Cracked Shells: How Supply Shocks, Not Monopoly, Drive Egg Prices

Are rising egg prices a result of monopoly power? As of late, egg prices are taking a central role in the economic narrative with focus groups, and economists decreeing monopolistic “greed” as the prime cause of a sudden upturn in prices. Yet, this must be insufficient to establish why producers’ have—all of a sudden—become immensely greedier, or why they were less greedy in previous years. This central economic narrative—while popular among economists that would like to perpetuate the idea of “the evils of capitalism”—cannot provide us with a real explanation, based in economic theory.

Rather, the economic laws available to us dictate a very different story. When the supply of a good significantly falls, the price tends to rise, all other things being equal. This can be furthered by inflation expectations (consumers believe prices will increase and buy at the prevailing price) and if goods have inelastic demand (making prices sensitive to supply changes). Egg prices are not a result of monopolistic power, but rather they are dynamic pricing naturally responding to changing economic conditions.

Among those proposing the idea that rising egg prices are the product of “monopolistic power” include the Farm Group focus group, Senator Jack Reed, Attorney General Ken Paxton of Texas, and the Department of Justice themselves, who opened an investigation into major egg producers. Many among the FTC also have urged chairman Andrew Ferguson to investigate this matter. According to this narrative, the market-share of egg producers is very concentrated, being divided up between only a few producers. Prices rose in step with each other—which led to Cal-Maine being fined $53 million in a 2023 price-fixing case—allegedly suggesting collusion. The profits of egg firms in this time, such as Cal-Maine, have skyrocketed while consumers face higher prices. The final piece of the puzzle, in this narrative, is that production of eggs converges on 12-month averages rather than collapsing.…