Home Nation/World Business

Egg prices plunge as supplies rebound

Tim Hearden

Capital Press

Published on May 4, 2016 9:22AM

Tim Hearden/Capital Press   
Eggs are displayed at the Farmers’ Market Place supermarket in Shasta Lake, Calif. Commercial egg prices in California have fallen below levels seen before the passage of Proposition 2, which mandated minimum cage sizes for laying hens.

Tim Hearden/Capital Press Eggs are displayed at the Farmers’ Market Place supermarket in Shasta Lake, Calif. Commercial egg prices in California have fallen below levels seen before the passage of Proposition 2, which mandated minimum cage sizes for laying hens.

FRESNO, Calif. — Commercial egg prices in California are plummeting, and a slow global economy combined with a rebounding chicken flock after last year’s devastating avian flu outbreak are among the contributing factors.

As of April 29, retailers in the Golden State were paying an average of $1.42 to $1.49 per carton for jumbo and extra-large Grade AA eggs, and Southern California retailers paid as little as 68 cents a carton for extra-large eggs and $1.01 per dozen jumbo eggs, according to USDA shell-egg market reports.

It’s a precipitous drop from the more than $2.50 per carton that retailers were paying for jumbo eggs in early 2015.

Egg prices are now on a par with what they were in November 2008 when voters passed Proposition 2, which mandated minimum cage sizes for egg-laying hens.

The price slide shows the industry has withstood the requirement that each egg-laying hen have at least 116 square inches to spread its wings, said Paul Shapiro, vice president of farm animal production for the Humane Society of the United States, which sponsored the initiative.

“Last year was a bit of an anomaly because of the catastrophic bird flu that resulted in tens of millions of laying hens being killed across the nation,” Shapiro told the Capital Press in an email. “All that said, the big story is now that many California retailers are going 100 percent cage-free with their egg supply, and smart egg producers will convert sooner rather than later to capture that market.”

But the drop in prices concerns Karen Ross, California’s secretary of food and agriculture, who noted that prices for feed, water, land and other inputs aren’t going down.

“I’m very worried,” Ross told the Capital Press. “We actually had such high prices for longer than normal, and then to see how far down it’s come.”

Prices may not be finished dropping, either, said Randy Pesciotta, vice president of the egg division for the Bayville, N.J.-based commodity reporting service Urner Barry. As a global economic slowdown and a strong dollar have put a damper on exports, U.S. producers are quickly replenishing their flocks after losing 35 million chickens last year to bird flu.

One industry forecast predicted that U.S. egg producers will have 320.5 million chickens by December, up from 304 million now, Pesciotta said.

“That’s quite a bit of expansion still to come,” he said. “Some of it will be in the form of cage-free. That’s where the push is coming from on the demand side. But if that production is put in before the demand factor (rebounds) … it becomes a generic egg.”

Last year’s high prices prompted many consumers to find substitutes for eggs, Pesciotta said.

“A lot of that business hasn’t returned, and some of it may never return,” he said. “We lost all our export business because the price was so high.”

The prospect of increasing prices were a key fear among producers when voters passed Proposition 2, which also established cage size minimums for those farms outside California that sell eggs into the state. Critics of the initiative argued the cost of retrofitting farms to comply with the new law would make eggs cost prohibitive for many consumers.

At first, Midwestern egg producers that didn’t want to retrofit their barns simply avoided California. Those that did want to market to California found confusion in what actually constituted a Proposition 2-compliant cage, said Joy Mench, a University of California-Davis animal science professor.

“(T)he wording of Prop. 2 does not allow it to be regulated, so there is no official definition of what it means,” Mench said in an email. “That will have to be decided in the courts, either because there is a lawsuit or because someone is prosecuted.”

In enforcing the initiative, the CDFA uses the federal Shell Egg Food Safety rule, whose space requirement is larger than the United Egg Producer guidelines that most of the other states use, noted Maurice Pitesky, a poultry specialist at the UC-Davis School of Veterinary Medicine.

However, more eggs became available to California as numerous major chains — including chain stores such as Costco, Safeway and Walmart as well as food manufacturers such as General Mills and Nestle — announced plans to source exclusively cage-free eggs. Any new egg-laying facilities built in the last three or four years have been compliant, Pesciotta said.

The chain stores “are all coming out making statements due to the pressure put on them by the animal groups,” he said. “It is what it is. They’re bowing to the pressure. The industry has one choice. You’ve got to follow the lead or you’re going away.”

Pesciotta thinks prices will stabilize — in California and elsewhere — as the cage-free supply chain is fully established. Debbie Murdock, executive director of the Pacific Egg and Poultry Association, says she hopes so.

“All those eggs will be California compliant,” Murdock said. “Anybody that sells to those big suppliers, like McDonalds and Walmart, are now going to build to what they’re asking for. That will make it compliant with California.”

Ross believes exports will rebound as California continues to develop trading relationships in places like Southeast Asia, she said. In the meantime, some egg producers grappling with low demand and prices may do what some California dairy farmers have done amid low milk prices — diversify their crops, she said.

“I’m still so optimistic” about the state’s egg industry,” she said. “For all the challenges that we face, there are tremendous opportunities.”


Share and Discuss


User Comments