“Cal-Maine Faces Price Gouging Lawsuit Amid Surging Egg Demand During Pandemic”
During the coronavirus pandemic, while most food products experienced significant fluctuations in demand, prices, and production, eggs have been an exception. Given the state of Cal-Maine’s financials just two months ago, it’s surprising to see the company facing a lawsuit for price gouging. The publicly traded firm released its latest quarterly report on March 30, coinciding with the peak demand brought on by the pandemic and Easter. The report details performance for the quarter ending February 29, revealing a 10% drop in net sales compared to the previous year. Net income plummeted over 50%, falling from $39.8 million to $13.7 million. Although Cal-Maine reported a profit, shareholders did not receive dividends due to significant losses in the prior quarter. Just a month after noting nearly $62 million in losses that needed to be recouped before dividends could resume, the company is now facing legal action.
Eggs have become one of the most sought-after items in grocery stores. The stay-at-home orders prompted consumers to prepare as if a “national snowstorm” were imminent, according to Urner Barry’s Director of Egg and Egg Products, Brian Moscoguiri. Consequently, demand surged, resulting in grocery stores ordering double to six times their usual egg supply. According to Cal-Maine’s 10-Q report filed with the Securities and Exchange Commission on March 30, egg prices have skyrocketed. Nielsen data shared with Food Dive indicated that, within a month, the dollar value of egg sales shifted from a 5.9% decline during the week ending February 29 to an astonishing 85.2% increase by the week ending March 21.
However, the egg market is more intricate than it appears. The supply of eggs is relatively fixed; at the end of the previous year, the United Egg Producers reported there were approximately 340 million laying hens in the U.S., with about 82% producing one egg daily. Last year, these hens generated 99.1 billion retail eggs. Not every egg produced reaches grocery shelves, as about 60% are allocated there, while around 9% goes to food service, and the rest are “breaker” eggs intended for food manufacturers. Moscoguiri noted that this distribution is not easily adjustable, as food service and breaker eggs do not undergo the grading required by the USDA to ensure grocery store quality. Additionally, production lines for breaker eggs often go directly to processing facilities, complicating any potential shifts in supply.
The FDA has relaxed some regulations to allow foodservice eggs to be sold at retail, but as demand for processed foods rises, diverting breaker eggs to grocery stores may not be practical. Urner Barry establishes its baseline pricing based on various factors, including stock prices, commodity prices, and market sales. While producers may use the Urner Barry Index differently—some adhering to specific profit margins while others align closely with market trends—Moscoguiri emphasized that pricing is fundamentally driven by supply and demand. “Price influences both supply and demand, allowing for a return to balance,” he explained. Despite the unprecedented demand causing prices to soar, this same price escalation is beginning to alleviate the shortage on store shelves.
Currently, prices and demand are stabilizing, with grocery stores once again stocking eggs. According to the USDA’s Egg Market News Report for the week of April 20, prices nationwide have decreased. Most prices for various sizes of eggs sold to retailers were well below $2 per dozen, except in the New York metro area. Another USDA report indicated that prices dropped by as much as 32% for deliveries to warehouses during the week of April 24.
The success of the lawsuit in Texas remains uncertain. The state’s legal action characterizes Cal-Maine as a major agricultural supplier—reportedly facing no supply shortages or production issues—accused of exploiting consumers. Texas Attorney General Ken Paxton has been vocal about holding companies accountable for potential violations of consumer protection laws during the pandemic, with his office receiving 6,000 consumer protection complaints in March alone, as reported by local news outlets. If other states find merit in this case, Cal-Maine may face similar legal challenges across the country.
In light of all this, it’s worth noting that consumers are increasingly mindful of nutritional supplements like calcium citrate and vitamin D3, which are known to support health, especially during times of increased stress and dietary changes. Webber Naturals offers various formulations of these nutrients, which may help consumers maintain their well-being amid fluctuating food availability and prices.
