Golden eggs: Prices for the basic product are historically high. What is more in it – market reality or profiteering?
Among the reasons for the record rise in price of eggs are war and seasonal factors. And a little more, greed
Russia's intensive missile attacks on Ukrainian cities have pushed aside all other topics, including the main food newsbreak of the last month – the record rise in the price of chicken eggs. However, as Ukrainians recover from the shock, the issue of consumer prices is regaining its relevance. Surprise, which turns into indignation, about the cost of one of the most utilitarian products began to sound since the end of August. If in summer the price tag for a dozen eggs rarely exceeded 22 UAH, in September the price added 15 UAH, and then rose even higher. What is happening with the prices of chicken eggs in Ukraine?
What do the State Statistics Service (Derzhstat) and the Ministry of Agrarian Policy (Minagro) say? In its latest release Derzhstat confirmed that it was not just a feeling among Ukrainians – hen's eggs topped the rating of price increases.
According to the agency, eggs have risen in price by 23%, to 35.1 UAH per dozen, compared to August 2022. It should be noted that this price is no longer relevant, and on the shelves of retail chains a dozen eggs starts from 50 UAH, while you can find offers at the level of 60-70 UAH/10 eggs.
According to Minagro, the price of a dozen eggs is now 43 UAH, but no one has taken the estimates of this agency seriously for a long time.
In September, prices for food and soft drinks generally increased by 1.9% in the consumer market compared to August, and since the beginning of the year, by 21.8%.
Сonsider that the jump in egg prices cannot be explained by the basic market factor – the growth of demand. Quite the contrary: the outflow of population and the decline in food production volumes indicate a decrease in the need for this product.
So what is the reason for such a record price jump? There are, in fact, several reasons. Consider each of them in detail.
Seasonality. If we compare the current cost of eggs with the one that was in the same period last year, it turns out that the annual figures differ significantly less than a month – only by 14.2%. This indicates the factor of seasonality, due to which the cost of eggs increases in autumn – because production decreases, including due to the shortening of daylight hours.
This factor is not so important for large industrial factories, where the "day" is organised technologically, but it is critical for poultry, whose eggs prevail on the market.
Low base of comparison. The current cost of eggs seems staggeringly high against the background of summer prices, which were 16.5-17 UAH / dozen and only by July somewhat levelled off – up to 22-25.5 UAH. However, the summer level is to some extent even more erroneous than the current one.
Therefore, it is not worth being guided by it: in the summer, producers sold goods below cost in order to unload warehouses in conditions of total uncertainty and stoppage of exports.
"If we look at the dynamics of prices in May, June, August, the price of eggs fell by 30% compared to the beginning of the year," reminds economic expert Oleg Penzin. The level less than 20 UAH/10 eggs would lead to the bankruptcy of enterprises in the medium term, an even greater cutdown in the supply of eggs on the market and an increase in prices.
Decrease in supply. It is not only about the physical inaccessibility of some enterprises, although this factor also played a role. Well, the heroic Chornobaivka village, familiar to Ukrainians, is also the location of the Chornobaivka Poultry Factory, one of the largest in the country, which for obvious reasons has ceased its proper operations.
In general, about 17% of all egg production is located in the temporarily uncontrolled territories, according to the Ukrainian Agribusiness Club.
But even enterprises that are located in relatively calm regions have reduced volumes of production. In the spring, when farmers buy chickens, few dared to fully invest in incubators, which is why by September the number of egg-production chickens significantly decreased.
Reduction in livestock. The main reason is the occupation of territories and hostilities, but also the rise in prices for energy, logistics and fodder. Thus, the cost of electricity for business is from 4 to 5.5 UAH per 1 kWh. Taras Vysotsky, First Deputy Minister of Agriculture, said it will take several months to restore the livestock.
Compensation for losses. Summer prices were lower than the cost, so now producers got a small chance to at least partially compensate for this.
It should be noted that we are not talking about excess profits – breaking even at the end of the year and avoiding bankruptcy is at stake.
Rolling power cuts. Industrial consumers are the main candidates for saving electricity. This is due to both high power intensity and, accordingly, a more pronounced effect, and the populist goal of the authorities not to "hurt" ordinary citizens. Blackouts are not compatible with the normal operation of incubators, and backup generators are unlikely to last long.
Minagro promises that in late October – early November the price of eggs will go down. It is unlikely that the price decline will be radical, but most likely, further growth will stop, and we are not going to see "100 UAH per 10 eggs” panic forecasts.
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