The puns were ample: California cage law runs “afowl” of other states’ laws; California law puts the chicken before its eggs; California humane chicken law ruffles feathers; and the list could go on. But reality is a California law that went into effect Jan. 1, 2015, requiring shell eggs sold in the state to come from chickens in larger cages than the industry norm appears certain to make eggs more expensive in the Golden State and has added a layer of uncertainty for the egg industry in other states as well.
Preliminary estimates principally from academic institutions forecast shell egg prices initially may rise 10% to 40% and maybe more because of the law. While the greatest impact is expected in California, the entire nation may see higher prices as producers who ship eggs to California must comply with the law. A number of producers already have made changes in crate sizes, both in California and in other states.
“Depending on your source, egg prices are quoted as jumping 10% to 40% for California consumers,” according to a report from the Egg Industry Center (E.I.C.) at Iowa State University.
The initial law passed in 2008 required calves raised for veal, egg-laying hens and pregnant sows be confined only in a way that allow animals to lie down, stand up, turn around freely and fully extend their limbs. It applied to California producers only. Several states and countries have passed laws affecting confinement of veal calves and gestating sows, but chicken cage sizes generally were not part of the laws, although they have been in the sights of animal rights groups for decades, and a number of other states are considering new chicken cage laws.
The 2008 law was amended in 2010 to include all shell eggs sold in the state to be from producers who met the California standards. That changed everything.
While some animal rights groups maintained the California law meant “cage free” egg production, the state interpreted the law to require production facilities provide at least 116 square inches per hen. That’s 73% larger than the industry norm of 67 square inches in what are known as “battery cages” that allow minimal movement. A law banning “battery cages” went into effect in the European Union in 2012, significantly disrupting the egg industry in member countries for a period.
“While there are various ways to achieve these requirements, all of them lead to a higher cost of production,” the E.I.C. said. The study estimated the additional cost at 15%. Producers have two options, the E.I.C. said: build additional hen houses to maintain similar flock sizes or downsize flock sizes and modify existing facilities.
Early in 2014 Missouri filed a lawsuit to block the California law from imposing restrictions on other states, in part because it was seen as violating the interstate commerce clause of the U.S. Constitution and because its intent was “economic protectionism” for California egg producers rather than one of the law’s stated purpose of reducing Salmonella (which the poultry industry has shown isn’t accurate). Five other states, including Iowa, the nation’s largest egg producer, also sued California. In October, a federal district judge in California dismissed the case on grounds the lawsuit was not on behalf of the general populations of those states as it would affect only a subset of the population, “farmers who intend to participate in California’s egg market,” and banned it from being refiled, although it may be appealed.
Ironically, the restrictions on out-of-state producers were enacted in 2010 when it was realized the new law put California egg producers (a subset of the general population) at a distinct disadvantage to producers in other states.
That’s important because California is an “egg deficit” state, importing from other states more than 50% of the estimated 10 billion shell eggs consumed annually. California is the nation’s fifth largest egg producer but the nation’s largest egg consumer and the world’s ninth largest market. According to the E.I.C., between July 1, 2012, and June 30, 2013, Iowa shipped more than 1,311 million eggs, or 9% of its production, to California, and accounted for 30% of California’s egg imports. Missouri shipped about 572 million eggs, or 33% of its production, equal to 13% of California’s egg imports.
While the court ruled the law only affects a few egg producers in other states, it has an impact on all of California’s egg consumers. The E.I.C. estimated the changes would increase the cost of a dozen eggs 26.55c, based on a five-year average price of $1.77 per dozen. Should families buy fewer eggs because of higher prices, the E.I.C. said it “seems most likely” the reduction would be by “lower income families or those who are already very heavy users of eggs.”
Whether the California law ultimately will stand the interstate commerce test and how it will affect supply, demand and prices remains to be seen. Egg producers in other states, and the broader agricultural industry, have expressed great concern that if the California law stands, the barn door is open for more restrictions that will not only increase food prices but may ultimately cripple free trade between the states.