“Not even a quant, at first glance, can tell a good egg from a bad one.”
Not So Fresh Eggs
Ah, spring! You know it’s here when drugstore shelves fill up with marshmallow eggs and pink Peeps. But few people realize that real chicken eggs used to be as seasonal as their candy imitators. Even fewer know that the egg was once a speculative tool as controversial as credit default swaps are today.
The egg’s seasonality made evolutionary sense, since chicks hatched in spring stood the best chance of survival. It also made sense to eat, paint, roll, and otherwise revel in eggs when they were most abundant and cheapest. In mid-19th century New York, there were 72 times more eggs arriving on markets in May than in January. But people didn’t eat them only in spring. Instead they used varnish, butter, and liquid solutions such as waterglass to keep eggs edible for several months. Some methods claimed to keep them “fresh” for up to two years.
For generations, people kept eggs in their barns and cellars. With the invention of mechanical refrigeration in the late 19th century, storage became a major industry. By 1904, the United States had more than 600 refrigerated warehouses, most of them in cities and many of them several stories tall. Boston’s famous Quincy Market had cold-storage space for 150 million eggs.
Early cold storage suffered from uneven temperatures and bad circulation. Quincy Market’s discovery of eggs with a “fruity flavor” (blamed on apples in the next chamber) was typical of the industry’s technical difficulties. These contributed to the persistent price gap between cold-storage eggs and those few marketed as “strictly fresh” in fall and winter.
The source of controversy, however, was not the technology so much as how it could be used to deceive and cheat consumers. Unscrupulous merchants stored eggs without candling them, then blamed the rotted ones on the warehouses’ faulty refrigeration. Grocers bought cheap warehoused eggs and sold the best as “fresh” and the rest as “storage” (which added, of course, to the latter’s bad rep).
Eventually, the cold storage industry tightened up its quality standards. But this didn’t address the widespread belief that the industry encouraged immoral speculation. The merchants, known as “egg gamblers,” bought cheap in spring in order to sell dear in winter. It was speculation, of course, but was it immoral?
When food prices skyrocketed from 1909 to 1910, merchants’ claim that they helped make off-season eggs more affordable did not hold much water. Instead, newspapers charged them with hoarding and price-fixing.
Word spread of an “egg trust.” Several states passed laws mandating labeling and time limits on cold-stored foods. A similar bill reached the U.S. Senate. In the winters of 1912 and 1913, the New York Housewives’ League and other women’s groups organized egg boycotts and “trust-busting” discount egg sales.
Once World War I started, Americans had bigger things to worry about; but the stigma attached to cold storage eggs persisted into the 1940’s. The problem was that the egg’s opacity made it all too convenient a vehicle for deception — rather like some of our modern investment tools. Not even a quant, at first glance, can tell a good egg from a bad one.
What put an end to egg gambling? That’s the subject of the next post.