The ProEgg cooperative established less than two months ago represents a new model for the industry. This entity is constituted under the Capper-Volstead Cooperative Marketing Association Act. Enacted in 1922 this legislation allows bona fide farmers to form an association for their mutual benefit to market their products. The Capper-Volstead Act provides limited antitrust protection and is regarded as the “Magna Carta” for agricultural cooperatives.
According to Ric Herrera, CEO of the ProEgg cooperative, the enterprise came into being in response to supply chain disruption associated with state hen housing legislation and more recently, the extensive HPAI epidemic. Combining expertise and resources, while creating a stable, consistent volume through the “pooling” of eggs from cooperative members.
The initial eight members of the Cooperative include Cal-Maine Foods, Central Valley Eggs, Colorado Eggs, Hickman’s Egg Ranch, Oakdell Egg Farm, Opal Foods LLC, Ritewood Egg Farm and Willamette Egg Farms.
The Cooperative should represent a win-win for all participants, through rationalization of the supply chain and obvious contribution to sustainability. Customers will benefit from more extensive availability associated with a potential large supply flock with centralized marketing and distribution. Producers will be able to have consignments consolidated, reducing transport and delivery costs.
It is anticipated that additional producers will join the Cooperative and will attain the same benefits as the founding members of the Cooperative.
According to the Capper-Volstead Cooperative Act, there are restraints on the mode of operation. A Cooperative must function for the benefit of producer members with no outside entities involved. The Act specifically prohibits predatory pricing practices, pricing discrimination, attempts to raise prices by restricting output or collusion among members to the detriment of trade. The Act was passed in 1922 as an exemption from existing antitrust legislation but was, vetoed by President Wilson. The House overrode the veto in 1921 and the Senate in the following year.
It is evident that the management of ProEgg will have to tread a very narrow path since customer groups will complain to the Department of Justice as a result of any practice that deviates from the Act and established case law. The Secretary of Agriculture has the right to intervene in the event of any questionable or overt practice that is either explicitly disallowed or is considered inappropriate.
Given the experience of the CEO and the composition of the membership, illegal practices are considered unlikely but the retail chains comprising the customers will be monitoring the operation of the Cooperative.
It would be beneficial for ProEgg to promote the Cooperative in social media and to generate a positive image among consumers. It is understood that the Cooperative will emphasize benefits and will demonstrate the advantages of a rational and efficient supply chain.
The power and marketing leverage represented by the prevailing industry benchmark cost system will be minimized, given the spread of ProEgg across eleven western states, the population of consumers served and the availability of eggs from the flocks operated by membership. If the ProEgg model gives rise to similar cooperatives that are in turn successful in the Northeast and even the Midwest, it may be possible to develop a CME Midwest Large quotation that could serve as a more effective benchmark, avoiding the extreme fluctuations that are evident following any disruption in the supply chain.
EGG-NEWS welcomes the emergence of ProEgg as an innovative advance in rationalization of marketing eggs under the umbrella of the Capper-Volstead Cooperative Marketing Association Act.