Egg prices vs. egg supplies: Is it gouging or is it the market?

Hunting for eggs to dye this weekend? Be prepared for a variety of prices.

When COVID-19 hit the scene, the price of a dozen eggs jumped from a dollar to nearly $3 at some stores, but was it gouging or was it the market?

Since the outbreak of the coronavirus, egg prices have been driven up because of many factors. The price has increased three times in the last month.

Retail prices of a dozen large eggs ranged from as much as $2.98 at Carlie C’s IGA to $1.30 at Walmart on Sunday. As of Thursday, Carlie C’s IGA priced a dozen large eggs at $2.89, while Food Lion priced them at $2.19 and Walmart at $2.28.

How price is determined
Carlie C’s IGA has been accused of gouging egg prices.

Most smaller grocers, such as Carlie C’s IGA, buy their eggs based on the weekly cost of the product on the wholesale market, which fluctuates much like the stock markets and other commodity exchanges.

“Essentially as the market goes up or down each week we pay less or more for the eggs based on the supply and demand,” Carlie C’s President Mack McLamb told The Daily Record.

The second method of pricing is based on a set price over a determined period of time, usually around three months. As an example, at the end of March the retailer and the supplier look at what the average market price for a dozen eggs was for the last 13 weeks to determine the cost for the next 13-week cycle.

“That allows them to have a fixed cost on eggs,” McLamb said. “But if the egg market drops, they’re paying more for eggs than what the market is and if the egg market shoots way up, they’re paying less than what the market price is on eggs.”

McLamb says there are pros and cons for both weekly and quarterly buying options.

“Typically, history says you pay less for eggs if you’re doing the weekly market rather than the average,” McLamb said. “But you have this volatility of going up and down.”

There’s one other method retailers can use to set the price of eggs — using the average price from the previous year. Something that can have it’s own pitfalls, such as losing money just to get more customers into the store.

“If eggs get really abundant, then that means they’re going to have to take a bite on it because the market is going to be cheap and they’re still paying the price from the previous year,” McLamb said. “That’s just the risk you run.”

Supply and demand plays a major role
One example of the supply vs. demand principles involved in pricing is more about who has them and when. McLamb says there is a chance the retailer selling on a fixed price might be able to sell at a lower cost, only for a short time.

For example, if a retailer is paying $1.50 a dozen from the supplier and the cost to the supplier increases to $3 a dozen, the supplier is likely to sell to other retailers who are willing to pay the higher price, leaving the retailer who bought at a lower price with short supplies — supplies, which quickly run out.

“In this market, it’s like people who have cheap costing eggs, don’t have any eggs,” McLamb said. “They’ve got cases that are empty. They have a cheap price on eggs, but they don’t have many, they’re not able to keep them.”

So while the lower retailer is running out, those paying more are able to meet the demand, but at a higher price to the consumer.

“It’s probably never been this bad that I can remember,” McLamb said. “We’re paying a lot for eggs, but we’ve got eggs.”

McLamb also noted, for Carlie C’s at least, the decision had to be made between selling low, running out and not paying the higher price or paying the higher price and continuing to make them available to customers. The same goes for other products as well.

“We’ve got several things in our store where what we’re paying for the product is way out of line,” he said. “And it causes angst among the customers. But our choice is do we pay the higher cost and have the product or do we just be out?”

Prices are starting to drop
Despite an increased demand for eggs because of the Easter holiday, prices are moving to a downward trend. Over the last week eggs have dropped as much as $1 a dozen, so relief could be just a matter of time, McLamb said.

“We had this epidemic happening and on top of that we have Easter coming, which is typically a higher price on eggs,” he said. “We do anticipate eggs continuing to drop as things begin to settle.”

McLamb anticipates the drop on eggs could come in spurts, one at the end of this week and another at the start of next week.

The supply is also picking up, according to a spokesperson from USDA News.

The source, who couldn’t be identified because they aren’t authorized to comment on the market, told The Daily Record a recent reduction in the number of hens laying eggs combined with the ongoing heavy demand for eggs, has caused the market to increase; now more hens are becoming available and the price is starting to drop. It fell on a regional average of about 57 cents a dozen Thursday morning.

So is it gouging?
McLamb admits the rise in egg prices is something everyone is noticing and there could be price gouging somewhere in the supply chain before the eggs are in the hands of consumers.

“I can assure you this, there’s no retailer doing the gouging,” McLamb said. “The market is what the market is. When you have a significant increase in demand for any product, the price is just going to go up.”

He adds when the demand gets too great, the suppliers will find a way to slow the demand, whether the retailers or the consumers are happy.

“They’re trying to supply the demand,” McLamb said. “And the only way to curb the demand is to raise the price. Otherwise you’re just going to continue and everybody is going to be out of the product.”

McLamb, who says he’s been buying eggs on the weekly market since he began in the grocery business, is considering changing the way he buys. He admits the coronavirus epidemic has forced him to explore other options.

“It’s served us well and its served our customers well for decades,” McLamb said, “but it has not worked for the last two and a half weeks.”

There have been 147 “price gouging” complaints to the state attorney general’s office since the coronavirus outbreak in March.

-Dunn Daily Record