevated inflation categories, currently up 0.3% month-over-month as of December. This represents a small piece of a 10.4% year-over-year increase.
Eggs likely bear much of the brunt of rising food costs. As per data from the Bureau of Labor, the average price of a dozen large Grade A eggs have more than doubled in U.S. cities over the past year, from $1.79 in December 2021, to $4.25 currently.
Why Is the Cost of Eggs Rising?
Not everyone is in agreement over the cause behind the rising egg prices. Emily Metz, President and Chief Executive of the trade group American Egg Board, believes egg inflation is a big-picture issue:
“When you’re looking at fuel costs go up, and you’re looking at feed costs go up as much as 60%, labor costs, packaging costs — all of that … those are much much bigger factors than bird flu for sure,”
In fact, rising demand may be playing as much of a role in “egg-flation” as crippling supply. The U.S. holiday season is defined by dishes requiring eggs. Add in a 17% increase in the demand for eggs over the past decade, it’s no wonder to see the industry so pinched.
To some companies, however, the current supply scramble has been something of a blessing. Cal-Maine Foods (NASDAQ:CALM), the largest producer and distributor of shell eggs in the U.S., has enjoyed a 35% surge in share value rise over the past 12 months solely on the back of rising egg prices. In December, the company announced record-breaking top and bottom line figures.
Egg lovers have no fear, however, relief is likely on the way. According to Jada Thomson, a University of Arkansas agricultural economist, egg farmers have steadily replaced bird-flu-affected flocks over the last year; as demand for eggs eases post-holiday season, lower egg prices may come sooner than later.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
