Vital Farms ( VITL ) CEO Russell Diez-Canseco says the recent rise in egg prices, nearly 60% year-on-year, is “a head-scratcher.”
“Over the course of 2022, we certainly saw inflationary impacts on our key inputs like the grains we feed our girls. [hens] and the diesel fuel that truckers use to power their trucks while they get eggs into grocery stores,” Diez-Canseco told Yahoo Finance. “Our approach to price increases has been to bring them grudgingly in small amounts”.
A Vital Farms spokesperson told Yahoo Finance that the company raised egg prices last year. “As an example, the basic retail price of 12-count black cardboard increased from $5.99 to $6.99 and was generally reflected 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 that he hopes to keep Vital Farm’s long-term mission in mind.
“The reality is that we’re building a long-term brand and we’ve grown our supply year-on-year for 15 years in a row. We don’t see a short-term supply and demand clash as an opportunity so we just have to take our profits and that’s not how we’re operating.”
Senator Reed accuses mega egg producers of driving up prices
Vital Farms works with about 300 family farms in eight southern states to produce its large grade A pasture-raised 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 for them, and we raise prices when grain costs go up so they’re not the other way around. and we’ve been stuck footing the bill for the inflation that we’re seeing, the net result of which is that we have a pretty reliable supply of eggs for our business,” explained Diez-Canseco.
This business model differs from Cal-Maine Foods ( CALM ), the largest producer and distributor of eggs in the United States, which was recently accused of price gouging by Senator Jack Reed (D-RI) in a letter that write to the Federal Trade Commission. FTC).
Reed told Yahoo Finance: “I think what’s happening is that the major egg producers, not the local people, because they’re still harvesting their eggs in their backyards or on small plots and then selling them to a reasonable price, but some of these big companies are basically exploiting the potential to raise prices. It’s up, as you say, 138%. Inflation is much, much less than that, so it’s not inflation.”
Cal-Maine Foods did not respond to Yahoo Finance for comment, but posted a statement on its website.
“Many factors play a role in the increase in egg prices, most notably the recent impact of highly pathogenic avian influenza (HPAI), which has significantly reduced the domestic supply of hens, while consumer demand for eggs in shell is still good,” the statement read in part. .
Reed, however, says the bird flu outbreak is not the problem facing these producers. “What they’re doing is basically maintaining their production level and just raising the price because it’s essential. Families need eggs. It’s just a part of everybody’s daily life.”
In response to Reed’s comments, the CEO of Vital Farms said, “I don’t see anything in my cost structure that would have led me to raise our prices as much as you’re reporting. We’ve priced right to maintain- us. while continuing to pay our farmers an adequate profit for the work they do. I’m not suggesting anybody’s price go up. . . . I can’t explain why prices have gone up as high as they have.”
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @Brooke DiPalma or email him at bdipalma@yahoofinance.com.
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