The Rundown - Deep Dive: How Eggs Became a Luxury Item

Episode Date: February 15, 2025

We break down how a simple carton of eggs became a symbol of inflation, corporate profits, and political pressure. Egg prices are skyrocketing, and it's not just your grocery bill that’s feeling the heat—it’s a full-blown economic story. Bird flu has wiped out millions of hens, sending prices soaring while egg producers like Cal-Maine are cashing in big. Meanwhile, grocery stores are struggling with losses, and the latest inflation data could throw a wrench in President Trump’s economic plans. The content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures.Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome back to the rundown for another weekend deep dive. Today, we are cracking open a topic that's been on everyone's mind. The price of eggs. The January CPI report confirmed what we've all been feeling. Eggs are like a luxury item now. The price for a dozen eggs hit a record $4.95 last month. That's up 15% from December. And that's the biggest one-month jump in prices since the last major bird flu outbreak back in 2015.

And just to give a little more perspective, eggs are now 55%. more expensive than they were a year ago. And this is something that affects almost everyone. According to the USDA, 97% of U.S. households purchase eggs. And the average U.S. resident will eat around 270 eggs this year. And the ripple effect is more than just an expensive omelet. This will affect grocery stores, farmers,

and even the president and his economic policies. So that's what we're going to talk about today. What is driving egg prices through the roof and what does it mean for the broader economy? Let's crack into it. Let's first talk about what's causing all this eggflation. And apologies in advance for all the egg puns you might hear in this episode. Now, the high price of eggs can be blamed on the bird flu. It's pretty bad right now.

This strain of the avian flu, which first started causing chaos back in 2022, has wiped out a hundred million egg-glaying hens. And that's a hit to the supply of eggs. And if you remember back to AP macroeconomics, when supply drops and demand hold steady, prices go up. And that's exactly what's happening right now. with eggs. See, egg production depends on two things. The number of hens laying eggs and the number of eggs each hens lay. And right now, both those numbers are way down. Now, the USDA has tried

to fix the problem. In fact, they've thrown $2 billion at it, but they still haven't been able to stop the outbreak. And that's bad news for breakfast lovers like me. The USDA is forecasting that egg prices will rise another 20% this year, while overall food prices are only expected to go up by 2%. But see, here's the thing. Even with sky high, prices, people are still going to buy eggs. And that's because eggs are one of the most price inelastic food items, which is just a fancy way of saying that people don't really cut back on eggs even when the price goes up. We saw this happen back in 2014, 2015. That was the last time when the bird flu got really bad. It caused egg production to drop by 10%. And egg prices went up by 61%.

And you know what happened? Despite the supply shock, the overall egg industry's revenues increased by 32% in 2015 because of the higher prices and people just still buying eggs. Now, if history is an indicator of things to come, prices should eventually normalize. By 2016, the industry faced oversupply issues leading to falling prices. And that's probably what's going to happen now. It just seems to be taking a lot longer this time. But, you know, whenever there's a crisis or a shortage, someone tends to profit from it. And in the egg world right now, it's a company called Cal Main Foods.

So let's talk more about them. Cal Maine Foods is the biggest egg producer in the U.S. They control about 20% of the market, and it's a publicly traded company, trading under ticker symbol C-A-L-M. And their stock has been on fire lately. It's up nearly 75% over the past year. The company's doing great. Their gross profit has more than tripled since 2021, and they've sold over 330 million dozen eggs last quarter. And the reason that Cal Main is winning is because they have 75% more laying hens than their next close.

competitor. But not everyone is thrilled about their success. A group called Farm Action, which represents smaller farmers, says that Cal Main is more focused on buying up competitors than replacing lost hens. And in fact, politicians are getting involved. Last year, Senator Elizabeth Warren accused them of price fixing, questioning whether these price hikes are really about supply issues or just corporate greed. So it's becoming a political issue. Now, as for grocery stores, it's a totally different story. They're kind of in a tough spot here. Grocery store chains like Walmart buy eggs from egg producers like Cal Main. In fact, Walmart made up about 34% of Cal Main's overall revenue. But grocery stores don't make any money from eggs. In fact,

eggs are typically a lost leader for grocery stores, which means they actually lose money selling eggs in hopes of getting customers to come through the door and buy a high profit item like cereals or snacks. But as egg producers like Cal Main continue to raise prices, grocery stores just can't sit still and keep prices the same. But they also don't want to raise prices too dramatically to scare off shoppers. Again, they're kind of in a tough spot here. But you know who might be in the toughest spot is President Trump? Because the high price of eggs and overall inflation might ruin his entire economic plan.

So let's talk about that. This past week, we got the January CPI report, and the latest inflation data showed that inflation might be a problem again. The CPI in January came in at 3%, which was higher than expected. And to make matters worse, prices were up 0.5% from a month earlier, which was the biggest monthly general. up in prices since August of 2023. And that could be a sign that inflation could be re-accelerating again. And that could be a problem, especially for President Trump. Obviously, stuff getting more expensive

isn't great. Nobody likes that. But high inflation likely means no rate cuts from the Fed anytime soon. In fact, we heard the Fed shared Jerome Powell this week in his testimony to Congress say that the Fed intends to keep policy restrictive for now, which is Fed talk for, yeah, sorry, no rate cuts. And that could be a problem for President Trump, because he's been calling for lower rates for a while now. In a recent post on truth social, Trump said that rate cuts would go hand in hand with tariffs. But see, here's the problem. Trump's economic plan calls for tax cuts and tariffs, which economic experts say could add to inflation. But cutting interest rates could also make inflation worse.

So I don't know what President Trump is going to do. If inflation starts to creep back up and the Fed has to pause rate cuts, President Trump might have to change his policies. Or maybe he won't. Who knows? This is Trump we're talking about. Maybe he'll continue to push forward with tariffs and tax rates and rate cuts despite the threat of inflation coming back. But for now, markets seem to be ignoring all threats of tariffs

and they're only expecting one rate cut this year. But with Trump, things could change at a moment's notice. So there you have it. A recap of how bird flu might lead to an economic and political mess. You know, I think my biggest takeaway from this episode is that I should probably start a chicken farm, you know, at least for the next year or so. All right, guys, that's it for today's weekend, deep dive.

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Thank you guys again for watching and listening. Shout out to Mike and the incredible team at public for all the help behind the scenes. And we'll see you guys back here next week. Thank you.