After Proposition 12 came into effect on January 1, 2022, egg prices in the U.S. state of California were $2.23 per dozen at the first of the year, then increased to $2.87 later in the month. In the first week of February, prices had fallen back to $2.42, then reached $2.24 in mid-February.
While egg prices are fluctuating as anticipated, prices started morphing into Urner Barry’s cage-free quotation in the middle of December 2021, said Randy Pesciotta, Vice President of the company, in an interview with Egg Industry Insight.
California’s egg market
Because larger retail markets began early preparations by requesting cage-free eggs months before January 2022, Proposition 12’s implementation was smoother than some expected. However, its known that switchover markets tend to overreact, explained Pesciotta.
“While markets are known to fluctuate, the expectation is that they will eventually level out. I would expect the same scenario in California,” he added. “There was an initial rush to build inventory on the retailers’ part.”
Supermarkets replenished their inventories to ensure supplying cage-free eggs would not be an issue. This surge caused prices to increase for consumers, which reduced the consumer demand, causing the market to retreat. According to Pesciotta, the price increases potentially stagnated sales and have not quite picked back up again, which could potentially be a result of the declining markets.
The cost of other protein groups such as chicken, turkey, pork, beef and seafood could also influence what the egg market does, explained Pesciotta. “When you see those proteins at a higher cost, eggs will generally follow the same patterns, because they will still be the cheapest source of protein compared to the others.”
In short, Proposition 12 arrived as Pesciotta expected it to. “While prices can be chaotic after a market change, inventory and demand are likely to stabilize once retailers are supplied.” he explained.
What’s the supply like?
According to Pesciotta, the supply situation is not fully established due to companies still converting to cage free. However, companies that are currently not producing cage-free eggs, but have plans to, are expected to do so soon in the face of flock rotations, further influencing the future supply.
“Not everybody that was previously compliant with the state law enforcing 144 square inches per bird converted to cage free. I'm not confident that 100% of California producers with plans to convert have transitioned their flocks yet,” he said. “Typically, we need three months to establish how supply and demand will behave long term. It's an ongoing process.”
What are the effects of U.S. state legislation?
While Massachusetts legislation has potentially prevented movement of some eggs from the Northeast U.S. to California, as of right now, it hasn’t had a large effect on California’s egg supply, described Pesciotta.
“Additionally, Massachusetts has a significantly smaller population,” he said. “Egg color could also play into that. California is a white shell marketplace and a lot of business in Massachusetts is brown shell.”