Small egg farmers say roomy cages will squeeze earnings

LAKE PARK, MINN. - Two years ago, Isaac Baer spent more than $2 million to install a new cage system in his egg barn. The new hen homes are better ventilated, and a conveyor belt quickly carts away bird excrement. The birds are happy and healthy, Baer says.

They're also packed in too tightly under rules Congress is considering that would effectively make the cages obsolete.

The bill, based on a historic truce between U.S. egg producers and animal rights activists, would require the industry to almost double chickens' living space by the end of 2029. But it has divided the industry, with some small producers arguing that the cost of upgrading cages would drive them out of business.

"This will become such an economic problem for operations of our size," said Baer's uncle, Amon Baer, who testified against the provision in Washington last week.

A lot is at stake in Minnesota, the eighth-largest U.S. egg producer and home base for three of the industry's top 10 producers: Land O' Lakes, Michael Foods and Sparboe Farms. Iowa-based Rembrandt Foods, another top U.S. producer, is owned by Timberwolves owner and Minnesota billionaire Glen Taylor.

The cage agreement, if it becomes law, will force a collective capital investment of billions of dollars by farmers over the next 17 years. But industry supporters of the deal see that expense as the best path forward when consumers increasingly care about not only what food costs but also how it is made.

"This is what egg farmers wanted and what egg farmers need to survive," said Chad Gregory, head of United Egg Producers (UEP), a cooperative and trade group that helped broker the deal with the Humane Society of the United States.

The debate has implications beyond chickens. Other livestock lobbies with a lot of political clout and animal rights issues of their own have strongly opposed the deal. If the government can prescribe housing for hens, the pork and beef industries reason, it can do the same for hogs and cattle.

The biggest names in the egg business didn't like the idea at first either, investing millions of dollars in an unsuccessful attempt to defeat efforts to increase cage sizes. But they agreed to the pact after animal rights groups succeeded in pushing laws for roomier cages in California and four other states, often utilizing undercover video of cramped hen houses. The birds in current facilities can barely move their wings and live miserable lives, activists say.

Facing a patchwork of state regulations that would make a nightmare of selling eggs, the industry chose to work with the Humane Society, said Gregory, whose association represents farmers producing roughly 90 percent of the country's eggs.

The Humane Society compromised, too, settling for roomier cages instead of demanding that farmers raise hens cage-free. Plus, ballot initiatives to boost cage size would not be allowed in several of the country's biggest egg-producing states, including Minnesota and Iowa.

While the Humane Society was criticized by some for not going far enough, most animal welfare supporters accepted the accord, said Paul Shapiro, the society's vice president of farm animal protection.

"When enemies find common ground, it's a good thing," Shapiro said. "Animal welfare is an uphill battle, but it is the right policy."

Debate in Congress

Federal legislation necessary to mandate the cage agreement is linked to the farm bill now under consideration in Congress. Supporters asked Sen. Dianne Feinstein, D-Calif., to withdraw a cage-size amendment to the Senate version of the bill, fearing it wouldn't pass.

Hen home reformers believe their best shot is to amend the House version of the farm bill so cage sizes can be negotiated into the final farm bill approved by a Senate-House conference committee.

Peter Forsman, a small egg producer from Howard Lake, Minn., traveled to Washington last week for a Senate hearing on the issue. "As young farmers, we look at this as something that we can bank on," he said. "We need a consistent standard. In three years I don't know if it's going to be illegal for me to ship eggs to California."

Amon Baer, a longtime UEP board member, and his brothers see it far differently. The family has become the cage pact's most vocal critic.

"From a philosophical standpoint, I don't think the federal government should be setting farm production standards, and I don't care whether it's for oranges or apples or cows or chickens," he said.

The Baer clan -- Amon, three brothers and several of their children -- farm corn and soybeans and raise hogs and eggs in the southeast Red River Valley. Among them they have 1.4 million hens.

The nation's 10 biggest egg producers, by contrast, have between 7.6 million and 28 million hens, according to Egg Industry. The egg business, like much of the rest of agriculture, has long been consolidating.

"This kind of bill," Amon Baer said, "will do nothing but consolidate the industry further."

Costly remodeling

Investment necessary under the law would include "enriched" cages with perches and scratching pads, amenities aimed at making hens' lives better. New barns or barn renovations would be needed, too, since farmers must cut the number of birds per building as cages get roomier.

The UEP says the cage norm now is 67 square inches of living space per bird. Under the new cage pact, hens must have 124 inches of space by 2029, the change gradually phased in.

United Egg Producers estimates that over time, these investments will cost producers $20 to $24 per bird. For the Baer clan, that's at least $28 million. There are also indirect costs involving the timing of cage replacement, lowering return on investment, Baer said.

And consumers will pay considerably higher egg prices, Baer said. He and other opponents point to Europe, where egg prices shot up by more than 50 percent this spring and shortages arose soon after new cage mandates kicked in.

But the UEP's Gregory said Europe is in a different situation, with several individual countries failing to adapt to a European Union mandate, even though they had plenty of time to do so. In the UEP's analysis, cage investments over time will add 10 cents to the retail price of a dozen eggs.

The state's biggest egg producers either declined to comment on the legislation or said they haven't taken a position. The Chicken and Egg Association of Minnesota, which represents the industry, as a group is against cage legislation. "We are opposed to federal standards mandating the housing of livestock," said Steve Olson, head of the association.

The association concluded that the cage measure didn't improve birds' well-being or the quality of eggs, Olson said. Nor did it "improve egg farmers' ability to make a living."

In the House, a measure to increase cage sizes has 113 bipartisan co-sponsors, including Democratic Reps. Keith Ellison of Minneapolis and Betty McCollum of St. Paul. But more important, fellow Democrat Rep. Collin Peterson, the ranking minority member of the House Agriculture Committee, doesn't support adding the amendment to the farm bill.

A defeat of the cage measure would be tinged with irony, because it was built on a compromise between longtime antagonists, the UEP and the Humane Society. "That's the kind of leadership Washington needs more of," said the Humane Society's Shapiro.

Mike Hughlett • 612-673-7003 Jim Spencer • 202-383-6123