LAKESIDE, Calif. -- If consumers are thinking that eggs seem a little pricier, consider the recent changes on Frank Hilliker's ranch.
In the past six months, the third-generation egg farmer in central San Diego County has reduced his flock by half and embarked on a $1 million overhaul of his henhouses to make them more spacious. Customers are now paying about 50 percent more for a dozen eggs from Hilliker's family business at around $3 a carton.
It's all to comply with a landmark animal-welfare law that took effect in California on New Year's Day.
In 2008, voters overwhelmingly approved Proposition 2 to effectively abolish the close confinement of farm animals in cramped cages and crates -- a practice that animal advocates say causes needless suffering and boosts the likelihood of salmonella contamination.
But to ensure the well-being of California's 15 million laying hens, consumers will probably have to pay more for the supermarket staple. Prices for wholesale eggs are expected to rise 10 percent to 40 percent in 2015 because of infrastructure upgrades and the reduction of flocks to provide animals more space, according to Dan Sumner, an agricultural economist at the University of California, Davis.
Already, the specter of California's regulations is believed to be contributing to record prices for eggs. The average wholesale cost of a dozen large eggs hit a peak of $2 on Thanksgiving Day -- doubling in price from the start of November before settling this week at about $1.40. It comes at a time when soaring meat prices are expected to help push U.S. egg consumption to its highest level in seven years.
Adding to the pressure is increased demand for U.S. eggs in Canada and Mexico, where domestic poultry and egg industries are battling bouts of avian flu.
"It's sort of a perfect storm," said Ronald Fong, president and chief executive of the California Grocers Association, who doesn't expect a significant egg shortage this month, but is less clear about changes in retail prices.
California's rules are rippling beyond its borders. No state consumes more eggs -- and about a third of its supply must be imported. Iowa, where laying hens outnumber people by a ratio of 2-to-1, sells about 40 million eggs a day to out-of-state buyers.
Under a separate bill signed by former Gov. Arnold Schwarzenegger in 2010, all shell eggs arriving from other states were also required to comply with Proposition 2 by New Year's Day.
That requirement set off a barrage of lawsuits, including one from six leading egg-producing states. Missouri, Alabama, Iowa, Kentucky, Nebraska and Oklahoma invoked the constitution's interstate commerce clause by arguing that California was interfering with their local egg industries. The suit, which was dismissed by a federal judge in October, is being appealed.
"Egg producers have had six years to come into compliance with Prop. 2, and instead of using that time to convert to cage-free systems, they've simply sued and sued and lost every suit they filed while sitting on their hands," said Paul Shapiro, vice president for farm animal protection at the Humane Society of the United States, a leading proponent of California's new animal-welfare regulations.
Chad Gregory, president of the Georgia-based United Egg Producers, which represents more than 90 percent of the nation's egg farmers, said the industry would adapt to consumer demands -- especially since other states such as Oregon, Washington, Michigan and Ohio have joined California in introducing similar laws. He hopes the federal government will eventually step in to provide uniform guidelines.
"The interstate commerce challenge is going to be a bigger problem unless we have national standards," Gregory said.
Animal-welfare groups have successfully galvanized opposition to conventional cage systems, also known as battery cages, in no small part because they are so visually objectionable.
An invention of 20th century industrial farming, the systems house tens of thousands of birds in rows of tiered, wire confinements. A typical hen spends its entire life in a roughly 8-by-8-inch space, hemmed in on all sides by other birds. Detractors say it's cruel and conducive to injuries that lead to disease. The egg industry argues that the practice is safe, humane and essential for keeping a cornerstone of the American diet cheap and readily available.
Proposition 2, also known as the California Prevention of Farm Animal Cruelty Act, doesn't explicitly call for the elimination of cages. Rather, it prohibits confinement of farm animals that doesn't allow them to "turn around freely, lie down, stand up or fully extend their limbs."
Egg farmers say they're being guided by regulations established by the California Department of Food in Agriculture in 2013. Those rules, designed to adhere to Proposition 2, require a minimum of 116 square inches of space per bird in an enclosure -- nearly double the previous standard.
Hilliker, like many other farmers, has interpreted the department's regulations as a green light to keep conventional cages as long as they meet the density requirements. But he's still planning to retrofit his five barns so that they're cage-free.
SundayMonday Business on 01/05/2015