Egg prices crack two dollar mark

8:54 PM, Mar 16, 2008   |    comments
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Egg prices have been on the rise in the United States, partly due to an increase in the cost of chicken feed and high energy costs, economists and egg producers say. And while the run-up on prices has been great for many of the nation's largest egg producers -- four of which are in Minnesota -- the companies that buy eggs in bulk are feeling the pinch. The retail price for a dozen large eggs in January averaged at $2.18, according to the U.S. Department of Agriculture. That's 35 percent higher than January 2007, when a dozen eggs was $1.55. Last week, local grocery stores priced a dozen large eggs at around $2.24. "It's been quite a steep climb," said Ephraim Leibtag, an economist at USDA. "Nominal prices are at the highest they've ever been." After adjusting for inflation, retail egg prices were higher from the 1960s through the early 1980s. But Jim Jurmu, co-owner of Wuollet Bakery on Grand Avenue in St. Paul, has noticed the increase -- especially when coupled with the rising cost of flour due to high wheat prices. Starting Monday, prices on cakes, breads, cookies and other products will go up about 10 percent, Jurmu said. "It's not fun for anybody, but we have to pass the prices on," said Jurmu. "I've never seen egg prices this high." Egg producers aren't complaining. At Land O' Lakes, based in Arden Hills, egg revenue in 2007 was up 29 percent to $514 million. The higher sales helped the cooperative's egg business deliver pretax earnings of $24.6 million, compared with a loss of $40.2 million in 2006. The nation's largest egg producer -- Mississippi-based Cal-Maine Foods Inc. -- saw increased profits in 2007 that helped boost the company's stock price to more than $34 last week, nearly triple the price in April. Brian Buhr, an applied economics professor at the University of Minnesota, said the main reason for high egg prices is high feed costs. Chickens eat corn and soybeans, and corn prices have gone up as more of the crop gets dedicated to making ethanol. "Ethanol gets blamed for everything, so you might as well blame it for eggs, too," Buhr said. But economists and egg producers say there are other factors, including a strong demand for U.S. eggs and rising energy costs. In recent years, Americans on average have been eating about 255 eggs per person per year, said Steve Olson, executive director of the Broiler and Egg Association of Minnesota. The average has remained pretty stable, but overall demand for eggs has increased with population growth, he said. And while the U.S. population grew from 2006 to 2007, the population of layer hens dropped by about 6 million, to roughly 280 million hens that produce table eggs, Olson said. The total production of table eggs in the U.S. dropped by about 1 percent from 2006 to 2007 -- declining to 77.2 billion last year. Supply didn't keep up with demand partly because the egg industry saw tough times in 2005 and 2006, Olson said. In addition, the industry has tried to reduce the number of layer hens per cage after criticism about how chickens have been treated. Large egg producers are optimistic that high prices will continue in 2008. Cal-Maine Foods and Indiana-based Rose Acres are the largest egg producers in the U.S. Minnesota-based companies dominate the second tier of producers, according to an annual ranking by Egg Industry Magazine, a trade publication. Ranked in terms of the number of layer hens in production at the end of 2007, Minnetonka-based Michael Foods came in at No. 3 with 14 million birds producing table eggs, followed by Litchfield-based Sparboe Farms and the Calif.-based egg subsidiary of Land O' Lakes, which each had about 12 million layers in production. Renville-based Golden Oval came in ninth, with 6.8 million layer hens. Not all these companies' hens lay their eggs in Minnesota. Still, Minnesota ranks as the eighth-largest egg producing state, according to June 2007 data. There are about 10.2 million layer hens in Minnesota. Iowa is the largest egg producing state, with more than 51 million birds.

(Copyright 2008 by The Associated Press. All Rights Reserved.)

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