Egg prices are actually down. Averaging $1.73 a dozen during March, egg prices have fallen by 5% from March a year ago. So, yes, the CPI says the increase for food prices is up 2.7% during the past 12 months (March 2010-March 2011). But not for eggs.
We could say that egg producers are in a squeeze between higher costs and lower demand. The higher costs come from more expensive corn feed and higher transportation costs. Meanwhile people are eating fewer eggs. This year, consumption is projected to be equal to last year at 247.7 eggs per person. (In 1950 it was 389.)
Usually, egg demand increases during Easter. But even that is predicted to be less than usual. Did you know that Thanksgiving and Christmas are the biggest holidays for eggs? Easter is #3.
The Economic Lesson
The egg industry is composed of many small producers. And therein lies the problem from the supply side. We have a competitive environment where producers are price takers.
Imagine a line representing different competitive market structures. The far left side of the line is labeled perfect competition while the far right side is monopoly. Very similar products such as eggs and unpackaged lettuce tend to be sold in markets that are on the left side of the scale. Their producers have little power over price because their goods look just like someone else’s.