Egg Ranchers in Southland Are Scrambling to Survive : Increasing Out-of-State Competition, Price-Cost Squeeze and the Push of Urbanization Are Making Life Difficult

Bill Cramer is a Southern California egg rancher in his early 30s who, like many farmers, talks pessimistically but acts optimistically. In business since 1980, Cramer says “it’s been absolutely awful.”

“The industry just doesn’t make enough,” he complained.

Nonetheless, Cramer is in a partnership building a new egg ranch near Sun City in Riverside County that will be home to 1 million birds--10 times the flock at his family farm in Winchester.

Cramer’s mixed outlook reflects the clouded future of the world’s most prolific egg-producing region, the Southern California “Egg Belt” curving south from Upland through San Bernardino, Riverside and San Diego counties. While Stanislaus and San Joaquin counties also contribute to California’s annual production of 8 billion eggs--11.4% of the national total--three-fourths of them come from the Egg Belt.

But the urban migration that turned Orange County from citrus groves and bean fields into huge shopping malls and industrial parks is rapidly populating the Inland Empire, as workers seek affordable housing and new businesses move in to tap the growing work force. Historically, when homes have bumped up against farms--the original Southern California industrial base--the farms have been forced to relocate, as the egg farmers earlier did from the San Fernando Valley.

Moreover, as agricultural zoning becomes more restrictive, production costs increase. And the higher cost of production is coming as cheap eggs from the Midwest are beginning to steal traditional Western markets; some states provide financial incentives to egg farmers in an effort to bolster sagging rural economies.

“Our costs are going up tremendously, and we’re getting nothing more for our eggs,” said Charles S. Chao, president of the Inland Empire Poultry Assn. “Eggs are a commodity, and we don’t set their price.”

The urban pinch and out-of-state competition comes at a time when egg consumption has been falling. While the crop’s value increased to $347.4 million from the $335.5 million that egg farmers earned in 1985, that was far below 1984’s $409.3 million.

According to the U.S. Department of Agriculture, annual consumption per person in the United States fell from a high of 400 eggs in 1945 to 251 eggs last year, and a further drop--to 246 eggs--is expected this year. Moreover, since 1975, when consumption dropped to 276 eggs per person, the average has remained at the lowest levels since 1909, when the USDA began keeping records. (The previous low was 278, recorded in the Depression year of 1935.)

In addition, the major egg eaters today are age 50 or older, USDA economist Jack S. Ross said. The more numerous baby boomers born since World War II are eating fewer eggs per person, he said, leading to the expectation of further declines in consumption. Yet, Ross said, production costs continue to increase even beyond last year’s average of 62 cents a dozen.

Ross’ conclusion: “The outlook for the industry is not bright.”

More Egg Bargains

While only about 1,800 U.S. producers own flocks of more than 10,000 laying hens today, compared to 6,000 just 10 years ago, production this winter is up 1% over last year at this time, said H. Conner Kennett, USDA director of poultry. At the same time, he said, prices are down about 20 cents a dozen from prices a year ago on New York’s wholesale market.

“Fall and winter egg prices normally rise owing to a normal drop in a hen’s production cycle, but that wasn’t the case this winter,” Kennett said. “In light of the supply-demand situation of eggs in December, retail food shoppers--and wholesale buyers like bakeries--probably will continue to enjoy egg bargains into early 1988.”

That will likely not be the case, however, in Southern California, where retail egg prices are the nation’s highest, according to poultry specialist Donald D. Bell of UC Riverside.

Normally, Bell said, declining wholesale prices lead to reduced retail prices and some increase in consumption. But in Southern California the retail price of eggs broke the $1-a-dozen barrier about five years ago, after disease wiped out much of the East Coast’s production, and prices have yet to retreat despite the present surplus production.

Farming Losing Out

“It only takes just a few too many eggs in the nation to reduce the price to the producer and the packer,” he said. “We produce about 65 billion eggs a year nationally, and just 1% more eggs will depress prices by 5%. It takes a lot of change in price to move a surplus, so if retail prices don’t fall, a farmer is constantly being pushed on his costs--pricing at or below his cost of production a lot of the time.

“The turnip has no more blood,” Bell said of the region’s egg farmers. “All the ‘give’ is back toward the farmer, and the supermarkets have this almost infinite price increase they can work with. “Supermarkets are getting rich selling eggs, and the farmers are going broke.”

The farmer’s share of the consumer’s dollar spent for eggs has gone down sharply each year since Southern California retail prices soared in 1983-84, he said. A farmer selling eggs in Southern California gets about 35% of the current local retail price while the producer’s share nationally is about 55% of supermarket prices.

“Southern California is one of the few retail market areas that have not been going down in price,” said Cramer, the Riverside County farmer. “In the Central Valley, even the Bay Area, there is a better correlation between farm price and retail price.”

Southern California consumers pay “essentially double” what their supermarkets paid for their eggs, Bell said.

But Robert Pierre, general manager of the grower-financed California Egg Commission, said egg farmers should tend to their chickens when it comes to the retail end of the industry.

If eggs generate hefty profits for supermarkets, he reasoned, the markets will be more inclined to treat the product with respect in their dairy cases.

“It isn’t any industry’s place to tell retailers how to mark up their product,” said Pierre, who spent 17 years with Safeway Stores. “If we’re not smart enough as an industry to make money, then we shouldn’t be in business.

“I’d rather see the high markup than giving the eggs away and pounding the price down to the producer,” he added. “At least this way, we’ve got a chance to win.”

Promotional Effort

As it happens, the 3-year-old egg commission is working closely with retailers in its 1988 promotional effort, fueled by $5 million contributed by assessments paid by egg producers.

The new campaign, created by Asher/Gould, a Los Angeles advertising agency, made its debut Jan. 18 on radio and television, Pierre said. Asher/Gould created four new radio ads and as many television spots that stress the theme “Have some eggs now!” And to assure that retailers help pursue that theme, supermarket chains will share the billing (and the cost of air time) with the commission, he said.

The commission will continue to stress its “California FRESH Eggs” logo, too, in the face of an increase in low-priced eggs being trucked into traditional Western markets from Texas and the Midwest.

The out-of-state eggs are a byproduct of efforts by some Midwestern states--notably Iowa--to spur their stagnating rural economies by helping finance big new egg operations, said Chao of the Inland Empire Poultry Assn.

While Midwest egg producers must contend with bitter weather, they enjoy far cheaper feed costs from their surrounding corn fields, which helps offset the greater cost of trucking the region’s surplus eggs to California and other Western markets at prices local growers find hard to match profitably, he said.

“What’s more, if I’m in Texas,” Chao added, “I can use herbicides, insecticides--a multitude of things that I don’t have the benefit of here because it’s against California law. But those Texas eggs can come right in and be sold and eaten here just the same.”

Higher Costs

Besides those standards there are zoning pressures, too, as the Egg Belt urbanizes. Cramer is philosophical even about those, however.

“It raises costs,” he said of the urban encroachment. “You just have to be a lot more conscious about maintenance and fly control. Anytime you start working in a residential environment, you’re going to wind up paying higher costs to keep the neighbors happy.”

Even where he and his partners are building their new million-bird complex near Sun City, Riverside County expects up to 10,000 homes to be built in the area over the next few years, he said. “We’re going to have ‘instant city’ coming up to us in the next five years.

“We’ll just have to see,” Cramer said.

On the other hand, he acknowledged, a farmer’s land is also his pension, so the urban pressures are indeed a double-edged sword. “In 20 years, the value of the land will be such that it’ll be worth more doing something else than having chickens on it,” he acknowledged.

“There’s always going to be a future for locally produced eggs in Southern California,” Cramer added, “but it is yet to be determined how much of what we now have that will be: 80%, 50%, 30%--who knows?”

Obviously, with his million-bird investment, Cramer intends to be among the survivors.