Why egg prices have jumped almost 20% since last year

While July's Consumer Price Index (CPI) revealed overall inflation seems to be cooling, it did however reveal the price of eggs continues to inflate, up 5.5% month-over-month and almost 20% compared to last year. What is driving these cost increases and will there ever be relief?

Pete & Gerry’s CEO Tom Flocco joins Wealth! to give insight into what is causing the rising price of eggs.

Flocco says that the 19% rise comes from "a supply-driven price spike." He noted that in 2022, a spike was driven by the avian flu wreaking havoc on the industry, specifically those that are caged and caged-free producers.

For his company, the "biggest cost inputs that affect our pricing is going to be grain. I mean, it's the single biggest cost input to a dozen eggs. It can be as much as 50% of the cost of a dozen eggs, because it's not just corn and soybean. It's also a lot of nutrients that we put in there to make sure the birds are healthy, that the eggs are the best tasting eggs they can get."

He follows that up with: " There's also a transportation component of it. We are on 200 plus family farms that we contract with. We don't own any of them. We contract with those farmers. We spread from Oklahoma to Maine. All the way up to Wisconsin and all the way east. And so we have to truck those eggs to our three processing facilities so that they can be sorted, graded, packed, and then sent out to our retail partners."

The third biggest impact for Pete & Gerry's Flocco says is labor.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Nicholas Jacobino

Video Transcript

Well, the price of eggs have been a touchy subject for many over the last few years.

Today's CP I report showed that the prices are still rising up 5.5% on a monthly basis and 19.1% year over year peaking at $4.82 per dozen in January 2023.

According to the Bureau of Labor statistics, the BLS it has since come down but hasn't returned to pre pandemic levels.

So how much can we expect an omelet to cost by the end of the year?

Joining me now we've got Tom Flacco who is the CEO of egg producer, Pete and Jerry's great to have you here.

Ok.

So, I mean, what's, what's going on?

Like what is changing so materially that the price of eggs is going up this much, I think 19.1% year over year.

Yeah.

Good morning Brad.

Thanks for, thanks for having me on uh great question.

It's um it's probably important to start with just an understanding of the, the egg market and there really are 22 elements of the egg market.

There's the conventional commodity egg that you see in the, in the well in the store and then there are premium eggs like ours, Pete and Jerry's and Nelly's uh that really are affected by a whole different pricing dynamic.

So that 19% that you're seeing is at the commodity end.

And that's a supply driven price spike.

The same way it was back in 22 back in 22 avian influenza hit the industry very hard.

It took about 50 million birds out of the supply chain.

But most of that, almost all of that was at the caged and cage free end birds that never get outside where you have several 100,000 birds in a barn.

And so when one bird gets infected, the entire barn gets taken out and all those birds unfortunately need to be put down for safety reasons.

Uh That's where you're seeing that inflation at the premium end of the category where we are.

Uh you're not seeing that same inflation.

Our prices today are actually lower than they were a year ago to the end consumer.

Yeah.

Uh look there, I mean, there's no sugar coating it.

That, that sucks Tom, honestly.

Um and it's a big task for you and your business to navigate through as well.

You know, I, I wonder, you know, even as you're kind of laying out all of the different variables that you have to account for what is the largest perhaps increase or input in cost and expense that you've seen in order to just make sure that you can still get product to so many of the partners that you have, uh, that you distribute to.

Yes.

So the, the biggest cost inputs that affect our pricing is, is gonna be grain.

I mean, it's the single biggest cost input to a dozen eggs.

It can be as much as 50% of the cost of a dozen eggs because it's not just corn and soybean.

It's also a lot of nutrients that we put in there to make sure the birds are healthy, that the eggs are, are the best tasting eggs they can, they can get.

But there's also a transportation component of it.

We, we are on 200 plus family farms that we contract with.

We don't own any of them.

We contract with those farmers.

We spread from Oklahoma to Maine all the way up to Wisconsin and all the way east.

Uh And so we have to truck those eggs to our three processing facilities so that they can be sorted, graded, packed and then sent out to our retail partners.

So there's a lot of cost there.

And then the third big input is labor and we all know that labor has seen some inflation over the last 1824 months.

Uh So that's an important component of our cost structure as well.

Tom We, we also know the challenge is that, that businesses like yours are navigating, especially when it comes to climate change as well.

And uh you know, that was, that's almost kind of exemplified through what you were just telling us about the prevalence of even more diseases that could spread through the flock as well or through your operations.

Um And, and have a detrimental impact.

How, how is that something that your business is navigating through uh that also plays into this broader inflation picture too.

So for us, the, the, the avian influenza hasn't actually affected our business very much at all because our, our farms are so decentralized.

We don't have any one farm that accounts for a meaningful part of our production.

So again, the, the 22 cycle, we had one farm that was hit this last cycle, which is still going on.

It's lasted a lot longer than people thought it usually dies down by now.

We haven't had any farms that have been affected.

So touch wood for that.

So we're, we're feeling insulated against it, but we don't, we, we also have a very high standard of biosecurity at every one of our farms.

All of our farms have to be compliant.

Our trucks have to be compliant that are going in and out of these facilities so that we're not in fact spreading that disease and we're not, we're not affected at our end, Tom Flacco, who's the CEO of Pete and Jerry's Tom.

Thanks so much for taking the time here with us today.

Helping us wrap our minds around as consumers as we know.

You are probably as well.

Um on the other side of this inflation print and, and trying to get a good sense of what's going into some of these prices too, Tom.

Appreciate the time.

Thanks for having me.

Welcome.