- Cal-Maine Foods, the country's largest producer and marketer of shell eggs, has "adjusted" its cage-free egg production to be more "in line with reduced demand," Dolph Baker, chairman and CEO of Cal-Maine Foods, said in a statement.
- Baker said even though many food service providers, national restaurant chains and major retailers have publicly said they would transition away from conventional eggs and exclusively offer cage-free eggs by specified dates in the future, the higher price for the specialty product "has resulted in reduced demand."
- Cal-Maine is positioned to increase production of cage-free eggs if demand trends change, the executive said.
Cal-Maine is smartly positioning itself to respond to an erratic market performance for shell eggs, particularly those raised in cage-free conditions that seemingly are in high demand among restaurants, food manufacturers and retailers. But, for now, it remains to be seen if the demand for cage-free is as strong as some initially believed.
Nestle said in 2015 that all eggs used in its U.S. products would come from cage-free hens by 2020, and Mondelez, PepsiCo, Sodexo and McDonald’s are among other food giants to pledge their commitment to cage-free eggs. On the retail side, Kroger launched a private label line of cage-free eggs last fall. Some brands already are using humane egg production as a point of differentiation — and a mark of quality — such as New York-based condiments maker Sir Kensington’s, recently acquired by Unilever.
Although advocates have hailed these pledges as a victory for improved animal welfare, the chicken industry has warned that raising chickens in a cage-free environment costs more — about $40 per bird. It's evident these higher costs have put off some users.
California also has seen higher prices since voters overwhelmingly passed Proposition 2 mandating stricter animal welfare laws. The law became effective in January 2015, and a recent study revealed that consumers initially paid 33% more for eggs, although the price hike has moderated closer to about 9% since then. It will be interesting to see if these price increases are a deterrent for other states considering a similar initiative.
It's not clear exactly where the tipping point may be for consumers as far as egg prices are concerned. Some may be willing to pay up to 33% more for a dozen eggs if they know there's a shortage and the price hike comes from the cost of providing better conditions for laying hens. However, they may balk and cut back on egg purchases if they suspect supplies are being manipulated just to keep prices high.
Not every U.S. poultry company is following the trends and adopting cage-free and antibiotic-free policies. Poultry processor Sanderson Farms has bucked the industry’s “no antibiotics” trend by advertising why the company uses them. There is concern that exposure to antibiotics in food may lead to resistance in humans when the drugs are used, but Sanderson Farms has argued this threat is overblown.
It remains to be seen whether this approach will translate into higher revenue, or whether consumers will be turned off and simply decide to pay more for antibiotic-free poultry. The same could be said about cage-free eggs.