Comment by anigbrowl
2 years ago
I lean toward (2), and I think we have strong evidence for this in the form of 'shrinkflation', where firms redesigned their packaging to provide less product while maintaining prices or brand identity (eg making the packaging appear to be the same size while having lower product weight/volume). The fact that changing product packaging requires a significant investment in adjusting production lines says to me that it was a proactive decision rather a simple reaction to market conditions.
By contrast, eggs went up quite a bit a couple of years back due to a combination of increased demand and a coinciding outbreak of avian flu. But while one could feed chickens less or selectively breed for smaller eggs, the actual manufacturing of the egg is basically up to the animals rather than the accountants. If you crack open a fresh egg you pretty much know what you're getting and it isn't easy to change. It's not feasible to sell cartons with only 5 or 10 eggs rather than the more common amounts of 6 or 12 (or 30 if you have an insatiable appetite for them as I do). So there normal forces of supply and demand have reasserted themselves and prices have (somewhat) returned to where they were a few years ago. It's been easier to observe changes than for items like beef which I buy more intermittently.
It's amusing to point out eggs as some kind of holy grail of how price moves naturally, when the two largest egg producers (Cal-Maine Foods and Rose Acre Farms) were just fined in federal court for price fixing.
That's interesting and sort of amusing, but I didn't notice as I buy from fairly small farms.
It's not that I think eggs are immune to price fixing, but rather that the packaging of fresh eggs isn't easy to change; the eggs themselves can't be altered and while you could sell fewer of them per box consumers (in the US at least) are used to multiples of 6 and would immediately notice. In contrast you could reduce the volume of, say, detergent but redesign the container, and many consumers might not notice that they were getting 6-7% less.
What I'm getting as is that while the causes of egg price changes might be legit or greed, it isn't as easy to hide the price changes from the consumer as when you operate a whole production line and can alter the appearance and volume of the package itself.
You don't even need to redesign (resize) the packages (boxes, think laundry detergent or cereal). Just fill them up with 5-10% less and only change the printed weight/volume. If the package doesn't transparently show the product inside it's not as obvious.
Because they're such total dicks, here are some Cal-Maine brands I go out of my way to avoid when I get eggs in stores:
They're just the ones who got caught. A lot of markets have only 2 or 3 major players. With so few players they could cooperate to raise prices without doing anything more than observe what each other are doing and responding accordingly. Price being the only means of communication or coordinating between the players.
Kelloggs, General Mills, and Nestle hired lawyers that appealed to populism to convince jurors that egg producers price fixed with a probability of at least 51%. That's hardly proof of price fixing.
> finding that the egg suppliers had exported eggs to cut supply in the US market, as well as limiting the number of hens, reducing flocks and killing chickens earlier than they usually did.
It was sufficient proof to convince a full jury, which makes them guilty of price fixing. They can certainly appeal, that's how the court process works. It's how all trials in the US work.
Also, I have to take issue with the insinuation that these egg producers are the underdogs with a small business budget for lawyers themselves. They're the largest egg producers in the US with billions of dollars worth of assets.
4 replies →
I think the increase in profits is proof enough.
https://abc7.com/eggs-egg-prices-cal-maine-foods-profits/130...
5 replies →
Shrinkflation is hardly a new phenomenon. There is no evidence to indicate that firms were less greedy a few years ago.
Temporary high egg prices were at least partly caused by a temporary supply shortage from a bird flu outbreak. That was somewhat different from the monetary issues which usually drive inflation.
https://apnews.com/article/bird-flu-outbreak-turkey-egg-chic...