Okay, we’re not actually counting chickens, but the recent egg price talk reminded me of an episode of Billions; season 4 episode 3 to be exact, and the title, “Chickentown”. Without taking up too much time in explaining the plot, all you need to know is that a very large trade was made on the assumption that supply of chickens would be low and therefore the price of chickens, high. This was all dependent on a sole individual responsible for “counting” chickens, otherwise known as the Chicken Man, and a tip was provided to a trader that he wasn’t counting the chickens at all, instead he simply called a number of large poultry producers to ask for the count. Of course, these companies would give a favourable, lower count so the prices would stay elevated. Well we learn later on in the episode that the Chicken Man died and a number of poultry regulatory officials went to Arkansas, discovered the so called rigging, and as for the multiple million dollar chicken trade, it was unsuccessful.

This episode aired in 2019, not long after the “Georgia Dock”, a US wholesale chicken price index was suspended in 2016 due to lack of sufficient data. Which ultimately resulted in price fixing allegations and subsequent fines to the likes of Tyson Foods, Pilgrim’s Pride, and Sanderson Farms. This all coming from a tip to a New York times reporter that a few hedge funds had massive shorts (a bet against) on major poultry producers. Now, there has been a newly launched investigation by the DOJ into egg pricing practices on the corporate level after the recent spike in prices. This was an ask from advocacy groups following a jump in profits reported by the largest egg producer in the US – Cal-Maine Foods. The CEO stated that the increase in profits was simply a result of higher prices at the grocery stores and US consumers paying those prices.

We can safely say the recent spike in North American egg prices isn’t due to a Chicken Man, but in fact a prolonged fatal strain of bird flu that has continued to impact U.S egg supply. The flu had already affected 31 million commercial laying hens year to date; to put this into perspective, this isn’t too far of the total 2024 affected of approximately 38 million. Anytime we have a demand/supply imbalance, price drifts away from its natural equilibrium and the magnitude of that drift depends on the elasticity of demand of that product. With eggs in the top 10 of foods consumed, we can say that demand is fairly inelastic, simply meaning as the price of eggs goes up, demand does not decrease in a meaningful way. In fact, the global average per capita egg consumption for 2024 was estimated to be around 180 eggs, taking a look at the US and Canada, those numbers come in around 252 and 272 respectively. So why the concern if consumers aren’t opposed to paying a higher price per dozen? The answer is inflation, which is still very much in focus for most central bankers, especially the Fed.

The price below shows the recent trend in US prices. March saw an average price of $6.23, up approximately 60.4% on a year over year basis and up 5.9% from February, as based on the latest consumer price index report. What’s notable, is the contrast to inflation on food prices overall in the states, which rose 3% in the past year. We have had some relief as of late, with prices down closer to USD $3 per dozen, this was a result of increased imports by the US from Turkey, Brazil and South Korea. The stability of the reduced prices however is dramatically called into question by looming tariffs. At minimum, the baseline tariff rate of 10% would impact Turkey and Brazel, but South Korea could see a 26% tariff.

If we think about how eggs are imported, shell eggs specifically, it’s not as simple as throwing cartons onto a shipping container. They have to first be transported to processing facilities and unloaded by hand, this already bears a higher import cost and to levy additional tariffs on top of this could send prices higher.

Some consumers in the US are taking chicken matters into their own hands, much like Dollar Bill from Billions attempted to do, albeit households are looking to increase supply, not decrease. In a recent report from Bloomberg, more Americans are starting their own coops, trying their hand in raising laying hens from chicks. When we think about how to navigate increased prices from tariffs, we don’t often consider individuals taking control of their own supply chains, but in this instance, it could work. It’s reported that 11 million US households now own backyard chickens, this is up 28% from 2023 as reported by the American Pet Products Association. One US feed and ranching equipment company in the US - Tractor Supply Co. came out to say they expect to sell a record amount of chicks this year. The company has ran promotional “chick days” for the past several years with many locations expecting even higher demand this year with customers lining up to secure their own egg source. Now having a backyard coop isn’t a feasible endeavor for all Americans (I’m currently picturing a balcony of hens in a New York high rise) so time will tell if consumers will keep purchasing the same basket of goods or simply reduce their breakfast of choice. All of that to say, never count your chickens before they hatch seems to be applicable in more ways than one nowadays.

On behalf of Pyle Wealth Advisory, have an egg-ceptional weekend!

Ally Pyle