This year, egg prices have been skyrocketing, with California setting a record–leading the country at over $10 for a dozen.
One of the main reasons for the high prices is the current avian flu outbreak, which threatens flocks and dairy cows, yet milk prices have remained stable.
Dan Sumner is a professor of Agricultural Economics at UC Davis with a focus on egg and milk production. Sumner said California milk prices haven't gone up like eggs have because the state is not an importer of dairy products.
Sumner added that California ships dairy products all over the United States and the world. He said California is a “price taker,” which means dairy farms in California take the price they get and don’t say anything about it.
“Our milk production in California fell by 10% last November. But US milk production didn't change, hardly at all,” Sumner said. “And since we ship our dairy products all over the rest of the world too, we're competing with dairies from New Zealand to Ireland. And so our prices really haven't changed, even though our milk production has come down. That makes it harder on the farmers.”
There are not any farmers making high profits, even though they've been taking losses, according to Sumner.
“So that's the other side of the coin, in the sense, consumers have been protected and farmers have been taking substantial losses.”
Sumner joined CapRadio’s Insight host Vicki Gonzalez this week to talk about dairy and why egg prices are particularly vulnerable.
This story has been edited for length, clarity and flow.
Interview highlights
As an economist, was the writing on the wall? Was this easy to predict for you?
Certainly, the bird flu wasn't easy to predict. The price impacts have happened many times in the past, so we knew something was coming. The puzzling thing about this outbreak for the epidemiologists and the veterinarians was that what seemed to have worked in the past, most recently in 2015 when we had a big outbreak, was their standard policy. Well, they started applying that in early 2022 and it really hasn't worked. Seemed to work for a while, then it came back. The disease came back, that is. 2023 was relatively calm, but only relative to how bizarre it's gotten in 2024, so that's the problem. And I'm not going to predict whether the disease will go away anytime soon. The epidemiologists and veterinarians seem quite frustrated, and nobody claims to have the answer.
Why is it so stubborn from an economic standpoint? Why is it difficult when we just went through this a decade ago and what measures were put in place that don't seem to be working this go around?
That's really a science question. So let me just very quickly say what scientists have said to me, and they've also said this in public. And that is, it seems far more endemic in the wild bird population than it had been in the past. And you know, wild birds are everywhere. They tried all the strategies that used to work for keeping birds, wild birds, away from commercial flocks. They've tried other measures. They thought they were plenty sanitary, moving, say, a feed truck from farm to farm. They clean those thoroughly, or a veterinarian or a worker, but they've redoubled all of that, and it doesn't seem to be the disease itself that is more virulent. But of course, there's lots of science going on on that score as well.
Why are eggs more expensive in California?
Well, there's two reasons. If you were to look a year ago, California, or two years ago or three years ago, California would have also led the nation, but prices were three bucks a dozen here, and maybe $2.50 or $1.50 somewhere else. And that is because everything is expensive in California. So, the cost of production goes all the way through the cycle, and we bring in most of our eggs from the rest of the country. So it's not the cost of production here relative to other places. So it's the cost of marketing here. And of course, we require cage free eggs only to be sold in California, and they're going to be a buck or two to a dozen.
But what you're talking about is, why 10 bucks? Not why three bucks? So if someone were to say to you, we were $1 above everybody else, well that's about normal. When we're three or $4 above everybody else, that's not normal. But in a sense, the difference between the rest of the country is almost back to normal, in the sense that we have phenomenally high egg prices, and so do they. Ours are just a little bit higher. $1 a dozen used to seem like a lot higher. Now, it seems like a little bit higher. I don't want to minimize how extremely high egg prices are, that's for sure.
Are there other factors behind the egg price increase that aren't getting as much attention?
Inflation, so other things would be going up three or 4% or something like that. That's rounding here when it comes to egg prices these days. There's a few other things. It's sort of like the cage-free part in California that used to be the big difference. Now, it's a small part of the total egg price. Over the long haul, over a decade or two, sure, we require more about our eggs, not just cage-free, but a higher proportion of people want specialty eggs of various forms, outdoor eggs, pasture-based eggs, eggs with special nutrition for the hens to make the eggs more nutritious.
But none of that's really correlated with the bird flu. This spike is bird flu-induced. I will say the other thing special about us is because we're drawing on maybe a third of the eggs in the country are eligible for California. That does make us a little bit more vulnerable for spikes, so that a consumer in the Midwest, if cage-free prices jump up, they have the option to say, I'd rather cage-free,’ but I'll take cage. At these prices, I'll take eggs from hens in cages after all. We don't have that option, and that makes us a little vulnerable.
I mentioned this particularly because back in December, there was a spike in the amount of bird flu among the cage free population, and so our prices went up relative to the rest of the country by more than the dollar or two and for a while, people were saying, ‘why is California way out of line?’ Well, for the last couple of months, there's been less cage-free avian influenza and not more. And the Midwest prices have gone up even more relative to our prices, but they still aren't as high as we are, but they've gone up compared to us.
When you have less of a product, and demand for it goes up, the price goes up, which can open itself up to price gouging. Is any of that happening, or does this outbreak open itself up to the possibility that some people could take advantage of this and make more money?
Well, there's no question people are making more money. So, if I'm an egg farmer, let me say, I don't know farmers who wish disease on their neighbors. I'm not suggesting that at all. But just like if there's a freeze on oranges in Florida, and the price of oranges goes up. If you grow oranges in California, you're going to make more money that year. You may lose money the year before. You may have the freeze the year before. So here, if I have a hen house and somebody in Indiana and Ohio, as has happened in the last few weeks, is terribly hit by bird flu, and I have plenty of eggs, I'm still going to be advantaged by those high prices. Now, let me tell you, farmers will say yeah, and next time around, I'm the one that hit, and it certainly doesn't help me to have high prices if I don't have any eggs to sell. So overall, over the last year, there have been record high egg profits.
I wouldn't call that price gouging. I would say prices have gone up because you and I and everybody else wants to make our cookies, or during Christmas, wanted to make the egg dishes, and some of us think we can't get along without french toast on Sunday morning, and it's hard to make that without eggs. So consumers, as high as these prices are, have been willing to pay them, and that means that prices have to go that much higher to cut off the supplies. There's one other thing to recognize, and this is changing. Sometimes the restaurants or the supermarkets want to protect us from these high prices.
So there are supermarkets selling, at least in my little town, are obviously selling eggs at a loss, in the sense that wholesale prices are running $8 a dozen, and they're selling eggs for six. Could they jack up the price? Sure. Have some other stores in the same little town jacked up the price? Yeah, but I like to phrase it: somebody running the egg shelf in a supermarket, or in the division, the region for that supermarket chain, says, ‘what's going to annoy my consumers more?’ Some of them said, ‘I'll lose money on eggs. I'll have to raise the price somewhere else in the store. I won't advertise that, but I just have to, otherwise you can't lose money on everything. Some other store manager says, ‘look, if they cost me $8 a dozen, I've got to charge $10 to make it work.’ That's what they do. Somebody else says they'll be mad at me if I run out of eggs at noon, but they'd be even madder at me if I made them $1 an egg, so I'm gonna run out at noon instead.
Do you see egg prices coming down at any point, given that the main driver is bird flu, sometime this year, or are we just in it for the long haul?
There are people making all kinds of predictions. They don't know either. I could make a prediction. I'd have about a 50/50 chance of being wrong. If I was right, I'd be lucky. So that is to say, we don't really know what's going to happen with the disease. It was just terrible in Ohio and Indiana in February and March. Maybe they'll get it under control there, or maybe not. But I think there are lots of things that have been proposed. None of them are real solutions, so I just don't know. And that's, I think, the fair answer.
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