eggsThe dreaded, but predicted,  egg price spike finally hit in early 2015, with “shell egg” prices soaring as a result of Proposition 2 going into effect.  California consumers have seen egg prices double, or more, in the first few weeks of the new year.  Retailers are scrambling to find Proposition 2-compliant eggs, going so far as to poach eggs from other states, consumers are getting fried about the price increase and…………OK, enough with the bad puns.  As of early 2016, egg prices appear to have stabilized and, of late, dropped back to early 2014 levels.

In 2008 California voters passed Proposition 2 which essentially outlawed the use of “battery” cages in egg production in the state. California producers, fearful they would be put out of business by cheaper eggs from out of state, then secured passage of a state law in 2010 that also banned grocery stores from selling eggs that didn’t meet the new California standard. Attempts by other states to overturn the law in court have been, so far, unsuccessful, however the legal challenges have not fully played out. People in the egg industry say that this is one reason the egg industry in California has gone into a sharp decline. According to government statistics, the number of egg-laying chickens in California has fallen by 23 percent over the past two years.    California used to import 30% of its eggs from other states, but because of a hen-laying shortage in the state, retailers have had to look to other states to provide over half of California-sold eggs.  Government agencies report that the average price for a dozen jumbo eggs in California is $3.16, up from $1.18/dozen a year ago.  As of February 2016, the average egg price in the U.S. dropped back to historical levels.   In California, a dozen eggs can be purchased for under $2.00.   In fact, Costco outlets in California are selling 18 extra large eggs for under $2.00 as of April 2016.

According to the USDA,  in 2014, egg prices in most markets experienced a brief and very sharp price spike. Egg prices traditionally are strong in the fourth quarter, but the spike in 2014 was larger than usual, considering that table egg production increased in November 2014.  The high prices nationwide in the fourth quarter of 2014 are likely the result of both strong exports of table eggs to Mexico in November and uncertainties about the future of the table egg market in California due to new cage size regulations that went into effect on January 1, 2015. In the short term, the new regulations have widened the price difference between the California market and other parts of the United States. At the end of October 2014, the difference between the wholesale prices of Grade A large eggs in the Southern California market and the New York City market was around 12 cents per dozen. Prices in Southern California rose to average $2.68 per dozen by the middle of December.  Like in other markets, prices then began to decline, but by the beginning of 2015 had only fallen to around $2.28 per dozen, resulting in a price differential between the Southern California market and the New York City market of over $1.00 per dozen. This chart is based on information from the USDA report:

According to one knowledgeable observer, before January 1, 2015, the average price difference between the California price series and the National price series was 17.54 cents/dozen.  However, in the first few weeks of the new year, the California premium over National prices increased 10 fold to $1.75/dozen.  Thus, it appears Proposition 2 has caused a $1.58/dozen increase in the price of eggs in California, so far.  Given that the average price of large eggs in California in 2014 was $1.31/dozen, we can thus say that the new law caused a 120.6% increase in the price of California eggs.  However, it is unclear as to  how much of this price increase is due to a temporary shock (partially resulting from CA producers reducing flock size) and how much is a long-term price increase due to increased marginal costs of producing eggs.  The only way to answer that question is to wait and see what happens to egg prices.

One of the major reasons for the price spike is that not enough law-compliant egg producers are 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 California than in other parts of the West. Some observers have documented 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. As 2015 began, California was short by 2-3 million laying hens without legally compliant housing to meet the residents’ demand for eggs, so retailers had to look to other states for eggs.   Another troubling indicator is that the wholesale price of eggs is almost 300 percent higher than it was a year ago.  That does not bode well for future retail egg prices.

Nor does the avian “bird” flu that hit Midwest farmers in 2014.   According to the NY Times, deadly avian flu viruses have affected more than 33 million turkeys, chickens and ducks in more than a dozen states since December 2014.    Iowa, where one in every five eggs consumed in the country is laid, has been the hardest hit: More than 40 percent of its egg-laying hens are dead or dying.   Notably, the high density of these egg farms is one of the major reasons that this flu, which can kill 90 percent or more of a flock within 48 hours, is decimating more birds in Iowa than in, say, California.  So the California law may have played a role in slowing the spread of this flu.   Analysts project that it will take years for these flocks to be replenished, meaning that high (or higher) egg prices will be with us for the coming years…..not months.    The AP claims that egg prices jumped up by 17% in just one month.   It also talks of increased turkey prices on the horizon.

For now, consumers have little choice but to wait and see how the national egg markets respond to the new California law and how the avian flu effects poultry farms.  Price relief is not likely in the foreseeable future unless consumer demand drops noticeably.   Most egg farmers are taking a wait-and-see approach before they make the investment necessary to sell eggs in California.  Consumers will, alas, have to do the same while they try to figure out what else goes well with bacon and toast.   In the meantime, here are some egg shoping tips that will help avoid paying more than you should for eggs:

• The color of the egg:  Brown eggs are no healthier or fresher than white ones. The shell color is usually a reflection of the feather color of the chicken—brown eggs come from chickens with brown feathers, and white eggs come from chickens with white feathers. Impact on nutrition? None. More humane? No.

• Pastured/pasture-raised. If you don’t mind paying extra (about twice as much), these eggs could be good for seeking both enhanced nutrition and humane treatment. Pastured hens move about freely outdoors, have an organic diet and are allowed to eat grass, worms and bugs, all of which produce a deeper-colored yolk, creamier texture and richer flavor. A study published in the journal Renewable Agriculture and Food Systems found that eggs produced by pasture-raised hens contained more than double the omega-3s and twice as much vitamin E as conventionally raised eggs.

• “Certified Humane” and other feel-good words:“Certified Humane,” “Animal Welfare Approved” or “Food Alliance Certified,” it means that the manufacturer’s claim of “cage-free,” “free-range” or “pasture-raised” might have been verified by an independent third party. This labeling has everything to do with humane treatment and nothing to do with nutritional content. There are multiple third-party certifiers.  To learn more about the criteria they use to “certify” food, check out this link.  Similarly, “vegetarian fed” eggs are often touted as better than regular eggs.  But keep in mind that chickens mostly eat vegetable matter, but they also regularly eat bugs and worms. If your eggs are labeled vegetarian and free-range, they might not be real “vegetarian” eggs, as roaming hens probably eat a bug or two. Nor is there any known nutritional difference between vegetarian and nonvegetarian eggs.

• Omega-3–enriched. These eggs come from hens that are fed a diet rich in algae, flaxseed, chia seeds and/or fish oil—all good sources of healthful omega-3s. If you eat fatty fish several times a week and/or take a daily omega-3 supplement, you might as well skip omega-3–enriched eggs and save yourself some money.  But if you want to avoid fish may want to try omega-3–enriched eggs.

Now that egg prices appear to be dropping in 2016, the worst of the Proposition 2 impacts upon the California market may prove to have passed.