Home Audio Price premiums making producers think twice about California's egg law

Price premiums making producers think twice about California's egg law

DES MOINES, Iowa – The California egg law that kicked in on January 1st meant a lot of headaches for the egg industry.

The law prescribed more space per laying hen than the industry standard, and if a particular operation doesn’t comply with the law, its eggs can’t be sold in California, a state that eats one of every ten eggs produced in the U.S.

Naturally much of the industry was unprepared to provide eggs under those conditions, and a shortage of compliant eggs caused prices to spike in California early this year. Last week, southern California supermarkets were paying about two dollars and 20 cents for a dozen large eggs, but in mid-January, those same dozen eggs cost around three and a half dollars.

Based in Seymour, Indiana, Rose Acre Farms is the country’s second-largest egg producer; CEO Marcus Rust says the difference has made some producers think twice about budgeting more space per bird.

“We looked at it originally [and] I figured Y2K-type effect,” explains Rust. “Yeah there’s a lot of talk about it, and everyone’s talking about it; it won’t happen. But it did happen. And when it did happen, the premiums got up to maybe two bucks a dozen or a dollar a dozen for a short time period. So, we decided that we needed to have some. So there were some older flocks, and some of the birds got moved out earlier and we’re still producing some California-compliant eggs right now.”

Demand for Easter eggs has delayed a solid read on what egg prices will look like in California, with some analysts predicting market equilibrium at about 50 cents above prices here in the Midwest.

Earlier in the year, several states, including Iowa, mounted an effort to challenge the California law, but their suit was thrown out on lack of standing. Currently the case is on appeal, but Rust says he’s pessimistic that much could be done to change the way eggs are now produced, with the California law factored in.

“I think our court system in this country is pretty well broken down,” says Rust. “It takes years and years to get to cases, and then the cases are appealed, and appealed. So any effort legally is probably a wasted effort, because the legislature will just change the law and then you’ll have to file again.”

To hear more about how the California egg law has affected the egg industry, click the audio player above this story.