Anyone who has recently strolled through the grocery store has likely noticed the eye-popping price of eggs. What was once an affordable staple has felt more like a luxury item in recent months with the average retail price for a dozen large grade-A eggs hitting a new record at $4.95 in January.[1] In recent weeks prices pushed even higher, reaching $7.95 in New York, $7.47 in the Midwest, and averaging $9.11 for a dozen eggs in California.
To put this in perspective, the national average price of eggs over the past 40 years has rarely exceeded $2 per dozen, even during periods of economic uncertainty. The last major supply shock was in 2015 when an avian flu outbreak led to a 50% increase in the price of eggs. Behind this current surge in egg prices lies a real-time lesson in economic forces – supply and demand, inflation, and the ripple effects of public policy.
The market is currently receiving earnings updates from Q4 of last year, and investors are being reminded about the importance of past results. At the same time, headlines about potential policies under the new Trump administration, coupled with large investments in artificial intelligence (AI), underscore the market’s appetite for future potential. This duality is not new, but the stakes feel higher as the combination of AI and political shifts has the potential to reshape existing companies and industries.
Supply is Completely Scrambled
Over the past year, a series of challenges, including avian flu outbreaks, supply chain disruptions, and rising production costs, have significantly reduced the supply of eggs. At the same time, consumer demand has remained steady, or in some cases, even increased, particularly during holiday seasons when baking peaks. When supply is reduced, but demand holds firm, prices are pushed higher.
The primary culprit in rising egg prices has been an outbreak of H5N1, a highly transmissible and fatal strain of avian influenza, or bird flu. The outbreak initially started in early 2022 and persisted with ebbs and flows since then. When an outbreak occurs, USDA policy requires egg producers to cull all exposed chickens within their flocks, even when there are only a few confirmed cases. This directly impacts the supply of eggs headed for grocery stores. Since the beginning of December, a recent surge of bird flu has affected nearly 45 million egg-laying hens across 10 states.[2] For context, the total U.S. egg-laying population is approximately 304 million, meaning nearly 15% of the nation’s supply has been impacted in the past two months – a staggering shock to the market.
A less dramatic, but perhaps more lasting component of higher prices, has been the impact of inflation. Rising feed costs, transportation expenses, and labor shortages have compounded the pressure on farmers. The USDA reports that feed costs alone have surged by over 30% in the past two years, squeezing margins and increasing retail prices.
The Cost of Cage-Free Eggs
Recent policy changes have already begun reshaping the egg market. Voters in multiple states enacted new animal welfare laws that require cage-free conditions for certain livestock, including egg-laying hens. Transitioning to cage-free farming typically requires more space, higher feed consumption per bird, and increased labor costs – all of which pressure prices. Additionally, fewer farms nationwide meet these standards, tightening supply even further.
Currently, eight states – Arizona, California, Colorado, Massachusetts, Michigan, Nevada, Oregon, and Washington – have laws in place that ban the production and sale of conventional eggs for animal welfare reasons. National retailers like Trader Joe’s and Whole Foods have made similar commitments. Unfortunately, outbreaks of bird flu had a disproportionate impact on cage-free egg layers in 2024 due to the increased contact these flocks have with wild birds. Approximately one-third of U.S. egg layers are cage-free hens, but they contributed nearly 60% of all bird flu cases for the year.
Adaptation for Farmers an Shoppers Alike
While the high price of eggs may be frustrating at the checkout line, it serves as a reminder of the forces shaping our broader economic environment. When supply and prices are affected by an external force like bird flu, consumers and businesses are forced to adapt. Consumers are turning to alternative protein sources, including plant-based egg substitutes and bulk purchasing strategies to mitigate costs. Restaurants and bakeries, facing tight profit margins, are either adjusting their pricing models, reducing portion sizes, or temporarily altering recipes to use fewer eggs. These behavioral shifts illustrate how markets adapt in real time to supply shocks.
Farmers are also taking measures to protect their flocks. Many poultry farms have installed truck washes to disinfect vehicles entering their property and require workers to shower and change clothes before stepping inside a barn. Farmers have invested in duplicate sets of tools, so nothing used in one barn is shared. Some poultry farmers have even invested in lasers that shoot beams of green light in random patterns to discourage wild ducks and geese from landing. None of these measures are a cure-all, but they can help protect production and profitability.
While the price of eggs may not meaningfully impact the financial security of our clients, it serves as a reminder that plans must be flexible enough to adapt. Whether an investment plan, a retirement budget, or a grocery list – the key is having the ability to make minor adjustments or substitutions that still fit your long-term plan. In the short term, egg supply remains constrained and the price of breakfast may push even higher. However, as producers adapt and market conditions stabilize, relief should come – reminding us that, as with investing, patience and flexibility are key to navigating market fluctuations.
Resources
[1] Average Price: Eggs, Grade A, Large (Cost per Dozen) in U.S. City. U.S. Bureau of Labor Statistics
[2] Confirmations of Highly Pathogenic Avian Influenza in Commercial and Backyard Flocks. USDA
