Which comes first for shoppers: cheap eggs or happy chickens?

Photographer: Daniel Acker/Bloomberg

The Creation of an American Eggpocalypse

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
Read More.
a | A

Every major grocery and fast-food chain in the U.S. has pledged to stop selling or using eggs from caged chickens. So that's all taken care of -- a great victory for animal-rights campaigners, and presumably chickens. Yay!

Well, maybe not all taken care of. This is from the trade publication Egg Industry:

Many of the cage-free egg purchase pledges have implementation dates around 2025, which was thought to be the minimum amount of time required for the industry to convert from more than 90 percent cage-housed hens to being predominantly cage free. Unfortunately, many of the retail store purchase pledges don’t contain intermediate benchmarks, and they have provisions for availability and affordability of eggs. Couple this with many consumers’ reluctance to pay the premium for cage-free eggs, and we have the current confusion in the marketplace where surplus cage-free eggs are being sold to breakers at substantial losses for egg producers.

A restaurant chain such as McDonald's, which set off the big rush to go cage-free with its pledge a year ago, can manage the transition deliberately, steadily increasing the cage-free share of the 2 billion eggs it buys every year in the U.S. For a food retailer it's much harder, for the simple reason that when cage-free and conventionally produced eggs are sold next to each other, and the cage-free ones cost more, consumers tend to buy the cheaper eggs.

It's an interesting paradox. Grocers are making the cage-free pledges because they want to accommodate shifting public attitudes about humane treatment of animals. But the revealed preferences of shoppers deciding which eggs to buy don't exactly square with the notion that everybody wants chickens to run free. In California, where the matter was put to a statewide vote in 2008, 63 percent of voters supported a ban on cages that were too small for chickens to move around in. For a referendum, that's a pretty impressive margin of victory. It still implies, though, that 37 percent of Californians would have preferred to have the option to buy cheaper eggs laid by chickens crammed in tiny cages.

California's ban on small cages went into effect last year, and one result has been the widening of an existing egg-price differential with the rest of the country. A dozen large eggs now cost between $1.23 and $1.28 wholesale in Southern California, according to the U.S. Department of Agriculture's weekly egg report, compared with between 77 and 81 cents in New York. In the European Union, where a similar ban on "battery cages" went into effect in 2012, there has also been a noticeable effect on prices, although it has varied by country. In France, where the battery cages have for the most part been replaced by larger "enriched cages" in which the hens can perch and move around a bit, there was a big price spike in 2012, but it didn't last:

In the U.K., on the other hand, prices jumped in 2012 and 2013 and haven't gone down much since -- probably because almost half of egg production is now from "free-range" chickens that get to spend at least some of their time wandering around outside.

The production method that the U.S. appears to be moving toward is what the Europeans call "barn production," in which the chickens are free to move around in a crowded barn, but not outside. Fortune's Beth Kowitt paid a visit to one such facility recently for a story about McDonald's big switch, and it sounded harrowing:

Here the chickens dominate. Hens jump back and forth between the structures right by our heads. The weaker ones hang out at the front, while the boss birds sit one level up so they can see everything. Manure drops from the upper levels, and a few eggs going by on the belt are soiled (they’ll be cleaned later). When I depart, my shoes are covered in dried manure, and some has fallen into the back of my coverall and made its way down my shirt.

Fun! Industry-financed studies by university and USDA researchers found that such barn production -- they called it "aviary" production -- resulted in higher chicken fatality rates and lower air quality inside the barns than either battery-cage or enriched-cage production, as well as lower egg production. Overall, one of the studies estimated, aviary production has average operating costs per dozen eggs that are 23 percent higher and total costs 36 percent higher than battery cages, while enriched cages' operating costs were 4 percent higher and total costs 13 percent higher.

Almost all the animal welfare legislation enacted in Europe, the U.S. (Michigan has also enacted a battery-cage ban that goes into effect in 2019) and elsewhere has allowed for egg-laying hens to be kept in larger, better-appointed cages. But the voluntary cage-free pledges in the U.S. don't. Why not? In part just because "cages" sounds bad. From Kowitt's article:

“Science was telling us enriched, but when talking with the consumer, they had no clue what enriched was,” says Hugues Labrecque, who runs the egg business that serves McDonald’s at Cargill.

There is a bit more to it than that. The Humane Society of the U.S., a driving force behind the cage-free pledges, argues that enriched or "furnished" cages still:

provide an unacceptably limited amount of space per bird; prevent many important locomotory activities, including running, jumping, flying, and wing-flapping; and constrain perching, dustbathing, and nesting.

So cage-free it is. As someone who pays $5 and up for free-range eggs at my local farmer's market and generally thinks we should be nicer to our farm animals (seriously, who can be against dustbathing?), I should be happy about this. I'm worried, though, that by jumping into cage-free pledges, food retailers in the U.S. may be setting themselves up for failure. Lots of people in this country don't want to pay extra for more-humanely sourced eggs. It's fine for a majority of legislators or voters to decide that they have to. But can Kroger really do that? We'll see.

  1. Rival Burger King made the pledge way back in 2012, but did not inspire a flood of imitators like McDonald's did.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Stacey Shick at sshick@bloomberg.net