Forget pandemic puppies. Meet the inflation chicken

Which shortage came first: the chicks or the eggs?

Spooked by a huge spike in egg prices, some consumers are taking steps to secure their own future supply. Demand for chicks that will grow into egg-laying chickens — which jumped at the onset of the pandemic in 2020 — is rapid again as the 2023 selling season starts, leaving hatcheries scrambling to keep up.

“Everybody wants the heavy layers,” said Ginger Stevenson, director of marketing at Murray McMurray Hatchery in Iowa. Her company has been running short on some breeds of especially prolific egg producers, partly as families try to hedge their bets against skyrocketing prices and constrained egg availability.

“When we sell out, it’s not like: Well, we can make another chicken,” she said.

McMurray’s experience is not unique. Hatcheries from around the country are reporting that demand is surprisingly robust this year. Many attribute the spike to high grocery prices, and particularly to rapid inflation for eggs, which in December cost 60% more than a year earlier.

“We’re already sold out on a lot of breeds — most breeds — until the summer,” said Meghan Howard, who runs sales and marketing for Meyer Hatchery in northeast Ohio. “It’s those egg prices. People are really concerned about food security.”

Google search interest in “raising chickens” has jumped markedly from a year ago. The shift is part of a broader phenomenon: A small but rapidly growing slice of the U.S. population has become interested in growing and raising food at home, a trend that was nascent before the pandemic and that has been invigorated by the shortages it spurred.

“As there are more and more shortages, it’s driving more people to want to raise their own food,” Stevenson observed on a January afternoon, as 242 callers to the hatchery sat on hold, presumably waiting to stock up on their own chicks and chick-adjacent accessories.

Raising chickens for eggs takes time and upfront investment. Brown-egg-layer chicks at McMurray’s cost roughly $4 apiece, and coops can cost hundreds or thousands of dollars to construct.

Mandy Croft, a 39-year-old from Macon, Georgia, serves as administrator on a Facebook group for new chicken farmers and is such an enthusiastic hobbyist that family members call her the “poultry princess.” Even she warned that raising chickens may not save dabblers money, but she said her group was seeing huge traffic nonetheless.

“We get hundreds of requests a day for new members, and that’s due to the rising egg cost,” she said.

The surge in bird-raising interest underscores how America’s first experience of rapid inflation and shortages since the 1980s is leaving marks on society that may last after cost increases have faded. And the story of the chick and the egg — one in which supply problems have piled atop one another to create rapid inflation and inflict hardship on consumers — is a sort of allegory for what has happened in the economy as a whole since 2020.

Prices on a wide variety of products have popped in recent years as unusually strong demand for goods — spurred by pandemic lifestyle changes and savings amassed from stimulus checks — choked global shipping routes and overwhelmed factories and other producers. Those problems have only been compounded by Russia’s war in Ukraine, which has disrupted global food and energy supplies.

Grocery inflation has been particularly acute as grain supplies contracted and costs for fuel, fertilizer and animal feed have soared. Compounding the situation, bird flu began sweeping through commercial chicken flocks early last year, pushing egg prices sharply higher. Highly pathogenic bird flu had been found at farms raising 58 million birds in 47 states as of January, according to the U.S. Department of Agriculture.

“It’s just been one thing after another,” said Jayson Lusk, who leads the agricultural economics department at Purdue University.

As the problems add up, some grocery stores have started rationing egg supplies, limiting customers to one or two cartons apiece. And because eggs are a major ingredient in products including baked goods and mayonnaise, those price increases have spilled over.

Prices for eggs have started to decline: The Agriculture Department said this week that the average price of a carton of large eggs was just under $3.40, down from more than $5.00 at the start of the year.

But that’s still about twice what a carton of eggs cost at this time last year, and it could take months for prices to return to more normal levels. Commercial farms need time to rebuild their depleted stocks of egg-laying hens, and changes in wholesale prices tend to happen faster than grocery store costs. Another potential headwind: Easter is approaching, which is likely to cause demand to pick up.

In the meantime, the egg-spurred rush for raise-at-home chickens demonstrates how one shortage can snowball into another: While hatcheries can theoretically hatch more chicks to meet the surge in demand, that is proving to be difficult in today’s economy.

“Demand is up, but we’ve not expanded for the last three years because we don’t have the workforce,” said Jeff Smith, one of the owners of Cackle Hatchery in Missouri.

He’s paying more to try to lure workers, he said, but he thinks that there just aren’t applicants in his area.

Nationally, unemployment is at a 50-year low, and there are nearly two positions open for every jobless applicant.

Because of increased labor and equipment costs, Smith is charging more. Retail chicks will cost 15%-18% more this year, and wholesale prices will be 10%-15% higher.

“One of our biggest cost increases is continuing to raise wages to compete,” Smith said, explaining that he is also paying more to help his employees deal with rapid inflation, and he thinks that will continue. “I don’t see the inflation going anywhere.”

While inflation has slowed on a yearly basis for six months, price gains are still unusually rapid. Policymakers at the Federal Reserve are trying to slow the economy and wrestle it back to a normal pace. The Fed lifted rates to just over 4.5% this week, its eighth rate increase in the past year.

Fed officials generally look past grocery inflation when setting policy because food prices move around for reasons they cannot control. But they are intent on preventing the kind of inflation to which Smith is alluding: price increases that stem from rising labor costs as employers try to cover inflation.

If wages and inflation feed on each other, it could keep inflation elevated, entrenching it in the economy in a way that could make it harder to stamp out. Central bankers say that for now, they are not seeing signs of such a spiral.

And while central bankers typically just wait out unexpected shocks to supply like the ones pushing up prices across the farming industry, they have acknowledged that it is harder to do that when one-off disruptions last for years and build on one another.

That is why central bankers have been responding to today’s rapid inflation by trying to rein in demand — the part they can influence. By making it expensive to borrow and spend money, the Fed deters families from making big purchases and discourages business expansions, cooling consumption and slowing the job market. There are already signs that price increases are starting to wane.

But in the near term, some of inflation’s trajectory is going to hinge on luck — not just Fed policy.

Eggs offer an example of why. While a looser labor market might slow spending and make it easier for companies like Smith’s to expand, helping demand and supply to rebalance, that alone would not be enough to solve the nation’s poultry problems. Central bankers cannot determine when commercial farms get past the bird flu.

When it comes to groceries broadly, the war in Ukraine and other uncontrollable forces — drought, crop turnout — will be key.

Jonathan Haines, a senior analyst at Gro Intelligence, which tracks global crops, said there were “glimmers of hope in the year ahead” for global food prices as supplies improved for eggs, vegetable oils, meat and other commodities. But heavy rainfall in California slowed production of things like leafy vegetables and broccoli and could add price pressures in the months ahead.

“Things are starting to ease,” Haines said of food prices. “But they’re still high relative to history.”

Whether today’s situation leads to lasting changes in how people procure their eggs remains to be seen. The Chicago Roo Crew, which rehouses unwanted hens and roosters, fears that today’s spike in chick purchases could leave people dumping adult birds later.

“We’re incredibly worried about this right now,” said Julia Magnus, a co-founder of the group. There was a spike in “dumped birds” after early pandemic buying and the group is “still dealing with the aftermath.”