Eggflation is just more price-gouging
pluralistic.net
pluralistic.net
Egg supply is down. You either raise prices to lower demand, or you sell at the lower price until the shelves are empty. The latter means the product goes to the connected or the insiders rather than to those who really need it. It also causes black markets in the product by those connected individuals--and such secondary markets are a bad thing when you're dealing with a product with safety implications. (Say, any perishable food.)
I'd prefer the price go up.
> Because not all inflation is caused by price-gouging. Some is caused by too little capacity
The thesis, restated, seems to be that an egg monopolist buys up all viable competitors, and then keeps production artificially low. As you note, this causes the market price to increase. In a healthy market, this causes new production to come online. But in this case, allegedly, that is all bought up by the incumbents.
Egg production fell 6.6% [1]. Egg prices rose 60%.
The author knows exactly how markets work: Prices are high because there is not enough competition. Cal-Maine is tricking people into tolerating higher prices by loudly complaining about every small problem they face. They're literally bragging about it on investor calls.
[1] https://www.cnbc.com/2023/01/23/high-egg-prices-due-to-a-col...
It seems plausible to me that the price elasticity of demand[1] for eggs is small - that is to say, even if the price of eggs doubles, people will only reduce their egg consumption by a small amount.
If the prices jumped by 60%, and now the shelves were full of an abundance of expensive eggs, that would be suggestive that the reason for the spike in price is pure profiteering.
But I have seen no evidence that a large number of eggs are going unused because prices have spiked. So I think it's plausible that the increased prices now really do reflect an increase in demand.
Eggs are a scarce resource. When the supply of eggs falls faster than the demand for eggs, the amount of resources required to obtain eggs will go up. Those resources can be money, or they can be time spent going from store to store searching for eggs, or they can be social connections in terms of knowing who can get you eggs and leaning on those connections. And those who have the ability to procure more eggs will now be able to demand more resources for those eggs.
You can say that it's unfair that Cal-Maine is getting a windfall here, instead of letting the grocery stores have a windfall, or instead of requiring people to burn time and gas looking for eggs while the price of the eggs they find remains the same. But I don't think you can say that Cal-Maine is the reason there is an egg shortage.
[1] https://en.wikipedia.org/wiki/Price_elasticity_of_demand
Agreed.
>If the prices jumped by 60%, and now the shelves were full of an abundance of expensive eggs, that would be suggestive that the reason for the spike in price is pure profiteering.
Price gouging, one form of profiteering [1], “is the practice of increasing the prices of goods, services, or commodities to a level much higher than is considered reasonable or fair.” [2]. The ability to sell product has nothing to do with price gouging.
Cal-Maine’s profit margin is up 7,890% year-to-year [3]. This is textbook profiteering.
>And those who have the ability to procure more eggs will now be able to demand more resources for those eggs.
What one can do is rarely what one should do. The people who can’t afford eggs could resort to violence. But where would society be then?
>or instead of requiring people to burn time and gas looking for eggs while the price of the eggs they find remains the same.
Or, like with toilet paper, meat, or several other essential items during the pandemic, groceries limit the amount of eggs customers can purchase to keep them stocked.
All this to say: We’re being fucked.
[1] https://en.m.wikipedia.org/wiki/Profiteering_(business) [2] https://en.m.wikipedia.org/wiki/Price_gouging [3] https://www.google.com/finance/quote/CALM:NASDAQ?sa=X&ved=2a...
There isn't an oversupply of eggs--since egg prices went nuts I have seen many an empty shelf, never have I seen eggs on clearance.
If they were producing less and maintained profit margins or saw them drop, that might be an indication that the costs in general have risen enough that the price increases are just because the sellers can
We've raised our own birds for eggs since we bought a place. Ducks, chickens and quail. It's not something that most people can do but I'd recommend it if you have a bit of space - chooks are great for eating scraps and ducks are just cool as.
Furthermore usda says “As a result of recurrent outbreaks, U.S. egg inventories were 29 percent lower in the final week of December 2022 than at the beginning of the year. By the end of December, more than 43 million egg-laying hens were lost to the disease itself or to depopulation since the outbreak began in February 2022.”
So there’s a ~15% reduction capacity and shell egg stocks are down 30%. And egg profits have also been down the last few years. But no, it’s OBVIOUSLY that monopolist who controls an entire 15% of production that’s driving prices up. Or maybe the source blog post fails to provide citations, makes inaccurate and emotional arguments, and just kind of hopes that prices are set at COGS.
When there is a shortage of something, buyers will start offering more money to get that limited supply, which means that those who have the supply will make more per unit than before.
The thing to understand is that at some level, almost all prices are set by an auction. And this is especially true for commodities.
Edit: have been looking around, and the few numbers I’ve found show that Cal Maine has about a 20% share of the US egg market. So not a hugely competitive market but certainly not a monopoly.
https://www.eggindustry-digital.com/eggindustry/january_2022...
"the top 10 U.S. egg producers housed 52.6% of the total U.S. table egg laying flock in this year’s survey"
https://en.m.wikipedia.org/wiki/Lysine_price-fixing_conspira...
If the author is economically illiterate, should we assume you’re statistically illiterate?
If you are operating a business and the cost of anything in your process goes up, what goes down?
Think really hard about this one.
Or are you entrepreneurially illiterate?
And watching the elastic effects target thisThe particular commodity disproportionately way has been a big eye opening.
I typed that comment out in the roughly 20 seconds between moving plastic blocks around while assessing the performance of some equipment. In so doing, I named the first things that came to mind. Among those things, PPP loans infamously went to many employers who used them for things other than actually making payroll, becoming a target of populist criticism. Hardly a case of blaming the little guy. It's appalling how quickly HN assumes bad faith these days.
Anyway, QE was mostly pre-Covid, so while we might blame it for broad inflationary trends, it's incongruous when looking at short-term trends in egg prices.
The Fed engaged in additional QE as a direct response to Covid. Fraudulent PPP "loans", while despicable, are much closer to the little guy than QE, artifically low interest rates, and even open pondering of the central bank buying stocks.
As for bad faith - the dynamic is like saying one wants small government, and then attacking the Postal Service or the National Parks. Invoking the general argument to draw ire, and then directing that attention at things besides the overwhelming systemic problems burns up the energy of the original critique and is at the very least echoing people who are arguing in bad faith.
I did not invoke the general argument. What I was intending to do was to point out that the stimulus checks were only a small fraction of expansionary monetary policy during COVID.
>and then directing that attention at things besides the overwhelming systemic problems
The examples I gave were intended to demonstrate the general point referenced above, and not to be exhaustive.
>very least echoing people who are arguing in bad faith.
I was refuting a bad-faith argument from the people you are complaining about. The conventional line is that the stimulus checks were a primary driver of inflation. I explained why that is not true. You accuse me of "echoing" that argument. This is ridiculous.
>Fraudulent PPP "loans", while despicable, are much closer to the little guy than QE
If I'm going to entertain this line of reasoning, shouldn't we at least consider that the Fed bought distressed loans at the same time that many landlords may have been pushed towards default, and foreclosure sales prevented, due to the eviction moratorium? That may be closer to the little guy than it seems at first.