HSUS deal means Congress dictates size of chicken cages

LAKE PARK, Minn. -- Amon Baer has one thing to say about amendments to the 2012 farm bill where Congress would dictate exactly -- to the square inch -- how big his egg laying cages must be. It is part of a deal brokered by the United Egg Producers leaders and the Humane Society of the United States, ostensibly to prevent state-by-state laws that undermine the egg industry.

"Kill it," Baer says of the proposed law.

Baer initially was reluctant to talk about the provision, which is coming ever closer to becoming federal law.

"I know that in challenging the powers that be in UEP, and their newfound ally, the HSUS, my farm may well become the next target for animal rights activists," he says. But he says the dangers to his industry and livestock in general are too large to stay silent.

Baer is one of the political and policy leaders in a group of family companies run by four brothers, their wives and nine sons. Together, the family accounts for 1.4 million laying hens that makes them -- collectively -- the biggest in the region, but only a modest-sized egg producer, nationwide.

"I feel like I'm being asked to give up my freedoms and my rights," Amon says. "My father moved here in 1960. We bought the operation. We've built it up since then, bringing our children into the operations. We've bought and paid for all of this. What right does a producer in Indiana or in North Carolina -- or anyplace else -- have to tell me exactly how to produce eggs in Minnesota?"

Amon says Russia tried to employ command-and-control agriculture in the 1920s, and went from one of the bigger producers to one of the smaller producers because of it. European Union farmers have crippled their production ability with similar restrictions. He and his brothers think it's the first step in a process that will "chase livestock out of the country," and have it produced in places like Brazil or Mexico.

"For the grain farmers, your markets for distiller's dried grains and soybean meal are going to leave the country," brother Jona Baer says. "The grain prices will be discounted. And the eggs are going to come in." The trend will be especially evident on the liquid side of the market, where the products are pasteurized for longer shelf life. That's 35 percent of today's market.

"We're not going to change the way eggs are produced. We're just going to change the location."

If passed in its current form, the brothers say that by mid-2027, they would have to replace their entire egg production system, or potentially face closure -- a $35 million investment for no additional production. Even if the customers wanted it, the cost would put them out of business anyway. "It'll be illegal to ship or sell eggs from cages we're using today," with unspecified consequences for those who don't.

Evolution of cages

If you live in a 200-mile radius of Fargo, N.D., chances are the eggs you've eaten -- whether you buy them in a grocery store, at a restaurant or from a big box discount store -- come from one of the Baer family farms at Lake Park, Minn.

When the Baers were growing up, they would put chicken cages together by hand.

"It's been a constant evolution of differing designs, of size, of numbers of birds in a cage," Amon says." Later, they went to larger cages and put more birds in. There has been a lot of research and scientific work to determine what is the optimal size -- for the number of birds in a particular cage, and how many square inches they needed."

Scientists traditionally determined bird welfare by measuring their productivity, including livability and feed conversion rates. A hen producing more eggs was assumed to be happier than a less productive hen.

"The first thing (in determining hen health) was we eliminated all of the parasitic infections that normally would attack a bird -- round worms, tape worms, lung worms, lice, mites, E. coli, toxidiosis. By taking the hens off the floor and removing access to their own manure, we were able to eliminate almost all the parasitic infections that would normally affect birds that were on the floor. That was the science at the time."

Birds were healthier because they laid more eggs with less feed.

Cages themselves (versus free-range) eliminated the need for antibiotics from the laying hens' diet. "We still use it very sparingly in the growing stages. We do a lot more vaccinating now than we did 30 years ago to protect against other diseases."

Rights, welfare

In the past decade, the Baers have seen an increase in animal welfare impacts on their business. In the past 10 years, there has been new research on behavioral tendencies of animals. "They're trying to develop a science based on a combination of bird health and behavioral characteristics," Amon says

The Baer operations have had 53-square-inch cages per hen. That was the industry standard, and that's what the breeding companies were recommending, Joel Baer notes.

Anticipating outside pressure, the UEP put together a scientific committee that looked at dozens of studies on birds and livability, productivity and feed conversions. The committee recommended 67 square inches per hen, but didn't specify the style of cage.

"That constitutes the UEP Certified Program," he says. The recommendation did not discuss cage height or cubic inches, Amon recalls. The new recommendation, roughly 10 years ago, was a voluntary guideline that would describe birds "being taken care of to the best scientific standards," Amon says. Getting UEP-certified theoretically would help a producer with certain customers, who were highly concerned about birds being raised to the best scientific standards.

In two separate lawsuits, however, customers including Kraft, Kellogg, General Mills and Nestle have sued the UEP over these on grounds that it would be a concerted act to control supply and maintain and increase the price of eggs -- price fixing, in violation of antitrust laws. The plaintiffs alleged the UEP used "animal welfare" as a pretext to force larger cages on the market. The UEP has spent nearly $5 million in defending the system, Amon says.

The Baers did not attempt to adopt the 67-square-inch standard, in part to avoid the possibility of being swept into the antitrust case. Further, cage systems have a working life of 30 years or more. Older cages aren't made to divide out evenly into seven, eight or nine birds. "You'd end up having to cut a chicken in half and put 7½ chickens in a cage (to meet the standard). That doesn't work very well."

Meanwhile, the Baers' customer base wasn't calling for different production methods. When the guidelines came out, Amon went to each of his distributors and marketers, and asked if they demanded production from larger cages. "I told them I was willing to make the changes. Every one of them to a person said they wanted to have the lowest-cost eggs on the market."

Baer says the UEP's stance in the lawsuit begs a question. "A cynical person might conclude that UEP and the companies that are being sued have figured out a legal method of doing what they are accused of in the lawsuit," Amon says, half-joking. "I have never been a cynical person."

Voter initiatives

Twenty-four states allow initiative-and-referendum, allowing voters to go to the polls and change state laws and constitutions.

In 2008, California voters approved Proposition 2, which calls for larger cages, despite the egg industry spending millions of dollars trying to defeat it. They lost by a 2-1 margin, Amon says. The law doesn't take effect until January 2015, so consumers aren't yet affected by it at the stores, even though it is causing turmoil in the industry.

For one thing, it creates momentum for similar state laws. California, Michigan and Ohio have passed laws either through initiatives, or negotiated with HSUS under the threat of initiatives.

Last year, HSUS went into the state of Washington and prepared a ballot initiative that would have outlawed cages completely. "No cages allowed," Amon says.

The deadline for submitting signatures to get it on the ballot for a constitutional amendment was July 8. "At that point, UEP entered into negotiations with HSUS to come up with a cage system that they would accept. The deadline was to have the agreement signed before July 7" so the issue wouldn't go on the ballot.

Negotiations started in May and were completed by July. UEP agreed to a deal with HSUS that would require a phasing-in period calling for "enriched colony cage systems," with nesting areas, a scratch pad and a roosting area, and 124 square inches. HSUS agreed that, if passed into federal law, HSUS would oppose any state law requiring more space than the federal standard, even though the HSUS in the past has opposed cages of any kind.

If made into federal law, it would mandate cage size, Amon says. "It would not be based on any sciences, but just a negotiated number." He says producers are giving over to federal planners the authority to develop new cages and develop new systems. The government, through some commission, is going to write the rules, right down to the square inch exactly how farmers are allowed to raise chickens."

Some industry sources agree.

Simon Shane, an English-born poultry consultant from Durham, N.C., in his "EGG-CITE.com" commentary, said the industry was "stunned" by the agreement, adding that over the next 17 years the industry would have to invest $8 billion to $10 billion to meet the standards. He noted that HSUS had been "diametrically" opposed to any cage systems at all in the past.

Joel, facetiously, says the government is "so good at running all federal programs" with efficiency.

Eliminating competitors

According to the Baer brothers, the new law will have the effect of eliminating competitors.

There are about 400 commercial egg producers in the U.S. Of those, about 60 to 70 might be larger than 1 million birds. Nationally, there are about 285 million birds.

"All of these companies that have 2, 4, 5 . . . 10 or 20 million birds today, they were all happy with the free market system as they were building their operations," he says. "They all started small like our operation here. They grew and grew and grew. Now, if you start passing laws that might make it more difficult for them to move eggs, now they want to abandon their free-market principles and ask for a federal law."

"A small company like ours can adapt some of its production practices to meet specific standards if a state over here has different standards from another state," Amon adds. "These large companies have 2-million bird, in-line complexes -- Indiana, North Carolina, Texas, Iowa -- spread all over. To run those operations they have to have one selling desk. The person who is in charge of selling those eggs needs to be able to pull them out from any given complex, any given area, and move them to any given state on a very short notice. Having different state laws with different requirements, would require them to have one complex, maybe in Iowa, that had birds at a different square-inch standard. That eliminates them from filling eggs out of a differing complex."

He says consumers in this part of the country should not be dictated to by consumers in other parts of the country.

"We don't have the San Franciscos, the New York Cities, the Hollywood crowd," Amon says, where money doesn't seem to be an object. "There are people who can afford to pay $5 a dozen for organic eggs. In the Midwest here, there are a lot of people who can't afford to pay $5 a dozen for eggs. They need the lowest-cost protein available if they're going to feed their families."

Consumers who want cage-free eggs can get them from organic producers.

Organic producers stand to lose because the standards will force larger-scale producers closer and closer to their style of production, it will "blur the difference in value between a cage-produced egg and a cage-free egg."

No membership vote

When the UEP board voted on the HSUS deal before July, Amon Baer was present. "I voted against it consistently," he says.

"I have been a member of the UEP for 20 years and I have never gotten a chance to vote on this," Jona says. "Only the board of directors has been allowed to vote, and in private. They won't even discuss it with other UEP members present in the room and they have no intention -- other than the board -- of letting anyone else, other than the board, vote on it."

Rep. Kurt Schrader, D-Ore., a veterinarian, has introduced it in the House, along with a couple colleagues from California. Two Democrats and two Republicans in the House have sponsored it. Amon doesn't know if there are sponsors in the Senate. "They're going to try to get it attached to the farm bill," Amon says.

Rep. Frank Lucas, R-Okla., chairman of the House Agriculture Committee, and Rep. Collin Peterson, D-Minn., both have expressed concern about the impacts of such a bill on small producers. The Baer brothers hope that kind of support will be sufficient, but they're not sure.

Amon thinks that if the bill is passed, mid-sized producers will be forced out, whether that is the purpose or not.

One specific cage size may not fit every region of the country. For example, larger cage sizes may be more cost-effective in the South where they don't have to heat buildings. In northwest Minnesota, changing to larger cages would mean greater heating costs for raising the same number of birds and producing the same number of eggs.

So far, among national ag groups, only the UEP is in favor of the bill. Some state egg organizations in California and other states have come out in favor. "Those are primarily states where members from the UEP are on the board and asking for it," Amon says. A group of eight national entities -- American Farm Bureau, the National Farmers Union and major cattle, dairy and hog groups are opposed to the amendment.

"If we, as egg producers, hand over our rights and liberties to the government to dictate how on-farm production practices should be conducted, the other livestock groups are concerned that it's a very small step for Congress to then say, 'We're already regulating how chickens are being produced. Now we want to regulate hogs. Now dairy. Now beef.' Ultimately you end up with boards and commissions of politicians and bureaucrats in Washington, D.C., dictating what goes on in every single farm."

While farmers in the Red River Valley and surrounding areas are concerned about wheat, corn, soybean and sugar beet policies, they would be wise to consider the long-term effect on their commodities that feed the livestock industry.

Jona wonders if the big egg producers have looked closely at what their egg production costs are going to be under the new rules. "They are going to be shocked," he says. Corporate players look to the short-term -- this year, next year, quarterly. "We're looking at the next generation," he says. "We came here from the ground up. Presidents of those corporations are not out in the barn like we are."

The Baers know they're perceived as big players but that's regional, and only if you didn't do the math. "When we say 1.4 million birds here, it's four different entities," Joel says. "Divide it out. We're not that big. Combined together, we're a big-sized operation."

Amon says that if the amendment becomes law, animal rights advocates will be asking for modifications and changed standards in every legislative session.

He says the bill would have a big impact on lenders, who must decide whether to loan money on equipment that should last for 25 years, but could become prematurely obsolete because of a Congressional mandate.

Joel thinks HSUS doesn't really care about 124 square inches. It's only a stepping stone. "Their goal is to make meat-eating consumers into vegetarians," he says. "They know they can't outlaw meat, but they want to make animal proteins so expensive that you can't afford it. UEP was an absolute fool to sit down and negotiate with HSUS."

The Baer brothers think the California law couldn't have held up to a federal legal challenge because they couldn't have restricted interstate commerce in this way. "If their reason was for the health or welfare of their citizens, they have an argument to make," he says. "In the United States we can ship any product. Nobody has been injured by the law yet because it doesn't take effect until 2015."

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