Starting 2015, the California egg law passed six years prior finally went into effect, making it so no eggs can be sold in the state unless the laying hens had 116 square inches per bird.
Even though the law is in California, any state wanting to sell there must comply. It essentially doubles the amount of space most hen houses need for the birds they already have.
In the first week of January, egg prices spiked higher according to Maro Ibarburu with the Iowa State University Egg Center.
Ibarburu says, “Right now the price in California is a lot higher than for example, the Northwest, if you look at the historical trend, the Northwest and the California prices were the same, on a mantle basis. And if you look at the last weeks prices, so this week, the California price is 66 percent higher than the Northwest.”
The market will have to rebalance as producers decide if they will comply with the new law and Ibarburu says it depends on how many will decide to make a bigger investment, “Even though this has the potential to have an excess supply in the rest of the country. With time and as we reach a new equilibrium, it shouldn’t be that different.”
How long higher prices will last is unknown according to the Iowa Egg Council’s endowed ISU professor Hongwei Xin. Some out-of-state egg producers, like Iowa, are making California a specialty market by installing new regulation housing.
Xin says, “If you build a 100,000 layer house to meet the new regulation. We’ll be looking at about 3 million dollars.”
Other producers might just choose to sell to other markets.
Xin says, “Well, there’s a lot of uncertainty as far as how much of conversion is being done, inside of California and how many external houses are being built. We know that there are a lot of, quite a bit of construction going on in preparation for California egg supply but as for how much, that’s a little bit hard to say right now.”
Iowa is the biggest egg producer in the country and historically nine percent have been exported to California or about 1.35 billion eggs a year.