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Inflation: Egg prices show ‘tacit type of collusion,’ Farm Action president says

Farm Action President Joe Maxwell sits down with Yahoo Finance Live to talk about the corporate profit occurring as egg and grocery prices continue to rise and how FTC investigations could curtail potential collusion.

Video Transcript

- All right, well, egg prices have skyrocketed over the past year, up nearly 60%. That's according to the latest inflation data. Now, this has one organization, Farm Action, calling on the FTC to investigate the egg industry. We want to bring in Joe Maxwell, Farm Action President, joining us now. Joe, it's great to have you here.

We brought you on. There was a recent tweet that you just sent out saying egg prices were up 138%. You're calling BS on the excuses. Those excuses that you talk about are avian flu and inflation. You say it's price gouging. Why?

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JOE MAXWELL: Well, first, avian flu is real, but the consumers know that in this country, something's wrong at the grocery store with 138% increase in the price they're paying for eggs. It's obvious to us when we look at the profit that these companies are making, over 960% profit, that something's wrong, something's afoul.

- Pun intended, I assume. 58 million birds killed from the avian flu how significant, in your estimation, has that contributed to the rise in prices?

JOE MAXWELL: Well, it's obvious that the avian flu is real. 50 million laying hens lost, but-- and from 2021 to 2022, that reflected a loss of production of eggs in this country by 5%. 5% is a number. It's a real number, but it does not justify 138% increase at the grocery store nor 960% increase in gross profits for the largest egg producer in this country who has not experienced one case of avian flu.

- Sometimes it's a blurry line between supply and demand and price gouging. How do you define that?

When we focused on the FTC Act, the Federal Trade Commission Act, there are several laws that govern this area. We felt that based upon high prices of eggs, moderating cost of production of eggs, and no one in the marketplace coming in to take over market share from the dominant firms indicated something was going wrong. And we believe the FTC Act is the best place to talk about or have an investigation and review a tacit type of collusion, these companies working together to artificially keep the price high using the avian flu and higher cost as a basis for getting away with this price gouging.

- Well, Joe, in his statement, Cal-Maine did say that there were many factors besides the avian flu that did impact prices, such as fuel, labor. They go on to say, quote, "The domestic egg market has always been intensely competitive and highly volatile even under normal market circumstances," end quote. They also went on to add that they do not sell eggs directly to consumers or set the retail egg prices. So what is your response to that?

JOE MAXWELL: Absolutely, well, according to their own filings in November using a 26-week period prior to November 2022 and compared with November-- 26 week prior to November 2021, the company did experience a 40% increase in cost of goods. 22% of that was reflected in feed costs. Feed costs went up 22% year over year. However, again, their gross profit was 960%.

They turned the company from a net income line item of a loss in 2021 to over $350 million profit during the year they're claiming avian flu and high cost was the basis for raising these prices. The-- their own evidence, Cal-Maine's own evidence, found in the SEC filings, would indicate something is not working right in the marketplace, and FTC, DOJ have authority to investigate and make that determination. And we're calling on them to do so on behalf of the consumers who are tired of facing these type of prices at the grocery store.

- It is a staggering number, sir, and consumers are really struggling with it. What has been the FTC's reaction? I know Senator Jack Reed is also calling on the FTC to investigate price gouging. How have they reacted to you?

JOE MAXWELL: Well, in introducing this story, you indicated how busy the FTC is. We will also be looking at sending a letter to DOJ-- or copying DOJ in on that letter along with USDA. Under the Biden administration's whole government approach to antitrust and competition issues, we feel that we need to make sure every agency with this kind of power is alerted, and the ones that have the bandwidth should immediately take on this issue on behalf of America's consumers.

- And what have been-- the focus here being on Cal-Maine. Have we seen similar types of price increases across the industry?

JOE MAXWELL: Absolutely. That's a key point. So matter of fact, if Cal-Maine chose to raise their prices by themselves, you would expect Rose Acres or one of the other leading dominant firms would step in, take that market share away. USDA clearly reported in August that with a moderating feed cost and the high price of eggs, August of 2022, that the expectation of the market would be one firm would come in, put down more hens, have more eggs, and take market share away.

In December of 2022-- and this was our flag-- in December of 2022, USDA ERS, that's the organization in government that makes these reports, indicated that had not happened. It had not materialized was their words. So that begins to show that the market dynamics that one would expect in this scenario just aren't working, which would indicate perhaps some type of tacit collusion among the companies to keep egg prices high.

I mean, why we're put down-- why have more eggs if you're making more money selling fewer eggs? There's not an incentive, but yet the market dynamics say it should respond positively to add production and lower price. It's not working. So that's why we're calling on government to take a hard look at those agencies that have that responsibility.

- OK, Farm Action President Joe Maxwell. Please keep us posted, sir. Thank you.