Study finds higher egg prices from California law
Sweeping laws that changed animal confinement standards in California raised the price of eggs dramatically upon adoption and have kept prices higher than had the laws not been enacted, according to a new Purdue University study.
“Our results indicate that over the 22 months observed in our data after the initial structural break in retail prices, total consumer welfare losses from higher retail prices in the three markets (studied) were between $117 million and $144 million, or between $12.15 and $14.97 per household,” the authors, Jason Lusk and Conner Mullally, wrote.
An analysis of the laws’ effects on egg production and prices in California could inform other states considering similar legislation, the Purdue researchers said.
The California law, approved by 63 percent of California voters in a referendum, required farmers to increase the amount of space available to animals in chicken cages, veal crates and sow gestation crates.
The law banned production and sale of products that didn’t meet these requirements. The California legislature later passed a law that barred the import of eggs and other livestock products from other states unless they were raised in accordance with the California laws.
That law spurred other states, including Iowa, to sue California for violation of the U.S. Constitution’s commerce clause. However, that lawsuit, led by Missouri’s attorney general, was unsuccessful.
Once the law banning the import into California of eggs not produced under the law’s specifications took effect, eggs supplies declined, and prices rose.
By July 2016, the number of egg-laying hens and eggs produced in California had dropped by 35 percent. Lusk and Mullally say that led to price increases as high as 33 percent per dozen. The average price for a dozen eggs was 22 percent higher from December 2014 to September 2016.
By fall 2016, prices settled down but were still about 9 percent higher than they would have been without the new law.
“Egg prices compared to other places increased pretty dramatically,” Lusk said. “Californians initially paid quite a bit more for eggs, and now they’re paying more, but not as much as right when the law went into effect.”
Lower prices at the end of the study may stem from a boost in supply following a burst of production after the avian flu epidemic. “After the recovery of the egg industry from the 2015 bird flu outbreak, there was a glut of eggs on the market that led to record-low prices. The large available supply would have made it fairly easy to redirect eggs to California in response to high prices,” Mullally said.
But egg production in California is still significantly lower than it had been before the new laws took effect. According to data from the U.S. Department of Agriculture’s National Agricultural Statistics Service, California produced more than 5 billion eggs every year from 2008 to 2013. By 2014, that number had dropped to about 4.6 billion, and in 2015 and 2016, California hens produced fewer than 3.5 billion eggs.
Lusk and Mullally believe the findings can inform residents and lawmakers from other states considering laws that require larger living spaces or free-range requirements for animals.
“Improving animal welfare may be a worthy policy goal. However, our results show that any such policy changes come with a price,” Mullally said.
The findings also show that because of higher retail egg prices, Californians may experience at least a $25 million annual welfare loss, a monetary measure of how a change affects quality of life.
Lusk’s future work on the issue will look at consumers’ stated preferences for cage-free eggs and the actual demand.
Want more news on this topic? Farm Bureau members may subscribe for a free email news service, featuring the farm and rural topics that interest them most!