Egg Industry Presentations

Collective Impact of "Cage Free" Announcements

Over the past few months we have been confronted with a cascade of announcements concerning retailers, food service companies and manufacturers requiring a transition to housing systems for hens other than conventional battery cages. Alternatives are collectively referred to as "cage-free" although the term is not defined and means different things to producers, academics and buyers. Alternative systems include barns with slats, litter, combinations of floor systems, aviaries, enriched modules, combi-aviaries and various permutations of confinement to buildings or gradations of outside access.

Chad Gregory, president of the United Egg Producers who is tracking announcements by buyers of eggs has calculated that collective commitments to transition from conventional cages through April 6th represents 138 million hens or 48 percent of the total national flock held both for the shell and liquid segments of the market.

Given that 10 percent of the national flock is currently housed in barns or aviaries, U.S. egg producers will have to install new housing for approximately 270 million hens over the next 10 to 12 years if the entire market transitions to "cage-free" systems. This does not take into account expansion of one percent compounded annually which could add another 31 million hens to the total over 10 years. Assuming an average capital cost of $40 to house a hen as a median value over the proximal ten years, the U.S. industry is going to have to raise $10.8 billion to re-house existing caged flocks.

Even if moderate expansion is contemplated an additional $1.2 billon will be required. This is independent of packing plants, vehicles, services, feed mills and other investment to support production. In the highly unlikely event that no additional customers commit to "cage-free" the industry is still facing a bill of $5.5 billion.

There has been no mention of pullet rearing in discussions on enhancing welfare. It is axiomatic that pullets should be raised in systems reflecting the housing to which they will be subjected during production. This means that a complex will require new installations for rearing.  Their extent will depend on the laying cycle as determined by considerations such as molting and duration of lay.

One very significant factor in financing replacement of housing and equipment is the reality that U.S. egg producers have functioned with low margins for at least seven of the past ten years and have not been setting aside realistic depreciation to replace equipment. This is the foundation for the resistance by a splinter group to recognize current trends and to unjustifiably condemn alternatives to cages--this could be characterized as a manifestation of the King Canute Syndrome-or failing to respond to the inevitable.

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