Blog

Effect of New California Laws on Egg Prices

A number of recent articles have reported on California's new egg law.  Here's a summary of what's happening if you're unaware:

“To recap, in 2008 California voters passed Prop 2 which essentially outlawed the use of “battery” cages in egg production in the state. California producers, fearful they would be put out of business by cheaper eggs from out of state, then secured passage of a state law in 2010 that also banned grocery stores from selling eggs that didn’t meet the new California standard. Several state attorney generals challenged the law, on the grounds that it violated the interstate commerce clause, but their initial attempt was unsuccessful.

In any event, all this finally went down on January 1, 2015. ”

Now that the new law is in place, there has been much interest in the effects on California egg prices.  I've seen a large number of articles written on the topic either before the law went into effect on Jan 1 which speculated on the potential change in egg prices or articles reporting on the effects after the fact.  I previously showed a picture taken in a grocery store that one of my students from California sent me suggesting that California consumers were taking note of rising prices.

Most of what I've read in these stories, however, is anecdotal.  They often only indicate what happened to egg prices in California without comparing to prices elsewhere (how to we know there isn't an overall price increase in every location due to some other factor besides the new law?).  As a result it has been difficult to get a sense of whether the increase in egg prices in California is due to the new law or some other factor.

To delve a bit into the issue, I was able to locate some data from the USDA, Agricultural Marketing Service (AMS).  Almost every day since the first of January, the AMS has released the National Shell Egg Index Price Report, which reports egg prices nationally and in California. Because this is a new report in 2015, I had to contact the AMS to get the data going back into 2014. To make things simple, I only focus on the prices of large eggs and the data are reported in cents per dozen.  

Here's a graph of the two price series over time, with the bold black vertical line indicating when the new CA law went into place. 

The first thing to note is that beginning in November, egg prices started increasing in California, but they were also increasing in the rest of the US.  Thus, attributing the November price increase to the new CA law (as many news stories did) seems misplaced.  

However, toward the end of November, and especially after the 1st of the year, the two price series begin to diverge.  After almost a year of moving up and down in tandem, something clearly happened around the first of the year that caused a divergence, and that "something" is almost certainly the new CA law.

One way economists try to sort out the effects of a policy such as this is to calculate a "difference in difference."  The reported price premium for CA eggs may be due to the way the AMS is measuring these data relative to the National price series, making us skeptical of the reported premium at any point in time.  However, we can be more confident in how this premium changes over time, because a "difference in difference" nets out these measurement effects, among other factors.  

Before Jan 1, 2015, the average price difference between the California price series and the National price series was 17.54 cents/dozen.  After Jan 1, the California premium over National prices increased 10 fold to 175.62 cents/dozen.  Thus, as of the date of this writing, it appears the new CA law has caused a 175.62-17.54 = 158.08 cent/dozen increase in the price of eggs in CA.  Given that the average price of large eggs in California in 2014 was 131.05 cent/dozen, we can thus say that the new law caused a (158.08/131.05)*100 = 120.6% increase in the price of California eggs.  

Now, as we can see from the figure above, the price series appears to be coming back together at the beginning of February, so we don't yet know how much of this price increase is due to a temporary shock (partially resulting from CA producers reducing flock size) and how much is a long-term price increase due to increased marginal costs of producing eggs.  The only way to answer that question is to wait and see what happens to egg prices.  

Prop 2's Eventual Effect on California Egg Prices

I've seen a number of stories in recent weeks about the effects of Prop 2 on California egg prices (e.g., see here or here). To recap, in 2008 California voters passed Prop 2 which essentially outlawed the use of "battery" cages in egg production in the state.  California producers, fearful they would be put out of business by cheaper eggs from out of state, then secured passage of a state law in 2010 that also banned grocery stores from selling eggs that didn't meet the new California standard.  Several state attorney generals challenged the law, on the grounds that it violated the interstate commerce clause, but their initial attempt was unsuccessful.  

In any event, all this finally went down on January 1, 2015.  It seems California consumers are noticing higher prices (Note: it seems egg prices were already rising throughout the country before this).

One of my students, from California, passed along this picture one of his friends recently took at a California grocery store.

Animal Welfare Conditions for Hens Making Eggs for Whole Foods

I ran across this story in the New York Times via a Facebook link from Marc Bellemare to a blog post by James McWilliams.  

The story is interesting for a number of reasons.  First, an animal advocacy group uses the same sorts of undercover video tactics to expose animal welfare problems, but this time does so for a cage free, organic egg producer that sells to Whole Foods among others.  Second - and this is the issue that bothered McWilliams - the New York Times story was relatively dismissive of the video and gave the egg producer's side of the story a "fair hearing" (something presumably they wouldn't have done had this not been a cage free, organic producer).  

I think it's actually a good lesson on both counts.  Cage free or organic does not necessarily guarantee high animal welfare.  There are many variables related to management and monitoring, among others, that are important. But, secondly not all undercover videos are what they seem.  As the 3rd sentence in the NYT story begins:

“The hens in the video belong to Petaluma Farms, whose owners assert that the group is distorting and exaggerating the conditions under which its organic and conventional eggs are raised . . . ”

That may be true or it may not; we simply don't know based on the evidence presented.  The video does appear to show some disturbing images but it also doesn't provide much context.  Clearly, this was in the dead of night, when presumably the birds are less mobile perhaps not due to living conditions but because they're sleeping.  And, yes the video shows many chickens in manure, which seems disgusting.  But, I've been on small family farms that have chickens that are as free-range and un-industrial as it gets - and where do those hens like to hunt for food?  In the dung piles next to the cattle pens.  And, even in these "natural" contexts that have any sizable group of birds, one or two will likely be missing a good deal of feathers.  I'm not necessarily defending the farm in this video or the conditions shown , but what I am saying is that without more information and context it's hard to know what to make of it, though it would seem to warrant some further scrutiny.  

Sometimes its stories like this that don't quite fit the prevailing narratives that can get us to think more deeply about an issue, regardless of our initial biases.  

Rolling Stone and Agricultural Journalism

By now, I suspect most of you are aware of the Rolling Stone, rape story saga (here's a timeline of the events).  To recap, Rolling Stone ran a story about a gang rape at a University of Virginia fraternity.  The story caused a national outcry, leading to vandalism of the fraternity, protests across the nation, and a suspension of the fraternity system at UVA.  However, after the initial outcry, a number of news sources began to question the veracity of Rolling Stone's account.  Most prominently, the Washington Post ran a number of stories, and eventually showed that the victim's story (at least as initially reported) was fallacious.  Rolling Stone has apologized for running the story.

Reading various accounts of the on goings, it seems that Rolling Stone, and the journalist - Sabrina Erdely - who wrote the story, got at least two things wrong.  First, the journalist went into the story with an agenda. It seems the magazine's editors were predisposed to believe there was a "rape culture" and only needed a good story to back it up.  Sources suggest that Erdely wanted to do a story on campus rape and went from campus to campus to find the "right" one. As one source put it,  

“But Erdely was committed by her own admission to finding a story that would confirm her preconceptions about a campus violent crime wave against women.”

Second, the journalist only told one side of the story.  As Megan McArdle put it:

“Unfortunately, reporting by others suggests that Erdely didn’t do one of the basic things that reporters do to try to keep fabrications or exaggerations out of our stories: Check with the other side.”

A number of people have said that the details of the case are a distraction and it is the bigger issue that one should focus on.  But, as McArdle wrote:

“Nor am I very convinced by the people — including Erdely — who have argued that focusing on Jackie’s story is getting us “sidetracked” from “the real story,” which is about the rape culture at UVA and the slothful institutional reaction to Jackie’s story. The story was headlined “A Rape on Campus.” The first thousand words are devoted to Jackie’s horrifying story, and much of the rest of the story is devoted to Jackie’s descent into depression and her interactions with the deans. If the story is so irrelevant to the real point of the article, then it should have been pulled out when the victim refused to provide details that would have permitted the author to contact the accused for comment.

But of course, if Jackie’s story had been pulled out, the article wouldn’t have received anything like the attention it got”

OK, so what does any of this have to do with the sorts of things I normally discuss on this blog?

I'd argue that something analogous often happens in the reporting of stories related to food and agriculture, particularly animal agriculture.  It is not a perfect analogy, and I am in no way drawing a moral equivalency with rape.  What I am getting at is the way journalists tell stories and how their editors choose whether to run them.

It is not as if Rolling Stone is too removed from food reporting.  They ran their own expose on meat and animal cruelty just last year.  In a story titled In the Belly of the Beast the lede goes as follows:

“A small band of animal rights activists have been infiltrating the factory farms where animals are turned into meat under the most horrific circumstances. Now the agribusiness giants are trying to crush them. ”

I'm not claiming that the stories told in the Rolling Stone piece aren't true (in some cases they likely have videos and pictures to back their claims).  Some of the events are horrific and may well be prosecutable offenses.   But to what extent are they symptomatic of a broader "cruelty culture" and of the industry more generally, as the story seems to suggest?  

Is there a more general pattern to how these stories are told? It is likely that the authors went in to the piece with a story to tell, and lo and behold they found one. It likely fit a preconceived narrative that the publishers believed.  To what extent did the authors reach out to get the "other side of the story?"  There seems to be little attempt to systematically do that (though they do cite an episode from Nighteline where a reporter confronted a dairy owner).  Again, I'm not saying the particular stories they tell are incorrect, but what I am asking is whether the article indicts the entire industry as the story seems to suggest?  After all, the story ends with an indictment of the present agricultural system and a call for an alternative sort of system.

This isn't just about this particular Rolling Stone story on animal cruelty.  Look, for example, at this piece by Jon Entine at Forbes.com, where he shows video footage of Michael Pollan, an ardent critic of today's commercial agricultural system, outright admitting that much of the journalism about food and agriculture doesn't have to tell both sides.  According to Entine, Pollan said in an interview:

“The media has really been on our side for the most part. I know this from writing for the New York Times where I’ve written about a lot of other topics. But when I wrote about food I never had to give equal time to the other side. I could say whatever I thought and offer my own conclusions. Say you should buy grass feed beef and organic is better, and these editors in New York didn’t realize there is anyone who disagrees with that point of view. So I felt like I got a free ride for a long time.”

That was precisely the problem with the Rolling Stone rape story.  The writer got a "free ride" because the story fit a narrative already believed to be true.  

I have no problems with journalists writing true stories of injustice or cruelty in food and agriculture.  And, I am not a fan of the "ag gag" laws.  What I caution is making broad claims about industry-wide behavior without the evidence to support it.  

Gestation crates hit The Dailyshow with John Stewart

A couple days ago John Stewart did a segment on the impending decision by New Jersey's governor Chris Christy to veto (or not) a bill that would outlaw the use of gestation crates in the state.  

While I wish Stewart would have given looked a bit more critically at the supposed statistic that 93% of New Jersey citizens want the ban, and no doubt hog farmers will be a frustrated that Stewart didn't give any serious discussion of why such crates are used (to prevent fighting, harm to human workers, etc.).  Nonetheless, it is funny.  And it does show how uphill is the battle many hog farmers face in trying to defend the practice.