Eggonomics 101

Some basic economics behind the spike in egg prices (feat. Taylor Swift)

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I’m experimenting with using this space to post thoughts on economic policy, markets, and research. Feedback is welcome and appreciated.

Egg prices are spiking again, garnering coverage everywhere from The New York Times to People Magazine. While it may seem like spiking egg prices cause the media to run around like a chicken with its head cut off, there’s good reason for the coverage. Although egg prices only make up 0.135% of weekly consumer spending, they are particularly salient to consumers and often go viral on social media.

I covered the egg price beat at the White House in 2022-2023 – when prices spiked to $4.82/ dozen in January of 2023 up from $1.93/dozen in January 2022 – and learned more about eggs than I thought was possible – including the incredible power of the Swifties to lower egg prices (more on this below). Here are some thoughts on the basic eggonomics behind the current price spike – including whether we will need Taylor to call on her Swifties again.

The national wholesale price for a dozen eggs hit $4.85 on January 3, 2025, up from $2.50 on November 29, 2024, according to the latest USDA Egg Markets Overview. In California, where state law requires chickens to have larger cages, the wholesale benchmark is $8.97 per dozen, up from $5.28 per dozen in November. Retail price data from the CPI, which are available with a lag, show prices rising from a trough of $2.04 in August 2023 to $3.65 in November 2024; I wouldn’t be surprised if we hit a new peak when the December CPI comes out.

The U.S. has roughly 380 million commercial “layers,” the industry term for chickens that lay eggs. Layers produce an average of 0.8 eggs per day. Do the math, and you get daily production of about 300 million eggs, or nearly an egg per person per day. Egg imports and exports are negligible.

As you’ve read in the headlines, the spike in egg prices is mainly due to a resurgence of highly pathogenic avian influenza (H5N1) or bird flu, although the dynamics reflect a richer set of supply and demand factors. Bird flu typically spikes in commercial layer populations in the fall and spring, when seasonal migration of wild birds spreads the virus to commercial populations through, for example, contamination of waterholes.

When an outbreak is detected, farms implement a practice called “stamping out,” culling all the birds in the infected facility. According to USDA data, 20.0 million commercial layers have been culled since October 2024, or roughly 6% of the steady-state layer population. In April and May 2024, a prior wave of infections caused farms to cull 15 million layers.

Source: USDA

The current price spike, and the previous one around the 2022-2023 holidays, reflects this supply shock along with other supply and demand factors.¹ On the supply side, the shock from culling is compounded by the “time to build” new layer populations. Layers don’t produce eggs until they are 18 weeks old. Add on the time required to sanitize infected facilities, and it can take months for the supply to recover from an outbreak. On the demand side, the key factors are the increase in demand for eggs around the holiday baking season and the lack of substitutes, which makes prices very sensitive to changes in supply.

A question I would often get when I was covering this beat is why there isn’t a corresponding spike in the price of chicken meat. The answer has multiple components. “Boiler” chickens used for meat have a shorter “time to build” — they are typically slaughtered at just 6-7 weeks old — allowing supply to recover more quickly from outbreaks. Chicken meat can be frozen and stored — allowing the market to smooth out shocks to supply. Furthermore, compared to eggs, chicken meat has more substitutes. And boiler chickens are also less likely to get bird flu due to their age and less dense commercial habitats.

Another question floating around is whether, and to what extent, the egg price spike reflects price gouging by commercial egg producers. Last April, Vox ran a piece with the subtitle “How corporate greed plays a role in making bird flu outbreaks — and egg prices — worse, ” and an outside group called on the FTC to look into price gouging behavior.

Most economists, myself included, take issue with the idea that corporate greed has any causal role in the spike in egg price. Firms just didn’t wake up one day and decide to be greedy; they’ve always strived to maximize profits. At the same time, though, Econ 101 logic tells us that, in an imperfectly competitive market, a production shock that removes suppliers from the markets should raise the pricing power and profits of the remaining firms. The egg sector is somewhat concentrated, with a single firm, Cal-Maine, controlling 12% of the market and the top 10 producers accounting for 52%. That said, eggs are a fairly homogeneous good, and it’s not clear that you need many competitors to have a competitive market. (In the extreme, where eggs are a pure commodity, you only need two firms to have perfect competition.) My prior is that any pricing power effects are at most modest relative to the supply and demand factors listed above, although I’m open to being convinced otherwise.

When should we expect egg prices to subside? In February 2023, when egg prices were near their previous peak, Trevor Noah asked Taylor Swift to have fans push down egg prices. Causal inference is hard, and the timing isn’t perfect, but who am I to second-guess the power of the Swifties?

It’s above my paygrade to predict whether the Swifties will be called into action this time around, but maybe we won’t need their help. Demand should ebb from now until Easter, and infections should lull until the wild birds begin migrating north this spring. My prediction is for (somewhat) lower egg prices in the months ahead. Let’s hope I don’t get an egg on my face!

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1. The 2015 spike was also primarily caused by bird flu but peaked before the holiday season.