Archive for Sunday, March 23, 2008

Soaring egg prices reflect ‘perfect storm’ in market

March 23, 2008

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— 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.

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