Initial short supply causes price run-up for California eggs

New rules for producing shell eggs for use in the state of California took effect on January 1, 2015, and the price for cage-produced eggs in California went on a wild ride in the month of January.

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Experimental I Dreamstime.com | The Urner Barry average quoted spot market price in the month of January for cage-produced California-compliant eggs was $1.66 per dozen higher than the average Midwest spot market price in January.
Experimental I Dreamstime.com | The Urner
Barry average quoted spot market price in the month of January for cage-produced California-compliant eggs was $1.66 per dozen higher than the average Midwest spot market price in January.

New rules for producing shell eggs for use in the state of California took effect on January 1, 2015, and the price for cage-produced eggs in California went on a wild ride in the month of January.

Randy Pesciotta, vice president, egg department, Urner Barry, said the wholesale spot market price for California-compliant eggs rose sharply and peaked at $3.42 per dozen.

Because of this high spot market price, some egg producers shipped truckloads of cage-free eggs meeting all Proposition 2 requirements to California for sale as cage-produced Proposition 2-compliant eggs. The spot market price for California-compliant eggs in the month of January averaged $2.9571 per dozen versus the Midwest average price for eggs of $1.2946 per dozen, an amazing spread of $1.66.

Pesciotta said the price premium between California and the Midwest for eggs has varied over the years, but that it has typically run in the 12-18 cents-per-dozen range in the years before the implementation of Proposition 2. He said the price spread has increased when tighter emissions standards have been implemented in California for diesel trucks and then adjusted back down somewhat as the supply of carriers came back into line with demand for shipments to the Golden State.

High retail egg prices

As expected, retail prices for eggs in California surged along with the wholesale price. There are published reports of retail prices for cage-produced eggs reaching the $5-6-per-dozen range in some Southern California stores. Finding actual retail price data for cage-produced California-compliant eggs isn’t as easy as it is for eggs sold in other states. For example, Walmart.com will provide the price for eggs in all of the myriad forms and pack sizes it sells in for each retail location in the U.S., except for the California-compliant cage-produced eggs, which weren’t on the list of available items in early February.

The high wholesale price for California-compliant cage-produced eggs and the subsequent high retail prices are believed to have led to a drop off in consumer egg purchases and a subsequent decrease in demand from retailers.

“It works every time: Nothing cures high prices like high prices,” Pesciotta said.

He explained that by the end of January the wholesale supply of cage-produced Proposition 2-compliant eggs began to exceed the demand and the spot market price had fallen to $2.74. He also said numerous loads of eggs were being offered at close to $2 per dozen in early February. 

Future premium for California eggs

As the wholesale egg prices decline, retail prices should soon follow, and this will allow for the market to find a sustainable spread or premium for cage-produced California-compliant eggs over the Midwest price. Pesciotta said that the market might not discover a long-term California egg price premium until after Easter, which falls on April 5 this year. Industry sources have predicted that the premium between California-compliant cage-produced eggs and the Midwest quote may settle at around 40 cents per dozen, or more than twice what the differential was prior to the implementation of Proposition 2.

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