If the Egg Bill isn’t passed, what’s next for US egg producers?

At this point, it appears that nothing short of a miraculous Hail Mary pass, like the one from Doug Flutie to Gerard Phelan, will get the Egg Bill passed by Congress in time for the United States egg industry to begin an orderly transition into enriched cages prior to the California Proposition 2 implementation deadline of January 1, 2015. Egg Industry asked executives from several U.S. egg companies what they think will happen over the next few years and what course(s) of action the industry should pursue. Many companies declined to comment, and others would comment only if they were not identified; what follows is a summary of the responses received, without attribution.

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Without passage of the Egg Bill, will the US egg industry transition out of conventional cages and into enriched colonies?
Without passage of the Egg Bill, will the US egg industry transition out of conventional cages and into enriched colonies?

At this point, it appears that nothing short of a miraculous Hail Mary pass, like the one from Doug Flutie to Gerard Phelan, will get the Egg Bill passed by Congress in time for the United States egg industry to begin an orderly transition into enriched cages prior to the California Proposition 2 implementation deadline of January 1, 2015. Egg Industry asked executives from several U.S. egg companies what they think will happen over the next few years and what course(s) of action the industry should pursue. Many companies declined to comment, and others would comment only if they were not identified; what follows is a summary of the responses received, without attribution.

Proposition 2 implementation

Proposition 2 requires that hens be able to stand up, fully extend their limbs, lie down and spread their wings without touching each other or the sides of their enclosure as of January 1, 2015. In addition to Proposition 2, which was a ballot initiative, the California legislature passed A.B. 1437, which requires that all shell eggs sold in California as of January 1, 2015, come from hens living in environments that meet Proposition 2 standards. The Protect Interstate Commerce Act, or King Amendment, prevents states from enacting standards for agricultural products produced in other states. The King amendment undercuts A.B. 1437, and at time of press, it was still attached to the House version of the Farm Bill.

The California Department of Food and Agriculture published floor space requirements for hens in all types of enclosures (Table 1). If the King amendment does not survive the reconciliation process and is removed from the Farm Bill, then California egg producers believe that if they reduce the number of birds in their cages to meet the CDFA requirements by January 1, 2015, that they will be in compliance with Proposition 2. Industry sources estimate that California’s total layer flock would drop from the current total of approximately 19 million hens down to 10 million hens at the Proposition 2 compliant densities. According to industry sources, “housing” of all types for an estimated 1 million hens is under construction in California, so that the number of hens in a Proposition 2 compliant California may be closer to 11 million by January 1, 2015.

Possible legal challenges

The goal of animal right’s activists in getting Proposition 2 passed was not to get hens more room in cages; it was to get them out of cages. It is likely that there will be lawsuits brought against egg producers charging that CDFA-required cage densities don’t fulfill Proposition 2 requirements. It is also possible that out of state egg producers might challenge the legality of A.B. 1437. If the King amendment survives in the Farm Bill, this would likely lead to legal challenges of this amendment by California egg producers. Egg producers from California and from other states seem to agree that without the Egg Bill, the King Amendment would crush the California egg industry, with only specialty producers, like organic or cage free, surviving.

Supply disruption?

Approximately 38 million people live in California, according to 2012 U.S. census figures. There are approximately 0.9 hens for every person in the U.S. If we assume the same ratio for California, then there would need to be approximately 34 million hens to meet California’s egg needs, and it looks like, at most, 11 million of those hens would be in California. Approximately a third of U.S. egg production goes to the breakers, and let’s assume that only shell eggs sold in California will be affected by Proposition 2 at this point. This means 12 million hens would need to be housed at California densities in other states. At minimum, this requires going from 67 square inches per bird to 116 square inches per bird, which means pulling approximately 7 million birds out of cages. So unless there are a bunch of hen houses being built, the U.S. table egg layer flock might shrink by 15 or 16 million head on or around January 1, 2015.

It appears likely that there will be some supply disruption for users of eggs in California and possibly in other states sometime after January 1, 2015. At minimum, wholesalers who service California and other states will have to add SKUs to keep California eggs separate from egg destined for sale or use in other states. If egg producers who previously serviced California choose not to comply with CDFA density requirements, then there might actually be an oversupply of eggs for the rest of the country while California experiences an egg shortage. This could lead to “black market” importation of eggs into California.

After Proposition 2

The Egg Bill provided U.S. egg producers a means of transitioning from conventional to enriched cages over an extended period of time. The cage ban in the EU has led to cage free becoming the predominant means of housing hens in several EU countries, with free range becoming the most common system in a few countries. Egg producers in some countries converted to enriched cages, just to pull them out and go to cage-free systems a few years later. How can U.S. producers avoid some of the problems that EU egg farmers have encountered?

California is just the start. Egg producers in Ohio and Michigan will have to comply with state standards. Without the Egg Bill, the Humane Society of the United States may dust off the signatures for ballot initiatives in Washington and Oregon.

Some egg producers think that with or without the Egg Bill, U.S. egg producers should transition into enriched cages.

One producer said, “We have done something horribly wrong if we let the country become totally cage free. From a sustainability standpoint, we just can’t let it happen. We will have done a terrible disservice to everyone if we let it happen. How can we justify a system that uses 30 percent more grain and thus requires that much more land. I think the [US] egg industry will do a better job than they did in Europe in letting people know why that is a bad idea.

“Enriched cages allow you to meet the behavioral needs of the bird while maintaining all of the health and sustainability benefits of cages in a protected environment. The birds can perch, forage, dust bathe and lay their eggs in a nest. We can’t stay where we are, we can’t go to cage free.”

Keeping cages

The big question is how does the industry make a transition to enriched cages without making itself vulnerable to legal challenges? Because of litigation surrounding the voluntary UEP-Certified Program, which gave birds more space in conventional cages, egg producers are somewhat limited in what they can do collectively to transition to enriched cages that would also provide more space. No egg producers wanted to comment on any possible future collective action.

Perhaps the UEP-Certified Program could be extended to include enriched cages, which set standards for everything except a specific allotment of space per bird, which would then be left up to the individual producer to determine and explain. Another option might be standard setting for housing hens using a group process like the American National Standards Institute. All interested parties are allowed to contribute to the standard setting process, so this would involve more than just egg producers.

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