Eggflation: Eggsploring The Reasons of Egg Price Surge and Its Ramifications

Author: Caroline Velenthio Amansyah

Co-writer: Bintang Sebastian Maxi

1. Introduction: Yes, The Rising Egg Price is A Global Trend This Year

Global egg prices have hit historic highs, impacting the egg supply worldwide. We expect these elevated prices to persist till the end of 2023. While some markets may see slight price drops, they won't return to pre-2021 levels.  Rabobank's monitor egg prices which reached a new high in Q1 2023. Prices in the US, EU, and Japan have soared, as have those in several other markets (Mulder, 2023). 

In the Indonesian context, Minister of Trade Zulkifli Hasan, also known as Zulhas, acknowledged increases, particularly in broiler chicken and egg prices, have reached staggering levels in several Indonesian regions, including Jakarta, where broiler chicken prices have surpassed Rp50,000 per kilogram, and egg prices fluctuate between Rp32,000 and Rp33,000 per kilogram (Figure 1)

The root of these escalating prices can be traced back to a domino effect that began towards the end of 2022. Notably, this upward trend in prices is linked to the extended duration during which chicken and egg prices remained well below their target ranges. For instance, despite the intended price range of Rp27,000 to Rp28,000 per kilogram, these prices lingered at or below Rp28,000 for several months, leading to losses for egg producers (CNBC Indonesia, 2023). 

To mitigate these losses, egg producers reduced their egg-laying hens, which subsequently reduced the supply and resulted in elevated prices. A similar pricing discrepancy occurred with chicken meat, where target prices were set between Rp36,000 and Rp38,000 per kilogram, but during key holidays like New Year and Eid, prices dropped to Rp32,000 per kilogram. This disparity created losses for chicken growers, who resorted to measures such as culling and premature maturation of chickens, further depleting the supply and driving prices upwards. In essence, the recent price surges in chicken and egg products can be attributed to pricing imbalances and their associated impacts on supply, creating a cycle where reduced supply leads to heightened demand and, consequently, elevated prices. Minister Zulhas underscores that addressing this situation will necessitate time and supply chain adjustments  (CNBC Indonesia, 2023).

Additionally, egg prices have closely followed the FAO Food Price Index historically, but recent shifts are attributed to rising feed costs. The impact varies across markets, with potential avian influenza outbreaks in Brazil being a significant concern worldwide (Mulder, 2023). In short, the increase of egg prices can be explained by two common factors of inflation, the combination of cost-push and demand-pull. Further breakdown of the potential factors are discussed below.

2. Factors Affecting Egg Prices and The Inverse Perspective

a. Cost-Push Factors

1.