If you’ve purchased eggs at any point in the past year, you may have noticed drastic changes in prices. This level of change for a cooking staple is alarming and is not controlled by your local grocery stores. It’s an example of how commodity markets and supply chains work.
Eggs are considered a commodity good, meaning they’re relatively standardized and widely produced, so their price is driven less by branding and more by underlying market conditions. In the United States, egg prices are shaped largely by national supply, but places like Colorado Springs feel those shifts in price quickly because they rely both on local farms and shipments from various regions around the country.
A major reason for the recent volatility in egg prices is outbreaks of the Avian Influenza virus, or bird flu. When farms detect the virus, large numbers of chickens are euthanized to prevent the spread. This shrinks the supply almost overnight, and because it takes months to raise new egg-laying hens, the shortage lingers beyond the halted spread of the virus. When supply drops and demand stays relatively the same, prices will rise. More buyers are looking for eggs than there are eggs on the shelves in grocery stores, so the price will increase.
The foundation of most introductory-level economics courses at Colorado College is the concept of supply and demand. Students, myself included, learn that supply reflects how much producers are willing to sell at a given price, while demand reflects how much consumers are willing to buy. Eggs are a great example of this supply and demand effect, because people won’t drastically reduce their consumption or purchasing of eggs when prices rise, so when supply is disrupted, prices move sharply rather than gradually.
Microeconomics courses also focus on how supply chains affect pricing. Eggs move from farms to processors to distributors to grocery stores, and each step adds a certain cost. Feed prices, fuel to transport the product and labor to harvest the eggs all play into the price tagged at the grocery store, which is the price consumers pay. Even if the root cause of the shortage is national or global, local prices are especially volatile.
These same ideas show up beyond the U.S. context as well. In my current European Union course with Professor Maria Sanchez, we discussed how agricultural markets are shaped by policy through the Common Agricultural Policy (CAP). The CAP is essentially a large-scale attempt to stabilize farmer income and food supply through subsidies and price supports. It often involves mechanisms where governments ensure farmers receive a minimum price, even if market conditions would otherwise push prices lower.
That connects directly to the concepts of price floors and price ceilings. A price floor sets a minimum price to protect producers, while a price ceiling caps prices to protect consumers. In theory, these tools can stabilize markets. In practice, they often create trade-offs or overproduction of goods without enough people to purchase them.
A price floor can lead to overproduction, also known as surpluses, while a price ceiling can lead to shortages if producers are not incentivized to supply enough goods if prices are too low and they won’t make a substantial profit. The CAP has historically faced both of these issues, from excess production to debates over fairness and efficiency.
In Colorado Springs, we don’t have a system like the CAP controlling egg prices, so the market adjusts more freely, and the U.S. as an economic entity has less government intervention in the free market unless drastic measures are needed, like in a recession. Prices are responding directly to changes in supply, costs, and demand without the government controlling the market.
This issue can arise with various goods, so check the prices at your local Safeway, Sprouts or King Soopers for price adjustments and spend accordingly.