Inside D.C.

Who pays for “guilt-free” production?

It’s no secret I believe the corporate food processing world is more concerned with being perceived as humane and sustainable than it is realistic about the economic consequences of its mad dash to ultimate “sustainability,” however that status is defined at the moment.

Fearing negative publicity – and naively believing the propaganda activist groups tell them about “consumer demand” – Big Food tosses aside science and producer experience, instead indulging in a navel-gazing exercise about its corporate and brand image.  This leads to a feeding frenzy over which company can be the next one to jump on the cage-free-no-antibiotics-no-artificial-flavors/colorings-stall-free-vegetarian-fed-free-range bandwagon.

I’ve said there’s a cost to these moves and the question is who bears the increased cost?  Are the food companies willing to pay the price through slightly lower profits for their guilt-free PR move?  Is it the producer who pays to keep Big Food happy?  Is it consumers who pay the added cost of production changes it may not even truly care about?

This week at USDA’s Outlook Forum in suburban Virginia, Dave Rettig, co-founder and CEO of Rembrandt Foods in Spirit Lake, Iowa — the nation’s third largest egg producer and the largest ‘in-line’ producer of egg products – laid it on the line.  In describing the lemming-like rush to cage-free eggs by major food retailers, he said, “It’s the most significant change that we’ve been part of.  What is truly unprecedented is the amount of capital required to make these changes.”

Rettig, according to Agri-Pulse, said Rembrandt has been shifting to cage free facilities for five years, but the industry generally has not.  Who better then to tell the USDA audience what it should already know, namely cage-free production is not cheap or cheaper than convention production. “People think it’s cheaper – actually it’s more expensive,” the egg man said.  Cage-free production requires more capital investment, higher feed costs, more labor, and less efficient egg collection, i.e. fewer eggs make it to the carton.

An egg industry study released in 2015 says a dozen eggs costs about 15 cents more to produce, and that hike is likely passed on to the consumer.  Rettig says the cage-free market has grown 13.7% a year since 2007, and the number of birds has tripled in eight years.  He predicts cage-free will be about 30% of the retail market in seven years; food service companies and manufacturers, who currently use 4-5% of the cage-free supply, will jump that demand to about 40% by 2022.  This all translates to a quadrupling of the population of cage-free hens in just seven years.  The big guys, like Rettig, can likely handle this shift and the increased cost better than smaller companies.  Accelerated consolidation, i.e. loss of smaller producers, is almost unavoidable.

Perhaps conventional U.S. animal producers should take a page from their organic cousins’ playbook.  I’ve always been told by organic producers when I question the retail price of organic products that organic products are more expensive to produce, therefore more must be paid.  And given the public for some reason believes it’s their collective privilege to pay more for organic – and retailers and processors certainly do little to disabuse them of this notion – then why doesn’t that same logic apply to the egg guys and cage free or pork producers and stall free?  Doesn’t a farmer or rancher have the right to maintain their margins by charging more for a product that costs more to produce? We could call it the corporate responsibility premium.

I guess I have to break my oath and re-enter a supermarket somewhere and comparison shop prices on products produced with cage-free eggs versus those which are not.  Why will I not be surprised if the cage-free or antibiotic-free are just a tad bit pricier?  And given the competition for cage-free among retailers, processors and food companies, I want to know if the companies claiming to be cage free are, and whether those which import cage-free eggs to uphold their commitment declare that fact, and if they do, do they list the country from which the eggs are sourced? See, that way I can check the safety standards and such.

I always chuckle when I read one of the corporate press releases expounding on a company’s wonderfulness for going cage free or stall free or antibiotic free.  However, I’ve yet to see a corporate press release that acknowledges the increased cost of production to farmers and ranchers.  I’ve never seen a Big Food retailer extend its generosity of spirit to the farmer, I’ve never read the line: “And XYZ Corp. knows this move will cost our suppliers more to produce, so we are increasing proportionally what we pay our farmer suppliers so they can maintain their margins.  It’s the right thing to do and this is just that gosh darn important to us.”