Unusually high prices on everything from gasoline to cars to groceries has become the norm for many Americans. In the months since the world began its return to ‘normal’ following the pandemic, inflation has soared, challenging central banks and shifting consumer spending patterns. Indeed, you may have, for example, decided to defer a planned car purchase because of higher interest rates. If you’re like many Americans, you’ve probably come to expect higher prices at the grocery store checkout. However, the price of one staple, eggs, might still prompt sticker shock. The price of eggs is sky-high, especially for those who live in California where, thanks to regulations requiring that eggs meet cage free specifications, the cost of a dozen eggs now tops $7.00 up from the $2 range a year ago. National averages for a dozen eggs are closer to $4.00, about double last year’s price.
What’s going on? Well, like so many other industries, the egg industry has experienced supply chain problems. In addition, and more critically, the industry has been hit with avian flu, resulting in the demise of some 44 million egg-laying hens. While the supply chain issues should largely resolve, it’s less clear what the timeline is for recovering from the avian flu. Already, its impact on the industry is significantly greater than for the 2015 outbreak, an event the USDA considered one of the most significant in history. Some are predicting that the days of the egg being an inexpensive source of protein are over, while others are more optimistic that the outbreak can be contained, and prices will fall. Given that the flu is spread by birds, controlling it can be difficult, making it challenging to predict what may be next. For now, though, higher egg prices mean less money in the grocery budget for consumers to spend on other items. For restaurants, higher egg prices can mean a choice between higher prices on menu items or lower profits. For producers, higher egg prices reflect the challenges of being in a business where unexpected events can quite literally just fly in.
Discussion Questions:
- Discuss supply and demand as it relates to the price of eggs. What do the higher prices tell you about the elasticity of demand for eggs? Are there substitutes for eggs?
- Are eggs a commodity product? Does your response change if you consider eggs sold in California?
- Discuss the spillover effects of higher prices on eggs. Which other industries might be affected? Will those effects be positive or negative? Explain.
- Reflect on the implications of avian flu for producers, consumers, and businesses that use eggs.
Sources| Washington Post: https://www.washingtonpost.com/business/2023/01/10/egg-prices-avian-flu-inflation/; Forbes: https://www.forbes.com/sites/anthonytellez/2023/01/12/why-are-egg-prices-still-so-high-its-not-the-reason-you-think/; NBC News: https://www.nbcnews.com/business/consumer/egg-prices-why-are-they-so-high-right-now-rcna65603; Unsplash: https://unsplash.com/photos/fgckzdnKkds