Clucking Over Egg Prices...???
- From: "Gregory Morrow" <ajoi@xxxxxxxxxxxxxxxxxxx>
- Date: Mon, 24 Mar 2008 03:03:03 -0600
[Sloppy journalism alert!: On the print page of this article there is a
graph showing the "tremendous" rise in egg prices, comparing the average
price of a dozen eggs in 1980 at 83 cents vs. the 2008 price of $2.17.
Actually, adjusted for inflation, that 1980 price is $2.34. So, eggs are
*cheaper* today than in 1980. I used this inflation calculator -
interestingly, from the "westegg.com" site - to compare:
http://www.westegg.com/inflation/
IMNSHO when doing price comparisons it's incredibly lame and lazy to quote
past prices of things, and for the writers *not* to adjust those prices to
today's dollar for the benefit of the reader. Shame! Or maybe adjusting
that 1980 egg price to 2008 dollars would have taken the "sails" out of the
"sky is falling" gist of this article, hmmm...??? I see the same type of
journalist scare -mongering in writing about gas prices. Few articles point
out that present gas prices are not that much higher than the earlier 1981
peak...fear sells, I guess.
Anyways, this week I paid $1.49 for a dozen Grade A Large eggs at Treasure
Island here in Chicago. I've used so few eggs this winter that when I went
to make an omelet today I noticed the "use by" date on the oldest of my
three cartons of eggs was Nov. 27. They were just fine...eggs can last a
long time in a suitably cold fridge.]
------------------------------
Why egg prices are cracking budgets
http://www.chicagotribune.com/news/chi-sun-eggs-pricing-mar23,0,1499371.story
Demand is high, supplies are tight and soaring corn prices are driving up
the cost of chicken feed. Guess who pays.
By Mike Hughlett
Tribune reporter
March 23, 2008
"NORTH MANCHESTER, Ind. - The massive henhouses plopped into a cornfield
here resonate with the clucking of hundreds of thousands of birds. Across
the U.S., cash registers beep, ringing up eggs for more than $2 a dozen.
To Bob Krouse, head of the firm that owns the veritable chicken city, those
hens are part of the soundtrack to a golden era of record egg industry
profits.
For consumers, well, let's just say the Easter Bunny shelled out a lot more
green this year: Retail egg prices have been increasing at rates not seen in
at least 30 years.
Egg eaters are feeling the pain of soaring chicken feed prices, which egg
producers are successfully passing down to the grocery aisle. What's more,
the egg industry's normal response to good times, which is to feverishly add
capacity until prices drop like a rock, hasn't materialized. That could keep
supplies tight and prices high well into 2009.
Producers are wary of adding hens for myriad reasons. They fear
overexpanding, an expensive mistake they've made before. Meanwhile, the
costs of expansion are rising and credit is tight. Even the tricky issue of
animal welfare is in play: Californians will vote this year on banning cages
that are standard in the industry, spooking some egg producers.
"It's a perfect storm that's going on, no doubt about it," said Scott Beyer,
a poultry expert at Kansas State University.
Food prices generally have been rising at an annual rate of nearly 5 percent
in recent months, a pace not seen since the early 1990s. Milk prices jumped
11 percent last year; chicken prices 6 percent, according to the Bureau of
Labor Statistics.
But neither can match eggs: Prices soared 29 percent in 2007, a pace that
has continued this year. Consumers don't like it, but eggs are such a basic
item that they don't appear to be changing their habits.
Take Kathy Hayes of Itasca. Yes, she made a special trip to a Dominick's
supermarket this week to take advantage of an egg deal: Buy $10 worth of
groceries, and a dozen eggs that normally cost $1.89 could be had for 99
cents. But Hayes said she hasn't cut down on buying eggs. "Eggs are just a
staple."
Feed fuels egg prices
A key reason for the egg price escalation is a surge in commodity prices.
Corn has shot to record highs as more of the U.S. crop is used for ethanol,
not food, economists say. And corn is the main ingredient in chicken feed,
which comprises about 60 percent of an eggmaker's costs.
At Midwest Poultry Services, Krouse's firm, feed costs are about 70 percent
higher than they were a year ago. Krouse said he's never seen feed cost so
much, and he's been in the egg trade since 1982, when he went to work for
Mentone, Ind.-based Midwest Poultry.
Indiana ranks third in U.S. egg production, after Iowa and Ohio. Midwest
Poultry, which also has a big facility in Loda, Ill., is the nation's
12th-largest egg producer, according to Egg Industry, a trade publication.
This past week, Midwest's North Manchester facility, the Hi-Grade Egg
Producers plant, was buzzing with the Easter rush. The two to three weeks
before the holiday are the most intense, volume-wise, of the year. "It's
like a fire drill," Krouse said. "It's a massive amount of eggs we have to
get out."
Even on an ordinary day, the North Manchester plant is no slouch: Its 2.5
million chickens churn out more than 2 million eggs. While the plant has
some cage-free production, most eggs made here originate in nine cavernous
henhouses filled with "battery" cages. Krouse describes a state-of-the-art
house as "a giant machine with chickens in it."
Indeed, cages stacked 10 high create a giant wall of white leghorn hens.
Their pink-crowned heads poke out from their pens, as they peck at feed in a
trough. Eggs drop from their cages to a conveyor. Manure drops to another
conveyor belt. The place is a din of clucking and clicking-the sound of
wings beating against steel wire. This Easter, business is about as good as
it can get for egg producers like Midwest. "We've never seen profits like
this," Krouse said, echoing sentiments in the egg industry's trade press.
It's a welcome departure from the grim times of a couple of years ago, when
the highly cyclical egg industry was deep in the red. The problem then was a
common one: Producers overexpanded in 2004 and a glut of eggs hit the
market.
"The industry has always been one where as soon as egg prices got good,
everybody went nuts and put in new facilities and then the market would
crash," said Tom Lippi, general manager at Chore-Time, a Milford, Ind.-based
maker of egg production equipment.
But that's not happening this time around. The industry's largest producers
have been a lot more "levelheaded," wary of overexpanding and swinging back
into the red, he said. "They are being very cautious."
Expansion difficult
Kansas State's Beyer said that expanding production is increasingly more
costly and difficult. Permits for new facilities are harder to get as
regulators have increased scrutiny of environmental impacts. Credit markets
are tight, making financing more difficult. And most expansions these days
mean adopting a newer production method that costs twice as much as the old
one.
Krouse is in the midst of investing in the newer technology, though for
improving efficiency, not for the sake of expanding Midwest's output. In
Manchester, he's converting Henhouse No. 1 from the older "A-Frame"
configuration to the newer "stacked deck" system. He has done the same with
several other henhouses already.
Both A-frames and stacked decks involve piling pens atop each other. But the
latter has a conveyor system that allows for manure to be collected
efficiently, dried quickly and largely deodorized. In A-frames, which make
up at least 80 percent of U.S. henhouses, manure simply accumulates in a
giant pile on the henhouse floor, reeking in warm weather and creating a
haven for flies.
Also, while the bulk of the manure in an A-frame drops to the floor, some
inevitably falls from chickens on higher levels onto birds caged below. The
industry's own animal welfare guidelines call for producers to avoid such
spillover as they upgrade their henhouses.
Under fire from animal rights groups, United Egg Producers, the industry's
trade group, adopted a set of animal welfare guidelines in 2002 and has been
phasing them in. The bulk of the nation's eggmakers adhere to the
guidelines.
One of the code's key provisions is to give birds more room, gradually
increasing a hen's cage space from about 50 square inches, an industry norm
in 2002, to 67 square inches by April.
To do that, producers reduce the number of hens: For instance, Midwest is
gradually cutting back from eight birds per cage to six or even five,
depending on cage size. The cumulative effect is big-tens of millions of
hens have been effectively taken out of production, which has put more
upward pressure on egg prices. But it hasn't allayed animal rights
activists.
"To the extent they are giving animals a little more space, that is a
definite improvement," said Paul Shapiro, head of the Humane Society of the
United States' factory farming initiative. Still, "it's hard to find an
example of more egregious cruelty" to animals than the battery cage system,
he said.
The egg industry says its welfare code is scientifically sound and that
caged egg production is considerably less costly than cage-free, a plus for
consumers. It is set to battle the Humane Society over the issue in
California this November.
If the measure passes, the industry fears bans would spread to other states.
Fear over such bans is another reason for producers to put off expanding
capacity, keeping upward pressure on prices, say egg executives and industry
observers.
"It's the uncertainty of investing back into the business," Krouse said.
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