May 09, 2008

The Real Reason For High Egg Prices

There is an article in the news today that talks about the rising cost of eggs. The article is filled with interesting information.

On the retail level, a dozen eggs in March cost $2.20 -- 34.8 percent more than in March 2007, when they sold for $1.63, according to the Bureau of Labor Statistics.

And as is usual in today's climate the blame was laid on ethanol production for driving up feed costs. But as I showed in a post a while back anytime you have two price points it is easy to figure out how much added corn costs have added to the increased price.

But in this case let's look at in a different way. As I noted in my previous post, according to the USDA it takes 4 pounds of feed to produce a dozen eggs. The price of a bushel of corn on the Chicago Board of Trade is $6.18 per bushel. At 56 pounds per bushel, that means that corn costs 11 cents per pound giving a total feed cost of 44 cents to produce a dozen eggs.

So even if the egg producer was getting his feed free in March 2007 the price at the retail level has risen more than the total cost of feed over that time period. So clearly corn costs alone can't explain the entire increase in the cost of eggs.

So what is causing the rapid rise in egg prices? The article gives a hint.

But the largest and most efficient egg producers, such as Cal-Maine Foods, Inc. of Mississippi, are cashing in.

Cal-Maine profits rose nearly $40 million, or 229 percent, in the three months that ended March 1 compared with the same quarter last year.

So while ethanol is taking all the blame for rising costs, egg producers are laughing all the way to the bank. Believing in some myths can be hard on the wallet.

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