Vital Farms (VITL) CEO Russell Diez-Canseco says the recent surge in egg prices, which are up nearly 60% year-on-year, is “a head-scratcher.”
“Throughout 2022 we have certainly seen an inflationary impact on our key inputs such as the grain we feed our girls [hens] and the diesel fuel that truck drivers put in their trucks when they deliver the eggs to the grocery stores,” Diez-Canseco told Yahoo Finance.
A spokesman for Vital Farms told Yahoo Finance the company had increased egg prices over the past year. “For example, the retail price of 12-count black boxes went from $5.99 to $6.99 and was widely visible at most retailers by the end of 2022.”
The national average for a dozen large Grade A eggs is $4.25 in December 2022, up from $1.79 last year.
Diez-Canseco told Yahoo Finance he held off pricing to keep Vital Farm’s long-term mission in mind.
“The reality is that we are building a brand for the long haul and have expanded our offering year after year for 15 years in a row. We don’t see a short-term supply and demand shock as an opportunity to just wipe our profits, and that’s not how we operate.”
Senator Reed accuses mega egg producers of price gouging
(Courtesy of Vital Farms)
Vital Farms works with approximately 300 family farms in eight southern states to produce its large, grass-fed Grade A eggs.
“We buy eggs exclusively from these farms and they sell their eggs exclusively to us on multi-year contracts. The price we pay them is predictable to them and we raise prices when grain costs go up so they don’t get turned upside down and kinda stuck to foot the bill for the inflation we’re seeing ultimately resulting in us having a fairly reliable supply of eggs for our business,” explained Diez-Canseco.
This business model differs from Cal-Maine Foods (CALM), the top egg producer and distributor in the US, which was recently identified by Senator Jack Reed (D-RI) in a letter to the Federal Trade Commission (FTC).
The story goes on
Reed told Yahoo Finance, “I think what’s happening is that big egg producers – not the locals because they still harvest their eggs in their backyard or small plots and then sell them at a reasonable price – but some of them are big Basically, companies are exploiting the potential for price increases. It’s up, as you say, by 138%. Inflation is far, far lower, so it’s not inflation.”
Cal-Maine Foods has not reached out to Yahoo Finance for comment, but it has released a statement on its website.
“Many factors play a role in the increased egg prices, most notably the recent impact of highly pathogenic avian influenza (HPAI), which has significantly reduced national chicken supply while consumer demand for shell eggs remains good,” the statement said in part.
However, Reed claims the bird flu outbreak is not the problem for these producers. “Essentially what they are doing is maintaining their production levels and only increasing the price because it matters. Families need eggs. It’s just a part of everyone’s daily life.”
In response to Reed’s comments, Vital Farms’ CEO said, “I don’t see anything in my cost structure that would have caused me to increase our prices by as much as you are reporting. We’ve taken just enough price to keep us whole and continue to pay our farmers a fair profit for the work they do. I’m not suggesting anyone drop the prices…I can’t explain why the prices have gone up as high as they have.
Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].
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