PHOENIX — Arizonans who shouldered the cost of soaring egg prices over the past two years have reason to be resentful towards the egg industry. Nationally, egg prices peaked at an average of $4.82 per dozen in January and some stores in Arizona sold a dozen for as high as $6 and $7. Prices are more manageable today, averaging $2.07 a dozen nationally.
600% rise in profits for “nation’s largest egg producer”
Earlier this year, U.S. Congresswoman Katie Porter of California (D) said in a tweet that “The nation’s largest egg producer saw profits rise by 600% last year… I want corporations to answer for this abuse.”
12News decided to verify the claim of whether the nation’s largest egg producer saw profits rise as much as six-fold last year.
THE SOURCES
- Egg producer Cal-Maine
- The Federal Reserve
- Open Market Institute
- Farm Action
WHAT WE FOUND
No one disputes there were legitimate reasons for higher egg prices. An avian flu outbreak, higher feed costs and inflation were major forces.
However, a report by Farm Action analyzes profits of the largest egg producer Cal-Maine and shows it enjoyed a five to six-fold increase in gross profit margins during a six-month period. The company controls 20% of the market and sells under brands like Eggland’s Best, Safeway Select and Land O’Lakes. In other words, as the company and its clients raised prices to astonishing levels, they weren’t just keeping up with costs. They were making massive profits.
So yes, we can verify the nation's largest egg producer saw profits rise 500-600% last year.
Federal jury rules against egg producer
“If companies were just charging what they had to in order to afford their higher costs then you wouldn’t see such record-high profit margin increases. I think consumers have a right to question that,” said Claire Kelloway of the Open Markets Institute.
There are ways to hold companies accused of price gouging accountable, Kelloway said. But those strategies take time.
For example, a federal jury in Chicago recently ruled that top egg producers, including Cal-Maine, illegally inflated prices during a period in the early 2000’s. Kelloway says even though the decision comes many years after the investigation, the jury’s decision “matters in the grand scheme of things.”
“A lot of anti-trust cases don’t’ go to trial and it’s pretty significant that a jury found companies were guilty here,” Kelloway said.
For their part, Cal-Maine told Reuters, “While we are disappointed with the overall decision, we prevailed on a number of issues.” They said the jury determined damages would only be rewarded for a period between 2004-2008.
More reforms are needed to prevent price gouging
Kelloway said even though more vigorous anti-trust enforcement measures are in place, more reforms are needed to prevent companies from consolidating and manipulating markets.
“There should be greater scrutiny of the deals that let these companies get consolidated in the first place to ensure more competition,” Kelloway said.
The Justice Department, The Federal Trade Commission, private attorneys and state attorneys general can investigate allegations of price gouging.
205 egg companies produce America’s eggs
In the case, the plaintiffs argued Cal-Maine Foods and another company “rigged” the market. The case showed 205 egg companies produce almost all eggs in the U.S. They are in an organization called United Egg Producers that gives advice to the companies. Evidence suggested they gave advice to shrink U.S. chicken flock to increase prices, Reuters reported. Trade associations United Egg Producers and United States Egg Marketers were also found liable.