Grain prices not the most disruptive challenge for egg producers

Animal welfare issues have the U.S. egg industry at a tipping point.

Through early September, all of the news about this year’s U.S. grain harvest has been bad. Each successive estimate results in yet another reduction in the expected harvest. Coupling demand estimates with the forecasted harvest has analysts predicting the lowest corn carryover going into the 2012 harvest that the U.S. has experienced since 1996. I remember 1996 as the year when the term “fiscal austerity” took on real meaning for poultry operations. Given the market situation, you would think that grain price and availability would be the biggest challenge facing egg producers, but I think something else will have a bigger impact on the egg industry in coming months.

The Humane Society of the United States will bring great change to the egg industry. Even if Congress doesn’t pass legislation making provisions of the agreement the law of the land, the genie is out of the bottle and how layers are housed in this country will change. The United Egg Producers-HSUS agreement provides a framework for an orderly transition from the current cages and housing densities to enriched colony housing at much lower densities. Without passage of the legislation, a transition away from the industry-standard battery cages will take place; it just won’t be a smooth one.

Disruptive forces bring change and innovation in free-market systems. Animal welfare issues have the egg industry in the U.S. at a tipping point, and change is coming. How fast and how smooth the transition out of battery cages is will be determined by the success or failure of lobbying efforts by UEP and HSUS. I think that there will be more disruption and a faster transition to alternative housing systems if the legislation is not passed. Remember, producers supplying the California market have to change by January of 2015, no matter what happens with the legislation. The country may become a bunch of separate markets for egg, with some states having strict laws while in other states anything goes. It all makes $8-per-bushel corn seem like a small problem to have.