Feeding the Planet Causes Egg Price Hike

US - With prices soaring, eggs are just one example of the forces at work in today's food chain.
calendar icon 8 December 2008
clock icon 6 minute read

Richard Meryhew and Chris Serres write in Star Tribune of Minneapolis and St Paul:

Jack Romine picked up the grocery receipt lying on his kitchen table and began studying the numbers.

Milk, bread, a head of lettuce. Prices were up but not out of line. Then came the shocker - $2.29 for a carton of eggs.

He called the store to double-check. No, the clerk told him, $2.29 was the going rate for a dozen large Grade As.

"I couldn't believe it," said Mr Romine, 77, a retired advertising director from Brooklyn Center.

In a year of soaring food costs, nothing in American grocery carts has spiked like eggs -- up nearly 60 percent in two years.

What's to blame? A lot, it turns out.

Global pressures, such as increased demand from changing diets in developing countries, and rising feed costs from spikes in commodity prices this year are partly responsible.

So are long-term trends in the egg industry. Rapid consolidation and a move to industrialized production have left fewer players producing the bulk of the nation's eggs. And newer environmental regulations make expanding, or getting into the business, more difficult.

But the most significant influence on pricing may well have been the industry's own doing. Over the past two years, after a several-year slump, egg farmers have cut back on the size of their hen flocks at a pace not seen in more than 20 years. The result: fewer hens means fewer eggs, which in turn means higher prices. That has generated a profit bonanza for the egg industry, but has also caught the attention of the US Department of Justice, which is investigating whether some of the nation's largest egg producers conspired to fix prices.

Through it all, one thing is clear: industrialized food production has not insulated consumers from price volatility. In fact, some agricultural experts argue it may have exacerbated the problem.

Troubles on the Horizon

"Today, about 250 businesses produce 95 percent of the nation's eggs."

Amon Baer's northwestern Minnesota egg farm is a far cry from the one his dad had in the 1960s. Back then, hens roamed freely and Amon and his brothers picked eggs by hand.

A generation later, Mr Baer's mechanized facility, which employs 25 people, cranks out 18,000 dozen eggs in a day.

Two henhouses with 150,000 birds each span the length of two football fields and flank a packaging center, where the eggs are inspected, cleaned and boxed.

Hens - from as few as three to as many as 10 - live in small, wire-battery cages that are stacked four rows high. Water drips from a nipple at the top of each cage. Feed is delivered by conveyor belt.

Eggs roll slowly across the bottom of the slightly sloped cage onto another conveyor belt, where they wind their way to the packaging center.

"Pricing is good right now," Mr Baer said. "But there are a lot of pretty dark clouds on the horizon that make me question whether it will be so in the future."

Just 20 years ago, 2,500 egg producers handled most of the eggs sold and consumed in the United States. A large henhouse had perhaps 100,000 birds. Today, about 250 businesses produce 95 percent of the nation's eggs from hen houses that are as long as football fields and capable of housing more than 500,000 hens.

"The barriers to entry are getting higher all the time, as are all the investment capital requirements to get into the business," said Allan Rahn, a poultry specialist and former economics professor at Michigan State University. "It's become a very sophisticated industry, and you gotta be big to compete."

But industrialized farming, long viewed as the means to cheap food, couldn't keep prices down this year. Shoppers are paying more for just about everything at the grocery store. White rice was up 55 percent this past year. Potatoes rose 41 percent, and bananas 24 per cent.

"During the past two years ... the number of hens laying eggs for food fell by eight million to 280.3 million through the third quarter of this year."

Meanwhile the spectre of deflation or falling prices, haunts the economy. The consumer price index fell 1 percent in October, the biggest drop in more than 60 years. While prices for energy, cars and personal computers were all rapidly declining, grocery prices are still up 7.5 per cent compared to a year ago, a pace not seen in 18 years.

And that generated huge windfalls for the US egg industry, which last year produced 90.6 billion eggs. Cal-Maine Foods, the nation's biggest producer, saw its profits more than quadruple in 2007 to $152 million from $37 million. At Land O'Lakes, an Arden Hills-based farmers' co-operative that owns the nation's third-largest egg producer, MoArk, profits surged 83 percent last year to $162 million.

Eggs have spiked before. But traditionally, when that has happened and producers see money, they race to expand and add more hens, flooding the market with eggs and bringing prices back down again.

"We always joke among ourselves, 'We're able to out-produce any good market overnight,'" said Bob Krouse, president of Midwest Poultry Services L.P. in Mentone, Indiana, one of the top 15 egg producers in the nation.

No more. During the past two years, as prices were climbing and egg exports booming, the number of hens laying eggs for food fell by eight million to 280.3 million through the third quarter of this year. When compared with the same month from the previous year, hen populations have declined for 21 consecutive months, concludes the Star Tribune article.

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