The cost of eggs stood out in Thursday's CPI report—up almost 60% year-over-year and up 11.1% compared to last month.
This is the largest month-over-month increase since April 2020 and the largest jump year-over-year since September of 1973, per Steve Reed, an economist at the Bureau of Labor Statistics (BLS).
Eggs, he said, single handedly brought up the cost of groceries in December: up 0.2% month-over-month. "If you sort of removed eggs, if you took eggs out of [the 'food at home' category], it would have been virtually flat. Eggs were over 90% of that increase," he said. As of December, the cost of grade A large eggs per dozen was $4.25.
What's behind the spike in price? The avian flu outbreak.
"The total size of the U.S. egg-laying flock decreased by about 10% when roughly 40 million laying hens caught the disease and were subsequently destroyed in 2022," Kevin Bergquist, Wells Fargo Agri-Food Institute Sector Analyst told Yahoo Finance.
As a result, the total egg production dropped by about 5%.
David Anderson, Texas A&M AgriLife Extension Livestock economist and professor in the Department of Agricultural Economics, said production expenses triggered record high prices too.
"Feed costs have been much higher for a couple of years now. As feed prices went up, profits went down, and the economic response to that is to produce less, so we had been producing slightly fewer egg laying chickens any way, prior to HPAI hitting," he said.
Anderson added: "A small change in supply or quantity produced generates a much larger increase in price. In other words, if the price goes up, consumers are going to buy eggs anyway, or that they will not cut back very much at all. There is really not a substitute for an egg in my egg McMuffin, or my omelette. You pretty much have to have eggs."
In addition, holiday baking led to an increase in demand, he said.
As a result of supply issues, some retailers are limiting customers' egg purchases. On November 29th, 2022, Yahoo Finance spotted this sign at a BJ's Wholesale Club limiting 2 egg cartons per a customer. (BJ's did not respond for comment). A Whole Foods in Brooklyn recently imposed a similar limit.
Other major retailers are holding off on limits. A Target (TGT) spokesperson told Yahoo Finance: "While we are experiencing low inventory of some egg products, it ultimately depends on the brand. We are not limiting guest purchases at this time."
The current average sale price of Target's private label 12 count of Good & Gather conventional eggs is $4.26, a cent higher than the current national average for U.S. cities.
Said a Walmart spokesperson: "While we have some regions of the country that have seen some tightness in supply, we are seeing improved supply on eggs right now and have recovered from a challenging holiday season which had very high demand and impacts due to avian flu ... We do not have any purchase limits on eggs."
With the Easter Holiday around the corner, it may take a while.
"We typically see egg prices peak in the spring, especially table eggs because of Easter and Easter egg hunts. That provides a boost to egg demand and prices. That is coming up pretty soon, so that demand will likely keep egg prices high in coming months," Anderson said.
He called this year "out of the ordinary."
"I expect egg prices to continue to increase for a few months. Egg producers are working to expand production. They are trying to expand laying flocks. Productivity as measured by the number of eggs per 100 chickens is up about 1.3 percent over last year," but it's a tragic reoccurring cycle due to the avian flu, formerly known as HPAI.
"Then HPAI hits another farm and wipes out a bunch more chickens," he said.
Anderson is optimistic though. "I do expect as we go further into 2023 that increases in production will begin to catch up to and surpass the disease losses so production will expand, we’ll get back to the 327 million or so egg layers and prices will come down."
Well's Fargo Bergquist was confident too: "We expect a slight decline between now and Easter, when prices will likely spike again. However, we don’t anticipate a retraction back to pre–bird flu levels. If the outbreak dissipates over the next six months, flock-laying birds will slowly rebuild, increasing egg supplies and helping alleviate high egg prices in the long term. Summer egg prices are usually much lower than the holiday seasons, and that could happen again in 2023."
And per the USDA, inventory is on the rise and prices are starting to fall.
"During the last week of 2022, inventory sizes started to rise, and prices fell. Going forward, wholesale prices are expected to decrease as the industry moves past the holiday season and continues rebuilding its egg-laying flocks."
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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