Feed, flat and tucking costs mean pricey eggs at market

Flats of eggs are displayed at a discount mart in Seoul. [YONHAP]

Egg prices are skyrocketing due to soaring feed and fuel costs.

A flat of eggs, which carries 30 eggs, was selling for 8,480 won ($6.7) at a discount mart Tuesday, and reached 9,000 won at a traditional marketplace in Jongno District, central Seoul, in May. That is about 2,000 to 3,000 won more expensive compared to the end of last year, and similar to that of the first half of 2021, when the bird flu outbreak pushed up the egg prices.

“Feed costs have been rising since the beginning of this year to the point that I can no longer afford them,” said an farmer who runs an egg farm in the northern Gyeonggi region, during a Tuesday phone call with the JoongAng Ilbo.

The egg farm, which has 400,000 hens, consumes about 35 to 40 tons of feed a day. Feed costs 600 won per kilogram (2.2 pounds), from 400 won last year, according to the farmer. The cost increase translates into an 8-million-won increase in daily production costs.

“Feed cost takes up a major part of the production costs in the egg farm business, up to 70 percent,” said the farmer.

The feed costs are pegged to the international grain prices, especially corn. Corn is the main ingredient in livestock feed, and therefore drives feed prices.

The corn price has been sharply rising since the beginning of this year.

Corn futures was traded at $315 per ton on Tuesday at the Chicago Board of Trade, up 1.9 percent on year. The corn price was $200 in January 2021, and surged 50 percent over the past 16 months to cross the $300-mark in March.

Russia’s invasion of Ukraine is the main factor behind the corn price hike, as Ukraine is the third-biggest corn exporter in the world. Rising global freight rates exacerbated the trend as well.

The uptrend may continue well into the latter half of the year.

“The feed price has gone up once every two or three months,” said the egg farmer, “and it’s devastating to hear that there might be additional price hikes in the second half of the year.”

Soaring fuel costs is another issue.

The egg farmer in Gyeonggi delivers eggs to the processing facilities through a subcontractor every day. The money paid to the driver, who uses a five-ton truck, includes both fuel costs and labor costs. Monthly fuel costs increased by 3 million won from last year to 10 million won, the farmer said.

Dubai crude, which traded at $76 per barrel in January 2022, hit $90 in February and broke the $100-per-barrel level in March. The price was $110.88 per barrel Tuesday. Diesel is more expensive than gasoline for the first time in 14 years.

Packaging became more expensive as well.

A pulp egg flay for 30 eggs costs 110 won now, a 20-won jump compared to last year, according to the farmer. Packaging for 25 eggs became 7.4 percent costlier to 360 won since last year.

“We cannot cut the production cost by ourselves, since all the additional costs are from outside the farm,” said the farmer.

Industry intermediaries, which process eggs provided by farms and deliver the products to retailers, are under growing pressure.

“It costs about 50 won per egg to sort and pack the products and to supply them to the retailers,” said an anonymous business owner who runs an egg farmers’ cooperative in the southern Gyeonggi region.

The business owner said that the company is losing out as “the fuel cost jumped 25 percent from last year.”

The price of 30 eggs recently rose 18 percent to 5,300 won at the local markets near the egg farms.

Discount marts took the hit as well.

“Consumers are sensitive to egg price fluctuations, so we cannot easily raise the price even when the cost goes up,” said an insider at a discount mart. “Shipping or storage of eggs is not that easy, too, so there is hardly any profit left.”

The international grain price hikes have taken a toll on not only the egg business but also the livestock industry. The retail price of U.S. beef was 4,400 won per 100 grams in May, up 77 percent on year, according to the Korea Institute for Animal Products Quality Evaluation. Imported pork prices increased 10.6 percent to 1,414 won per 100 grams in the same period.

“The soaring global inflation is the result of expansionary fiscal and currency policies, demand recovery, supply bottlenecks, the Russia-Ukraine war and subsequently rising energy and raw material costs,” said Her Yun-ji, researcher at the Korea Energy Economics Institute.

Experts forecast that the situation may get worse when harvest season begins in July in Ukraine.

“The war in Ukraine will affect the international grain prices more fully in the latter half of the year, pushing domestic food prices even further up,” said Korea Rural Economic Institute researcher Kim Jong-jin.

BY KANG KI-HEON, KIM MIN-SANG, KIM YOUNG-OK [shin.hanee@joongang.co.kr]