WattAgNet: Dramatic egg price shifts cloud cage-free choices

Since January 2015, the U.S. estimated farm egg price per dozen for all sizes of white cage-produced eggs has gone on a roller coaster ride from a high of $2.045 in August 2015 back down to a low of $0.306 in May 2016, according an the Egg Industry Center analysis. During this same time frame, the U.S. Bureau of Labor Statistics reports that the retail price per dozen of large white cage-produced eggs has ranged from a high of $2.966 in September 2015 to a low of $1.491 in June 2016.

The last two years have served as a reminder of the inelasticity of demand for shell eggs sold at retail. Simply put, a relatively small change in supply can result in a large change in price. The avian flu-induced supply shortage drove the retail price of cage-produced eggs to levels close to those of cage-free eggs. In some stores, shortages of cage-produced eggs were so severe that cage-free eggs became the consumers’ only choice.

As the nation’s layer numbers recovered, the cage-produced egg supply outstripped demand and prices plummeted. Egg producers have also been adding cage-free capacity rapidly and the supply now exceeds the demand, but retail cage-free prices haven’t fallen to the extent cage-produced egg prices have. In early September, my local Walmart had cage-produced eggs at $0.54 per dozen and the least expensive white cage-free eggs were $2.57 per dozen.

If retailers want to stick to their cage-free purchase pledges, then they will need to set interim targets for shifting their egg purchases to cage free. These targets will only be met if the retail pricing strategy is changed to encourage consumers to shift to cage-free eggs. How many consumers will feel good enough about the words “cage free” to pay $2 more per dozen?

Terrence O'Keefe is editor of Egg Industry and content director of agri-business at WATT Global Media. To contact O'Keefe, email tokeefe@wattglobal.com.