Egg Prices: A Long Road to Recovery

The COVID-19 pandemic has left an indelible mark on the U.S. egg industry, with record-high egg prices persisting and showing no signs of abating until the second quarter of 2023. The shift in consumer behavior, regulatory changes, and long biological lags in livestock production have all contributed to the sustained high egg prices, leaving consumers and investors alike wondering when relief will arrive.

The pandemic-induced shift from food-away-from-home to food-at-home led to a surge in demand for table eggs, which are primarily sold in grocery stores. This increased demand, coupled with a collapse in cafeteria demand and foodservice industry, created a significant mismatch between supply and demand for table eggs. As a result, retail and farm-gate prices for table eggs skyrocketed by approximately 141% and 182%, respectively (Abstract).

In response to the supply chain disruptions, the FDA issued temporary exemptions from certain food safety standards for breaking stock egg producers seeking to sell into the retail table egg market. This regulatory change allowed for the diversion of breaking stock eggs to the retail market, helping to alleviate the supply shortage and push prices towards their long-run pre-pandemic equilibrium dynamics (Abstract). However, the long biological lags in livestock production have contributed to the sustained high egg prices, as it takes time for the industry to respond to changes in demand.

Consumer preferences for credence attributes, such as cage-free and organic eggs, have also played a role in the price dynamics of the egg market. Before the pandemic, these eggs commanded a premium due to consumers' willingness to pay for animal welfare and environmental sustainability. However, the pandemic led to a shift in consumer priorities, with a focus on meeting basic needs and affordability. As a result, the premiums for credence attributes decreased by as much as 34% during the pandemic, and these premiums did not fully recover following the return to more "normal" price dynamics (Abstract).

As the egg industry works to address the supply chain disruptions and adjust to the new consumer preferences, investors and consumers alike can expect egg prices to remain elevated for the foreseeable future. The long biological lags in livestock production, coupled with the ongoing shift in consumer behavior, suggest that it may take until the second quarter of 2023 for egg prices to return to more "normal" levels.

In conclusion, the COVID-19 pandemic has had a profound impact on the U.S. egg industry, leading to record-high egg prices that are expected to persist until the second quarter of 2023. The shift in consumer behavior, regulatory changes, and long biological lags in livestock production have all contributed to the sustained high egg prices, leaving consumers and investors alike waiting for relief. As the industry works to address these challenges, investors and consumers should remain vigilant and prepared for the long road to recovery in the egg market.