Study from academia, egg producers and FMI examines lack of consumer demand, high costs
A new study on cage-free egg production finds vast challenges related to costs and construction, a continuing lack of consumer demand and growing concern about unintended consequences related to operations and financing. The study was conducted in 2022 by a team of researchers from Michigan State University, with collaboration from Kansas State University and Purdue University, and was funded by the FMI Foundation, United Egg Producers and United Egg Association.
Among the most relevant consumer-related insights of the research:
More than half of consumers (56%) are unaware of whether their grocery store has made such a pledge, and only 19% believe their store has made a pledge.
There are segments of consumers willing to pay significant premiums for cage-free eggs, but the largest segment (representing 55% of consumers) is primarily motivated by price and does not discriminate between cage and cage-free eggs.
If conventional eggs are removed from the market, and prices remain unchanged, the share of consumers choosing not to buy eggs will increase by 20%.
Consumers prefer government subsidies to support cage-free transitions over mandates that require adoption of certain housing practices.
Consumers also prefer establishing minimum cage space requirements over the complete abolition of conventional egg production.
“While eggs are on most consumers’ minds, this research 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,” said David Fikes, executive director of FMI Foundation. “We are proud to support this report as it is consistent with the FMI Foundation’s ongoing work to help the food industry uncover, understand, and better align with consumers’ ultimate values, whether those be cost, taste, convenience or a desired hen housing method.”
Producers see more challenges
As part of the study, seven producers—one small producer, one medium producer, and five large producers—were surveyed. All seven producers said cage-free systems require at least two times the capital of caged facilities and would require investment in cage-free pullet houses.
Producers do anticipate that revenue from cage-free systems is 8% higher than conventional systems, on average, but costs are estimated to be at least 8-19% higher, on average.
Additionally, while retrofitting has been recommended as a way to reduce capital investments, producers said that sometimes this can create long-term problems within the facility.
“We've done some remodels of existing eight facilities. We don't really find that to be economical or in the long-term best interests from an animal care standpoint and a total best cost standpoint,” one producer state.
To that point, producers relayed that the increased contact of the birds with feces and other birds in a cage-free environment increases the disease risk.
Cage-free production houses also require 2-3 times more labor than caged facilities as well as more feed per hen.
For the study, interviewees were also asked whether they currently had plans to transition more of their facilities to cage-free. Three out of seven producers had ongoing projects driven by their customer. However, each producer stated that they would not engage in speculative building based on the voluntary, informal pledges made by retailers.
Customer demand, capital financing, environmental sustainability, and food security were the most commonly cited barriers while innovation and entrepreneurship opportunities, an industry “reset” within the animal activist community and gaining market share were listed as potential opportunities.
“In the current market, the producer is waiting for the retailer to act, and the retailer is waiting for the producer to act. As a result, producers mentioned that the cage-free transition period would be a tension point across the supply chain,” the study noted.
Findings revealed a consensus that the 100% cage-free commitments by January 2026 made by retailers are infeasible, and additional conversations are needed to better incentivize the investment and transition to cage-free production.
“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, president and CEO of United Egg Producers. Further, the study sheds light on one of the greatest challenges – that 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.”
Recently, inflation, supply chain issues, and avian flu outbreaks have led to a substantial increase in the price of eggs. 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. In our study, we look at this issue from both the consumer as well as producer perspective to understand how the market would shift in such a context,” said Dr. Vincenzina Caputo, associate professor at Michigan State University. “Providing an economic assessment of market and producer impacts paints a clearer picture of the future market environment for producers, consumers, and other industry players. Likewise, it gives policymakers insights on how to react to these changes from a policy perspective, while also enriching the current debate on price inflation and cage free mandates/pledges.” Despite the complexity of the issue as well as ongoing challenges for producers, egg producers believe cage-free production will still continue to expand, although only to 51% of total production by January 2026.
