Egg prices should be examined for grouting: Farm Group

Egg prices should be examined for grouting: Farm Group

TThe price of eggs has skyrocketed in recent months, up 138% year-on-year last month. A dozen eggs now average about $4.25, in part because of bird flu, which is tearing through poultry farms across the U.S. — wiping out about 58 million birds in the past year.

But there is another culprit, says a farm advocacy group: price gouging. America’s largest egg producer saw a 600% jump in profits in the last quarter alone.

Farm Action, a nonprofit that campaigns against corporate influence in the farm industry, alleged in a letter to Federal Trade Commission (FTC) Chairwoman Lina Khan on Thursday that Mississippi-based Cal-Maine Foods engages in “apparent price gouging, price coordination, and other unfair or deceptive acts or practices” as Americans pay more than ever for the key ingredient.

Farm Action claims the “real culprit” behind the massive price increases is “a collusion among industry leaders to turn inflationary conditions and a bird flu outbreak into an opportunity to extract huge profits.”

Cal-Maine Foods, which controls 20% of the retail egg market, reported quarterly sales up 110% and gross profit up more than 600% over the same quarter last fiscal year, according to a December filing with the Securities and Exchange Commission (SEC) . The company pointed to a reduced supply of eggs nationwide due to bird flu as the reason for higher prices and record sales. Cal-Maine brands include Egg-Land’s Best, Farmhouse Eggs and Land O’ Lakes eggs.

The company has not had positive tests for bird flu on any of its farms, according to the quarterly report. Cal-Maine did not respond to a request for comment.

“Bird flu is not manufactured – it’s real,” says Joe Maxwell, co-founder of Farm Action. “But the dominant companies are using this supply chain disruption to undercut consumers. The numbers in our letter clearly indicate that the production loss due to avian flu was small compared to the prices being charged.”

At the heart of America’s rising egg prices is a tighter supply of eggs due to bird flu. Commercial poultry farms affected by the disease must cull all birds and rebuild their flocks, meaning they could be out of business for months.

“This is the biggest emergency that the USDA has ever faced in this country,” said Gino Lorenzoni, assistant professor of poultry science and avian health at Penn State University. “And it doesn’t look like it’s going to stop anytime soon.”

Regulators and industry groups have long argued over whether companies should have the power to set prices and increase the cost of groceries, especially in times of crisis.

There is no federal law that prohibits price fixing, although the FTC has the power to prevent “unfair or deceptive practices” as the nation’s top consumer protection enforcer. The agency has historically been reluctant to use the full scope of its authority under this provision, but Farm Action believes there’s a good chance regulators will investigate.

“The FTC has broader authority when it comes to deceptive practices,” says Maxwell. “Steden spoke directly to this type of case and said publicly that it was something the FTC intends to take more active enforcement on, so we felt that opened the door to present this case to the chairman and the FTC.”

Khan has previously argued that enforcers should seek to challenge monopoly power in markets “with highly inelastic demand” that “impose significant costs on the public,” according to Farm Action.

Overall, US egg inventories were down 29% in December compared to the beginning of the year, largely because the dominant egg producers chose not to increase production despite “favorable conditions,” said Basel Musharbash, an attorney for Farm Action.

“Could there be a completely harmless explanation for all this?” says Musharbash. “Sure. But it suggests something worth investigating here and looking at how the industry seemed to calibrate its production decisions across competitors to induce and sustain these extremely high prices throughout the year.”

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Write to Nik Popli at nik.popli@time.com.

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