THE TRANSITION TO CAGE-FREE EGGS

Authors: Dr.

Vincenzina Caputo, Dr. Jayson Lusk, Dr. Glynn Tonsor, and M.S. Aaron Staples

February 2023

For inquiries, please contact:

Dr. Vincenzina Caputo, Associate Professor

Michigan State University

vcaputo@msu.edu • T: 517-505-9221

Acknowledgments: The research was directed by Dr. Vincenzina Caputo from Michigan State University and conducted in collaboration with

Dr. Jayson Lusk from Purdue University and Dr. Glynn Tonsor from Kansas State University. The authors acknowledge the work of the graduate

student, Aaron Staples (Michigan State University), who assisted with the implementation of the individual interviews and surveys, as well as

with the data analysis and the assembly of the report. This report was made possible with support from the United Egg Producers, The Food

Industry Association, FMI, and the United Egg Association.

Executive Summary

State regulations, retailer pledges, and final consumer demand have contributed to a rising share

of egg-laying hens housed in cage-free systems over the past decade. Nonetheless, conversion

from conventional to cage-free housing is costly for both egg producers and final consumers. As

such, there remains uncertainty about the extent to which egg producers will be willing and able

to continue the transition to cage-free housing at a rate commensurate with retailers’ cage-free

pledges. To explore this issue, this study investigates the challenges and opportunities associated

with the transition to cage-free housing, including interviews with and a survey of egg producers,

a survey of egg consumers, and economic modeling of the sector. Key insights and implications

are as follows:

• While there is a high level of stated support for retailers to make cage-free pledges among

the general public, 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.

Consumers do not expect a full conversion to cage-free egg systems by 2026, and on

average, expect a 10-percentage point increase in cage-free laying hens from now to

January 2026.

• Consumers prefer government policies to subsidize the transition to cage-free or mandatory

labels to policies that mandate producers adopt certain housing practices. Amongst the

policies to restrict housing practices, consumers prefer minimum cage size requirements to

an outright ban on conventional production.

• 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 prices remain unchanged

and conventional eggs are removed from the market, the share of consumers choosing not

to buy eggs will increase by 20 percentage points.

• Egg producer interviews reveal the prevalence of long-lasting contractual relationships

with retailers, the importance of retailer demand driving the evolution of the market to

cage-free, and opportunities to reset the conversation with animal advocacy organizations.

However, these interviews also reveal several barriers and unintended consequences to

further transition to cage-free, including:

o Higher costs and labor requirements associated with cage-free production;

o Challenges obtaining financing to convert or build cage-free facilities without

longer-term commitments from retailers, particularly in an environment of rising

interest rates and when existing facilities can no longer serve as collateral;

o Divergent interests of grocery and food service/egg product sectors with respect to

hen housing;

o Concerns that transition to cage-free production could facilitate consolidation given

that larger producers often have better resources and access to capital; and

o Skepticism that retailer pledges can be met by January 2026 without significant

financial incentives, particularly given the high costs of building materials and long

construction lags associated with the permitting and supply chain disruptions.

• A majority of egg producers view conventional housing as superior in food affordability,

production efficiency, and environmental impact relative to cage-free production.

• Producers anticipate revenue from cage-free systems to be 8% higher than conventional

systems, on average. But costs are estimated to be at least 8-19% higher, on average,

depending on the category of expense, with additional labor and capital costs anticipated

to be the categories with the largest increases.

• Producers are more likely to be willing to transition to cage-free production when cost-plus

contracts are available and at higher anticipated return on investment (ROI) levels.

• In aggregate, egg producers believe cage-free production will grow to 51% of total

production by January 2026.

• Economic modeling focused on the shell egg marketing indicates the following:

o For every 1% reduction in the equilibrium quantity of conventional eggs produced

and sold, it takes a roughly 1.9% increase in the equilibrium quantity of cage-free

eggs produced and sold and an increase of at least $21.6 million year in total

wholesale egg spending to leave egg producer profits unharmed; and

o If the share of shell eggs sold cage-free increases by 20-percentage points, the cost

of producing cage-free is 20% higher than for conventional, and consumer demand

does not change, egg producer profits would fall $72.5 million/year in aggregate,

not counting any additional fixed costs producers would have to incur to facilitate

the transition.

 
iii 
 
Table of Contents 
List of Tables ................................................................................................................................................ v 
List of Figures ............................................................................................................................................. vi 
Chapter 1: Motivation and Objectives ...................................................................................................... 1 
1. Motivation........................................................................................................................................... 1 
2 Research Objectives ............................................................................................................................. 3 
Chapter 2: Individual Interviews with Egg Producers ............................................................................ 5 
1. Semi-Structured Interview Questions and Procedures ....................................................................... 5 
2. Producer Profiles ................................................................................................................................ 6 
3. Comparing Operational Activities: Cage-Free v. Conventional......................................................... 7 
4. Business Plan and Relations with Buyers ......................................................................................... 10 
5. Future of the Industry: Barriers and Opportunities ........................................................................... 12 
5.1. Barriers ...................................................................................................................................... 13 
5.2 Opportunities .............................................................................................................................. 17 
6. Final Remarks ................................................................................................................................... 20 
Chapter 3: Egg Producer Survey ............................................................................................................. 21 
1. Producer Survey Questions and Procedures ..................................................................................... 21 
2 Transitional Situation and Views ....................................................................................................... 23 
2.1. National, Industry-Wide Perspective ......................................................................................... 23 
2.2. Own-Operation Perspective ....................................................................................................... 26 
3. Laying Hen Housing Investment Decisions ..................................................................................... 31 
4. Provided Comments.......................................................................................................................... 35 
5 Final Remarks .................................................................................................................................... 36 
Chapter 4: Consumer Survey on Egg Product and Policy Preferences ............................................... 37 
1. Consumer Survey Questions and Procedures ................................................................................... 37 
1.1 Section 1: Sample demographics and egg purchasing habits ..................................................... 37 
1.2 Section 2: Egg Purchasing Habits ............................................................................................... 37 
1.3 Section 3: Word Associations ..................................................................................................... 38 
1.4 Section 4: Consumer knowledge, attitudes, and perceptions of the egg industry ...................... 38 
1.5 Section 5: Choice Experiment on Egg Selection ........................................................................ 39 
1.6. Section 6: Policy Preferences and Ballot Initiatives .................................................................. 42 
2 Data Analysis ..................................................................................................................................... 43 
3 Results................................................................................................................................................ 44 
3.1 Sample Characteristics ................................................................................................................ 44 

 
iv 
 
3.2 Egg Purchasing Habits ................................................................................................................ 46 
3.3 Consumer knowledge, attitudes, and perceptions of the egg industry ....................................... 49 
3.4 Word Association ....................................................................................................................... 51 
3.5 Choice Experiment ..................................................................................................................... 52 
3.6 Policy Preferences ...................................................................................................................... 58 
4 Final Remarks .................................................................................................................................... 61 
Chapter 5: Market and Producer Impacts of the Conversion to Cage-Free Egg Housing ................ 62 
1. Equilibrium Displacement Model ..................................................................................................... 62 
2. Disaggregated Egg Market Analysis ................................................................................................ 63 
2.1 Data and Parameter Estimation .................................................................................................. 66 
2.2 Results for Expenditure Neutral Demand Shifts ........................................................................ 71 
2.3 Results for Egg Producer Profit Neutral Demand Shifts ............................................................ 73 
3. Aggregate Egg Market Analysis ....................................................................................................... 74 
3.1 Data and Parameter Estimation .................................................................................................. 75 
3.2 Results......................................................................................................................................... 76 
Chapter 6: Conclusion and Implications ................................................................................................. 78 
Chapter 7: References ............................................................................................................................... 80 
 

 
v 
 
List of Tables 
Table 2.1. Thematic areas and core questions in the qualitative interviews with producers ........................ 6 
Table 2.2. Egg producer profiles ................................................................................................................... 7 
Table 4.1. Labels used in the consumer choice experiment and their meaning .......................................... 41 
Table 4.2. Consumer sample demographics relative to U.S. census (n = 961, % frequencies) .................. 45 
Table 4.3. Egg purchasing habits of the sample ......................................................................................... 46 
Table 4.4. Total and marginal WTP estimates from the LCM ($/dozen) ................................................... 52 
Table 4.5. Own- and cross-price elasticities of demand ............................................................................. 55 
Table 4.6. Total and marginal WTP, by market segment ........................................................................... 58 
Table 4.7. Best-worst scale response frequencies ....................................................................................... 59 
Table 5.1. Descriptive statistics for variables used in regression analysis ................................................. 67 
Table 5.2. Estimates of demand for conventional and cage-free eggs ........................................................ 69 
Table 5.3. Estimates of supply for conventional and cage-free eggs .......................................................... 70 
Table 5.4. Change in producer profits from conversion to cage-free housing, varying assumptions ......... 77 

 
vi 
 
List of Figures 
Figure 1.1. Shell egg retail prices by region over time, Source: USDA (2022) ........................................... 3 
Figure 2.1. Cage-free system operational activities discussed with producers............................................. 8 
Figure 2.2. Main barriers and opportunities to cage-free adoption mentioned by producers ..................... 13 
Figure 3.1. Views on national cage-free market share, now and January 2026 ......................................... 24 
Figure 3.2. Views regarding laying hen housing, opportunity vs. challenge.............................................. 25 
Figure 3.3. Views on which production method ranks best across different characteristics ...................... 26 
Figure 3.4. Percent premium for cage-free annual expenses compared to caged, retrofit v. new .............. 28 
Figure 3.5. Example laying hen investment decision question ................................................................... 31 
Figure 3.6. Projected investment: Contract options and common ROI in both production settings .......... 33 
Figure 3.7. Projected investment: Conventional with spot pricing and cage-free with cost-plus .............. 35 
Figure 4.1. United Egg Producers certification criteria, Source: UEP (2022) ............................................ 39 
Figure 4.2. Example choice experiment task .............................................................................................. 41 
Figure 4.3. Example best-worst policy question ......................................................................................... 43 
Figure 4.4. Attributes that are most and least important to consumers when buying eggs ........................ 47 
Figure 4.5. Consumer perceptions over past and future egg prices ............................................................ 48 
Figure 4.6. Consumer perceptions over why egg prices have increased over the past year (n = 766) ....... 49 
Figure 4.7. Respondent estimates for percentage of cage-free laying hens, currently and Jan. 2026 ........ 50 
Figure 4.8. Consumer perceptions of egg producers providing different services to laying hens .............. 51 
Figure 4.9. Mean WTP to keep each egg product in the choice experiment ($/dozen) .............................. 53 
Figure 4.10. Market simulation demonstrating the effects of the removal of conventional eggs............... 54 
Figure 4.11. Variation in mean premiums ($/dozen) relative to conventional, by select demographics.... 57 
Figure 4.12. Best-worst scaling (BWS) results, differential in voting........................................................ 60 
Figure 4.13. Responses to various ballot initiatives ................................................................................... 60 
Figure 5.1. Effects of decrease in demand for conventional and increase in demand for cage-free .......... 65 
Figure 5.2. Expenditure neutral shifts in conventional and cage-free egg demand .................................... 71 
Figure 5.3. Impacts of expenditure-neutral demand shifts on egg producer profitability .......................... 72 
Figure 5.4. Increases in retailer egg spending required to hold egg producers’ profits constant ............... 74 
 

Chapter 1: Motivation and Objectives

1.1. Motivation

The U.S. is the second largest egg producer in the world, with a total production of 113 billion

eggs in 2019 alone (FAO, 2021; Ha, 2021). Most of the egg production takes place in the Midwest,

specifically Iowa (15%), Ohio (9%), and Indiana (9%) (Ha, 2021). More than 70% of the laying

hens producing eggs are held in conventional production, 22.5% are cage-free, and 6.8% are in a

certified organic production system (UEP, 2023b). In the last several years, the number of cage-

free layers and cage-free produced eggs has increased. Between December 2020 and December

2021 alone, the number of cage-free laying flocks increased from 80 million to 94.3 million hens,

an almost 18% increase. Likewise, weekly cage-free egg production increased by 17% from the

beginning to the end of 2021 (USDA AMS, 2021a, b; USDA ERS, 2021a).

Coinciding with an increase in consumer demand for cage-free and organic, two additional

factors are driving the transition to cage-free egg production methods: (i) the recent legal

developments such as cage-free mandates, which require eggs and egg products to come from hens

raised in cage-free facilities and (ii) the widespread private sector commitments to going cage-free

in the next five years (McDougal, 2021; Shanker and Pollard, 2021). Legal developments have

occurred state-by-state through ballot measures and legislative action instead of federal efforts. To

date, ten states have passed legislation to transition to 100% cage-free eggs (USDA ERS, 2021b,

Fatka, 2021). For example, California voters passed Proposition 12 in 2018, banning the sale of

caged eggs as of January 1, 2022. States with similar mandates require the transition by January

1, 2026.

While it remains too early to conclude the economic implications of cage-free mandates,

Oh and Vukina (2021) predict that California’s implementation of Proposition 12 will result in an

annual welfare loss for California consumers and retailers of $72 million and $23 million,

respectively. Studies have also explored the economic cost of previous production mandates in the

egg industry, such as California Assembly Bill (AB) 1437, which banned the sale of eggs that did

not meet heightened minimum space requirements. Mullally and Lusk (2018) state that the

implementation of AB 1437 increased prices by 9% and cost California consumers at least $25

million per year. Carter, Schaefer, and Scheitrum (2021) suggest that AB 1437 decreased

economic surplus by $2.85 billion across the country between January 2015 – December 2017,

with nearly 70% of this burden borne by out-of-state market participants.

Interestingly, citizens have voted for stricter production practices despite having

purchasing patterns that deviate from their ballot preferences.

This wedge between voting patterns

and revealed purchasing behavior creates uncertainty across the supply chain and will likely elicit

diverse responses from producers depending on individual circumstances. Even in states without

such legislation, the largest U.S. retailers, including Wal-Mart, Kroger, and Meijer, have

voluntarily pledged to 100% transition to cage-free eggs by 2025. To fulfill the pledges, around

three-quarters of all egg production will have to transition to cage-free production (see Lusk,

2019). This trend has obvious implications for egg producers and other actors along the supply

chain (including retailers and consumers) as production adjusts to these new circumstances.

A key challenge for producers is the need to make capital investments to transition to

alternative housing when there remains high uncertainty about the future. Converting from cage

to cage-free systems is costly and requires significant capital (Trejo-Pench and White, 2020).

These factors lead to increased production costs. These costs are likely to be at least partially

passed through the supply chain and onto the final consumer, particularly given the inelastic

consumer demand for eggs. This partly explains why cage-free eggs are significantly more

expensive than conventional eggs. The average market price for a dozen Grade A eggs was around

$1.17 in November 2021 (USDA ERS, 2021b) compared to $1.64 for cage-free eggs in the same

month (USDA AMS, 2021b), meaning an almost $0.50 premium is charged on average for cage-

free eggs. The extent of this premium varies significantly across regions; see Chang et al. (2010)

for a discussion and Figure 1.1 for more recent price data at a retailer level. As a result, a producer’s

willingness to adopt cage-free production is likely dependent on their location.

This diversity in generatable premiums and the existing differences in physical and

financial inventory among business operations suggest that the adaptation mechanisms of

producers are expected to be highly heterogeneous. These challenges highlight the need to better

understand conversion costs and how such costs might be transmitted through the supply chain.

Understanding these aspects is important to producers and processors to make informed production

decisions and long-term investments. Likewise, it has relevance for policymakers trying to

The phenomenon is known as the vote-buy gap (Norwood, Tonsor, and Lusk, 2019; Paul et al., 2019).

Note that conventional eggs in Figure 1.1. refers to Grade A large eggs. For the 2022 Northwest data, the USDA

only reports the price for Grade AA large eggs instead of Grade A.

evaluate how the transition and possible subsidies or incentives could impact the wider supply

chain, including consumers.

Figure 1.1. Shell egg retail prices by region over time, Source: USDA (2022)

1.2 Research Objectives

This project provides a wide-scale investigation of the U.S. egg sector, including an analysis of

necessary production adjustments, changes in consumer behavior, and market effects from a

potential conversion to cage-free. In particular, this project conducts a comprehensive economic

evaluation of the cage-free conversion to better inform industry decisions, policymakers, and

consumers. To accomplish this overall goal, the project was organized around four main

objectives:

• Objective 1: Evaluate producer attitudes, concerns, and adoption willingness of cage-free

production via egg producer individual interviews.

• Objective 2: Determine current egg producer’s financial situation and expected transition

timing regarding hen-housing methods via an egg producer survey.

• Objective 3: Determine consumer preferences and buying patterns for eggs in “cage-free

only” marketplaces via an egg consumer survey.

• Objective 4: Summarize the research team’s opinions and provide economic-informed

recommendations to key stakeholders to navigate the future landscape of the egg market.

The remainder of this report is structured as follows. Chapter 2 describes the qualitative results

of semi-structured interviews with seven egg producers on their general sentiments and concerns

regarding the transition to cage-free eggs. Chapter 3 describes the results of a national producer

survey sent to UEP members, providing a more granular quantitative analysis of industry attitudes

and expectations. Chapter 4 outlines the findings from a national egg consumer survey, evaluating

consumer perceptions and preferences toward egg products and egg policy. Chapter 5 builds on

the findings from the previous chapters with an equilibrium displacement model predicting how

market shifts could affect egg producer profitability. Chapter 6 concludes with a discussion of the

implications of this report and the future outlook of the U.S. egg industry.

Chapter 2: Individual Interviews with Egg Producers

2.1. Semi-Structured Interview Questions and Procedures

We conducted semi-structured interviews with seven egg producers in June 2022. Interviews were

conducted individually via Zoom and lasted between 45-75 minutes. We followed a topic-guided

approach where each interview started with a schematic presentation of the topics. Questions were

arranged into four themes: (i) current business operations, (ii) cage-free production, (iii) business

plan and relationship with buyers, and (iv) future industry directions. For each theme, we asked

questions developed following recent debates about cage-free production and through a pilot in-

person interview with a large U.S. egg producer. Table 2.1 presents the thematic areas and core

questions, while the questionnaire is available as supplemental material accompanying this report.

Probing questions were also asked to explore issues in more detail, while closing questions were

used to gain additional egg production-related information or answer producer questions.

Individual responses were mapped to one of the survey themes, and patterns across each theme

were identified by comparing responses across participants.

In what follows, we discuss the results of each of the four survey themes. We begin with a

broad overview of the aggregate producer profile before describing the cage-free conversion and

producer insights on the difference between production systems. Then, we explore the producers’

relationships with their buyers and how these relationships influence their business plans and

financial decisions. The section concludes with a discussion of the producers’ perceptions about

The full questionnaire is available here: link.

Summary

We conducted semi-structured individual interviews with seven egg producers to evaluate their

attitudes, sentiment, and willingness to adopt cage-free production. Producers compared the

operational activities of cage and cage-free facilities, spoke to the primary barriers and

opportunities in cage-free markets, and offered their perspective on cage-free ballot initiatives

and retailer pledges. Producers indicated higher fixed and variable costs in cage-free housing

systems, with capital and labor costs being two of the central drivers of the cost increase. While

several producers indicated a willingness to adopt cage-free production once their consumer

wants cage-free egg products, most were hesitant to view the transition as an opportunity. The

most commonly cited barriers to cage-free adoption included limited consumer demand, high

capital costs, a contradiction to environmental sustainability efforts, and food insecurity.

the future of the industry, including the barriers preventing further adoption of cage-free eggs in

the United States, as well as potential opportunities.

Table 2.1. Thematic areas and core questions in the qualitative interviews with producers

Thematic Areas

Core Questions

Business

operations

• Can you please provide a brief overview of your current production setup?

This could include your (i) role in the supply chain; (ii) number of

production plants and geographic location(s); (iii) annual production; and

(iv) variety and type of egg products.

Cage-free

production

• What share of your egg production is from cage-free facilities?

• How has the switch to cage-free affected your (i) labor demand; (ii) capital

requirements; (iii) feeding process; (iv) safety and quality control; (v)

disease management; and (vi) marketing strategies?

Business plan

and relations

with buyers

• What percentage of your eggs do you sell under contracts, and how long

have you had these relationships with your buyers?

• How often do you communicate with your buyer about the transition to

cage-free eggs?

• Does your company have an annual business plan for the transition to

cage-free? Does this plan include strategies on what to do with the

outsourced cages?

• How difficult is it to finance the new construction of cage-free facilities,

and have there been significant barriers to capital?

Future

industry

directions

• How do you perceive the legislative changes occurring in different states

towards going 100% cage-free?

• What do you perceive as the biggest challenges to converting to cage-free?

2.2. Producer Profiles

Seven egg producers participated in the individual interviews (Table 2.2). We interviewed one

small producer, one medium producer, and five large producers. Producers covered the shell egg

and liquid egg marketplaces and supplied both grocery stores and the wider food service industry.

Current cage-free adoption rates of the seven interviewed producers varied quite significantly. Six

producers had less than 30% cage-free production, while one had more than 60% cage-free

production. Three of the seven producers have ongoing cage-free construction projects. To

maintain producer anonymity, producers’ production level, employment, exact current cage-free

adoption rates, etc., are withheld from this report.

Table 2.2. Egg producer profiles

Producer

Gender

Farm Size

% Cage-Free

Customers

Egg Types

Male

Small

< 30%

Grocery stores

Shell egg

Male

Medium

< 30%

Food service companies

Liquid eggs

Male

Large

< 30%

Grocery stores & food

service companies

Liquid eggs &

shell eggs

Male

Large

< 30%

Grocery stores

Shell eggs

Male

Large

< 30%

Grocery stores & food

service companies

Liquid eggs &

shell eggs

Male

Large

< 30%

Food service companies

Liquid eggs

Male

Large

> 60%

Grocery stores & food

service companies

Liquid eggs &

shell eggs

2.3. Comparing Operational Activities: Cage-Free v. Conventional

To better understand the differences between systems, we asked respondents to compare and

contrast the operational activities of cage-free and caged systems. More specifically, interviewees

were asked to describe how the cage-free transition affects five interrelated factors: (i) labor

demand, (ii) capital requirements (infrastructure), (iii) feed system and associated costs, (iv)

disease management, and (v) food safety/quality. The results are summarized in Figure 2.1.

Producers were first asked to discuss the difference in capital requirements for

infrastructure investment for cage and cage-free systems. All seven producers stated that cage-free

systems require at least two times the capital of caged facilities and would require investment in

cage-free pullet houses. Producers recommended that the bird spend their entire life in a cage-free

environment to be trained to maneuver through the system. For instance, Producer A stated: “Try

to get that pullet as well-trained in that [cage-free] equipment so they know where to lay the eggs,

they know how to go up and down the system to get feed and water. Once you’ve lost that training

period, you’re never going to get that back.” In addition, six out of seven producers recommend

against retrofitting caged facilities into a cage-free environment. They argued that while

retrofitting can be seen as a way to reduce capital investments, it could sometimes create long-

term problems within the facility. Producer C suggested, “We've done some remodels of existing

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.” For this particular producer, greenfield

facilities are preferred.

Figure 2.1. Cage-free system operational activities discussed with producers

The second factor our producers unanimously discussed was increased labor demand.

Securing willing workers for a cage-free environment and training them requires higher wages.

Speaking of their own experiences, producers reported that the labor demand for cage-free systems

was about 2-4 times as high as that of caged production. For example, when asked about labor

demand, Producer C stated that cage-free requires “much more of an animal care role where

people are actually interacting with the birds, and they have to be much more attuned to the

behaviors. It requires a lot more training, a lot more experience, and a lot more care… [and] also

a different labor rate.” Given the more specialized tasks and the enhanced need of fulfilling a

• Cage-free systems require at least 2 times the capital to caged facilities

• Also must consider investment in new cage-free pullet houses for training

purposes

Capital Requirements

• Cage-free production houses require 2-3 times more labor than caged

facilities

• Cage-free facilities also require more specialized labor

• Fecal matter and poor ventilation are most commonly cited worker safety

concerns

Labor Demand and Worker Safety

• Cage-free facilities require 2-3 lbs. more feed per 100 hens than caged

systems

• Slight differences in feeding schedules across systems

Feed System

• Disease can be more common and widespread in cage-free systems due to the

bird's increased contact with other birds and fecal matter

• Cage-free systems can require a more intense vaccine regime

Disease Management and Animal Welfare

• Same level of food safety can be achieved, but the presence of floor eggs in

cage-free systems is a potential food safety concern

• Cage-free facilities can have lower percentages of Grade A eggs due to

manure stains and cracks in the shell

Food Safety/Quality

“more animal husbandry role” (as stated by Producer D), the pool of potential employees shrinks.

The pool further shrinks when considering the implications of the transition for worker welfare.

In addition, business operations will incur costs due to an increased need for feed. For

example, Producer E stated that “cage-free systems can require 2 lbs. more per 100 birds and can

even be as high as 3 lbs. more per 100 birds.” Expanding on this point, Producer F remarked,

“Conventional housing generally requires 22.5 lbs of feed per 100 birds per day while cage-free

can require two pounds more.” These numbers align with calculations by Alltech (2022), who

reported a 7-8% increase in feed intake for cage-free flocks relative to caged ones.

The increased contact of the birds with feces and other birds in a cage-free environment

increases the disease risk meaning “a much more intensive vaccine regime for cage-free birds,”

as stated by one of the producers (Producer E), and “higher testing requirements for diseases such

as salmonella” (Producer C) are needed. The disease pressure and rigorous vaccine regime present

long-term risks and costs to producers. Additionally, three producers (Producers B, D, and E)

suggested that mortality rates can be 2-3 times greater in cage-free systems compared to

conventional facilities. In their opinion, this is mainly because of the birds' interaction with their

fecal material, more cannibalistic behavior, and the birds' protective instinct to "crowd" one

another. The higher mortality rate suggested by producers aligns with findings from Alltech (2021,

2022) and Weeks, Lambton, and Williams (2016), reporting lower mortality rates in conventional

systems than in cage-free and free-range systems. However, Producer C stated that the mortality

rates were similar across systems, though they agreed that mortality rates could be higher during

the first few years as the producer adjusts to the transition. Indeed, research from Schuck-Paim,

Negro-Calduch, and Alonso (2021) support this claim, stating that producer experience plays a

role in reducing mortality rates. Their findings suggest that cage-free mortality rates have declined

over time, and there is no statistical difference between the conventional and cage-free systems.

Freire and Cowling (2013) also find no differences in laying-hen mortality rates between systems.

Thus, debate surrounds whether cage-free mortality rates are actually higher than caged systems.

The safety risks affect not only the birds but also the eggs they lay. Cage-free systems

result in floor eggs (i.e., any egg laid on the litter floor), and these floor eggs are more susceptible

to safety concerns. One issue with floor eggs is that it is difficult for workers to know how long

the egg has been on the floor. When found, there is also a higher chance that they might have been

contaminated with diseases (as stated by one of the producers).

Even more, there can be a food

quality concern. Producer D noted that a higher share of eggs in a cage-free system tend to be

undergrade “due to manure stains and cracks.” With poor shell appearance, Producer E reports

that “conventional systems can average from 94-97% Grade A eggs, while cage-free production

generally ranges from 88-94%.” Thus, there is a potential difference in terms of overall egg

quality, which will impact the profit producers can generate.

2.4. Business Plan and Relations with Buyers

Interviewees were asked to provide a broad overview of their contractual obligations, including an

estimated number of buyers and the percentage of eggs for shell-egg and liquid-egg markets. Each

producer stated that they sell the majority of their eggs through formal contracts to a few primary

customers. Most contracts are long-lasting relationships, with some spanning multiple decades.

Three producers explicitly described some of their contractual agreements as need-based, where

the contract does not specify a specific quantity but rather an agreement to meet the need of the

customer; two of seven producers describe having informal handshake agreements with buyers.

Spot markets make up a small share of annual sales, ranging from 0 – 20% for our seven producers.

All producers stated that they consistently monitor the cage-free situation with their

customers, but the frequency of these conversations varied. Producer F indicated that they had

weekly discussions with their buyer, while Producer B said their conversations were annual. The

remaining producers stated that they converse with their customers about once a month or less

regarding the transition to cage-free.

One point consistently made by each producer was that their customer drives the decision

to transition to cage-free. From these discussions, there also appears to be a positive correlation

between the percentage of cage-free production and sales to shell-egg markets. For example,

Producer E stated that most of their cage-free eggs are destined for grocery stores, while Producer

B, who supplies all liquid eggs, added, “We’re not marketing to retailers and consumers who are

looking at an egg as an egg. We’re marketing to big branded processed food companies where we

The anticipated share of eggs ending as floor eggs differed across producers with some of our interviewees reporting

losses up to 20% floor eggs at times (Producer D), while others indicated a share of around 5-6% (Producer A).

Nevertheless, all producers agreed that achieving 1% floor eggs was the goal, although even 1 % loss already

represents a huge loss.

are one of five to ten ingredients on a back panel, and the consumer is not as locked-in on the

choice of am I eating an egg, and where does it come from. They just want to make pancakes.”

This apparent relationship may stem from the fact that the cage-free attribute is more salient

on a carton of eggs than on a processed food box for a product containing eggs. In other words,

there is likely a difference in the way consumers think about eggs as a final product versus

eggs as an ingredient. There also may be regional variation in cage-free adoption rates, where

producers whose primary customers are located in regions without cage-free mandates are less

likely to transition. For example, Producer A stated, “In the West and the Northeast, you’re

probably going to continue to see a lot quicker of a transition than in other parts of the country.

We’re in the Southeast, and there have not been any major legislative pushes in our areas toward

going cage-free. So, it really just depends on where you’re located and where your customer base

is.”

Interviewees were also asked whether they had a business plan to transition more of their

facilities to cage-free. While three out of seven producers had ongoing projects, these were always

customer driven. Each producer stated that they would not engage in speculative building based

on the voluntary, informal pledges made by retailers. Relatedly, when asked whether federal

support would incentivize a faster transition to cage-free, all producers stated that this would not

solve the long-term issue of finding a buyer. Thus, producers will only transition to cage-free at

the request of their customers.

Regarding financing their completed or ongoing cage-free construction products, each

producer stated that securing funding through banks has not been a significant barrier. However,

they did note that loan approval required proof of a long-term commitment from the customer.

Without this contract outlining the transition timeline, banks may be hesitant to approve the loan

given the significant capital investment. Producers also suggested that while funding has been

available, it could become more difficult to acquire as more producers transition. That is, if

mandates restricting caged production are imposed, all producers will be forced to transition at

once, and funding could become more difficult to obtain. This is particularly true because cages

will lose their value. As cages lose value, producers cannot claim them as collateral, which

increases the producer’s debt-to-asset ratio and makes the bank less likely to lend. Smaller

producers are more likely to be negatively affected by this precautionary lending, which raises

concerns over industry consolidation. We discuss this concern more later in the chapter.

Most producers stated that they are not opposed to any production system, but they want

to know that the market demand is there before transitioning. “We don’t have a preference on the

style of production, cage-free versus conventional. But our models are predicated on

understanding the customer and delivering what they want, where they want it,” claimed Producer

F. Producers requested clear communication and firm commitments from their customers. With

producers suggesting that it takes two to three years to build new cage-free facilities and no hard

commitments made, the 2025 deadlines for the retailer pledges look infeasible.

2.5. Future of the Industry: Barriers and Opportunities

Producers were asked what, in their perspective, were the (three) largest barriers and (three)

opportunities to transitioning to 100% cage-free production. As summarized in Figure 2.2,

customer demand, capital financing, environmental sustainability, and food security were the most

commonly cited barriers. Innovation and entrepreneurship opportunities, an industry “reset” within

the animal activist community and gaining market share were listed as potential opportunities in

cage-free. In what follows, we discuss key findings that express barriers and opportunities raised

by the producers.

Figure 2.2. Main barriers and opportunities to cage-free adoption mentioned by producers

2.5.1. Barriers

Barrier 1: Customer demand and commitment

Customer demand and commitment by the retailers was one primary concern raised by producers

during the interview. Each raised similar concerns regarding the commitments made by the

retailers to transition to cage-free eggs by January 1, 2026. Producer E stated, “Retailers that did

try to make the decision when the conventional option was still present saw consumers continue

to buy the conventional option. Then, when they subsequently removed the conventional option,

they experienced a significant decline in egg sales.” This response addresses two key issues. First,

with cage-free commitments in place, retailers will find it difficult to attain cage-free goals when

consumers still have the option to purchase cage eggs. There is a disconnect between consumer

voting behavior and current purchasing behavior. Indeed, three of seven producers used the phrase

“consumers vote with their wallet” to demonstrate how consumers vote to impose stricter

production standards yet continue to purchase the cheaper, caged product option. Secondly,

Producer E’s quote demonstrates that in states without a cage-free mandate, no retailer has a first-

mover advantage to switch to cage-free. That is, if a retailer voluntarily removes the cage egg

alternative from their shelves, they will experience a “significant decline in egg sales” as

consumers shop at a competitor’s store for the cheaper alternative. Indeed, research indicates that

consumers compare food products/prices, shop at multiple retailers, and substitute across retail

outlets (e.g., Bonfrer, Chintagunta, and Dhar, 2022; Richards and Jura Liaukonytė, 2022). Yet,

there appears to be an agreed-upon, soft commitment to a 2025 deadline for all the major retailers

to go cage-free.

The differences in voting and purchasing behavior create uncertainty and risk in the supply

chain. 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. For example, when describing the impending 2025

deadlines and the cage-free transition, Producer F stated, “Most retail chains are saying, ‘Yeah, do

that for me, and I’ll buy it in 2025.’ ‘Well, what about 2023 and 2024 when I have to make that

transition?’ ‘Yeah, I’ll buy them in 2025.’ So that’s the dilemma that, as an industry, we are

perplexed with.” In other words, retailers want producers to invest in cage-free facilities to be ready

for the hard switch, but retailers are hesitant to purchase cage-free eggs during the transition, given

what is known about current consumer purchasing behavior. Producers, on the other hand, will not

engage in the speculative construction of cage-free facilities. They will only invest once they have

a long-term commitment from their customers to account for the transition period.

Barrier 2: Capital, financing, and equipment

When asked about the three limiting factors to cage-free production, Producer F’s response was

“Capital, capital, and capital.” Producers, as a whole, agreed that cage-free capital requirements

are at least double that of caged systems, and they need a long-term contract in place with a

customer before requesting funding from a bank. Producers use this contract to demonstrate to the

bank that they have a committed buyer, increasing the probability of loan approval. As discussed

above, some producers feel like they are “in the dark” (Producer A) as to what their customer

wants. Producer C added, “The industry is being asked to make a conversion that is an expenditure

and a commitment of time and resources orders of magnitude beyond anything we have been asked

to consider in the past. It simply is not going to happen in a vacuum; it has to be a partnership.”

Even when a long-term commitment is in place, it will take approximately 2-3 years to

build cage-free facilities (Producers C, D, E, and F). Producers D and F also suggested that

permitting concerns and the construction of cage-free pullet facilities can add to this timeline.

Moreover, limited equipment supplies and ongoing supply chain constraints could present

additional hurdles. Specifically, Producers C, D, and E each mentioned that as demand for cage-

free facilities increases, firms might find it more difficult to obtain equipment because there are

only a limited number of suppliers. This could further delay the speed at which the industry can

convert to cage-free production.

While the producers interviewed here stated that they have not had trouble securing funding

to date, Producers A and D acknowledged that this could become a concern if producers were

forced to transition all at once. A bank’s decision to approve a loan will depend on the value of the

firm’s assets, and as cages lose their value, it could become more difficult for firms to secure

funding (Producer D). This is particularly true for smaller firms that have a weaker market position,

leading the bank to view the loan as riskier. If financing becomes difficult to acquire, larger

producers may view the transition to cage-free as an opportunity to buy out smaller firms and gain

market share.

Barrier 3: Environmental sustainability efforts

While cage-free production and environmental sustainability are often lumped into the same

discussion, multiple producers stated that cage-free runs against their environmental goals.

According to at least four of the seven producers, cage-free production—which is more expensive

than caged production—requires more water, feed, and land while also having a higher carbon

footprint. These insights are supported by Leinonen et al. (2012), whose life-cycle assessment of

different egg production systems finds that the cage system has lower environmental impacts and

global warming potential than cage-free and organic systems.

Shepherd et al. (2015) also suggest

that cage-free systems have higher carbon dioxide emission rates than cage systems, likely driven

by increased hen activity and lower stocking densities. Producer E stated that their transition to

cage-free facilities had pushed them “further away from their goal of attaining carbon neutrality,”

while Producer D suggested that cage-free production runs “diametrically opposed” to their

environmental sustainability initiatives. There is a concern in the industry that consumers,

policymakers, and actors across the supply chain do not understand this tradeoff (Producers B, C,

D, and E). In these producers’ eyes, mandating cage-free production counters the progress in

reducing the industry’s environmental impact.

With regard to a growing population and a growing demand for protein, Producer D noted

that he believes environmental sustainability efforts need to be center stage “because the need for

that production, the need for more food, the need for more farmland without destroying the

environment is going to become intense.” When speaking about the transition, Producer D added,

“It’s hard to scale it back when it’s time to say, all right, we got to get back to the environment.

So, I really hope we don’t make too many wrong turns that are hard to undo if it does become

apparent soon that the environment is what we really need to be focused on.” As the country pivots

towards a higher cost, lower efficiency system with a higher environmental footprint, producers

suggest exercising caution over further mandates, and they encourage honest, open conversations

about cage-free production across the supply chain.

Barrier 4: Food affordability and security

With ongoing concerns about inflation and increasing food costs, the U.S. is already experiencing

issues with food security (USDA ERS, 2022). Producers B, D, E, and F see the conversion to 100%

cage-free as a food security issue. Capital and variable costs are higher in the cage-free system,

and the higher costs are typically passed down the value chain and borne by the consumer. This

difference in production costs explains the current price premium for cage-free eggs compared to

conventional caged eggs.

Specifically, Leinonen et al. (2012) find that the cage system requires less feed, water, and housing or land than non-

organic cage-free, organic cage-free, and free-range. With less input requirements, the cage system has lower

eutrophication and acidification potential, which are commonly used metrics for assessing environmental concerns in

agriculture systems. The cage system also has lower electricity use for ventilation, lighting, etc., which contributes to

the lower primary energy use and global warming potential.

If the conventional caged alternative is removed from the market, and all producers and

retailers must supply cage-free eggs, then the average cost for eggs increases. As the price

increases, the quantity demanded decreases, and fewer eggs are bought and sold in the

marketplace. The price increase will be most detrimental to the lowest income bracket, who rely

on eggs as a cheap source of protein. Forcing a transition to a more expensive product with an

identical nutritional profile while removing the cheaper alternative is likely to disproportionately

impact the most food-insecure groups. “We have to think smart, or we’re going to have a hungry

nation,” stated Producer E.

2.5.2 Opportunities

When asked to provide three potential opportunities in cage-free production, many producers

struggled to provide a complete list. Others were skeptical of viewing the transition to cage-free

as an opportunity. Producer A stated that he sees the transition “as more of a risk than an

opportunity because of the capital requirements and the unknowns,” while Producer B said that it

comes down to “educating the consumer about what they’re signing up for… What are we selling

to people, and do they really want it?” Producer B added that he currently sees limited opportunity

in the liquid egg marketplace but noted, “If everybody’s operating under the same rules… I think

the industry can become more efficient. The more volume and scale people have in the arena, the

better they are going to get at it.”

Opportunity 1: Innovation and entrepreneurship opportunities

Some producers were hesitant to suggest opportunities for entrepreneurship on the production side.

For instance, when asked about areas for entrepreneurship, Producer B stated, “I think on the

processing side, for sure, there’s always that flexibility. How do you add value? But on the

production side, no… I think any entrepreneurship is going to get mowed down by the scale of

production.” Producer C agreed with this assessment, adding that an entrepreneur “can start small

and try to build a niche brand, but by the time you look at the land and all the other resources…

the capital requirements are so enormous. It’s such a barrier.” Producer C instead suggested that

there should be an emphasis on helping the industry “solve the labor challenge.”

Producer C was not alone in assessing the need for technologies such as robotics to help

with labor. When describing the differences in labor demand and labor tasks between caged and

cage-free systems, Producer D noted that “Well, I don’t really need people if I could find a robot

to do some of those things. I think robotics is a big part of where we’re going as an industry, both

in production and in our processing plants.” Producers D, F, and G also mentioned advancements

in ventilation and other technologies to provide a more sanitary environment for the hens and to

dry the manure. For example, Producer G notes that they have installed in-floor heating, a

technology that dries out the manure to a point where the robots can sweep it; it also reduces the

smell for workers. Relatedly, Producers F and G discussed ways to convert manure into fertilizer,

turning a byproduct of production into a new product line.

Opportunity 2: “Reset” with the animal activist community

Producer C stated that the conversion to cage-free “presents an opportunity for the industry to have

a reset in how the consumer sees us, and how the animal welfare community perceives the

industry… I think the industry has an opportunity to prove and show how effectively and efficiently

they can do this while improving animal welfare.” Over the past few decades, there has been an

increase in consumer demand for animal welfare attributes in food. At the same time, there has

been an increase in corporate responsibility for animal welfare standards. One example is Producer

G’s zero-tolerance policy for a failure to handle the bird properly. To promote animal welfare,

workers must watch a three-minute video daily on how to handle a bird, body cameras and security

cameras track behavior, and auditors monitor workers to ensure they are handling the bird

correctly. Producer C added that the transition to cage-free serves as “an opportunity to exit some

of the oldest systems and the oldest production methodologies.” With the expectation that most

producers will build greenfield facilities instead of retrofitting caged facilities, producers can

model their future facilities to incorporate technologies such as recovery pens (Producers C and

G).

Additionally, now that some producers have been producing cage-free for more than a

decade (Producers C, D, E, F, and G), there have been improvements in technologies and

production practices that have reduced some of the early challenges. For example, when first

learning about cage-free production, at least two producers (Producers E and F) consulted with

European producers that were further ahead in the cage-free transition. One issue was that the

European producers could not replicate the scale of U.S. production. Thus, while producers could

learn about some key aspects of the business, there was still a substantial learning curve.

“Like anything, there is a learning curve associated with transitioning to cage-free systems.

This includes how you grow the pullets, transitioning the pullets to the layer house, and labor

training,” stated Producer A. One example of this learning curve comes from Producer C saying,

“over the last ten years, we’ve gone from a situation where mortality in cage-free was significantly

higher than in convention production, to today, where it’s as good if not lower.” Noting that this

has to do with bird training, a more specialized workforce, and experience, there are avenues to

improve animal welfare. With more experience, producers will continue to adjust to the cage-free

setting, and there will likely be improvements in housing and equipment design.

Opportunity 3: Gain market share

Whether cage-free is viewed as an opportunity depends on the company’s size. In general, larger

producers benefit from economies of scale, and they have larger customers that may agree to long-

term cage-free agreements making funding easier to acquire. Small producers, however, may find

it difficult to compete in this space due to high capital costs and barriers to entry. Producer F noted,

“I’m afraid that the industry is going to continue to consolidate… there are a lot of producers out

there that are struggling to figure out what to do. Do we invest in cage-free? Do we sell the

business? Do we let somebody else worry about it? I think those are all valid questions that every

producer in the egg business is trying to figure out and are struggling with today.” Producer D

agreed that consolidation is likely, adding, “If we’ve got money, it’s in chickens, in cages, and

trucks. Our ability to borrow money is based on the value of our assets. And when you have 10

million cages worth of farm, and all of a sudden, your customers say, ‘I’m not buying eggs from

those cages in two years.’ They’re not worth very much.” As cages lose value, and without a long-

term contract, it may be more difficult to acquire funding, and banks may view smaller producers

are more risky borrowers.

Indeed, when asked to describe the potential opportunities for cage-free production,

Producer A (a small producer) stated, “I think this is going to drive consolidation. If you’re a

producer that can buy people out that might not be as good a financial shape, you know that’s

probably an opportunity to grow the business.” Producers B and D noted that small producers

would have to search for ways to supply a niche market, potentially through developing more

specialty products. Even amongst large producers, the excitement over cage-free was limited

(except for Producer G, who has already transitioned more than 60% of their facilities to cage-

free). For example, Producer E stated, “there is an opportunity for additional revenue, but it also

comes at a cost. So ultimately, it could cancel out.”

2.6. Final Remarks

In interviews with seven egg producers, we heard similar experiences and perceptions regarding

the transition to cage-free production. Interviewees described the differences between cage-free

and cage production and echoed common barriers preventing the transition to cage-free

production.

Producers indicated significantly higher fixed and variable costs in cage-free

environments. With lower stocking densities, producers estimated that cage-free capital costs are

more than double those of conventional production. This is the most commonly cited barrier to

cage-free adoption, with producers also speaking to the need for long-term commitments from

buyers to finance construction. With limited consumer demand—where retailers are hesitant to

commit to cage-free before the pledge date, and consumers continue to purchase the cheaper

alternative—the transition period from cage to cage-free production may be a point of tension

across the supply chain. Heightened annual expenses also result from additional pullet training,

vaccinations, feed, and labor relative to cage production. These heightened costs, along with the

increased risk and variability in the cage-free system, will have ripple effects across the supply

chain and most likely translate to higher egg prices for the consumer.

With these production barriers and anticipated market shocks, producers emphasized a

need for full transparency and honest conversations surrounding cage-free systems. This includes

a better understanding of the capital investment and transition timeline and more conversations

about the potential unintended consequences of cage-free production. In the wake of current

macroeconomic conditions and supply chain constraints, producers believe the timeline for the

transition to cage-free must better reflect current market conditions, equipment constraints, and

other logistical challenges. There was a consensus amongst producers 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.

Chapter 3: Egg Producer Survey

3.1. Producer Survey Questions and Procedures

In the final week of September 2022, Chad Gregory distributed an email encouraging all UEP

members to use an enclosed link and complete a 31-question survey. By November 3, 2022, 68

UEP members had opened the survey. Among these 68 respondents, 29 (mostly) completed the

survey. To demonstrate when the other 39 respondents exited the survey, 48 answered the survey’s

first question, 38 answered the 5

question, 34 answered the 10

question, and 30 answered the

question.

Ultimately, in this report, we focus on the 29 complete surveys such that the comparison

of responses across survey questions reflects information from the same set of UEP members.

Complete documentation of survey responses received is in the supplemental material

accompanying this text, along with a copy of the survey instrument. To assess the possible impacts

of focusing on the 29 fully complete surveys, we compare feedback from the fully available sample

with the complete surveys. This comparison indicates that both samples are very similar in their

Low response rates are becoming increasingly common in online surveys. While the small sample size may be seen

as a limitation, it is particularly important to emphasize the share of the overall industry represented in our completed

responses. As we describe later in the report, our best estimate is that the 29 completed responses represent 28-41%

of U.S. domestic egg production.

Summary

Building upon the individual producer interview feedback, the research team built a survey

inviting more comprehensive feedback on the transition to cage-free production. UEP members

were invited to complete a survey designed to gather feedback regarding the current and future

status of laying hen housing in the U.S. A total of 29 members completed the survey,

representing nearly 50% of UEP membership production. While there is diversity of opinion,

UEP members generally view the laying hen housing situation as more a challenge than an

opportunity. The majority of UEP members view conventional housing as superior in food

affordability, production efficiency, and environmental impact. Annual revenue for cage-free

systems is estimated to be 8% higher than conventional systems, but annual costs are estimated

to be 8-19% higher. On aggregate, respondents believe cage-free production will grow to 51%

of total production by January 2026. Using information from potential investment decision

environments, producers are identified to be more likely to invest when expected return on

investment (ROI) increases and when Cost-Plus contracts are available.

assessment of current cage-free prevalence in the U.S. and expectations for the number of laying

hens in January 2026 that may produce table or market-type eggs. Combined, this adds some

reassurance regarding focusing on the 29 complete surveys.

We further consider the collective production of the 29 complete respondents. The survey’s

question identified the current laying hen operation size. Consistent with the need to assure

anonymity and encourage survey participation, seven answer ranges were presented, spanning

from “Less than 500,000 laying hens” to “Over 5 million laying hens.”

We can use mid-point

levels of the presented size ranges to approximate operation size. It is important to note that 11 of

the 29 respondents selected the largest presented size of over 5 million laying hens. If we first

assume a small or conservative value of 5.5 million applies to these 11 respondents (on average),

then combined, the 29 respondents may represent about 90.5 million laying hens. Knowing that

some operations exceed 10 million laying hens, this estimate is likely too low. If we alternatively

assume 9.5 million applies to the 11 selecting the largest presented size range, then the 29

respondents may represent about 134.5 million laying hens. For context, there are approximately

300 million layers under UEP membership (UEP, 2023a; b). Given this, we are confident that the

29 complete respondents represent over 30% of UEP membership production, and our best

assessment is that about 50% of UEP membership production is represented.

As UEP members

account for 92% of U.S. egg production (UEP, 2023a), our sample represents 28-41% of all

domestic egg production.

To further classify current production practices, questions 21 and 22 asked how many

facilities (barns) are currently operating as cage-free and conventional. The most common

response for both production systems was operating six or more facilities. Consistent with

heterogeneity in the industry, three respondents (11%) indicated they do not currently have cage-

free facilities, and four respondents (14%) indicated they do not currently have conventional

facilities.

Which state respondent’s laying hen businesses were based in was asked to provide

geographic insight into our sample [Q23]. Twenty-five respondents indicated their state of

The exact survey question is available in the Appendix along with response counts, both for the sample of 29

complete responses and the entire set of responses received.

For clarity note that throughout this report, simple rather than weighted-responses are reported. This reflects an

inability to confidently extrapolate the available n=29 data sample to the national level in a manner consistent with

the industry’s actual size distribution.

business, with four in California, five in Indiana, four in Iowa, three in Michigan, two each in New

York, Pennsylvania, and Utah, and one each in Maryland, North Carolina, and Oregon. Combined,

this indicates that about 28% of respondents are from the West, 24% are from the East, and 48%

are from the Central/Midwest regions.

As a final base question, we asked the duration respondents expect their laying hen business

to remain operating [Q25]. While 10% (3 respondents) indicated less than 5 years and one

respondent (3%) suggested 6-10 years, the overwhelming majority (86%, 25 respondents) reported

over 20 years.

We now sequentially provide results for various survey questions. A complete set of

response statistics is available in the Appendix. Throughout the text, we include the question

number in [.] as a guide to comparing with the Appendix resources.

3.2 Transitional Situation and Views

3.2.1. National, Industry-Wide Perspective

The beginning of the survey, Q1-Q9, focused on the national egg situation. On average,

respondents believe 29% of U.S. laying hens currently are housed in cage-free systems [Q1 mid-

points] and that by January 2026, this will be 51% [Q2 mid-points]. Figure 3.1 provides a

distributional summary of responses.

Beyond the expected increase on average, Figure 3.1 reveals varied opinions on the future

cage-free market share (wider dispersion of responses). This is not surprising given diverse

discussions and likely associated views on the industry’s future. To appreciate the diversity of

views on the industry’s future, note that two (7%) respondents expect less than 30% cage-free, 13

respondents (45%) expect 31-50% cage-free, 11 respondents (38%) expect 51-70% cage-free, and

the remaining three respondents (10%) expect 71-80% cage-free in January 2026.

In January 2026, respondents expect that 53% of cage-free eggs will be table (vs. breaker

eggs) [Q3] and that 50% of conventional eggs will be table eggs [Q4]. Combined, this indicates

minimal shifts are expected. Average expectations are for about 315 million laying in January

2026 producing table or market-type eggs, representing industry growth given a current estimate

of 303 million [Q5 mid-points]. Only four respondents (14%) expect less than 300 million

To further assure anonymity, we do not further associate state of business with facility count nor operation size

information in this report.

reflecting a shrinking industry; six respondents (21%) expect between 300 and 309 million,

reflecting little to no change; and 19 (66%) respondents expect 310 to 349 million. A key point to

appreciate here is that despite ongoing dialogue around housing practices, on balance industry

growth is expected.

Figure 3.1. Views on national cage-free market share, now and January 2026

To assess perceptions regarding productivity, respondents were first informed that the

average laying hen produced about 296 eggs per year in 2020. They were then asked, separately

by housing system, what productivity they expected in January 2026 [Q6]. On average,

respondents indicate cage-free yield will be 11 eggs per year lower, with 295 eggs per year

expected for conventional and 284 for cage-free systems. This on-average statement masks notable

variation as six (21%) respondents indicate cage-free yield will be higher, with the highest

differential being 15 eggs per year (325 cage-free vs. 310 conventional). Conversely, the majority

(19 respondents, 66%) expect conventional systems will yield more eggs, with one respondent

expecting 75 eggs per year higher (250 cage-free vs. 325 conventional). The other four respondents

(14%) suggested equivalent yields.

A qualitative question was included to broadly assess where respondents fell on an

opportunity-challenge spectrum regarding laying hen housing [Q7]. On a 5-point scale, spanning

from “enormous opportunity” to “enormous challenge,” respondents were asked what best aligns

with their view for the national industry regarding a possible increase in cage-free production. As

summarized in Figure 3.2, nobody responded “enormous opportunity,” 5 (18%) responded

“opportunity,” 10 (36%) responded “equally balanced opportunity & challenge,” 5 (18%)

responded “challenge,” and 8 (29%) responded “enormous challenge.” Combined, while there is

a diversity of opinion, this indicates that UEP members view the housing situation as more of a

challenge than an opportunity.

Figure 3.2. Views regarding laying hen housing, opportunity vs. challenge

To gather insight into how housing systems differ, a question asked which housing system

ranked highest or best (cage-free, conventional, or no major difference) regarding specific

categories of wide interest, including sustainability, animal welfare, production efficiency, food

affordability, and environmental impact [Q8]. Figure 3.3 provides a summary of views revealing

several key points. Overall, UEP members view conventional housing as superior in food

affordability, production efficiency, and environmental impact. A slight majority (62%) view

conventional systems as best for sustainability, with about one-fourth seeing cage-free and

conventional as equivalent. Animal welfare is the only area where more (45%) view cage-free as

superior. It is worth noting that the definitions of these terms were left to the producers’ discretion,

which presents a degree of subjectivity in the responses to Figure 3.3.

Figure 3.3. Views on which production method ranks best across different characteristics

3.2.2. Own-Operation Perspective

Questions 10-25 in the survey focused on the respondent’s situation and views, rather than the

national industry perspective discussed above [Q1-Q9].

On average, respondents indicate that 38% of their laying hens currently are housed in

cage-free systems [Q10 mid-points]. Comparing back to the first survey question discussed above,

this reveals that current cage-free adoption is higher among survey respondents than what is

believed nationally (29%). However, there is wide variation in our survey sample as three

respondents (10%) indicate 0-5% of their laying hens are currently cage-free, and four respondents

(14%) state that 96-100% of their laying hens are currently cage-free.

When asked to consider the situation in January 2026, respondents believe 62% of their

laying hens will be cage-free, on average [Q11 mid-points]. This also points to our survey sample

being, on average, slightly skewed more toward cage-free adoption, as the national, industry-wide

projection was 51% (Q2).

The survey’s 12

question asked respondents to consider how annual expenses across nine

different categories would be impacted if converting an existing conventional housing facility to

cage-free. Respondents were instructed to answer this presuming they maintained the same number

of laying hens. The full set of response frequencies are available in the appendix. Here we note

very few instances where cage-free is believed to have lower expenses than conventional. In fact,

the most prevalent response in four of the nine categories is cage-free is more than 20% higher

(the highest presented difference) in annual costs than conventional. If one presumes 25%

reasonably applies to this highest presented category, then an average cost difference can be

derived from the survey responses. As shown in Figure 3.4, this leads to an average estimate of

cage-free annual costs being 19% higher for labor, 11% higher for feed, 17% higher for fixed/non-

operating capital, 14% higher for variable/operating capital, 8% higher for electrical/utilities, 14%

higher for bedding/wood chips, 10% higher for repairs/maintenance, 10% higher for mortality, and

9% higher for morbidity when compared to conventional housing.

Question 13 in the survey is intentionally very similar to question 12 but alternatively

assesses annual cost impacts when building a new cage-free facility. Figure 3.4 presents implied

average cost increases. If again one presumes 25% reasonably applies to this highest offered

category, average cost difference estimates for new construction are cage-free annual costs being

18% higher for labor, 11% higher for feed, 17% higher for fixed/non-operating capital, 16% higher

for variable/operating capital, 9% higher for electrical/utilities, 15% higher for bedding/wood

chips, 8% higher for repairs/maintenance, 11% higher for mortality, and 8% higher for morbidity

when compared to conventional housing.

Combined, this indicates that similar impacts on annual costs are anticipated, whether

converting an existing facility or building a new cage-free facility. Annual costs are estimated to

Here and in several other cases where answer options are ranges, interval-censored models are used to derive mean

estimates.

be at least 8-19% higher for cage-free systems, depending on the expense category, with labor and

capital being areas of magnified expense differences.

Figure 3.4. Percent premium for cage-free annual expenses compared to caged, retrofit v. new

The estimated 8-19% higher costs for cage-free systems could be seen as a lower bound estimate of the anticipated

increase in cost. In the survey, participants were asked to state how much less/greater cage-free expenses would be

per expense category. The range of categories only went up to "20% or more." Our estimates presume that 25%

reasonably applies to this range. It is possible, however, that some producers anticipate costs for a given expense

category to be much greater than 20% or 25%. Indeed, the data from the qualitative interviews presented in Chapter

2 suggest that capital and labor can be more than double the rates of conventional. Thus, these estimates should be

seen as a lower-bound estimate of the increase in cost.

10%

19%

11%

14%

17%

14%

11%

18%

11%

16%

17%

15%

0% 5% 10% 15% 20%

Repairs/Maintenance

Mortality

Morbidity

Labor

Feed

Electricity/Utilities

Capital, Variable

Capital, Fixed

Bedding/Wood Chips

Building new housing Retrofitting conventional housing

It is also prudent to consider the revenue aspects of housing decisions. Accordingly, a

similarly designed question was included to assess expected differences in operational revenue,

again presuming the same number of laying hens when operating a cage-free rather than

conventional housing facility [Q14]. Three respondents (11%) anticipate more than 5% lower

revenue from cage-free, four respondents (14%) expect about the same revenue in cage-free and

conventional systems, and the remaining respondents expect cage-free revenue to be higher. Using

these responses, we derive an average implied estimate that cage-free revenue will be 8% higher

than conventional.

We then asked respondents to consider the expected return on investment (ROI) in laying

hen facilities, separately for conventional and cage-free systems with the same number of laying

hens [Q15]. The most common expected ROI for both systems was 6-10%. Taking the full set of

responses into account, we derive an average estimate of +10.3% for cage-free (with a 95%

confidence interval of 8.0% to 12.6%) and +10.6% for conventional (with a 95% confidence

interval of 8.7% to 12.4%).

A key take-home point is worth highlighting from questions 12-15. The 8% revenue impact

from question 14 is on the lower end of cost impacts, summarized in questions 12 and 13 points.

Meanwhile, a similar return on investment is expected when directly assessed, per question 15.

While this suggests some inconsistencies, combined, these points align with ongoing inner-

industry discussions around the transition in housing being complicated and varied.

We included a 5-point Likert scale question to assess views on what collateral would be

accepted to secure financing in support of expanding cage-free production [Q16]. While some

diversity of views exists, the majority anticipate lenders would utilize existing conventional

facilities, existing cage-free facilities, farmland, and other business assets as collateral.

We then turned to gather information on the share of eggs sold under different egg pricing

methods, separately by housing practice. First considering conventional eggs [Q17], 11% are sold

on the Spot/Open-Market (no contract), on average. However, this masks notable variation, with

55% (16 respondents) indicating no use of the Spot/Open-Market, two respondents (7%) selling

This reflects an interval-censored model presuming lower-end values of -10% (three over 5% lower than

conventional responses) and higher-end values of +25% (four over 20% higher than conventional responses).

This reflects interval-censored models presuming lower-end values of -4% (one cage-free response of below 1%)

and higher-end values of +25% (two cage-free and one conventional response of over 20%).

50% on the Spot/Open Market, and one respondent (3%) selling all their conventional eggs on the

Spot/Open Market.

On average, 32% of conventional eggs are sold with contracts tied to an external price (e.g.

Urner Barry report), with 45% (13 respondents) indicating no use of external price contracts and

41% (12 respondents) indicating over one-half of their conventional eggs are sold on external price

contracts. On average, 29% of conventional eggs are sold using cost-plus contracts (e.g.,

considering feed or other costs), with 52% (15 respondents) indicating no use of cost-plus contracts

and 31% (9 respondents) selling over one-half of their conventional eggs are sold on cost-plus

contracts.

Respondents indicating that they sold conventional eggs under contracts either tied to

external prices or with cost-plus considerations were presented with a follow-up question [Q17

follow-up] to assess the typical length of these agreements. While there was one instance of an

external price-based contract exceeding 15 years in length, all other responses indicated durations

of five years or less, with two years being the most common.

The methods used to sell cage-free eggs were then assessed [Q18], using parallel questions

to Q17 on conventional eggs. As a summary statement based on averages, cage-free eggs are more

likely than conventional eggs to be sold using cost-plus contracts. On average, 9% of cage-free

eggs are sold on the Spot/Open-Market (no contract), with 64% (18 respondents) indicating no use

of the Spot/Open-Market and only 1 respondent (4%) indicating majority use.

On average, 14% of cage-free eggs are sold with contracts tied to an external price (e.g.,

Urner Barry report), with 66% (19 respondents) indicating no use of external price contracts and

14% (4 respondents) indicating over one-half of their cage-free eggs are sold on external price

contracts. On average, 49% of cage-free eggs are sold using cost-plus contracts (e.g., considering

feed or other costs), with 38% (11 respondents) indicating no use of cost-plus contracts and 55%

(16 respondents) selling over one-half of their cage-free eggs are sold on cost-plus contracts.

The longest duration of external price-based contracts for cage-free eggs was three years,

with two years being the most common [Q18 follow-up]. The reported duration of cost-plus based,

cage-free contracts is more varied. While two years remained the most common duration, three

respondents indicated contracts of eight or more years, and two others reported five-year contracts.

We then gathered information on the distribution of eggs to consumers. Namely, we asked

what share of produced eggs are ultimately sold through retail (grocery), food service (restaurant),

manufacturing, or export channels [Q19 & Q20]. As a summary statement, a higher share of eggs

is believed to move through retail outlets today (59% on average) than in January 2026 (52% on

average), with slight differences expected in the other three outlets.

3.3. Laying Hen Housing Investment Decisions

The final section of the survey included a set of four questions designed to examine producer

decisions under alternative laying hen facility investment situations respondents may face. The

general intent here is to examine housing investment decisions with an elevated interest in how

changes in egg pricing arrangements and expected returns on investment impact these decisions.

Specifically, a choice experiment, a widely applied approach in economics research that our team

has noted experience with, was designed where respondents were asked if they would make a

Conventional (not cage-free), Cage-Free, or Neither (would not invest) construction investment.

An example question is provided in Figure 3.5.

Figure 3.5. Example laying hen investment decision question

Across four presented questions to each respondent, investment situations varied in the

possible egg pricing arrangement and expected return on investment (ROI) that applied. This

variation in investment situations allows researchers to map how producer investment decisions

may be impacted by egg pricing arrangement and ROI. Survey responses indicate details on the

producer’s selection and the two options that were not selected. Combined, this information

informs models that estimate probabilities of Conventional, Cage-Free, and Neither construction

investment.

Three possible egg pricing arrangements were considered: Open/Spot Market (“cash” price

situation and no contractual agreement), Urner Barry Contract (formula contract where the

received price is tied to Urner Barry reported price), and Cost-Plus Contract (formula contract

where received price is tied to feed and/or other production costs). Three possible expected ROI

ranges were included: 1-5%, 6-10%, and 11-15%.

Ultimately, 27 respondents completed the four-question investment decision sequence.

Among these respondents, 11 (40.7%) made the same selection in all four presented cases. This

likely indicates factors besides egg pricing arrangement and ROI underlie decisions for many UEP

members. Another pragmatic implication here, combined with the limited sample size, is that we

are constrained to rather simple logistic models as more sophisticated approaches are not viable in

this application.

It is useful to summarize the frequency of selections across all respondents and presented

scenarios. Cage-free investment is selected in 44% of presented scenarios, conventional

investment in 19%, and no investment in 38%. Before analyzing how decisions may change with

alternative egg pricing arrangements and ROI situations, this reveals notable hesitation in investing

(over one-third electing neither housing investment) and particularly in making conventional

housing system investments.

We ultimately estimate multinomial logistic models that estimate how the probability of

investment changes with adjustments in egg pricing arrangements and expected ROIs. Figure 3.6

presents the estimated probability of Conventional, Cage-Free, and Neither investment option

being selected in different situations. An upfront summary statement is that producers are more

likely to invest when expected ROI increases; they prefer Cost-Plus contracts to Urner Barry

external price contracts; and they are least likely to invest when facing Spot/Open market pricing

of their eggs.

These 27 respondents ultimately reflect 324 observations in our estimated models based upon a panel-data setup

(27 respondents, 4 scenarios/respondent, and 3 options/scenario).

Panel A. Spot/Open-market pricing

Panel B. Urner Barry external pricing

Panel C. Cost-plus contract

Figure 3.6. Projected investment: Contract options and common ROI in both production settings

26%

27%

64%

10%

64%

63%

31%

0% 10% 20% 30% 40% 50% 60% 70%

Both 11-15% ROI

Both 6-10% ROI

Both 1-5% ROI

17%

18%

50%

11%

72%

43%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Both 11-15% ROI

Both 6-10% ROI

Both 1-5% ROI

13%

42%

11%

75%

50%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Both 11-15% ROI

Both 6-10% ROI

Both 1-5% ROI

Panel A of Figure 3.6 presents the estimated probabilities of Conventional, Cage-Free, and

Neither option being selected when a common expected ROI and use of Spot/Open-market pricing

applies to both Conventional and Cage-Free investments. Considering the intermediate case of 6-

10% expected ROI, we estimate 27% would not invest, 63% would invest in Cage-Free systems,

and 10% would invest in Conventional systems. As anticipated, both the Cage-Free and

Conventional investment rates are higher if the expected ROI is 6-10% than when it is 1-5% (63%

vs. 32% for Cage-Free and 10% vs. 5% for Conventional).

Panels B and C of Figure 3.6 are similarly designed, portraying the case of laying hen

housing investments having common Urner Barry, external price and Cost-Plus contracts,

respectively. Comparing these figures to Panel A reveals producer preferences to avoid Spot/Open-

market pricing. For instance, in the intermediate 6-10% expected ROI case, Panel B indicates 72%

would invest in Cage-Free and 11% would invest in Conventional housing vs. the 63% and 10%

in Figure 3.6 reflecting a Spot/Open-market situation. Meanwhile, Panel C (also for 6-10%

expected ROI) indicates 75% would invest in Cage-Free and 11% would invest in Conventional

housing.

Combined, comparing values across Figure 3.6 reveals a strong preference, particularly in

Cage-Free investing, for Cost-Plus contracts. As a final figure to illustrate this further, Figure 3.7

presents estimated investment rates when Conventional investments are made in a Spot/Open-

market pricing environment while Cage-Free investments have Cost-Plus contracts available.

Sticking with the intermediate, 6-10% expected ROI case, Figure 3.7 indicates 81% would make

Cage-Free investments, 5% would make Conventional investments, and 14% would not invest.

This much lower rate of Conventional investing and a higher rate of Cage-Free investing is

consistent with revealed preferences for Cost-Plus contracts. This also sheds insight into how

alternative market situations may correspond with higher or lower investment rates.

Figure 3.7. Projected investment: Conventional with spot pricing and cage-free with cost-plus

3.4. Provided Comments

The survey ended with two open-ended questions, allowing respondents to provide additional

feedback [OpenEnded; Qend]. The exact typed feedback is included in the Appendix. Here we

include three comments to depict the varied views shared:

• “Cage-free is based on consumer demand. The consumer will ultimately decide what we

produce.”

• “A lot is up in the air – will companies and grocery stores hold their comment

(commitment) to change over by 2026”?

• “Producers will make the transition to cage-free when they can receive the right customer

commitment. Without the contracts it is too risky to make the investment. It costs $70 per

bird to build a cage-free facility today.”

3.5 Final Remarks

This chapter analyzes producer expectations, sentiment, and decision-making surrounding the

transition to cage-free production. We surveyed 29 egg producers whose annual production

accounts for approximately 50% of all UEP production. Results are largely consistent with those

from the semi-structured qualitative interviews presented in Chapter 2.

UEP members generally view the laying hen housing situation as more of a challenge than

an opportunity. Producers estimate an 8% increase in annual revenue relative to conventional

systems, but this revenue increase is coupled with an 8-19% increase in annual costs. Cost

estimates vary by expense category, with labor and capital being two areas of notable expense

increases. Food affordability, production efficiency, and environmental impact are also concerns,

where producers commonly rank conventional production as superior to cage-free production. The

results of hypothetical investment decision environments indicate that producers are more likely

to invest when the expected ROI increases and Cost-Plus contracts are available. Ultimately,

respondents believe that 51% of U.S. laying hens will be in cage-free environments by January

2026.

An Appendix is available in an online repository containing four additional resources to

provide complete documentation.

First is additional detail on the multinomial logit model

estimated using available choice experiment data. Second is the survey instrument distributed to

UEP members by email for online completion. Third is a Qualtrics standard output file, constrained

only to the respondents who completed the survey, which corresponds with the majority of the

results presented in this report. Finally, a parallel Qualtrics standard output file includes all

available responses, with the number of observations generally declining as the survey questions

progressed.

The additional resources are available here: link.

Chapter 4: Consumer Survey on Egg Product and Policy Preferences

4.1. Consumer Survey Questions and Procedures

To assess consumer attitudes and preferences for egg products and related policies, we surveyed

961 U.S. egg consumers. The survey was delivered to an online consumer panel maintained by

Qualtrics. In addition to having purchased eggs in the three months before the survey, respondents

had to be above 18 years old and buy at least half of their household’s groceries to participate in

the study. The survey included six primary sections, described in greater detail below.

4.1.1 Section 1: Sample demographics and egg purchasing habits

Respondents first reported various demographic and household characteristics, enabling insights

into how egg product preferences, attitudes, and policy preferences vary by consumer

characteristics. Demographic questions included respondent gender, age, income, education, race,

and region of residence. Household questions included household size, whether they have received

(and are currently receiving) Supplemental Nutrition Assistant Program (SNAP) benefits, and

whether they have ever worked on a farm or ranch, among others.

4.1.2 Section 2: Egg Purchasing Habits

Respondents reported their egg purchasing frequency, quantity purchased per shopping occasion,

and most frequent place of purchase to elicit general egg purchasing habits. They also identified

Summary

We conducted a national survey of 961 egg consumers in November 2022 to understand

consumer preferences and perceptions of the U.S. egg market. Using various statistical tools,

this chapter offers insights into how consumers may react to the transition to cage-free eggs.

While less than 20% of the sample was aware of retailers’ cage-free pledges, nearly 80% stated

that they would support a pledge. Additionally, results suggest that consumers prefer minimum

space requirement policies to bans on conventional production, but even the least preferred

policies are capable of passing through ballot initiatives. However, the results to a discrete

choice experiment provide conflicting evidence of what the consumer wants. While they may

state a level of support for cage-free production, the removal of conventional eggs from the

marketplace will result in a significant decline in egg purchasing behavior. Put differently, there

is a gap between the way consumers vote at the ballot versus with their wallet at a retail outlet.

the characteristics of the eggs they preferred to buy, including egg color, size, and labeling claims.

They were also asked to identify the three most and least important factors in their egg-purchasing

decisions from a list of 12 characteristics.

Given the current economic conditions, respondents were asked how egg prices have

changed over the past year and how they believe prices will compare next year. Respondents

indicating that 2022 egg prices are higher than 2021 prices were asked a follow-up question

regarding the factors driving this year-over-year increase. Specifically, they were given six factors

and asked to select all the factors that applied.

4.1.3 Section 3: Word Associations

Before providing respondents with information on the differences in egg production systems and

labels, we asked respondents word association questions. Each question was structured as follows:

“What one word or phrase comes to mind when you hear _______ eggs?” The six questions include

(i) caged, (ii) conventional, (iii) USDA organic, (iv) cage-free, (v) free-range, and (vi) pasture-

raised. These questions provide an initial reaction to how respondents view different egg products.

The order in which these were presented to participants was randomized to prevent ordering

effects, and each question was presented on a separate page.

4.1.4 Section 4: Consumer knowledge, attitudes, and perceptions of the egg industry

Consumer knowledge was measured through questions related to the structure and state of the egg

industry. Questions included what gender laying hens were, approximately how many laying hens

there were in the United States in 2020, and what percent of laying hens are housed in cage-free

systems, among others. Respondents were also asked whether the retail outlet they most commonly

purchase eggs from has pledged to discontinue selling conventional (caged) eggs in the near future.

Potential responses include yes, no, or I don’t know. They then stated whether they would support

or oppose such a pledge. To obtain a general perspective on how egg consumers view the industry,

respondents reported the percentage of egg producers they believe offer various amenities to their

laying hens. This list included the ten different services that factor into the UEP certification

program, as shown in Figure 4.1 (UEP, 2023c). Each characteristic had a sliding scale allowing

respondents to select a percentage between 0 – 100%.

Figure 4.1. United Egg Producers certification criteria, Source: UEP (2023c)

4.1.5 Section 5: Choice Experiment on Egg Selection

To elicit consumer preferences and willingness to pay for various egg products, we designed a

discrete choice experiment on egg selection. Choice experiments (see Louviere, Hensher, and

Swait, 2000 for more details about the method) have become commonplace in food economics and

marketing due to their simplicity, resemblance to real-world retail choice environments, and

external validity (Brooks and Lusk, 2010; Caputo and Scarpa, 2022). In a choice experiment,

survey respondents are presented with a collection of products that vary in multiple ways,

including price, and are asked to select the one they most prefer. For example, respondents are

presented with various food products offered at different market prices and asked to choose the

product they would purchase in an actual shopping situation.

Examples of food discrete choice

experiments designed to elicit consumer preferences and demand for eggs include Lagerkvist and

Hess (2010) and Lusk (2019).

In this study, the choice experiment was designed to mimic the U.S. egg market.

Respondents were presented with different egg alternatives, including (i) conventional, (ii) cage-

free, (iii) USDA- certified organic, (iv) free-range, (v) pasture-raised, and (vi) an alternative that

bears all four of the specialty labels. By incorporating these alternatives in the design, the study

See the review in Caputo and Scarpa (2022) for recent developments in food choice experiments.

effectively captured all production housing systems. Each product was offered at different price

levels to reflect the range of actual egg prices of eggs observed in supermarkets and supercenters.

Prices varied in $1.00 increments and ranged from $1.99 - $4.99 for conventional eggs; $3.99-

$6.99 for eggs labeled as cage-free, USDA-certified organic, free-range, and pasture-raised; and

$4.99-$7.99 for eggs reporting all labels. While eggs vary in other ways besides the housing system

used in production and price, respondents are asked to assume that all other characteristics are

similar across products and in line with their preferences. Each choice question included six

different egg alternatives of the same size (12 large eggs) and color (brown).

The prices appearing in each choice were determined by a main effects orthogonal

fractional factorial design, which resulted in 24 choice questions blocked into three sets of eight.

Each person was randomly assigned to one of the three blocks. In other words, the experimental

design required each individual to go through the choice exercise eight times, where prices varied

across the tasks. The order of the choice questions and the egg products shown to respondents in

each choice question varied randomly across respondents to avoid ordering effects. Figure 4.2

presents an example choice task.

In each choice task, respondents selected only one egg alternative or the “no-purchase”

option. In doing so, respondents were asked to answer as honestly as possible and in a manner that

would genuinely reflect how they would shop. Respondents were also provided with a table

summarizing the meaning of the labels before the choice experiment began (Table 4.1). The table

was adapted from Lusk (2019).

As shown in Figure 1.1 of this report, there is price heterogeneity across regions. To select the price levels that best

captured market prices, the research team identified prices for a dozen large eggs for each label at various grocery

stores (e.g., Walmart) across all 50 states. Additional price data were collected from the USDA (2022) and U.S. Bureau

of Labor Statistics. We then used these data to select the prices that incorporate the range observed in the choice

experiment on egg selection.

Figure 4.2. Example choice experiment task

Table 4.1. Labels used in the consumer choice experiment and their meaning

4.1.6. Section 6: Policy Preferences and Ballot Initiatives

To understand consumer preferences for various egg policies, we incorporated best-worst scaling

(BWS), following Caputo and Lusk (2020). In BWS, respondents are presented with a collection

of policy options, and they select the most desirable (best) and least desirable (worst) option. In

our analysis, respondents were presented with seven questions, each including three policy options

that the government could apply to shape the U.S. egg market. Each question reported three of

seven different policy options selected for this study. These included:

1. Federal ban on the production and sale of caged eggs: All eggs produced and sold in

the U.S. must be from cage-free facilities

2. Federal mandate on minimum average space requirements: All eggs produced and sold

in the U.S. must meet minimum standards related to cage size

3. State-wide ban on the production of caged eggs: Egg producers in your state cannot

house hens in conventional cages, but caged eggs can still be sold in your state

4. State-wide ban on the sale of caged eggs: All eggs produced and sold in your state must

be from cage-free facilities

5. State mandate on minimum average space requirements: All eggs produced and sold

in your state must meet minimum standards related to cage size

6. Mandatory labeling on eggs: Require all eggs produced and sold in the U.S. to have a

label indicating the housing system used in production; no restriction on production

methods

7. Farm subsidy: Provide funding to farmers that want to convert part or all of their

operations to cage-free facilities; no restriction on production methods

Figure 4.3 shows one of the BWS questions. After responding to each of the seven questions,

respondents were asked to vote on each of the seven policies as if it were on an election ballot.

Respondents would indicate whether they would vote for or against each policy; they are also

allowed to withhold their vote. They were asked to consider each policy option independently of

one another.

Figure 4.3. Example best-worst policy question

4.2 Data Analysis

The choice experiment data were analyzed using the latent class model (LCM) (Train, 2009),

following similar procedures applied in Lusk (2019). The LCM was selected among other models,

such as the multinomial logit model, to account for heterogenous preferences among egg

consumers. Indeed, past studies document substantial differences in how consumers evaluate

poultry production practices (e.g., Lusk, 2019). In addition, the LCM was preferred to other

discrete choice models that account for random taste variation like the mixed logit model (Train,

2009) to avoid biases from making erroneous parametric assumptions regarding preference

distributions, which are often found asymmetric and bimodal (Caputo et al., 2018).

Given our experimental approach, the LCM was specified as follows:

 















 



















 

















where represents consumers in our sample,  = conventional, cage-free, organic, pasture-raised,

free-range, and multi-labeled eggs and the no-purchase alternative (none);  indicates the choice

questions included in the experiment (T=8); 



is the estimated probability of individual  being

in latent class (or segment) c; P



is a continuous variable populated with the four price

levels selected for each egg alternative.

We estimated a four-class LCM and accounted for inattentive responses by constraining

all the parameters of the fourth class to equal zero, as suggested by Malone and Lusk (2018). To

improve the quality of the consumer survey data, the individuals projected to fall into this fourth

class were removed from the subsequential analysis. In estimation, the “none” alternative is

normalized to zero for identification purposes. The estimates from the model were then used to

calculate willingness to pay (WTP), market shares, and elasticities. Following Carlsson et al.

(2011), we also implemented simulations to predict how the market will respond to changes in the

market, e.g., the removal of the conventional (caged) alternative. In addition, we used Bayesian

calculations (see Scarpa and Thiene 2005) to derive individual-level WTP estimates, which were

then used in various regression models to determine individual-level determinants of WTP for

conventional, cage-free, organic, pasture-raised, free-range, and multi-labeled eggs. These

individual-level WTP values were then used to explore variations in mean WTP premiums across

demographics.

The additional consumer survey data were analyzed using various statistical and

econometric techniques. For instance, the data from the word association questions were analyzed

utilizing the word cloud generator “worditout.com,” which allowed us to calculate and visualize

the frequencies of the words associated with each egg alternative. The data from the remaining

survey questions were analyzed using descriptive statistics (e.g., means, frequencies, relative

importance) and graphical representations (e.g., bar graphs).

4.3 Results

4.3.1 Sample Characteristics

Through the consumer survey, we collected 961 responses. Table 4.2 reports the demographics of

the sample (first column of table 4.2) relative to that of the U.S. Census (second column of table

4.2). The sample is representative of the U.S. population with respect to gender and region. The

sample is older and over-educated with higher relative income compared to the U.S. census.

Differences across these characteristics are common in online surveys (Caputo et al., 2020; Caputo

et al., 2022). Note, however, that we should not expect a sample that is necessarily representative

of the U.S. population as our screening criteria ensured we sampled respondents that

purchase/consumer eggs and do at least half of the grocery shopping for their household. However,

there is no existing census-level data on the demographics (gender, education, etc.) of egg

consumers. Therefore, following Lusk (2018), we weighted our sample according to the stated

number of eggs each respondent purchased. Consistent with Lusk (2018), such weighting had

relatively minor effects on sample characteristics. Therefore, in what follows, we report the results

of the responses from the respondents who purchase/consume eggs without any special weighting.

Table 4.2. Consumer sample demographics relative to U.S. census (n = 961, % frequencies)

Characteristic

Sample

Unweighted

(n = 961)

U.S. Census

Weighted by

Egg Purchase

Volume

Male

45.8

48.6

44.5

Age

18-34

27.7

30.5

29.5

35-44

20.4*

17.0

21.4

45-54

12.4*

18.4

14.1

55-74

28.9

26.1

26.5

75+

10.6*

8.0

8.5

Income

Less than $20K

9.1*

15.8

7.3

$20K - $79K

49.3

47.1

46.7

$80K and above

41.7*

37.1

46.0

Education

Less than high school

1.6*

9.6

1.4

High school diploma

18.3*

28.3

17.6

Some college, no degree

20.7*

17.1

19.8

College degree

38.2*

32.2

38.6

Advanced degree

21.2*

12.8

22.7

Region

Midwest

20.6

21.1

18.2

Northeast

16.3

17.5

16.3

South

41.3*

37.7

41.9

West

21.7

23.7

23.4

Race and Hispanic Origin

White alone

83.1*

75.8

82.0

Black or African American alone

9.8*

13.6

9.9

Hispanic or Latino

8.0*

18.9

10.0

SNAP recipient

18.8

17.7

18.1

Superscript * denotes statistically significant differences between the sample and the U.S. population at the 5% level.

Following the Census Bureau, Hispanic origin is asked separately from the race question. As such, the percentage

indicating Hispanic, White, and Black or African American sum to more than 100%.

The percentage of recipients currently receiving SNAP benefits is calculated as the number of households receiving

SNAP benefits (USDA-FNS, 2022) divided by the total number of households (U.S. Census, 2022).

4.3.2 Egg Purchasing Habits

Table 4.3 summarizes the sample’s egg purchasing habits. Supermarkets (38%) and supercenters

(35%) are where consumers most frequently purchase their eggs. Most consumers purchase eggs

occasionally (33.8%) (every two weeks) and often (32%) (1-4 times per week). Consumers most

commonly purchase a dozen eggs per shopping occasion (52%)

Table 4.3. Egg purchasing habits of the sample

Egg Purchasing Characteristic

% of respondents

Most frequent purchasing location

Supermarket

37.6

Supercenter

35.3

Warehouse Club

7.3

Natural or organic store

5.9

Low-price, no-frills grocery store

10.0

Ethnic store

0.0

Farmer’s market

1.8

Other

2.2

Purchasing frequency (Frequency)

Very Often (Daily or 5-6 times per week)

12.8

Often (1-4 times per week)

32.0

Occasionally (Every two weeks

33.8

Rarely (once a month)

10.1

Other

1.4

Eggs purchased per occasion (Volume)

Less than 6 eggs

18.7

6 eggs

4.0

12 eggs

52.0

18 eggs

25.3

24 eggs

10.6

More than 24 eggs

6.2

Figure 4.4 reports how consumers perceive the importance of various product attributes

and claims when purchasing eggs. Specifically, the figure shows the differential between the

percentage of consumers that rate an attribute as most important versus least important. Attributes

with a positive differential are more commonly selected as “most important,” while those with a

negative differential are more commonly chosen as “least important.”

The results suggest that

price (+48%), taste (+41%), and safety (+36%) are the most important egg characteristics to

consumers. Amongst the least important features are novelty (-45%), color (-31%), and

environmental impact (-21%).

Figure 4.4 Attributes that are most and least important to consumers when buying eggs

Figure 4.5 reports how consumers report prices changing since November 2021 and how

they think egg prices will adapt to this time next year. The figure shows that 80% of respondents

have noticed a price increase, with nearly a third stating prices are more than 30% higher. The

respondents stating that egg prices are higher were asked what was driving the increase, amongst

a list of six different factors (select all that apply).

Respondents were asked to indicate the three egg attributes they would consider the most important and the three

egg attributes they would consider the least important. The relative importance of each attribute was then derived by

coding answers for most important as +1, answers for least important as -1, and all non-selected attributes as 0. The

average of this exercise then represents the relative importance. Thus, the score ranges from a minimum of -1 (all

respondents indicate the attribute to be among the least important ones) to +1 (all respondents indicate the egg attribute

to be among the most important ones).

-45%

-31%

-21%

-14%

-13%

-11%

-9%

-7%

10%

15%

36%

41%

48%

Novelty

Color

Enviornmental impact

Fairness

Convenience

Size

Origin

Animal welfare

Nutrition

Naturalness

Safety

Taste

Price

+/- differential of most and least important characteristics

Figure 4.5. Consumer perceptions over past and future egg prices

Figure 4.6 summarizes these results. Inflation (85%), higher production and transportation

costs (52%), and other supply chain challenges (45%) are the most commonly indicated reason for

the higher egg prices. Just 15% of consumers perceive the higher prices to be associated with the

greed of retailers; 13% for the greed of egg producers. A notable finding from Figure 4.6 is that

only 22% of consumers report avian influenza (AI) as a reason for the price increase. This statistic

comes despite heightened media coverage of the record number of AI outbreaks, where

approximately 50 million U.S. birds have been culled from the outbreak (CDC, 2022). As for the

price consumers expect to pay one year from now compared to now, over half (56%) of

respondents predict next year’s egg prices to be higher than current egg prices, but the most

common response was that egg prices would remain the same (25% of the sample). Just 19% of

consumers believe egg prices will decline over the next year.

25%

24%

17%

10%

24%

25%

15%

16%

0% 5% 10% 15% 20% 25% 30%

40% + lower

30% lower

20% lower

10% lower

The same

10% higher

20% higher

30% higher

40% + higher

Percentage of respondents

Compared to this time last year, egg prices today are:

Compared to today, I expect egg prices one year from now to be:

Figure 4.6. Consumer perceptions over why egg prices have increased over the past year (n = 766)

4.3.3 Consumer knowledge, attitudes, and perceptions of the egg industry

Figure 4.7 presents the distribution of consumer beliefs about the current and projected future

(January 2026) share of cage-free laying hens in the United States. The average estimate is 35%

of hens currently housed in cage-free environments, with the most common response in the 20-

29% range. This answer aligns with the correct answer using the UEP (2023b) estimate of 29%.

Figure 4.7 also shows the predictions for the percentage of cage-free laying hens in January 2026.

The figure shows a shift in the distribution to the right, where the average response is 45%. In

other words, the average consumer expects a 10-percentage point increase in cage-free laying hens

from now to January 2026. Compared to the results from the producer survey, the consumers have

a lower estimate of cage-free production in January 2026. The difference likely stems from

unawareness of retailer pledges to transition to 100% cage-free.

Indeed, when asked whether the store the respondent most commonly purchases eggs at

has made a pledge, most respondents did not know (56%), and only 19% of respondents said their

store had made a cage-free pledge. However, when asked whether they would support their retailer

in making this pledge, 79% of respondents said yes.

13%

15%

22%

45%

52%

85%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Greediness of egg producers

Greediness of food retailers

Bird flu

Supply chain challenges

Higher production and transportation costs

Overall economic inflation

Figure 4.7. Respondent estimates for percentage of cage-free laying hens, currently and Jan. 2026

Exploring consumer perceptions of the industry, respondents were asked to report the

percentage of producers that provide various amenities to their laying hens. The list of ten

amenities comes from the UEP certification (UEP, 2022c). Figure 4.8 reports the average

responses for each characteristic. On average, amenity rates are below 70%, meaning the average

consumer believes that less than 70% of producers provide these amenities to the laying hens. The

amenities that rank highest are water 24/7 (69%), disease prevention (61%), and indoor housing

for hens protection (61%). Amongst the lowest scores are for veterinarians on staff (43%), annual

third-party audits (47%), and no added hormones (49%). We do not have statistics on the exact

percentage of producers providing each of these amenities. Thus, the purpose of reporting these

statistics is to provide industry leaders with a general overview of how consumers view the

industry and potentially generate discussion on marketing mechanisms to promote consumer

perceptions.

17%

22%

18%

14%

12%

14%

16%

17%

16%

10%

15%

20%

25%

Percentage of respondents

Estimated percent cage-free

Current January 2026

Figure 4.8. Consumer perceptions of egg producers providing different services to laying hens

4.3.4 Word Association

Respondents were asked to report the first word or phrase that came to mind when hearing different

egg production systems. The figure included in this link presents word clouds for each system,

where the size of the word corresponds to the frequency it was used. There are a few interesting

takeaways from these consumer reactions. First is the difference in perceptions between

“conventional” and “caged.” Despite implying the same system, respondents attach more negative

associations when caged is used. Rather than use words like “normal,” “regular,” and “traditional,”

respondents frequently resort to terms such as “inhumane,” “cruel,” and “sad.” This distinction

signals a lack of consumer awareness in production systems while demonstrating the importance

of framing, messaging, and marketing. A notable second takeaway is the health halo attached to

the labeled eggs, where “healthy” is commonly used to describe cage-free, organic, free-range,

and pasture-raised systems. Lastly, there is significant overlap in the word clouds for the cage-

free, organic, free-range, and pasture-raised systems, suggesting consumers may view these

products as substitutes for one another.

43%

47%

49%

54%

55%

57%

61%

69%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Veterinarians on staff

Annual third-party audits

No added hormones

Good air quality

Employees with proper training

Proper lighting

Balanced diet for laying hens

Indoor housing for hens protection

Disease prevention

Water 24/7

4.3.5 Choice Experiment

The results from the LCM are provided in the Appendix (see Table A1). As mentioned, we

estimated a four-class LCM and removed inattentive responses from the subsequential analysis.

This included the calculation of WTP, market share, and elasticities. In what follows, we present

aggregate-level results and then explore underlying heterogeneity in consumer segments identified

by the LCM.

Table 4.4 presents aggregate WTP estimates for each egg product. The first column reports

the mean WTP for each egg product relative to “none” (total WTP), while the second column

reports the mean WTP premium for the labeled differentiated eggs versus conventional eggs

(marginal WTP). The total WTP estimates suggest that respondents show the highest total WTP

for the eggs carrying all the labels (cage-free, organic, free-range, and pasture-raised) ($6.86)

relative to “none.” This is followed by organic ($5.90), free-range ($5.06), pasture-raised ($5.04),

and cage-free ($4.79), with conventional eggs having the lowest total WTP ($3.49). Examining

marginal WTP estimates, cage-free eggs have the lowest mean WTP premium (relative to

conventional eggs). The results also indicate a high level of substitutability between the labels: the

sum of the total WTP values consumers attach to each single-labeled egg (cage-free, organic, free-

range, or pasture-raised) is significantly higher than WTP for eggs displaying these labels

altogether.

Table 4.4. Total and marginal WTP estimates from the LCM ($/Dozen)

Egg Alternative

Total WTP:

Mean WTP relative

to “none”

Marginal WTP:

Mean WTP premium vs.

conventional

Conventional

$3.49

---

Organic

$5.90

$2.41

Cage-free

$4.79

$1.31

Pasture-raised

$5.04

$1.55

Free-range

$5.06

$1.57

Multi-labeled

$6.86

$3.37

The multi-labeled egg option includes eggs with the organic, cage-free, pasture-raised, and free-range labels.

The optimal number of classes to be used in the analysis was selected in accordance with the usual information

criteria such as the Akaike Information Criteria (AIC), the Bayesian Information Criteria (BIC) and the modified

Akaike Information Criteria (3AIC).

In addition to estimating aggregate WTP for each egg product, we also conducted

simulations to explore the effects of different market conditions and relevant policies. For instance,

Figure 4.9 reports consumer WTP to retain each egg product in the choice setting. These measures

were estimated following the procedures described in Carlsson et al. (2011), showing the amount

of money that would make consumers indifferent between two choice conditions. In our case, we

are measuring the amount of money that would make consumers indifferent between keeping each

egg product in the market versus removing it from the market. Consumers were assumed to have

the option to choose “none” or select one of the egg products included in the choice experiment:

conventional egg (priced at $2.50/dozen), organic eggs ($4.50/dozen), pasture-raised

($4.50/dozen), free-range eggs ($4.50/dozen), and multi-labeled eggs ($5.50/dozen). These price

levels were used to reflect the average actual market prices for each of the studied eggs. Results

indicate that consumers are willing to pay up to $0.60 to simply have the option of buying

conventional eggs. For the single-labeled option, consumers are willing to pay up to $0.04 to have

the option of buying cage-free eggs, but their WTP increases to $0.46 when cage-free eggs also

display organic, pasture-raised, and free-range labels.

Figure 4.9. Mean WTP to keep each egg product in the choice environment ($/dozen)

Next, we projected how removing conventional eggs might affect purchasing behavior

following Lusk (2018). The left panel (Scenario 1) of Figure 4.10 shows a market scenario when

all products are present, while the right panel shows the market shares when conventional eggs are

$0.04

$0.06

$0.17

$0.47

$0.60

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70

Cage Free

Free Range

Pasture Raised

Organic

Multi-labeled

Conventional

excluded.

The simulation provides two key takeaways. First, market shares for the non-

conventional alternatives increase marginally, between 2-8 percentage points. Secondly, the

percentage of consumers opting out of the marketplace increases substantially, from 5% to 25%

of consumers. This increase is greater than the increase presented in Lusk (2018), who found that

the share of consumers who would refrain from buying eggs would increase from 4% to 17% if

conventional eggs were removed from the market. This may reflect the current environment of

higher egg prices and elevated inflation in the economy, leading to a large share of consumers

exiting the collective egg market if conventional eggs are no longer available.

Figure 4.10. Market simulation demonstrating the effects of the removal of conventional eggs

In addition to demonstrating the impact of removing conventional eggs from the

marketplace, we also calculated the price elasticities (see Table 4.5). The diagonal entries represent

own-price (direct) elasticities, while the off-diagonals represent cross-price elasticities. Own-price

elasticities describe the percentage change in the probability of each egg product (cage-free) being

chosen given a percentage change in its price. Cross-price elasticities measure how the probability

of choosing an egg product (cage-free) changes given a change in the price of another egg

alternative (conventional). Consistent with economic theory, all own-price elasticities are negative,

It is important to note how the elasticities play a role in determining the outcomes presented in Figure 4.10.

Elasticities measure the slope of the demand curve for each egg product. When simulating the removal of the

conventional eggs from the marketplace (Scenario 2 of Figure 4.10), new elasticities are calculated for each of the

remaining egg alternatives. Put differently, we are on new demand curves for each of the labeled alternatives, and

these new demand curves have different elasticities than the market with conventional eggs (Scenario 1 of Figure

4.10). This explains why we can observe a large jump in opt-out rates despite the inelastic own-price elasticity of

demand shown in Table 4.5.

indicating that a price increase decreases the probability of selection. However, there are varying

degrees of price sensitivity, highlighting different behavioral responses to price changes. At the

selected price levels from the aforementioned market simulation,

consumers appear less price

sensitive with conventional eggs; more price sensitive with labeled, differentiated eggs, especially

organic, cage-free, pasture-raised, and free-range eggs. For example, the model predicts that a 1%

increase in the price of conventional eggs will lead to a 0.7% reduction of conventional being

chosen, while a 1% increase in the price of cage-free eggs will lead to a 5.8% reduction of

conventional being chosen. Consumers also appear less price sensitive with multi-labeled eggs

than single-labeled eggs: organic, cage-free, pasture-raised, or free-range eggs. For example, the

model predicts that a 1% increase in the price of cage-free eggs will lead to a -5.84% reduction of

cage-free being chosen, while a 1% increase in the price of multi-labeled eggs will lead to a 2.28%

reduction of multi-labeled eggs being chosen. All cross-price elasticities are positive, suggesting

a degree of substitutability across the egg products. A custom-made Excel tool was developed to

allow the user to explore welfare estimates, market shares, and price elasticities under alternative

market price conditions. The tool can be downloaded here.

Table 4.5. Own- and cross-price elasticities of demand

Change in Quantity of …

Change in Price of …

(1)

(2)

(3)

(4)

(5)

(6)

Conventional (1)

-0.74

0.51

0.87

0.73

0.84

0.14

Organic (2)

0.19

-4.01

1.13

1.17

1.14

0.65

Cage-free (3)

0.15

0.52

-5.84

0.79

0.77

0.23

Pasture-raised (4)

0.18

0.77

1.13

-5.40

1.14

0.34

Free-range (5)

0.21

0.73

1.08

1.12

-5.55

0.33

Multi-labeled (6)

0.09

1.09

0.84

0.87

0.84

-2.29

We now focus on heterogeneity in consumer preferences for different egg types and market

segments. We first evaluated whether consumer demographic characteristics significantly affect

WTP premiums for labeled eggs (organic, cage-free, pasture-raised, free-range, multi-labeled)

The elasticities presented in Table 4.5 are calculated by determining the proportionate change in market shares

resulting from a 1% increase in the price of each respective egg when conventional eggs are priced at $2.50/dozen;

organic, pasture-raised, and free-range eggs are priced at $4.50/dozen; and multi-labeled eggs are priced at

$5.50/dozen.

versus conventional eggs. We did so by following two steps. We first utilized the estimates from

the LCM to calculate the individual-level WTP values using the Bayesian procedure illustrated in

Scarpa and Thiene (2005). Then, we used these individual-level WTP to 1) evaluate variations in

WTP premiums across demographics using graphs and 2) determine the demographics associated

with significant changes in WTP using a seemingly unrelated regression model (see Zellner (1962)

for more computational details). Figure 4.11 illustrates the variation in mean WTP premiums for

cage-free and multi-labeled eggs by gender, income, education, and age. On average, age is

negatively correlated with premiums for specialty labels. Education and income, on the other hand,

are positively correlated with cage-free and multi-labeled mean premiums relative to conventional

eggs. These results are consistent across the results from the regression (see here), which suggest

that: i) Age is negatively associated with WTP for all specialty egg products, as is residing in the

southern region; ii) education is positively associated with WTP, while income was a relatively

weak predictor of WTP estimates; iii) males were less likely to pay premiums for each of the

specialty eggs than females.

Figure 4.11. Variation in mean WTP premiums for cage-free and multi-labeled eggs ($/dozen)

relative to conventional, by select demographics.

To further explore heterogeneity in consumer preferences, we also calculated total and

marginal mean WTP values ($/dozen) across three distinct consumer segments revealed by the

LCM (the class probabilities exclude the 22% who have provided inattentive responses and have

zero coefficients for all parameters). The results are reported in Table 4.6. Segment 1 (55% of our

sample) is represented by consumers who are more sensitive to price changes, resulting in fairly

low WTP values for almost all egg types, ranging from $3.82 to $4.27. Indeed, consumers who

belong in this class have a relatively low, often negative, premium for cage-free (-$0.10), organic

(-$0.01), pasture-raised (-$0.05), free-range ($0.05) and multi-labeled ($0.35) eggs. We define

Segment 1 as “Price Sensitive.” Segment 2 (19% of our sample) is more price insensitive, as they

show relatively high WTP values for all the other egg types, especially for multiple-labeled eggs

($15.71) and organic eggs ($12.48). The WTP for cage-free, pasture-raised, and free-range eggs

ranges from $7.17 to $7.99. For this reason, we call Segment 2 “Price Insensitive.” Lastly, Segment

3 (26% of our sample) is the most animal welfare conscious. Compared to the other segments, this

consumer segment exhibits the lowest WTP for conventional eggs relative to none ($2.63). The

WTPs for the other products are similar in magnitude, ranging from $5.14 to $5.98. We define this

group as “Animal Welfare Oriented.”

Table 4.6. Total and marginal mean WTP values ($/dozen), by market segment

WTP by Egg Product

Segment 1:

Price Sensitive

Segment 2:

Price Insensitive

Segment 3:

Animal Welfare

Oriented

Percentage of sample

55%

19%

26%

Total WTP: Mean WTP relative to “none”

Conventional

$3.92

$3.42

$2.63

Organic

$3.92

$12.48

$5.37

Cage-free

$3.82

$7.17

$5.14

Pasture-raised

$3.87

$7.99

$5.40

Free-range

$3.97

$7.82

$5.37

Multi-labeled

$4.27

$15.71

$5.98

Marginal WTP: Mean WTP premium vs. conventional

Organic

-$0.01

$9.05

$2.74

Cage-free

-$0.10

$3.74

$2.51

Pasture-raised

-$0.05

$4.57

$2.77

Free-range

$0.05

$4.40

$2.74

Multi-labeled

$0.35

$12.29

$3.35

Overall, the results from the choice experiment are robust across egg consumers; for

example, the results from the choice experiment where responses were weighed by egg purchasing

volume reported by our respondents during the survey (see here).

4.3.6 Policy Preferences

Table 4.7 and Figure 4.11 report the results of the best-worst scaling (BWS). In short, Table 4.7

shows the share in which each policy was selected as the best and the worst when presented in one

of the policy questions. Figure 4.12 graphically illustrates the percentage difference between the

best and worst responses. A positive point differential means the policy was preferred more often

than not, and vice versa for the negative point differential.

Two main takeaways come from the BWS. First, there is a clear divide between policies

banning caged production versus policies mandating minimum size requirements. Each of the three

bans on the production/sale of caged products has a negative differential, meaning consumers more

commonly vote this as the worst policy than the best one. On the other hand, both of the minimum

size requirement policies have positive differentials. The second key takeaway is that consumers

are more likely to prefer policies that do not restrict egg production systems. That is, the two

policies with the highest point differential are mandatory labeling and farm subsidies for cage-free

housing.

Table 4.7. Best-worst scale response frequencies

% selected when present

Policy

Best

Worst

Mandatory labeling on eggs

46.2

27.2

Farm subsidy

40.6

25.6

Federal mandate on minimum average space requirements

38.1

30.8

State mandate on minimum average space requirements

34.8

28.9

Federal ban on the production and sale of caged eggs

28.3

44.7

State-wide ban on the sale of caged eggs

23.8

36.7

State-wide ban on the production of caged eggs

21.5

39.4

Following the BWS, respondents were provided with traditional ballot questions, where

they voted for or against each of the seven policies; they also had the option to withhold their vote.

Figure 4.13 reports the results of the ballot-style questions. The results are mostly in-line with

those described in the BWS, but some key differences emerge. Mandatory labeling was viewed as

the most preferred initiative, with 70% of respondents stating they would vote for the policy. Other

commonly “approved” measures include state (62%) and federal (59%) mandates on minimum

average space requirements, whereas the policies banning the production and/or sale of caged eggs

reached a 50% majority. However, when removing consumers who withhold their vote, more

people voted for the policies banning the production and/or sale of caged eggs at the state level

than against it. Comparing this result to the point differential in Figure 4.12, we see how ballot

initiatives can pass without being a preferred policy amongst the public.

Figure 4.12. Best-worst scaling (BWS) results, differential in voting

Figure 4.13. Responses to various ballot initiatives

-18%

-16%

-13%

15%

19%

State-wide ban on the production of caged eggs

Federal ban on the production and sale of caged eggs

State-wide ban on the sale of caged eggs

State mandate on minimum average space requirements

Federal mandate on minimum average space requirements

Farm subsidy

Mandatory labeling on eggs

+/- best-worst voting differential

43%

44%

59%

62%

70%

14%

16%

15%

14%

15%

10%

43%

41%

40%

26%

24%

23%

19%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Federal ban on the production and sale of caged eggs

State-wide ban on the production of caged eggs

State-wide ban on the sale of caged eggs

Federal mandate on minimum average space requirements

Farm subsidy

State mandate on minimum average space requirements

Mandatory labeling on eggs

Percentage of respondents

Yes Withhold No

4.4 Final Remarks

We surveyed 961 U.S. consumers to assess attitudes and preferences toward egg products, the

industry, and policy options. We find that price, taste, and safety are the most important attributes

for consumers when buying eggs. About 80% of respondents have noticed an increase in egg

prices, with nearly a third stating prices are more than 30% higher. Inflation (85%), higher

production and transportation costs (52%), and supply chain challenges (45%) are the most

commonly indicated reason for the higher egg prices.

Regarding consumer knowledge, attitudes, and perceptions of the egg industry, consumers

believe that less than 70% of producers provide the various amenities to the laying hens, with water

24/7 (69%), disease prevention (61%), and indoor housing for hens protection (61%) ranking

among the highest amenities.

Results from the choice experiment show that consumers are willing to pay $1.31 for cage-

free eggs over conventional eggs, but their WTP goes up to $3.37 when cage-free eggs also display

the USDA organic, pasture-raised, and free-range labels. Results from the choice experiment also

show differences in WTP across three consumer segments. More than half of consumers (55%)

have a negative WTP value (-$0.10/dozen) for cage-free eggs compared to conventional eggs.

About 26% of consumers made choices that indicate a WTP value of $2.51 for cage-free eggs over

conventional eggs, while only 19% of consumers have a WTP premium higher than $3.00

($3.74/dozen). In simulating the egg market with and without the conventional (caged) alternative,

the results suggest that removing the conventional egg alternative will result in a larger share of

consumers (25%) opting-out of the marketplace due to a high-degree of price sensitivity.

From a policy perspective and of notable importance, just 19% of consumers were aware

of retailer cage-free pledges, but nearly 80% of consumers stated they would support such a pledge.

Further, the average consumer prefers policies on minimum size requirements instead of banning

conventional production. Yet, when it comes to ballot initiatives, even the least preferred policies

have a high likelihood of passing, heightening concerns over how consumers vote versus behave

in the retail outlet.

Overall, the findings from the consumer survey provide insights for the industry to prepare

for the impending transition to cage-free.

Chapter 5: Market and Producer Impacts of the Conversion to Cage-Free Egg

Housing

5.1. Equilibrium Displacement Model

Previous sections of this report provided insights into producer and consumer preferences and

expectations regarding conventional and cage-free eggs. These insights are now brought together

to understand market-level impacts in which the aggregate actions of producers and consumers

combine and interact to affect market prices, market quantities, and egg producer profits.

These issues are studied in two ways. First, a disaggregate market for cage and cage-free

eggs is modeled, where producers supply both types of eggs to market and consumers choose

between them. In this context, we explore how demand shifts by retailers away from conventional

and toward cage-free eggs affect egg producer profitability. Second, a simple supply and demand

model of the aggregate egg market (including cage and cage-free) is constructed. In this

environment, we study how an aggregate supply shift, induced by extra costs brought about by

conversion to cage-free housing, affects egg producer profitability in an environment where

aggregate egg demand remains stable. In both the aggregate and disaggregate cases, we focus only

on shell eggs and ignore liquid eggs or other egg products; we also focus on the wholesale market

between egg producers and egg retailers rather than the final consumer market.

Summary

We construct an equilibrium displacement model to assess how changes in market conditions

could affect egg producer profits. Specifically, in this chapter, two types of shell egg market

shocks are modeled. First consider a world where retailers transition toward cage-free eggs but

hold constant their total spending on eggs. That is, the demand curve for cage-free eggs at the

retail-level has shifted but total spending on egg products remains fixed. In this scenario, the

model predicts that producer profits could fall due to fewer total eggs purchased given the

higher- average-cost cage-free systems. The second simulated market shock considers a supply

shock from the higher cage-free expenses, drawing insights from the producer survey reported

in Chapter 3, while holding demand steady. Under varying sets of assumptions, the results

suggest a decline in producer profits ranging from $27-136 million. Importantly, both scenarios

modeled here capture a single shock, meaning that the estimates may not extrapolate to market

scenarios where multiple shocks hit the system simultaneously.

In both cases, we utilize the approaches developed in Alston (1991), Lusk and Tonsor

(2021), and Wohlgenant (2011), in which an equilibrium displacement model is constructed. The

approach considers changes in prices and quantities from an initial equilibrium brought about by

an assumed exogenous supply shock, such as an increase in cost from housing conversion, or a

demand shock, such as shifts in retailer demand for conventional vs. cage-free eggs. The changes

calculated by the model may not align with changes observed in “real life” because, in reality,

there are multiple supply and demand shocks routinely hitting markets. However, what this

modeling approach permits is the ability to identify and study the market effects of a single shock

in isolation (in this case, the shocks associated with conversion from conventional to cage-free

housing), recognizing that future observed market changes would be muted or amplified as other

shocks (e.g., changes in feed prices, changes in consumer income, avian influenza) invariably hit

the system.

5.2. Disaggregated Egg Market Analysis

We begin with a model of the shell egg market in which retailers choose how many conventional

and cage-free eggs to purchase at a given set of prices. The demand-side of the model is as follows:

(5.1) 





 









 









 



(5.2) 





 









 









 



where 





is the proportionate change in egg price (i.e., 



   ), 





is the

proportionate change in quantity demanded, and 



are the price elasticities of demand. Subscript

C represents conventional eggs, and CF represents cage-free eggs. Equation (5.1) is the change in

demand for conventional eggs, and equation (5.2) is the change in demand for cage-free eggs. One

expects 



and 



, the own-price elasticities of demand for conventional and cage-free eggs,

respectively, to be negative: as egg prices rise, retailers are expected to buy fewer of them. It is

expected that retailer-consumers consider conventional and cage-free eggs as substitutes, and as

such, it is expected that 



 . 



are demand shocks representing the proportional change in

quantity demanded; they are the magnitudes of the horizontal shift in the demand curve expressed

relative to the initial equilibrium quantity.

The supply side of the model assumes independence in production (i.e., the quantity of

cage-free eggs supplied does not depend on the price of conventional eggs and vice versa):

(5.3) 





 









(5.4) 





 









where 



  are own-price elasticities of supply.

Equations (5.1) through (5.4) represent a system of four equations and four unknowns.

Once elasticity values are assigned and demand shocks, 



and/or 



, are assumed, then the

equations can be solved for the four endogenous variables, changes in quantities and prices: 











, 





, 





. Once these values are known, it is possible to calculate changes in total

revenue/expenditure and egg producer profitability.

We use this framework to consider a simple thought experiment. For a given reduction in

conventional egg demand, 



, how much would cage-free egg demand, 



, have to rise to hold

total egg expenditure constant? This “expenditure constant” calculation assumes retailers want to

continue to spend the same amount on eggs and they adjust their demands accordingly. In this

case, we identify the levels of 



and 



that force the following equality to hold:

(5.5) 











 











 





  











  





  





  











  







where 





and 





are the initial equilibrium price and quantity levels for egg type j = conventional

initial equilibrium and the right-hand side of equation (5.5) total expenditure on eggs in the new

equilibrium after the demand shocks. Even though total revenue/expenditure is being held constant

in this thought experiment, producer profitability is not, and one can calculate changes in producer

profitability (or producer surplus) as:

(5.6)  























  





.

Producer profits can fall even as retailers spend the same amount on eggs if the switch in demand

results in more egg production coming from higher cost-of-production systems.

Figure 5.1 below shows the market effects of the offsetting demand shocks considered in

this thought experiment. The left-hand side figure shows the market for conventional eggs. The

quantity of conventional eggs demanded by retailers is assumed to fall from 





to 





. This moves

the market from the equilibrium at point A to point B, as conventional egg prices and quantity

produced both fall. The right-hand side of the figure shows the offsetting effects in the cage-free

market as retailers increase the quantity of eggs demanded from 





to 





, moving the

equilibrium from point C to point D as cage-free egg prices and quantity both rise. The changes in

conventional egg prices affect cage-free demand, creating a feedback loop between the figures on

the left and right, which is accounted for in the model in equations (5.1) and (5.2). Looking at

Figure 5.1, it is important to note that the magnitude of the horizontal quantity demand shifts (the

red arrows, which are equal to  in the mathematical model) is more prominent in absolute value

than the equilibrium change in quantities. This is a result of the fact that  measures how much

more/less retailers are willing to buy at constant prices. But as these shifts occur, prices change,

which affects the ultimate quantity of eggs produced and purchased.

Within this framework, we can also consider a second thought experiment. Rather than

determining the magnitudes of the two demand shocks, 



and 



, that hold retailer

expenditures constant, we can instead determine the magnitudes of the shocks required to hold

producer profitability (equation 6) unchanged. In this setting, we can ask how much retailers would

have to spend on eggs to leave egg producers unharmed by the switch from conventional to cage-

free egg demand.

Figure 5.1. Effects of decrease in demand for conventional and increase in demand for cage-free

5.2.1 Data and Parameter Estimation

To implement the model described above, it is necessary to assign values for elasticities. To

accomplish this task, we econometrically estimate elasticities using monthly data from January

2017 to September 2022. The start date of January 2017 is chosen because this is the date at which

the USDA Agricultural Marketing Service (AMS) began releasing their monthly Cage-Free Shell

Egg Report,

which contains data on wholesale contract and negotiated loose cage-free egg prices

as well as data on cage-free and organic production. The reported cage-free contract price remains

fixed for long periods of time, whereas the negotiated price is highly volatile; thus, for empirical

analysis, we average these two wholesale prices for large eggs to represent the wholesale market

price for cage-free eggs. We utilize the reported cage-free and organic flock sizes and rates of lay

from the AMS report to calculate the quantity of cage-free and organic eggs produced each month.

For conventional egg prices, we use the Urner Barry farm egg price as reported by the Iowa State

Egg Industry Center (EIC).

To determine conventional shell egg quantities, we use the quantity

of table-type eggs produced reported in the USDA National Agricultural Statistics Service (NASS)

Chicken and Eggs monthly report. This is an overestimate of the number of conventional shell

eggs sold because it includes eggs that are ultimately broken, and it also includes cage-free and

organic eggs produced. Thus, to calculate the quantity of conventional eggs sold in shell form in a

given month, we take the total quantity of table-type eggs produced and subtract the reported

number of eggs broken and the estimated number of cage-free and organic eggs produced.

The employment rate from the Bureau of Labor Statistics is collected (for use in the

demand models), and the consumer price index is collected to deflate prices. For the supply

models, we collect data on the cost of feed for egg production reported by the EIC and data on the

number of egg-laying hens affected by avian influenza as reported by the USDA Animal Plant

Health Inspection Service (APHIS).

The USDA data are available at: https://usda.library.cornell.edu/concern/publications/rj4304553?locale=en [last

accessed December 6, 2022].

The Urner Barry data are available at: https://www.eggindustrycenter.org/industry-analysis [last accessed December

6, 2022].

Table 5.1. Descriptive statistics for variables used in regression analysis

Variable

Source

Units

Mean

Minimum

Maximum

Conventional Egg Price (



)

Urner Barry farm price

$/dozen

0.917

0.231

2.710

Cage-free Egg Price (



)

USDA AMS Cage-free Shell Egg Report;

Average of contract and negotiated prices

$/dozen

1.462

0.287

1.085

Conventional Egg Quantity (



)

Calculated from data in USDA NASS Chicken

& Egg Report and USDA AMS Cage-free Shell

Egg Report

million eggs

3910.98

2365.36

4719.70

Cage-free Egg Quantity (





Calculated using data from USDA AMS Cage-

free Shell Egg Report; does not include organic

million eggs

1325.08

512.40

2425.34

Employment Rate

Bureau of Labor Statistics; Percent of the

population employed

60.7%

52.6%

62.7%

COVID

Calculated; equals 1 for March through June

2020; 0 otherwise

0,1

0.058

Cost of Feed

Iowa Egg Industry Center; Regional Average

$/lb

0.115

0.092

0.168

Avian Influenza

USDA APHIS; cumulative number of hens

affected in 2022

million hens

3.06

0.00

36.70

Given these data, demand elasticities are estimated. We estimate log-log regressions so that

the estimated coefficients can be directly interpreted as elasticities. The basic structure of the

demand models are as follows:





  



 







  







  



  





  











 







  



 







  







  





 



   











 



where CPI is the consumer price index (normalized so that September 2022 is set to 1). In this

framework, 



are own-and cross-price elasticities of demand equal to 



in equations (5.1) and

(5.2).

Table 5.2 shows the estimated coefficients. Elasticities estimates are of expected sign and

of reasonable magnitude. The own-price elasticity of demand for conventional eggs is inelastic,

where a 1% increase in the price of conventional eggs results in a 0.321% reduction in the quantity

of conventional eggs demanded. Conventional and cage-free eggs are demand substitutes; a 1%

increase in cage-free egg price is associated with a 0.307% increase in the quantity of conventional

eggs demanded. Cage-free egg demand is, as expected, more elastic; a 1% increase in cage-free

egg prices is associated with a 1.065% increase in the quantity of cage-free eggs demanded by

retailers. COVID (the period from March to June 2020) was associated with a 27.1% increase in

conventional shell egg demand and a 40.5% reduction in cage-free demand. Conventional egg

demand is highest in November and December and lowest in May and June.

Supply equations take a similar form, except supply-side shifters are added to the model,

including feed prices, an overall time trend (to account for technological change), and the

cumulative number of avian influenza cases in 2022. The model also includes a one-period lagged

value of the dependent variable to account for asset fixity and partial adjustment to price changes.

Including this variable permits a calculation of both short and long-run supply elasticities.

Supply elasticities are shown in Table 5.3. The short-run supply elasticity of conventional

eggs is highly inelastic at 0.015. The longer run value is calculated using the lagged dependent

variable: 0.015/(1-0.925) = 0.19, which implies that a 1% increase in conventional egg price is

associated with a 0.2% increase in the quantity of conventional eggs supplied. Likewise, the short-

and long-run supply elasticities for cage-free eggs are 0.098 and 0.32, respectively. We utilize the

long-run elasticities in the modeling efforts that follow. The estimated price elasticities are

substituted into equations (5.1) through (5.4) to determine the effects of demand shifts.

Table 5.2. Estimates of demand for conventional and cage-free eggs

Parameter

Conventional

Egg Demand







Cage-free

Egg Demand







Constant

2.520

(2.709)

30.590*

(7.002)

Conventional Egg Price, 





-0.321*

(0.058)

0.682*

(0.149)

Cage-free Egg Price, 





0.307

(0.176)

-1.065*

(0.455)

Log of Employment Rate

1.374*

(0.661)

-5.56*

(1.708)

Covid

0.274*

(0.097)

-0.405

(0.250)

January vs. December

-0.069

(0.085)

-0.009

(0.220)

February vs. December

-0.149

(0.084)

-0.163

(0.216)

March vs. December

-0.018

(0.085)

-0.097

(0.221)

April vs. December

-0.088

(0.085)

-0.164

(0.220)

May vs. December

-0.207*

(0.086)

0.130

(0.223)

June vs. December

-0.257*

(0.087)

0.031

(0.224)

July vs. December

-0.108

(0.086)

-0.065

(0.221)

August vs. December

-0.097

(0.085)

-0.058

(0.220)

September vs. December

-0.128

(0.084)

-0.025

(0.216)

October vs. December

-0.078

(0.088)

0.023

(0.227)

November vs. December

0.011

(0.087)

-0.101

(0.226)

0.538

0.420

Note: Each regression based on N = 69 monthly observations from January 2017 to September 2022

Numbers in parentheses are standard errors

One asterisk represents statistical significance at the 0.05 level or lower

Table 5.3. Estimates of supply for conventional and cage-free eggs

Variable

Conventional

Egg Supply







Cage-free

Egg Supply







Constant

0.496

(0.754)

1.831*

(0.504)

Conventional Egg Price, 





0.015

(0.012)

---

Cage-free Egg Price, 





---

0.098*

(0.045)

Log Feed Price

-0.076

(0.055)

-0.062

(0.054)

January vs. December

-0.027

(0.020)

-0.065*

(0.024)

February vs. December

-0.114*

(0.019)

-0.152*

(0.023)

March vs. December

0.094*

(0.021)

0.043

(0.024)

April vs. December

-0.058*

(0.020)

-0.050*

(0.024)

May vs. December

0.003

(0.021)

-0.017

(0.025)

June vs. December

-0.078*

(0.021)

-0.072*

(0.026)

July vs. December

0.060*

(0.023)

-0.023

(0.025)

August vs. December

-0.015

(0.020)

-0.020

(0.024)

September vs. December

-0.045*

(0.020)

-0.072*

(0.024)

October vs. December

0.030

(0.022)

-0.023

(0.024)

November vs. December

0.019

(0.020)

-0.094*

(0.024)

Time trend

-0.001

(0.000)

0.007*

(0.002)

Cumulative Bird Flu Cases

-0.000

(0.001)

-0.002*

(0.001)







0.924*

(0.096)

---







---

0.695*

(0.084)

0.976

0.993

Note: Each regression based on N = 69 monthly observations from January 2017 to September 2022

Numbers in parentheses are standard errors

One asterisk represents statistical significance at the 0.05 level or lower

5.2.2 Results for Expenditure Neutral Demand Shifts

As a first thought experiment, we consider a situation where retailers wish to hold total egg

purchase expenditures constant, in dollar terms, while converting from conventional to cage-free.

Figure 5.2 shows the offsetting demand shifts (and resulting equilibrium quantities) that would

produce this expenditure-neutral outcome.

Panel A. Changes in quantity demanded

Panel B. Changes in equilibrium quantities

Figure 5.2. Expenditure-neutral shifts in conventional and cage-free egg demand

Panel A of Figure 5.2 shows that for every 1% reduction in the quantity of conventional

eggs demanded, a roughly 2.5% increase in the quantity of cage-free eggs demanded is required

to hold total spending on eggs constant. For example, if conventional egg demand falls by 5%,

cage-free egg demand must increase by 12.7% to keep total spending constant. Panel B of Figure

5.2 shows the same outcomes but in terms of equilibrium quantity changes. As indicated when

discussing Figure 5.1, shifts in quantity demanded are larger than the changes in ultimate

equilibrium quantities (recall, shifts in quantity demanded are the extra quantities that would be

bought at the same prices, whereas the equilibrium quantities are those that result after prices

change). Panel B of Figure 5.2 shows that for every 1% reduction in the equilibrium quantity of

conventional eggs produced and sold, it takes a roughly 1.7% increase in the equilibrium quantity

of cage-free eggs produced and sold to hold total expenditures/revenue constant. For example, if

conventional egg purchases fall 2%, it takes a 3.4% increase in cage-free purchases to hold total

spending/revenue constant.

What are the impacts of these revenue-neutral demand shifts on egg producers? Using total

2021 prices and production to set initial equilibrium expenditure/revenue, Figure 5.3 shows that

these expenditure-neutral changes are harmful for egg producers. For example, if the quantity of

conventional eggs demanded by retailers falls by 5% while the quantity of cage-free eggs

demanded by retailers increases by 12.7%, retailers will spend the same total amount of money on

eggs, but egg producers’ profits will fall by $18.69 million per year. This result occurs because

fewer total eggs are produced, and those produced are at higher average costs for producers.

Figure 5.3. Impacts of expenditure-neutral demand shifts on egg producer profitability

5.2.3 Results for Egg Producer Profit Neutral Demand Shifts

Instead of determining the corresponding demand shifts that result in the same total egg spending

by retailers, we now explore how much cage-free egg demand would have to rise to leave

producers’ profits unharmed.

We find that for every 1% reduction in the quantity of conventional eggs demanded, a

roughly 2.6% increase in the quantity of cage-free eggs demanded is required to hold producer

profit unharmed. For example, if conventional egg demand falls by 5%, then cage-free egg demand

must increase by 13.2% to hold egg producer profits constant. As indicated previously, shifts in

quantity demanded are larger than the changes in ultimate equilibrium quantities. For every 1%

reduction in the equilibrium quantity of conventional eggs produced and sold, it takes a roughly

1.9% increase in the equilibrium quantity of cage-free eggs produced and sold to hold total egg

producer profits constant. For example, if conventional egg purchases fall 1.1%, it takes a 2.1%

increase in cage-free purchases to hold egg producer profits unharmed.

As is likely apparent from this discussion, retailers will have to spend more on eggs to hold

egg producers unharmed as they shift from conventional to cage-free eggs. Figure 5.4 below shows

how much more retailers would have to spend on eggs (in total) to leave producer profitability

unharmed as they shift from conventional to cage-free eggs. For example, if the quantity of

conventional eggs demanded falls by 5%, retailers would have to increase the quantity of cage

eggs demanded by 13.2% and spend $23.81 million/year more on eggs to leave producer

profitability unchanged. Stated in equilibrium quantity terms (rather than in terms of quantity-

demand shifts), if the quantity of conventional eggs produced and sold falls by 1.1%, retailers

would have to increase the quantity of cage-free eggs purchased by 2.15% and spend $23.81

million/year more on eggs to leave producer profitability unchanged.

Figure 5.4. Increases in retailer egg spending required to hold egg producers’ profits constant

5.3. Aggregate Egg Market Analysis

Rather than separately modeling supply and demand for conventional and cage-free eggs, a simple

model of the aggregate egg market is constructed to understand how housing conversions affect

overall producer profitability. Equation (5.7) shows changes in total shell egg demand, where 



the total change in the quantity of eggs (both cage and cage-free) demanded,    is the aggregate

demand elasticity, 



is the weighted average egg price, and  is the change in retailer willingness-

to-pay for eggs (it is the vertical shift in the demand curve measured relative to the initial

equilibrium price). Equation (5.8) shows changes in total shell egg supply, where    is the

overall own-price supply elasticity and  is the change in marginal cost of egg production.

(5.7) 



 



 

(5.8) 



 



 

Once values for , , , and  are assigned, then equations (5.7) and (5.8) can be solved

for the equilibrium changes in quantity and price: 



and 



. In particular, the equilibrium prices

and quantities are:

(5.9) 





     

(5.10) 





     

Once these values are calculated, changes in producer profitability are calculated as follows:

(5.11)   











   



.

What is the magnitude of the supply shift, k, induced by a conversion from conventional to

cage-free eggs? K is the change in marginal cost expressed relative to the initial equilibrium price.

In a competitive equilibrium, it is also equal to the relative change in per-unit cost, which in perfect

competition equals the change in per-unit price, again expressed relative to the initial equilibrium

price. Start by defining the initial equilibrium aggregate unit price, which in this context is a

quantity-weighted average of conventional and cage-free prices: 



 









   









where 





is the quantity share of cage-free eggs and superscript 0 denotes initial equilibrium

shares and prices. Now consider a change that shifts the quantity of cage-free eggs supplied,

leading to a new weighted-average unit price of: 



 









   









. Thus, the change

in price is: 



 



 











 







 











 

















 











 



. Expressed

in relative terms,  









 











 







. Thus, the size of the supply shift depends on

the change in the share of the market supplied by cage-free eggs,









 







, and the extent to

which cage-free price/cost is higher than conventional expressed relative to the initial weighted-

average price, 



 







5.3.1 Data and Parameter Estimation

To determine aggregate-level supply and demand elasticities, we utilize the conventional and cage-

free estimates already reported in Tables 5.2 and 5.3, along with the decomposition results

provided in James and Alston (2002), which relate aggregate to disaggregate elasticities.

Aggregate-level elasticities that would rationalize the disaggregate elasticities indicate  

 and   .

To determine the sizes of the supply shocks, one must evaluate the increase in the share of

cage-free eggs and the relative cost of producing cage-free vs. conventional eggs. In our producer

survey, respondents indicated a belief that the current cage-free share was about 0.3, and

respondents thought, on average, this would increase to 0.5 by 2026. This would suggest an

increase of 0.5 – 0.3 = 0.2. Given the uncertainty around this parameter, we consider values that

range from a 0.1 to a 0.3 increase in cage-free share.

The additional value that needs to be determined is the increase in cost when going from

conventional to cage-free. Survey respondents indicated that cost increases would vary by expense

category. However, they state that, on average, variable operating costs would increase by about

15% when going from conventional to cage-free; other costs, such as labor were higher, and

responses were truncated at a 20% price increase given the survey response categories, suggesting

that respondents beliefs of cost increases could be much higher than 15%. Another point of

reference is the actual price differences between conventional and cage-free. From January 2017

to September 2022, the regional average price of Large Grade A conventional eggs delivered in

cartons to warehouses was $1.07/dozen, as reported by the USDA AMS (report WA_PY001). By

contrast, the cage-free shell egg prices (to first receivers) over this period averaged $1.28/dozen

for contracted large carton cage-free eggs and $1.30/dozen for negotiated large, loose cage-free

eggs, according to the USDA AMS Cage-Free Shell Eggs Report. Thus, over this period, cage-

free eggs commanded a premium of between $0.21/dozen to $0.23/dozen, depending on which

cage-free price series is used. These represent a 20% to 22% price premium for cage-free eggs.

Given these points of reference, we consider the impacts of a “low” cost increase of 15%, a “mid”

of 20%, and a “high” cost increase of 25%.

As in the previous section, when calculating producer profit changes, we use initial revenue

values based on 2021 averages and focus only on shell-egg sales.

5.3.2 Results

Table 5.4 shows the impacts on producer profits under different assumptions about the increase in

the share of cage-free eggs and the cost of cage-free production relative to conventional. Under

the most conservative scenario (a 10% increase in the share of eggs that are produced cage-free

and a 15% higher cage-free costs of production), producer profits are projected to fall $27.22

million per year in aggregate. Under the costliest scenario (a 30% increase in the share of eggs

produced cage-free and a 25% higher cage-free costs of production), producer profits are projected

to fall $135.8 million/year in aggregate. In the middle scenario (a 20% increase in the share of

eggs produced cage-free and a 20% higher cage-free costs of production), producer profits are

projected to fall $72.51 million/year in aggregate.

An important caveat to note about the producer profit changes reported in Table 5.4 is that

they do not include changes in fixed costs of production. Costs that do not vary with the quantity

of eggs produced (e.g., fixed capital and infrastructure) that would be incurred with a conversion

to cage-free would need to be added to the figure in Table 5.4 to determine the full economic

consequences of conversion.

Table 5.4. Change in producer profits from conversion to cage-free housing, varying assumptions

Increase in Share

of Eggs from

Cage-free

Per-Unit Cost of Cage-

free vs. Conventional

Egg Production

Change in Egg

Producer Profits

(million $/year)

10%

15%

-$27.22

20%

15%

-$54.40

30%

15%

-$81.56

10%

20%

-$36.28

20%

-$72.51

30%

20%

-$108.69

10%

25%

-$45.34

20%

25%

-$90.61

30%

25%

-$135.80

Note: Total egg demand is assumed to remain unchanged in all scenarios.

Note: Calculated changes in producer profits do not include changes in fixed costs.

Chapter 6: Conclusion and Implications

Given the pressure from animal advocacy organizations, rising consumer demand, challenges of

complying with different state regulations across multiple jurisdictions, and a desire to protect

brand image and equity, many food retailers have pledged to phase out the sale of eggs from

conventional cage production systems and move toward only selling cage-free eggs. Many retailers

have committed to fully convert to cage-free by 2026. While the share of eggs produced in cage-

free and organic systems has risen steadily over the past decade, the rate of increase is insufficient

to meet all existing pledges by the 2026 deadline. Moreover, final retail egg consumers are not

choosing to buy cage-free eggs over conventional at a rate where retailer pledges would be

automatically fulfilled by the market alone.

Higher costs are the main challenge producers face in further transitioning to cage-free

housing. These costs include greater capital and labor requirements, more feed, and potentially

higher mortality and morbidity associated with cage-free vs. conventional housing. In addition to

cost, egg producers expressed concern about environmental impact, animal welfare, food safety,

and consumer affordability when considering the further transition to cage-free housing. Producers

were also concerned about how the transition toward cage-free production might favor large vs.

small producers. There was a concern that smaller producers have less access to capital and less

ability to negotiate with retailers, which might increase consolidation alongside the transition to

cage-free production. Egg producers are sensitive to the needs of retailers and highlighted the fact

that retail demand would ultimately drive the transition to cage-free (or not).

Interviews and surveys with egg producers and consumers suggest several factors that

might facilitate the conversion to cage-free housing. To the extent there are concerns about

inequalities or consolidation, retailers could offer differential terms, including extended timelines

that vary by the size of the producer. Access to capital to build new facilities or convert existing

facilities is a major barrier to the transition to cage-free. Egg producers with long-term contracts

that ensure the volume of purchase from a retailer would be more able to secure financing from

lenders. Our survey of egg producers suggests that cost-plus pricing contracts will likely be most

attractive to egg producers in encouraging a transition.

Egg producers are skeptical that they can meet all existing pledges by 2026. Extending the

pledge deadlines would give egg producers more time to acquire financing from lenders and better

coordinate the depreciation of current housing stock with the construction of new facilities.

Extended timelines are unlikely to generate backlash from consumers, as our survey indicates

consumers do not anticipate a full conversion to cage-free by 2026. Indeed, most consumers are

unaware whether their grocers have committed to being 100% cage-free. Retailers could gain

goodwill from their customers by re-announcing commitments (that are mostly unknown to their

customers) while re-adjusting details and timelines in a way that is more advantageous for

producers.

While our survey indicates that consumers broadly support retailer commitments to go

cage-free, their buying patterns do not generally align with their stated policy preferences. More

than half of consumers are unwilling to pay any premium for cage-free eggs, and they will likely

reduce egg purchases if conventional eggs are unavailable in the marketplace. Such an outcome

would be costly for egg producers, retailers, and consumers. While it may be politically infeasible

and unpopular among producers, we note that consumers are highly suppsortive of using

government subsidies to support the transition to cage-free housing. Given the gap between

consumers’ stated desires and their actual purchasing behaviors, government support may well be

the only way to encourage the shift to cage-free production. Still, there is no free lunch, and

soliciting such support may invite unintended consequences.

Overall, this report provides a comprehensive investigation into the challenges associated

with the transition from conventional to cage-free housing production systems and, in doing so,

provides industry participants with joint insights to better serve investors and consumers.

 
80 
 
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