Massachusetts in a muddle over Cage Free Eggs.

A new Massachusetts law for cage free eggs is to go into effect on January 1 2022 but may lead to shortages and higher prices.

The Background

Massachusetts has a problem with cage free eggs. In November 2016, voters passed the ballot initiative Question 3 entitled “An Act to Prevent Cruelty to Farm Animals.” The measure received strong support, with 77.6% of voters approving. The Act was considered the strongest legislation to date against farm animal confinement in the USA. The law, which impacts mostly on the treatment of animals involved with food production, will take full effect on January 1, 2022.

However a dispute over a key provision of the initiative has not been resolved and threatens to lead to supply disruptions and higher prices

Ballot initiatives regarding animal confinement date back to 2002 and 11 states have enacted or passed laws that regulate the treatment of farms animals. The impetus for these initiatives came largely due to activism by the Humane Society of the United States (HSUS). In 2008, HSUS was a key advocate for California’s Proposition 2. After passage, a series of legal challenges to the California law led to rulings and precedents that have helped to define how it and other states implement animal welfare standards. Massachusetts Question 3 closely resembles other referenda.

The Standards

However, Question 3 differs from other state rules in one specific way. Quoting from the initiative: “Fully extending the animal’s limbs” means fully extending all limbs without touching the side of an enclosure. In the case of egg-laying hens, fully extending the animal’s limbs means fully spreading both wings without touching the side of an enclosure or other egg-laying hens and having access to at least 1.5 square feet of usable floor space per hen.

Every other state with these initiatives implemented either 1 square foot per bird or 1.2 square feet in Aviary systems, which allow for tiers of structures for cage free birds. The standard aligns with an agreement made between the HSUS and the United Egg Producers (UEP) in 2011. The pact was part of a long-term strategy by HSUS to raise egg industry standards by partnering with industry to facilitate changes in animal welfare.

For the industry, cooperation has allowed them time to convert to the new humane standards over time. As a result, it relieved pressure put on them by advocates and large end users like restaurant chains and non-commercial food service.

The situation

Because Massachusetts does not have a large egg industry, most of the eggs sold come from other states. No other state has a 1.5 sq. ft. standard, so there is not an extant supply of eggs coming from cage free facilities meeting the requirement. This leaves a gap in the supply.

Given the lack of ready supply, the Massachusetts House introduced a proposed amendment in May 2019 to revert to the 1 square foot standard. It included standardized, HSUS-approved enrichments of housing conditions like perches or multi-tiered platforms. Other states had worked through similar compromises. The amendment was dropped due to criticism, but reintroduced in October. It demonstrated the variety of constituencies interested in the matter:

• The New England Brown Egg Council  said the amendment represented an improvement to the 2016 law.
• HSUS, the prime mover in these ballot initiatives supported both the law and the amendment.
• The Massachusetts Farm Bureau opposed the original ballot initiative but said its members had already invested in new buildings compliant with the 2016 version of the law and now supports it.
• The Protect the Harvest Action Fund opposed the initiative from the start because of the inevitable increase in pricing for the consumer.
• The Humane Farming Association is suing the state to implement the law as written.
• The Supreme Court declined to hear a case regarding the law in 2019.
• State’s Attorney Maura Healy was required by law to finalize rule making last year. She has delayed the process in hopes of finding some sort of resolution.

And so both price and supply of cage free eggs face considerable ambiguity regarding come January 1, 2022.

The prospects

In 2020, the state produced 3.5 million dozen eggs. With a population of just under 7 million and consumption of 22 dozen eggs per year (US avg.), the state will demand more than 140 million dozen. Therefore, the burden is on imported supply. However there is no indication of significant commitment by out-of-state suppliers to convert to 1.5 square foot laying houses.

Prices spiked by 71% when California implemented it’s cage free law, although the change was concomitant with an outbreak of avian influenza. There were few outages. The California market is six times the size of Massachusetts. Motivated suppliers from other states invested in new cage house to capture the demand. A smaller market is less of an inducement for suppliers to produce in houses that have 33% less output. And eggs from those facilities will be price disadvantaged in other states.

In 2016, advocates for the initiative estimated that prices would increase is at the low end of about .12 per dozen. This is not reflective of the reality from past conversions. National wholesale prices averaged an approximately .50 per dozen difference when delivered to retailers in 2019. Average difference for loose eggs (restaurants/food service) has been around .35 – .60 per dozen versus conventional eggs.

While the premium for cage free eggs takes in several factors, the biggest change in cost is the housing itself. There are simply fewer birds in a cage free system than a traditional, conventional house for layers. There will be an additional cost from having production from cage free houses with a significantly lower density of birds, even if supply is assured.

Historically, egg demand is fairly inelastic and even expensive (cage free, free range, etc.) eggs are relatively cheap when compared with other sources of animal protein. The implementation of Massachusetts Question 3 may test that demand if prices soar and supply is disrupted.