On July 7, the United Egg Producers (UEP) and the Humane Society of the United States (HSUS) announced that they had reached an agreement to petition Congress for legislation requiring commercial egg producers to move from conventional caged housing to “enriched” colony housing. The groups announced that their goal is to have a law in place by June 30, 2012, and to have the new housing systems fully adopted by the end of 2029. As part of this agreement, HSUS and UEP said they will not “initiate, fund or support” any further ballot initiatives or local or state legislation.

UEP said in a statement that the goal is to have one national standard instead of an array of state laws that create confusion for both producers and customers. National legislation would also be an opportunity to more clearly define some vague language in state statutes. One clear example is the wording of California’s Proposition 2, which passed in 2008, requiring “expanded” space but not telling producers how much more space they must provide.

When Congress decides to “occupy the field” on an issue, the move normally means state laws are preempted. Therefore, a national standard would preempt other state laws in Michigan, Oregon and Washington, according to UEP.

The talks began last year after HSUS recognized that there were benefits to colony systems that include enrichments, such as nests, perches and scratch areas, as well as sufficient space to allow birds to behave more naturally. HSUS had previously insisted that only cage-free production systems were acceptable.

So what does this agreement mean? I am not familiar with the cost implications of changing layer housing systems, but the agreement includes one factor that almost certainly reduces compliance costs – time. Based on economic analyses conducted by the National Pork Board, the costs of changing from gestation stalls to group housing of sows increases greatly if producers have to retrofit barns. Conversely, if enough time is allowed for producers to basically wear out existing barns and then replace them with new technology, the long-term costs are much lower. We would think the same applies to layer barns and 18 years strikes me as a long-time horizon, indeed.

One source who works closely with the egg industry tells me that the biggest costs will fall on those who have built barns in the past few years, since caged houses can last 20 to 40 years. Those folks will, indeed, have to retrofit those barns. Perhaps more important is that the regulations will fall hardest on those producing “breaking eggs,” since many table egg producers have already gone to expanded space allowances. My source says liquid egg margins are tight enough that breakers may eschew new construction and simply go to fewer birds. The logical consequence would be fewer eggs and higher prices.

The agreement also means that the pork industry will see increased pressure to make a similar deal regarding sow gestation stalls. Florida, Arizona and California have passed ballot initiatives calling for stalls to be eliminated — usually 10 years hence. Oregon’s legislature passed a similar law, while producers in Colorado, Michigan and Ohio have agreed with HSUS to support state laws or regulations that have the same effect. Smithfield Foods announced that it would unilaterally eliminate gestation stalls from its company-owned operations.

Most laws take effect 10 to 12 years down the road. Ohio’s law has a 15-year time horizon. Smithfield’s original time frame was 10 years from the January 2007 announcement. They have not changed the time line even though they did slow the process in 2008-2009, when pork industry economic conditions were so bad. Smithfield’s Website says they will have 30% of their sows in group systems by the end of 2011.

None of this means that the pork industry should make a deal with HSUS. But it will no doubt embolden HSUS to push the issue. It will be very interesting to see just how much of the egg industry follows UEP’s lead on this. I’ve heard of major dissent over the agreement to push for legislation and I understand that some members may withdraw from UEP over the decision. A decision that puts the organization’s existence in doubt is probably not a good one.

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Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com