KANSAS CITY — Amid the endless coverage devoted to the rising cost of eggs, an important piece of the story has received scant attention — the resultant cost pressures on numerous processed foods categories, including several grain-based products.
Josh Sosland, editor of Milling & Baking News. Source: Sosland Publishing Co.
Notwithstanding the topic’s potency as a campaign issue ahead of last November’s elections, the continued interest in egg prices may be somewhat surprising — eggs, on average, account for about 1.5% of the caloric intake in the American diet. Still, the issue has struck a chord, and the timing for the latest bout of price increases is terrible. In the face of public weariness over food price inflation and amid pressure from retailers, consumer packaged foods companies have been working to lower prices or find ways to offer value to consumers looking to make their food budgets go further.
Precipitated by supply reductions due to outbreaks of highly pathogenic avian influenza (HPAI), the third major US outbreak in the past decade, retail egg prices rose 15% in January, according to Consumer Price Index data from the Bureau of Labor Statistics. The jump contributed an overall increase of 0.5% to consumer food prices.
A large share of egg production each year ends up not only at supermarkets, restaurants or schools, but at breakers for the ingredient market. According to the American Egg Board, 76.5 million cases of eggs were shipped to breakers in 2022, equal to 27.5 billion eggs and 29% of total US egg production.
For users of egg products such as dried eggs or liquid eggs, the cost escalation has been eye-popping. Prices for dried whole eggs recently were estimated at $23.25 per lb, up 272% from $6.25 a year earlier. This hefty jump understates the sea change egg ingredient buyers are facing since prices last year were still well above historical averages thanks, in part, to the residual effects of the last HPAI outbreak, in 2021-22. Before 2019, egg product prices were consistently lower, with a median price of $2.57 per lb during the 2000s and 2010s. Relative to that historical benchmark, recent prices were up 805%.
Many baked foods contain little or no eggs, and for traditional commercial bakers of bread and snack cakes, the cost of eggs and cocoa (another ingredient with surging prices) historically were almost rounding errors relative to, say, flour and sugar.
“They aren’t rounding errors any longer,” a baking executive said recently.
The magnitude of the problem may be seen perhaps most clearly when looking at the ingredient index compiled by Milling & Baking News for egg-containing foods. In the case of cake donuts, egg yolks currently account for 63% of the cost of all the ingredients that go into the donut. In other words, the egg yolks cost almost twice as much as the cost of the other ingredients like flour, sugar and shortening combined. Were egg prices at the historical medians ($5.05 per lb for dried yolks), eggs would account for only 17% of the ingredient costs in a donut.
Exacerbating the difficulties for bakers, unlike ingredients like wheat and soybean oil, dried egg product prices can’t be hedged. Bakers and mix manufacturers must synchronize ingredient purchases with product sales to the greatest degree possible to avoid losses due to market moves. Ingredient suppliers have developed egg substitutes, and many bakers are shifting to alternative products when possible. Still, substitution in many cases is difficult because of numerous functional properties of eggs prized by bakers, including aeration to build structure, leavening and, by helping preserve moisture, shelf life extension.
Finally, unlike a dozen eggs or a chocolate bar, the presence of an expensive ingredient may not be immediately apparent to a customer or a consumer when it comes to the many products — including cakes, cookies, pies, bread, pancakes and waffles — often made with eggs. Retailers must understand that a large proportion of the eggs they sell are not in the refrigerated section but are incorporated into finished food products. And costs are moving higher.
