UPDATE: Aug. 12, 2020: Hillandale Farms put out a response in which the company said it "unequivocally denies the allegations" of price gouging. The company says it was "shocked and dismayed" to learn about the lawsuit. "[O]ur approach to pricing has been consistent for decades, and without complaint, whether that has led to profits or losses, and the last several months have been no exception. We look to a third-party company, Urner Barry, which specializes in the timely, accurate and unbiased reporting of market news and quotations throughout the food industry," the statement says.
- The New York Attorney General's office sued egg producer Hillandale Farms on Tuesday, accusing the Ohio and Pennsylvania-based company of price gouging during the first few months of stay-at-home orders during the coronavirus pandemic. The lawsuit, filed in the New York Supreme Court, said the egg producer made $4 million in two months from unlawful price increases on its eggs, charging up to four times the price of eggs from the beginning of the year. The lawsuit demands the producer stop price gouging, pay penalties upward of $25,000 and give restitution to the state and consumers.
- According to a press release from the attorney general's office, Hillandale increased its prices not out of necessity, but because it utilized the Urner Barry price index to take advantage of consumers stocking up on food staples.
- Hillandale denied wrongdoing in a statement published by Bloomberg. “As retail demand for eggs reached historically high levels earlier this year, our dedicated personnel rose to the challenge and worked tirelessly to meet that demand through the most consistent production and delivery measures possible,” the statement said. The producer pointed out to the news service that egg prices now are lower than they were this time last year.
Nobody can dispute that in the first weeks of coronavirus-related lockdowns, eggs were hard to come by.
Grocery store stocks were nearly depleted. And across the board, eggs had become much more pricey than they were just a few months earlier. This wasn't just an issue in New York. Consumers throughout the United States faced the same issue. The Texas Attorney General's office filed a similar lawsuit against producer Cal-Maine Foods in April, and the Minnesota Attorney General's office settled a complaint about price gouging against producer Forsman Farms the same month.
The question is whether the price increases were a function of supply and demand issues or companies wanting to profit from the pandemic. The answer may not be quite so simple. Egg prices are determined mostly by the Urner Barry index, but there's much more to take into consideration beyond what's in the grocery store.
The number of eggs on the market is relatively fixed. According to April's monthly statistics from the Egg Industry Center, there were 330.6 million egg-laying hens in the U.S. as of April 1 — 3.5% less than last year. On any single day, about 81 out of 100 hens produce an egg.
Stay-at-home orders for coronavirus made people start preparing like there was a "national snowstorm" on the way, Brian Moscoguiri, Urner Barry's director of egg and egg products, told Food Dive earlier this year. As a result, demand everywhere spiked and grocery stores ordered far more eggs than normal. Moscoguiri said these volumes were anywhere from double to six times the regular amount.
But only about 60% of eggs produced go to grocery stores, according to the American Egg Board. Another 9% are shell eggs that go to foodservice. The remaining eggs are liquid, and often go straight to a processing facility to become liquid. Grocery store and foodservice shell eggs have different packaging and inspection requirements. FDA made allowances for foodservice shell eggs to be sold at grocery stores in April, but that was after some weeks of heightened retail demand for eggs and empty grocery shelves.
According to egg experts, producers and analysts, prices spiked because the market was not expecting such a quick shift in demand — both on the grocery retail side, where consumers started buying more eggs to stock up, and on the foodservice side, where demand abruptly fell off almost completely. After a number of weeks, prices and demand stabilized, and things are more or less back to normal.
Maro Ibarburu-Blanc, associate scientist and business analyst at the Iowa State University Egg Industry Center, told Food Dive earlier this year that currently, egg farming is generally not lucrative. Last year in the shell egg market, producers lost an average of 2.7 cents per dozen. He also pointed out that the market is prone to big fluctuations. Half of the time, the price changes 5% or more from week to week.
Even though the egg market appears to be more stable now, this still could be just the beginning of legal and civil action filed against producers. And since Minnesota was able to get a settlement from Forsman Farms, it may mean more jurisdictions are looking to go after producers, even if the egg companies are ultimately successful.