Spending

Why prices went way up in April for most eggs but not for cage-free or organic eggs

Twenty/20

If you went to the supermarket at any point in early April and noticed that eggs were suddenly way more expensive, you're probably not alone. In the early spring, conventional large white eggs were selling for roughly triple the price from the same time last year.

You may have also noticed that the more expensive specialty eggs in the dairy case — the cage-free, organic, or omega-3 kinds that can easily command $6 or $7 for a dozen at many New York City supermarkets — still cost about what they did before the pandemic upended grocery prices nationwide.

The reason for those two divergent trends has a lot to do with how those eggs are raised and sold long before you get to the supermarket. While you're a little late at this point to try the expensive eggs without splurging, here are some of the factors that dictate what you end up paying when you check out.

Existing contracts protect specialty egg prices from the market

While conventional eggs are sold on commodity markets, which are susceptible to price swings, cage-free eggs are usually not, according to Brian Moscogiuri, an analyst with food commodity business publisher Urner Barry.

While cage-free eggs make up 20% of America's egg supply and will even be the only kind of legal egg in California by 2022, they're still classified as a specialty item by the U.S. Department of Agriculture.

"They're not being priced based off of supply and demand and x-factor type events — the Black Swan events — like we saw with the pandemic," says Moscogiuri. "They're being priced off of a pre-negotiated contract that doesn't really change based on market factors."

Varying egg prices at a supermarket in the Williamsburg section of Brooklyn, New York, on May 14, 2020.
Photo by Ben Jay

Demand for eggs started to skyrocket in March as stay at home orders began to go into effect, reducing supply. As a result, wholesale prices for conventional eggs rose from about $1 per dozen to nearly $3 over the course of about three weeks. That led to shortages and much higher prices at the supermarket.

The USDA publishes wholesale prices for specialty eggs much less frequently than it does for conventional eggs. However, between February and March, according to its data, the price of the few cage-free eggs sold on the open market roughly doubled, while prices under existing contracts remained exactly the same. That led to a slight price jump for brown, cage-free eggs at the supermarket around mid-April.

Since then, prices for both conventional and cage-free eggs have settled around where they were pre-pandemic.

Buying from many different farmers can stabilize prices

Vital Farms, a Texas-based specialty egg seller that distributes to supermarkets nationwide, has managed to insulate itself somewhat from the market forces that drove up prices for conventional eggs so dramatically. Russell Diez-Canseco, the company's president and CEO, attributes this to the fact that Vital Farms buys eggs from about 200 family farms and avoids wholesalers altogether.

"When demand spikes, as we've seen over the last month or six weeks, the cost of our eggs to us does not change, because those are all governed by contracts that we have directly with small family farmers, and we did not change the our prices to the retailers," says Diez-Canseco. "The only thing I think we've seen is that in a time of really increased demand, some of the promotions that we might have planned with a retailer ended up getting cancelled."

The cost of our eggs to us does not change, because those are all governed by contracts that we have directly with small family farmers.
Russell Diez-Canseco
President & CEO, Vital Farms

In addition to existing contracts, the decentralized nature of Vital Farms' supply chain also provides some protection. If one farm halts production because of an outbreak, there are still dozens of others to pick up the slack.

Vital Farms even had enough eggs in storage for prospective new retail customers when demand spiked in April, according to Diez-Canseco. They were able to reroute those to existing clients to satisfy increased demand, staving off higher prices at the supermarket.

Prices could go up again before the pandemic ends

Relying on a large number of family farms is not a foolproof strategy, Moscogiuri says, since farmers could decide to break their contracts if they see an opportunity to make a bigger profit on the open market.

When egg supply decreased and demand skyrocketed in March, the price increase was only temporary, and appears to have not been sustained enough to convince many farmers to break existing relationships.

But there's no guarantee that won't change: Widespread outbreaks at farms or packaging/grading facilities could hamstring supply. That could cause supply issues similar to those that have plagued meat prices, which occurred when processing facilities had to go offline after outbreaks.

For the time being, at least, none of that has happened. In fact, Moscogiuri says that liquid eggs — the kind sold pre-scrambled in milk cartons — are selling at record low prices right now.

"I think our general philosophy is hope for the best but plan for the worst," says Diez-Canseco.

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