Sunday, February 25, 2024

Examining cage-free egg production and consumer demand

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GAINESVILLE, Ga. — A recent study conducted by Michigan State University, with cooperation from Kansas City University and Purdue University looked at cage-free egg production and consumer demand for cage-free eggs.

“This research confirms what egg producers have known — cage-free transitions are extremely expensive, take years to implement and must be done in active partnership with their retail customers,” Chad Gregory, president and CEO of United Egg Producers, said. “Further, the study sheds light on one of the greatest challenges — that grocery shoppers do not understand transition deadlines and largely are unwilling to pay the premiums necessary to make the transitions cost-effective for egg farmers and their retail customers.”

“Recently, inflation, supply chain issues, and avian flu outbreaks have led to a substantial increase in the price of eggs,” said Vincenzina Caputo, associate professor at Michigan State University. “But on the horizon is a series of legal mandates and private sector commitments to convert to 100 percent cage-free production by 2025. Adding these cage-free mandates and pledges to the mix could drive prices up even further. In our study, we look at this issue from both the consumer as well as producer perspective to understand how the market would shift in such a context.”

“Providing an economic assessment of market and producer impacts paints a clearer picture of the future market environment for producers, consumers and other industry players,” Caputo added. “Likewise, it gives policymakers insights on how to react to these changes from a policy perspective, while also enriching the current debate on price inflation and cage-free mandates/pledges.”

Motivation

According to the complete study, the United States is the second largest egg producer in the world. In 2019, the U.S. produced 113 billion eggs. The state in which produces the most eggs in the United States is Iowa. Followed by Ohio and Indiana. Seventy percent of egg laying hens lay eggs conventionally. Only 22.5 percent of hens are cage-free and lay eggs; 6.8 percent of hens are in an organic production system.

During the past few years, the amount of cage-free eggs and cage-free egg layers has grown. From December 2020 to December 2021, the amount of cage-free laying hens enhanced by 80 million birds to 94.3 million birds. This was an approximately 18 percent increase. By the close of 2021, the weekly cage-free egg manufacture expanded by 17 percent. The increase in production is due to cage-free mandates and grocery store promises to sell only cage-free eggs in the next five years. Legislative actions have also taken place in 10 states to remove conventional eggs from grocery stores. Although, voters may vote to have conventional eggs removed from stores, but their purchasing patterns are different.

Research objectives

This recent study provides insights into the American egg industry. It shows the breakdown of manufacture modifications, shifts in shoppers’ behavior and how the transition to cage-free eggs will affect the market.

According to complete study these were the objectives:

  • Objective 1: Evaluate producer attitudes, concerns, and adoption willingness of cage-free production via egg producer individual interviews.
  • Objective 2: Determine current egg producer’s financial situation and expected transition timing regarding hen-housing methods via an egg producer survey.
  • Objective 3: Determine consumer preferences and buying patterns for eggs in “cage-free only” marketplaces via an egg consumer survey.
  • Objective 4: Summarize the research team’s opinions and provide economic-informed recommendations to key stakeholders to navigate the future landscape of the egg market.

Demographics and egg purchasing behaviors

The demographics for this study comprised of gender, age, income, education, race and region of residence. The household questions consisted of household size, if the household has received (or is receiving) Supplemental Nutrition Assistant Program benefits or if they have ever worked on a farm or ranch. Respondents of the study spoke about how many times they purchase eggs, the amount of eggs they buy every time they go shopping and where they purchase their eggs.

Consumer findings

The executive summary said, there are many retailers that have made pledges to sell only cage-free eggs. Nevertheless, only 19 percent of consumers know that stores have made such commitments. Consumers don’t expect retailers to switch totally over to cage-free eggs by 2026. A 10 percent increase in cage free hens is to be expected by 2026. Consumers would rather have government policies that institute producers to use particular practices over labeling their products with “cage-free.”

Customers would rather have minimum cage size requirements than totally banning the production of conventional eggs. Some consumers will pay high prices for cage-free eggs. However, most consumers will purchase either conventional eggs or cage-free eggs, depending on which one is cheaper. If prices are not a factor and conventional eggs are removed, customers will choose not to buy eggs by 20 percent.

Producer findings

The executive summary stated, most producers favor conventional egg production over cage-free egg production. Conventional eggs are more affordable. The conventional egg process is much more efficient than the process for cage-free eggs.

Also, the environmental impact of conventional eggs is more dominant compared to cage-free eggs. Producers predict that the revenue for cage-free eggs will be 8 percent higher than conventional eggs. Although, the costs of cage-free eggs will be 8 percent to 19 percent higher than conventional eggs. These costs will depend on expenses, labor and capital costs.

Producers are keen to work for cost-plus contracts that transition to cage-free production for better investment returns. Producers stated in the summary that by January 2026 the growth in cage-free production will be up by 51 percent overall.

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