Wednesday, December 31, 2014

The egg market is ready to crack

The drop in gasoline prices could not come at a more opportune time for American families. It puts a little more cash in hand that can be used to pay for other necessities which haven’t been so kind to personal finances.

Food inflation has been running roughshod through consumers’ pocketbooks, achieving unprecedented heights over the past twelve months. Retail beef and bacon prices are up 14%. Spiral-cut hams, which have become a holiday tradition, cost 17% more this Christmas than last. 

Outcomes of regional droughts in steer country and an international piglet illness, these prices may correct themselves, but it won’t be anytime soon. It will take years to get the animal populations back to levels that can truly satisfy consumer demand.

While this is all occurring, the egg market is taking on a startling and permanent transformation.

California, our nation’s most populous -- and most influential -- state, has a new law requiring all eggs sold within the Golden State’s borders to be produced by hens raised in cages 73% larger than previous standards. Prior to the launch of the law, a cage could be 67 inches square. Now, they have to be 116 square inches.

This is the result of a proposition that the Humane Society of the United States (HSUS) somehow influenced 63% of California’s voters into approving under the claims that battery cages (as they are known) are cruel to chickens and increase the prevalence of salmonella poisoning.  

This has led to a 23% drop in California’s egg production in the past two years as many farmers have opted to not make the investments in equipment, buildings, and real estate to accommodate the new rules. Those who have stayed in business have made those necessary expenditures while at the same time cutting back on the size of their flocks.

What does this mean to Californians? Some say it will mirror what happened in the European Union when a similar law went into effect in 2012. Prices there rose 41%. As I write this column, it’s not yet 2015 and prices are already up 35% in California, with some consumers in food deserts seeing an unconscionable 70% increase in retail costs.

What does this mean to other Americans? As California’s population grows and the demand for eggs follows, egg producers throughout the US will undoubtedly meet the demand if the price is right for them to justify the pricey changes in the procedures. Californians already eat 4 billion eggs imported from other states and they represent 12% of the US population, so what they need and want really drives what happens throughout the country. That means more farms with larger cages, less chickens and higher costs nationally, not just at the epicenter of the new standards.

To that end, wholesale prices are up 34% nationally. And, we’re just at the tip of the iceberg when it comes to the transformation of the egg industry. It wouldn’t be a stretch to see the federal government mandate the larger cages; after all, it has always used the regulations of bureaucratic entities like the California Air Resources Board, for example, to set the laws for the rest of the land. On top of that, the Humane Society isn’t fully satisfied with what it wrought and is now trumpeting 216-inch cages or the complete lack thereof with a focus on free range.

This anthropomorphic over-attention for a food animal’s comfort doesn’t hurt the “evil” egg companies as much as it hurts the average family. Eggs are a staple of the breakfast table, a formerly inexpensive healthy high-quality protein. Eggs are also found in virtually everything we buy at the store, from breads to sweets to noodles. Because of all of the above, the per capita consumption of eggs is a whopping 259 per year.

Food inflation, whether caused by natural or governmental factors, is about the worst thing that could happen to a working-class family. Everyone needs to eat. It’s not something one can skimp on. There’s a reason that more than 400 local families line up for boxes of free food every other Saturday in Medina…it’s a tough world out there. Laws like this, no matter how well-meaning they may be, only make things tougher.

From the 05 January 2015 Lockport Union Sun and Journal   

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