Shortage of Legally Compliant Shell Eggs Sends Prices Soaring in California
$6 Per Dozen at San Francisco Safeway
By Dan Flynn | January 15, 2015
America’s $30.7-billion egg market is being scrambled — at least for awhile — by California’s new space requirements for laying hens that became effective on Jan. 1.The law, part ballot initiative and part the work of the California Assembly, applies to any producer supplying raw shell eggs to California consumers.And not enough law-compliant egg producers are now available to meet California’s demand and, according to the Iowa State University Egg Industry Center, this reality has translated into retail egg prices that are 66-percent higher in the Golden State than in other parts of the West.On Wednesday, Jerry Hagstrom, editor of The Hagstrom Report, distributed pictures to subscribers showing egg prices of $4.49 to $5.99 per dozen in a San Francisco Safeway store. By contrast, Walmart was delivering eggs in the Denver area on Wednesday at prices ranging from $1.84 per dozen to $3.88 per dozen, depending on consumer options.
To the extent that California’s new law has priced some people out of the egg market, demand will fall. And, to the extent that producers invest in the larger hen houses to serve the California market, the supply of eggs eligible for sale in the state will grow, and prices should eventually drop back some.
“In the short run, we will likely experience all sorts of variations as the market tries to find new equilibrium, “explains Maro Ibarburu of Iowa State University. He did a special report on “The California Situation” for ISU’s Egg Industry Center just four days before the new law took effect, which estimated eggs costs would go up by 10-40 percent.
He estimated a 15-percent increase in production costs for becoming compliant with egg sales in California. A 73-percent increase in space over conventional housing systems is required.
As 2015 began, California was short by 2-3 million laying hens without legally compliant housing to meet the residents’ demand for eggs, according to Terry Pollard, vice president of North American sales for Big Dutchman, the Holland, MI-based company that designs and builds housing systems.
Ibarburu says there are many unknowns that make it impossible to predict when egg markets might digest all the changes, especially in California. Egg consumption, and especially egg-white consumption, was on the upswing in 2014 largely from consumers looking for high-protein, low-calorie options. It remains to be seen how consumers react to record high shell-egg prices.
Producers can avoid the California law by pasteurizing eggs, which effectively eliminates the possibility of Salmonella infection. About 31 percent of the eggs consumed in the U.S. are processed eggs that are already pasteurized, and pasteurized shell eggs are sold at retail.
The U.S. egg industry provides about 128,000 jobs, pays $7.2 billion in wages, and contributes $2.2 billion in government revenues, according to economic output figures released by the industry on Wednesday.
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