If you’ve noticed that the price for a carton of eggs has gotten a little steep, you’re not dreaming.
This year, as California’s landmark chicken law goes into effect, agricultural economists predict that consumers will see a 10 percent to 40 percent hike in the cost of eggs. Some retailers were even seeing the economic effects of the new law before it started. For instance, on Thanksgiving day the average price of a dozen wholesale eggs shot up to $2, doubling in price from the start of the month. The holiday typically brings up demand, but experts speculate that California chicken farmers were already culling their flocks to meet the new legal requirements.
The current price for a dozen wholesale eggs: more than 35 percent higher than last year.
“I’m not sure that we can attribute all the price increase to the law, but there is no question that Prop. 2 is responsible for some of it,” said Jeff Perloff, a UC Berkeley professor of agricultural and resource economics. “And it’s anticipated that the price of eggs will continue to go up.”
In 2008 voters overwhelmingly passed Prop. 2, the first of its kind law. Known as the California Prevention of Farm Animal Cruelty Act, it requires farmers to give their egg-laying hens more space, including room to stand up, spread their wings and turn around. Laying hens have typically been housed in cages with 67 square inches of space. Now farmers must give each one 116 square inches. Knowing that it would take time and money, the legislation gave farmers seven years to fully come into compliance.
Estimating that a total retrofit would cost $400 million, farmers sued repeatedly and lost. The one concession they did get was the passage of a 2010 bill that required that shell eggs—not liquid eggs—coming into California from other states be produced under the same rules dictated by Prop. 2.
“At least it evened up the competition for California,” Perloff said.
Top egg producers from states including Iowa (the largest egg sellers in the nation), Missouri Alabama, Kentucky, Nebraska and Oklahoma challenged the law in federal court, saying that it violates the Constitution’s interstate commerce clause. The case was dismissed on the grounds that the states lacked legal standing, but the egg producers have filed an appeal. While California is the fifth largest producer of eggs in the nation—about a $1 billion a year business—it’s the largest consumer of eggs, importing 30 percent from other states.
“If the out-of-state egg producers win their challenge, California farmers are sunk,” Perloff say. “It will give everyone else the advantage.”
Jesse Choper, Earl Warren Professor of Public Law at UC Berkeley School of Law, says a successful appeal is not likely to happen.
“A be-kind-to-animals statute is very difficult to challenge under the constitution’s interstate commerce clause,” he says. “You would have to show that the law is about economics, but this law is about being nice to chickens. In order to win, the outside states would have to prove that they’re being discriminated against by being forced to bear an undue burden. But they’re only being asked to comply with the same rules as California—for the chickens.”
Iowa State University’s Egg Industry Center estimates that California will lose two to three million laying hens because of the space requirements required by the new law. More space per chicken means fewer fowl.
“A 3 percent decrease in egg supply would represent approximately 304 million fewer eggs available in California,” concludes research compiled by Maro Ibarburu, an associate scientist and business analyst at Iowa State.
Ibarburu says shopping statistics indicate that one person consumes 15 dozen eggs a year. He estimates that given the reduction in supply and the increase in price, consumers will spend $3.98 more a year on eggs. “This increase would be considered rather modest relative to total food costs,” he writes in his report.
But with the rise in retail prices for beef, pork and chicken—up more than 12 percent at the end of last year from the same period in 2013 due to nationwide droughts and the higher cost of animal feed—and now eggs, consumers may have to turn to different, less expensive proteins. Squirrel, anyone?
Posted on January 20, 2015 - 3:43pm