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Egg prices cracking budgets all around

Retail egg prices have been increasing at rates not seen in at least 30 years.

According to the Bureau of Labor Statistics, egg prices soared 29 percent in 2007, a pace that continued this year. Corn, the main ingredient in chicken feed, has shot to record highs as more of the U.S. crop is used for ethanol, not food, economists say. Chicken feed comprises 60 percent of an eggmaker’s costs.

Ap photo

NORTH MANCHESTER, Ind. — The massive henhouses plopped into a cornfield here resonate with the clucking of hundreds of thousands of birds. Across the U.S., cash registers beep, ringing up eggs for more than $2 a dozen.

To Bob Krouse, head of the firm that owns the veritable chicken city, those hens are part of the soundtrack to a golden era of record egg industry profits.

For consumers, well, let’s just say the Easter Bunny shelled out a lot more green this year: Retail egg prices have been increasing at rates not seen in at least 30 years.

Egg eaters are feeling the pain of soaring chicken feed prices, which egg producers are successfully passing down to the grocery aisle. What’s more, the egg industry’s normal response to good times, which is to feverishly add capacity until prices drop like a rock, hasn’t materialized. That could keep supplies tight and prices high well into 2009.

Producers are wary of adding hens for myriad reasons. They fear overexpanding, an expensive mistake they’ve made before. Meanwhile, the costs of expansion are rising and credit is tight. Even the tricky issue of animal welfare is in play: Californians will vote this year on banning cages that are standard in the industry, spooking egg producers.

“It’s a perfect storm that’s going on, no doubt about it,” said Scott Beyer, a poultry expert at Kansas State University.

Food prices generally have been rising at an annual rate of nearly 5 percent in recent months, a pace not seen since the early 1990s. Milk prices jumped 11 percent last year; chicken prices 6 percent, according to the Bureau of Labor Statistics.

But neither can match eggs: Prices soared 29 percent in 2007, a pace that continued this year. Consumers don’t like it, but eggs are such a basic item that they don’t appear to be changing their habits.

A key reason for the egg price escalation is a surge in commodity prices. Corn has shot to record highs as more of the U.S. crop is used for ethanol, not food, economists say. And corn is the main ingredient in chicken feed, which comprises about 60 percent of an eggmaker’s costs.

At Midwest Poultry Services, Krouse’s firm, feed costs are about 70 percent higher than they were a year ago.

Krouse said he’s never seen feed cost so much, and he’s been in the egg trade since 1982, when he went to work for Mentone, Ind.-based Midwest Poultry.

This past week, Midwest’s North Manchester facility, the Hi-Grade Egg Producers plant, was buzzing with the Easter rush. The two to three weeks before the holiday are the most intense, volume wise, of the year. “It’s like a fire drill,” Krouse said. “It’s a massive amount of eggs we have to get out.”

Even on an ordinary day, the North Manchester plant is no slouch: Its 2.5 million chickens churn out more than 2 million eggs.

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