Legislative, market uncertainty will force egg producers to adapt

As the months go by, the uncertainty about housing standards for layers in California and the U.S. as a whole continues. Many egg producers are sitting on the sidelines waiting, some are adding cage-free housing to satisfy a market which, while still small, is growing rapidly, and a brave few have added fully enriched cages and are trying to create a market niche for these eggs. Perhaps the one thing that everyone can agree on is that change is coming and the U.S. layer industry will undergo a major transformation.

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Some cage systems have been designed so that they can be operated as enriched colonies with the font of the enclosures closed or as cage-free systems with the enclosure fronts open.
Some cage systems have been designed so that they can be operated as enriched colonies with the font of the enclosures closed or as cage-free systems with the enclosure fronts open.

As the months go by, the uncertainty about housing standards for layers in California and the U.S. as a whole continues. Many egg producers are sitting on the sidelines waiting, some are adding cage-free housing to satisfy a market which, while still small, is growing rapidly, and a brave few have added fully enriched cages and are trying to create a market niche for these eggs. Perhaps the one thing that everyone can agree on is that change is coming, and the U.S. layer industry will undergo a major transformation.

The United Egg Producers commissioned Agralytica, an economic consulting firm, to estimate the cost of transitioning the U.S. egg industry from conventional to enriched cages as mandated in the cooperative’s agreement with the Humane Society of the United States. Thomas Early, economist, Agralytica, said that if U.S. egg industry converts to enriched cages following the schedule laid out in the agreement between the Humane Society of the United Sates and the United Egg Producers, it will require an investment of $5.7 billion to cover cage, equipment and housing costs for the 18 year period of the transition. If the agreement is not in force, Early forecasted that the industry would have to invest approximately $3.1 billion on cages, equipment and buildings over the next 18 years if conventional cages were only replaced as they wore out and they were replaced primarily with new conventional cages. So the additional investment required of the U.S. layer industry to convert to enriched cage housing would be $2.6 billion, according to Agralytica’s analysis, which was prepared in 2012.

Will the US egg market embrace enriched cages?

The conventional wisdom seems to be that if the Egg Bill passes, the U.S. market for eggs will transition out of conventional cages into enriched cages. After examining the transition that has taken place in European countries, this might not necessarily be the case.

EU legislation mandated moving hens out of conventional cages by January 1, 2012. Enriched or “furnished” enclosures were developed as an approved housing alternative in the EU. Some of these enriched enclosures are not called “cages,” but have been called “colonies” because of their relatively large size and number of birds they house. Enriched colonies tend to have 50 or more hens per enclosure. Enriched cages in Scandinavian countries tend to be small and house eight to 10 hens apiece because beak trimming is not allowed in these countries. 

Larger cage or colonies are more popular in countries were beak trimming is allowed because larger enclosures with bigger group sizes allow more “free space.” Since birds tend to cluster together most of the time, a larger enclosure with the same space per bird as a smaller enclosure will have more unoccupied area of the enclosure or “free space.” Free space is what allows birds to move about and stretch without touching another bird or the sides of the enclosure, which is a requirement in California’s Proposition 2.

Market varies by country

Germany banned conventional cages three years before the rest of the EU, and it adopted a stricter standard for enriched colonies. In Germany, enriched colonies must provide at least 124 square inches per bird for hens under 4.4 pounds and 139 square inches per bird for hens over 4.4 pounds.

Activist groups in the Netherlands and Germany have not been satisfied with enriched cages or larger enriched colonies for housing hens. These groups have successfully pushed retailers in these two countries to announce that they will only sell eggs from cage-free hens. Many egg producers who converted from conventional cages to enriched colonies then had to convert again to cage-free barn systems. Over 60 percent of layers in Germany are raised in cage-free barn systems.

In the UK, the move out of conventional cages has resulted in over half the birds being raised cage free, and many of these are free range. Cage-free barn systems have not become as popular in the UK as they have in Germany, but some enriched colonies are being used and retailers will still market these eggs.

What about the California market?

Cage-free egg production in the U.S. has grown rapidly and should reach 8-10 percent of total egg production in 2013 or 2014, according to industry sources. Safeway, one of the largest grocers in North America, reported last fall that cage-free egg sales now represent more than 15 percent of the chain’s total egg sales. Cage and equipment manufactures report brisk sales of cage-free systems in the U.S. 

Terry Pollard, vice president, sales and marketing, Big Dutchman, said, “The current West Coast trend appears to be headed towards 15 to 20 percent cage-free production.” He said that if enriched housing is deemed to legally meet Proposition 2 requirements, he expects that enriched colony housing will have approximately 80 percent market share for California. Enriched colonies will win the market share battle with producers because they provide the best overall bird performance and are the most cost-competitive to conventional cages.

Mike Button, export manager, Potters Poultry, predicts that the U.S. market will inevitably move to enriched cages or cage-free housing for layers. He said that managing an enriched house is similar to managing a house with conventional cages, but managing a cage-free aviary is a different animal altogether. An estimated 70 percent of U.S. layers are currently housed in high-rise deep-pit houses. Cage-free systems would not make very efficient use of the space under roof in this style of house. 

Hedging your bet

Just about every cage manufacturer now offers fully enriched and enrichable cages or colonies. Enrichable cages are the same enclosures as the enriched cages, just without the enrichments, e.g., the nest, scratch area, perches and claw shorteners. Some enrichable cage systems can be purchased with optional dividers so that the enclosures can be made smaller to house birds in smaller groups. This option could be useful if customers require eggs from non-beak trimmed hens at some future date.

Johannes Ten Elsen, managing director, Specht Ten Elsen, said that the rapid conversion of the German egg market from conventional cages to enriched colonies and then to barn systems caused them to modify their cage designs. Specht Ten Elsen offers the Varia System that meets EU and German standards for enriched colonies but can also be converted into aviary systems if the market goes cage-free. The waters, feeders and lights are in the center of the colony, which helps to direct bird activity away from the front of the enclosure.

Farmer Automatic’s Combi Layer System can also be operated as an enriched colony or as a cage-free aviary system. Steve Lamar, business development manager, Farmer Automatic, said positioning the waterers, feed line and LED lighting in the center of the cage opens up the front of the cage and allows for cage panels to be opened if the system is to be used as an aviary in a cage-free or barn system.

While it may be easy to open up the front of an enriched colony to use it as part of a cage-free system, the systems used to house pullets will need to be changed to prepare hens for a cage-free laying cycle, according to Ten Elsen. He said that when pullets are raised they need to have the opportunity to build up their wing muscles and get some flight time in prior to being put into an aviary. It may also be difficult to convert enriched systems that are more than three or four colonies high into an aviary system, but these convertible colonies may provide useful versatility for houses with relatively low ceilings.

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