In addressing an investors’ conference, Dolph Baker, Chairman and CEO of Cal-Maine Foods commented on the surplus of cage-free eggs in the U.S.  According to the most recent USDA Cage-Free Hen Report released on December 6th, there are 76.9 million hens held for cage-free production in addition to 17.4 million under the USDA Certified Organic program.  At the present time, 94.3 million hens are housed in other than conventional cages or enriched colony modules.  These hens represents 29.5 percent of a nominal U.S. flock of 330 million. 

Comparison of Nielsen sales data and the theoretical production of the cage-free flock suggests that a high proportion of eggs produced by barn and aviary-housed hens are down-packed to brown and white conventional eggs.  Baker expressed the hope that legislation mandating sale of only cage-free eggs in specific states will increase demand. 

Dolph Baker

Baker noted an average capital investment of $45 per bird to convert from conventional cages to alternative systems.  He cited a total cost of $6 billion for complete conversion and questioned whether all U.S. hens will eventually be transferred from conventional cages.  The figure of $45 in all probability represents conversion of existing units.  Projections based on realistic scenarios suggests a far higher figure since in many cases new complexes will be established involving expenditure on pullet rearing, packing plants, feed mills infrastructure and biosecurity installations.  A cost to convert the U.S. layer industry probably exceeds $10 billion if inflation in the cost of buildings and equipment is included in the projection.

Max Bowman, Vice President and CFO of Cal-Maine Foods noted that the company has grown "mostly through acquisition since going public in 1996".  Many egg producing companies have problems of succession and are disinclined or unable to raise capital to convert facilities given relative overproduction and margins which fluctuate from loss to small profits.

Cal-Maine has completed conversion of the Delta, UT. complex and is expanding and converting farms in Guthrie, KY and in Florida.