The case is about the new equilibrium price of eggs in the US in 2019. The 2015 outbreak of avian influenza caused a shortage of eggs in the country, leading to record high egg prices. But the high prices did not sustain for long and plunged in 2016 and 2017. The poultry industry saw some moderate recovery in egg prices in 2018, before they fell again in November 2018. The fall continued during the year 2019 with egg prices falling so low that they did not even cover the cost of production. The lower price was a reflection of the oversupply conditions prevailing in the US egg market since early 2018. The year 2019 saw some structural changes, including high demand for cage-free eggs in the market. To take advantage of the demand for cage-free eggs, retailers and producers alike pledged to move toward cage-free, organic, and nutritionally enhanced eggs. As the supply of cage-free eggs exceeded demand, some manufacturers began producing conventional eggs, which resulted in the oversupply of all categories of eggs in the country. As the egg glut continued, the number of hens in the US simultaneously increased. The low egg prices in the country were so unprofitable that the largest producer and distributor of eggs in the country, Cal-Maine, reported a wider-than-expected loss in the quarter ending August 31, 2019. The falling prices affected egg producers country wide, resulting in their incurring huge losses. The absence of a trade agreement between the US and other countries for the export of eggs and a global egg glut further aggravated the situation, creating the possibility of more price volatility issues in the coming years. The question is, will the egg prices fall further due to excess supply? Also, where are the declining egg prices headed? Is there a possibility of price recovery as the demand for eggs remains strong? .

Economics Case Studies | Case Study in Management, Operations, Strategies, Business Environment, Case Studies

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Issues

The case is structured to achieve the following teaching objectives:

	Identify and evaluate the factors affecting the Supply curve.
	Assess the impact of change in prices on the Supply curve.
	Understand how market equilibrium changes in response to changes in the determinants of demand and supply.
	Understand how oversupply impacts the product price and functioning of a product market.

Contents

Keywords

Demand, Consumption, Per capita consumption, Demand curve, Supply, Production, Cost of production, Product glut, Effects of oversupply, Individual supply curve, Market supply curve, Seller surplus, Elasticity of supply, Market equilibrium, Price determination

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