Consumers can expect higher egg prices, egg producers will see lower profits, and retailers won't meet their promised timelines for transitioning to 100% cage-free, according to new research funded by the FMI Foundation, United Egg Producers and United Egg Association.
The study was conducted in 2022 by a team of researchers from Michigan State University, with collaboration from Kansas State University and Purdue University.
Many retailers have committed to fully convert to cage-free by 2026, however, the rate of transitioning current conventional egg farms to cage-free systems cannot meet the deadline, the study says. In addition 55% of consumers are motivated by costs when they make their egg purchasing decisions.
“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," said Chad Gregory, UEP president and CEO.
More than half of consumers are unaware of whether their grocery store has made a pledge to transition to cage-free, and only 19% believe their store has made a pledge, the study says.
Gregory said the study sheds light on one of the greatest challenges: “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.”
The study's lead author, Vincenzina Caputo, associate professor at Michigan State University, said inflation, supply chain issues, and avian flu outbreaks, have led to a substantial increase in the price of eggs. “But on the horizon is a series of legal mandates and private sector commitments to convert to 100% cage-free production by 2025. Adding these cage-free mandates and pledges to the mix could drive prices up even further,” Caputo said.
According to egg producers interviewed for the report, cage-free systems require at least twice the capital of caged facilities and require two to three times more labor than caged-facilities. Cage-free systems also require higher amounts of feed, disease can be more widespread, and also increases some food safety concerns.
The producers also expressed concerns on financing the transition without the assistance of retailers, including through long-term contracts. They face challenges in obtaining financing to convert or build cage-free facilities without longer-term commitments from retailers, “particularly in an environment of rising interest rates and when existing facilities can no longer serve as collateral,” according to the report.
The study notes, “retailers will have to spend more on eggs to hold egg producers unharmed as they shift from conventional to cage-free eggs.”
Producers anticipate revenue from cage-free systems to be 8% higher than conventional systems on average. But costs are estimated to increase that much or more, depending on the category of expense.
David Fikes, executive director FMI Foundation, said the study “adds new information regarding the shopper’s willingness to pay for sustainability and animal welfare-related poultry practices and what they ultimately want their grocer to stock.”
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The FMI Foundation is an arm of FMI-The Food Industry Association, which represents major supermarket chains.
FMI Foundation noted "when provided no additional information," half of consumers indicated they were willing to pay a premium of no more than 30 cents a dozen for cage-free eggs. About 33% of consumers are willing to pay a premium of greater than a dollar per dozen.
The study found that if prices remain unchanged and conventional eggs are removed from the market, the share of consumers choosing not to buy eggs will increase by 20%. If this occurs, egg producer profits are expected to fall $72.5 million a year, which does not account for any additional costs incurred to facilitate the transition.
Even so, farmers believe cage-free production will grow to 51% of total production by January 2026. UEP reports more than 70% of the laying hens producing eggs are held in conventional production, 22.5% are cage-free, and 6.8% are in a certified organic production system.
The report notes that extending the retailer pledge deadlines of transitioning to 100% cage-free “would give egg producers more time to acquire financing from lenders and better coordinate the depreciation of current housing stock with the construction of new facilities.”
The report also says retailers could “gain goodwill” from their customers by re-announcing commitments and adjusting timelines that account for the challenges egg producers face in the short transition.