Egg Hyperinflation Could Spike Grocery Prices: Why Cal-Maine, Vital Farms Are Soaring

Egg prices are once again spiraling out of control in the U.S., with the Producer Price Index for “eggs for fresh use” surging 55.6% month-over-month in November and a staggering 80.2% year-over-year, according to official data released Thursday.

The Bureau of Labor Statistics highlighted that this single commodity’s price jump accounted for nearly a quarter of November's overall rise in the prices of final-demand goods.

While consumers could soon bear the brunt of these producer price increases at their local grocery stores, higher retail prices could translate into stronger profit margins for egg producers. This fact hasn't gone unnoticed by investors.

Shares of leading U.S. egg producer Cal-Maine Foods Inc. CALM soared to all-time highs on Thursday, extending a five-day winning streak. Year-to-date, CALM's stock has skyrocketed 87%, far outpacing the broader market, as represented by the SPDR S&P 500 ETF Trust SPY, which is up 28% as of Dec. 12.

Meanwhile, smaller competitor Vital Farms Inc. VITAL has seen an even greater rally, surging 142% year to date.

Chart: Egg-Linked Stocks Far Outperformed The US Stock Market In 2024

Why You'll Likely Pay More For Eggs At The Grocery Store Soon

When producer costs rise, consumers often feel the effects soon after.

The PPI, which tracks changes in prices received by producers for their goods, typically serves as a leading indicator for the Consumer Price Index—the measure of what consumers pay.

In November, the CPI showed the average price for a dozen Grade A large eggs in the U.S. was $3.64, marking a sharp 70.7% increase from a year earlier. But even that pales in comparison to the January 2023 all-time high of $4.82 per dozen, when the year-over-year increase hit an unprecedented 150%.

This massive spike in consumer egg prices followed a period of relentless increases in producer costs.

From September 2022 to December 2022, the PPI index for eggs saw monthly gains of 16.6%, 15%, 26%, and 24.5%, with year-over-year increases exceeding 200% by the end of the year.

A similar pattern could be unfolding now, foreshadowing even steeper grocery store prices in the coming months.

What's Driving Egg Prices Higher?

The surge in egg prices can be attributed to a combination of factors, including the devastating effects of avian influenza (bird flu), seasonal demand, and rising production costs.

1. Bird Flu Outbreaks:
   The U.S. poultry industry has been grappling with ongoing outbreaks of avian influenza, which have led to the culling of millions of laying hens. The reduced flock size has caused a significant supply shortage, pushing prices higher.
2. Seasonal Demand:
   During the holiday season, egg consumption typically spikes due to increased baking and cooking. Eggs are also viewed as a relatively affordable protein alternative to meat, keeping demand robust even as prices climb.
3. Production Costs:
   Higher feed and transportation costs are squeezing producers, further inflating wholesale egg prices.

These compounding factors have created a perfect storm for the egg market, leading to the recent surge in both producer and consumer prices.

The current trajectory of egg prices bears a striking resemblance to late 2022, when producer costs surged for several consecutive months before consumer prices peaked in January 2023. At that time, retail prices shattered records, with some grocery store shelves even running out of stock.

If history repeats itself, the worst may be yet to come for U.S. consumers.

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