Understanding the Supply Chain: Egg Prices - Sobel Network Shipping Co., Inc.

Understanding the Supply Chain: Egg Prices

If you have shopped recently then you have probably been shocked at the prices at the grocery store. In 2022, they have risen over 13 percent. Many things have led to the increase such as  climate change, Covid-19, and livestock problems. Food companies are also taking advantage of the situation to increase prices which renders greater profits. In fact, the two years since COVID-19 have become the most profitable than the 1950s for big food retailers like Walmart and Kroger which make up 40 percent of the nation’s food sales.

Many believe that the food price increases are a result of profit mongering conducted by beverage, meat, snack companies, logistics companies, and grocers. One of the biggest price increases has been seen in the egg section of the store.

In recent months, the price of eggs has skyrocketed. Many will say that it’s due to avian flu that the price has increased so substantially. However, there are many price points that impact the price of eggs. Eggs are categorized to appeal to a diverse market. In poorer neighbors, retailers do not typically sell such a large assortment of eggs. But in lucrative areas, grass-fed, cage-free, and pasture-raised eggs are regularly marketed.

What determines the cost of eggs? Are the higher prices worth it?

Many are surprised to learn that how a laying egg is raised impacts the price of the eggs. Cage-free hens live in large barns and organic hens are all raised in a comparable manner but often let outdoors. They are also given access to organic grain to produce higher-quality eggs. Pasture-raised hens must have access to 108 square feet of outdoor space whenever they desire and be provided with a quality diet. These factors all greatly impact price.

The wholesale markets are usually inclusive of freight and shopping costs which are required for distribution to stores. Usually, the markup is 10 to 15 percent over the cost. In addition, wholesalers will deduct any loss, damage, or restocking fees. At the wholesale stage, eggs will experience an increase of 10 to 30 percent.

At the packing stage, the packing company will end up adding another 30% to the price which also substantially increases the cost.

Even the inflated cost of feed is impacting the price of eggs at the local grocery store. It’s costing farmers a sizable amount to feed hens quality food, and they roll the extra expense to the consumer.

The final deciding factor the price of eggs goes to the retailers whose margins go up to 30 percent. The retailer has slimmer margins on the organic and cage free eggs, but the lower cost eggs have experienced a hefty increase in price which is going directly to the retailer’s bottom line.

The current inflationary prices remain due to the prohibitive cost of feed and the ongoing supply chain challenges. At this point, consumers will probably not see the prices dropping any time soon. In fact, the prices might continue to increase.