[ed. Get in losers, we're going losing.]
I reported on declining egg prices for FT Alphaville this month. This was a fun story, because a big jump in US imports from Turkey and Mexico helped drive at least some of the decline. It also landed right as the White House (briefly) decided to slap super-high tariffs on a bunch of stuff, including food products that can’t really be grown here.
Egg prices did fall, so the story wasn’t wrong. But it only happened for wholesale buyers, which means food companies, bakeries, restaurants, and presumably grocery stores.
The price of fresh eggs at the grocery store — what regular people pay — still hasn’t dropped, according to the latest CPI report. It actually increased in March. Whoops!
So why hasn’t the decline in wholesale egg prices shown up at the grocery store?
It was definitely a big one! The USDA data shows a 63% drop, before prices started to creep higher again ahead of the Easter holiday:
And the jump in imports was also pretty big, going by our most recent data (from February):
And yes, the total amount imported was low compared to the total amount of eggs that Americans eat.
But eggs are a commodity — you can basically substitute any egg for any other egg, notwithstanding what homesteaders say about the superiority of fresh eggs from a home flock. (I might learn about that soon, so uhhhhhh wish me luck, lol, yikes.)
For commodities, an unexpected change in supply, even at the margin, can move prices noticeably. The decline in egg prices was also probably fueled by a decline in wholesale demand. It seems reasonable to think fewer people are buying eggs at Waffle House because of its 50c-per-egg surcharge. If they’re buying eggs to make at home instead, that could boost retail demand for eggs.
Beyond that, though, how do we explain the difference in egg prices between consumer and wholesale buyers?
Let’s suspend our cynicism — at least for a moment — and try to come up with a reasonable explanation besides
Maybe this is simply a consequence of how consumer inflation is measured? Maybe the BLS’s survey logged the price of a dozen eggs on March 1, when prices were still high, and called it a day?
Nope!
... Most of the news stories about egg prices have mentioned Cal-Maine, the only egg producer that’s publicly traded. But their stories mention revenues, which doesn’t really address the central issue here, which is profitability. If Cal-Maine couldn’t provide competitively priced eggs because it was spending big replenishing its flocks after losses from avian flu, its sales would still be fine, but profits would suffer. The company owns 14% of the US’s layer hen flock, according to its latest quarterly report, so it could presumably move the needle (remember, commodities are priced on the margin).
But uh, check out the column on the far right, from its latest investor presentation:
That shows it earned $10.38 per share (diluted) in the quarter ended March 1. That’s 82% more per-share profit than it made for the full year of 2024. It’s already on track to exceed its per-share annual profit from 2023.
by Alexandra Scaggs, The Hedge | Read more:
Image: Alexandra Scaggs for The Hedge. Source: Bureau of Labor Statistics. Cal-Maine Foods.]
Image: Alexandra Scaggs for The Hedge. Source: Bureau of Labor Statistics. Cal-Maine Foods.]
