Egg industry hands animal advocates big win in cage-free fight

The nation's largest egg industry group is conceding the fight over a proposed ballot initiative in Massachusetts that would bar the in-state sale of meat or eggs from caged animals raised anywhere in the nation.

The decision hands animal rights advocates a partial victory in their push for more humane treatment of livestock.

"We don't have any options," United Egg Producers President Chad Gregory said in an interview with POLITICO. "The activists are ripping apart conventional cages, and we have no middle ground to go to."

The trade group's statement, which comes more than a year before the proposed November 2016 ballot initiative, is likely a bellwether of industry policy changes that could raise food prices and production costs and, in turn, lower egg and meat consumption.

While the pork industry has vowed to resist the proposed law, the egg group's conciliatory move marks a shift in the animal welfare fight after years of the unsuccessful attempts by producers to deflect the cage-free movement. Eggs are a $10 billion industry in the United States - the fourth-largest protein commodity, behind beef, chicken and pork - and the implicit concession that cage-free production is the way of the future indicates the tactics of the Humane Society of the United States and other animal rights groups are working as they gear up to go after meat producers for similar practices.

Those reforms have been driven, at least in part, by the marketplace as more major retailers and restaurant chains seek to accommodate consumer demand. While a significant percentage of the egg industry disagrees with the cage-free trend, it's becoming the new normal, said Rick Brown, senior vice president at the market reporting company Urner Barry.

"That's the evolution when your customer - McDonald's or whatever - says they want to go cage-free," Brown said. "Whether you like it or not, you're going to jump on board."

Gregory cited lessons from the egg industry's fight in California in explaining its decision. In 2008, United Egg Producers raised $10 million to defeat a cage-free ballot initiative there, known as Proposition 2, and gained the backing of at least 28 state newspaper editorial boards. But in the end, 64 percent of California voters supported the measure.

"We had every coalition in a state that you would want on our side," Gregory said. "We didn't just spend $10 million and do a couple TV ads. We built an unbelievable campaign - and we got clobbered."

The group's courtroom challenges, which argued the law violates the Commerce Clause, fared poorly as well, with defeats in Fresno County Superior Court in 2013 and the 9th U.S. Circuit Court of Appeals in 2015.

As a result, Gregory said his group will not raise money to counter the Humane Society's effort to put a cage-free question on the Massachusetts ballot during the presidential election in November 2016. Instead, it will "educate the lawmakers, voters and consumers" about the merits and cost-effectiveness of cage use, he said.

Not true of the pork lobby, which objects to language in the proposal that would bar the sale of meat from any animals raised in conditions that prevent them from lying down, standing, extending their limbs or turning freely.

Although the $26 billion pork industry hasn't decided exactly how to address the proposed law, which effectively would bar gestation crates used in breeding, National Pork Producers Council spokesman Dave Warner said his group will take some kind of action to counter the Humane Society's plans.

"This is all about HSUS getting momentum," Warner said. "The animal rights groups mounted a PR campaign against the [egg producers] ... then they started going after us. And they are still trying to go after us."

U.S. beef and pork companies have fought conciliatory moves by the egg industry in the past. When United Egg Producers partnered with the Humane Society to push for language in the 2014 farm bill that would spur farmers to use larger cages with such additions as ventilation, perches and scratching carpets and require egg cartons to disclose if hens were caged, the pork and beef industries, seeing a glimpse of their own futures, defeated the proposal.

"Because of that, the egg industry became a black sheep in the animal agribusiness industry," said Paul Shapiro, the Humane Society's vice president of farm animal protection. "But you have to give the United Egg Producers credit for being willing to stand up and advocate for reforms."

"But the egg group says going cage-free raises questions about higher costs and their effect on egg consumption.

For example, cage-free production requires farmers to retrofit barns and feed the hens more corn and soybeans because birds that move around must eat more to produce the same number of eggs. Together, these changes increase expenses and leave a larger environmental footprint, Gregory said.

Producers will pass those costs on to consumers, who as a result will eat less of the product, Warner said.

"If you raise costs, less people buy it," he said. "If less people buy it, there is less meat consumption, and there you have it. HSUS wants people to eat less meat."

The Humane Society sees things differently.

"When voters go to the voting booth, they recognize that this is a very simple question," Shapiro said. "Should animals be allowed to move?"

The group's motivations aside, prices inevitably will rise because of the production changes, and consumers will react to the increases by consuming fewer eggs, Brown said. Egg prices increased significantly after California enacted Prop 2 and a string of bird flu outbreaks decimated much of the egg industry in the winter and spring, he said.

"When that happened the retailers were somewhat slow to pass that along to the consumer," he said. "Once the price ultimately did go up ... we saw consumption decline by 17 to 30 percent because of the price. You did see consumer pushback, and movement slowed down. It didn't take very long before the supply started backing up and the prices went down."

However, some egg farmer say eggs will remain a relatively cheap and accessible source of protein for Americans, no matter the housing for the birds.

"We will get really good at producing eggs without having the chickens in cages," said Paul Sauder, who ran his family's egg operations in Pennsylvania, Maryland and Ohio before his son took the helm. "We will get as good at producing eggs with the chickens out of cages as we do with chickens in cages. We'll make the transition as an industry. We'll find a way to do it."

"There's not any facet in agriculture where the American farmer isn't going to take the challenge and produce food for the 300 million consumers in the United States," added Sauder, who heads up customer service for the company. "We can be the egg basket for the world."
But as egg farmers forge ahead, some lawmakers say they shouldn't expect much assistance from Washington.

"I think that the federal government should stay out of this argument and it should be market-based," Sen. Joni Ernst said in an interview with POLITICO. "It's very tough, but again if the market demands it, [egg producers] will shift."

The Iowa Republican is no stranger to egg production. In addition to sitting on the Senate Agriculture Committee, she hails from the state that leads the country in egg production; Iowa farmers sell about $2 billion in eggs a year, supplying more than 8,000 jobs, according to the Iowa Egg Council.

Ernst agreed with Warner's contention that the Humane Society's efforts to reshape the industry has relied on drawing an emotional response from consumers instead of the science of housing systems or the long-term impact on egg prices.

"I think having a ballot initiative is a great idea," she said. "However, I think it's good for legislatures to be able to look at legislation and to be able to actually understand the fact versus fiction behind it."

Still, even as they intend to push back in Massachusetts, the National Pork Producers Council isn't blind to the market changes being driven by consumer opinion and helped along by the Humane Society. More than 85 percent of U.S. pigs are kept in gestation crates for some period of time, but NPPC President-elect John Weber conceded that number will probably shrink.

"In another 10 years that percentage is probably going to change significantly," Weber said. "I would predict longer term ... we'll be housing sows differently."