Rembrandt Foods joins movement toward cage-free egg production

As McDonald's, Wal-Mart, General Mills and other corporate egg buyers increasingly require roomier housing for hens, the egg industry is under pressure to move toward a future that's freer of cramped bird cages.

Iowa-based Rembrandt Foods, the nation's third-largest egg producer, last week became the latest to make a long-term commitment to producing cage-free eggs. The company plans to announce a major new cage-free egg farm by year's end.

"Everything we do in the future will be aligned with cage free," said Jonathan Spurway, Rembrandt's marketing vice president. Rembrandt is owned by Minnesota businessman Glen Taylor, who also owns the Star Tribune and the Minnesota Timberwolves.

Animal welfare activists have long and loudly criticized caged housing, where hens are packed so tight they can't flap their wings. Consumers took notice. Then, so did food companies, which over the past two years have been telling egg suppliers to phase in cage-free production over the next decade or so.

"They have taken a stand that spreads across the entire food system," said Josh Balk, senior food policy director for the Humane Society of the United States, an advocate for cage-free production.

Still, going even partly cage free will take at least a decade. It will be expensive for producers, and their costs will be at least partly passed down the food chain.

In California, which bans eggs produced in conventional cages, wholesale eggs posted an average weekly price of $2.46 per dozen over the past 52 weeks, compared with $1.86 in the Midwest, according to Urner Barry, a New Jersey-based commodity news service and poultry pricing authority.

Randy Pesciotta, an Urner Barry vice president, said that premium stems largely from California's cage-free rule, which the state's voters approved in a referendum and took effect Jan. 1.

About 8 percent of the nation's egg-laying hens currently reside in cage-free housing. As for the rest, they're for the most part placed six to a cage, and given 67 square inches of living space, the size of a laptop computer.

In cage-free housing as implemented by the egg industry, hens get at least 144 square inches of living space and are able to engage in natural behavior like perching and nesting. Cage-free hens are still housed indoors, although birds that produce organic eggs must have access to the outdoors.

Rembrandt has cage-free housing for about 15 percent of the nearly 15 million hens it normally houses. The company operates three farms, one in Renville, Minn., and two in Iowa. Almost all of its eggs are "broken" and made into liquid or powdered products, primarily for food manufacturers.

While some of its hen housing could be converted to cage free, Rembrandt plans to build anew as its old capacity is depreciated, Spurway said. A new plant is expected to be announced in the next couple of months that may cost over $100 million.

Rembrandt has not made a final site decision, Spurway said.

The decision will be based partly on such traditional factors as proximity to customers and suppliers. But the risk of bird flu will also be weighed, Spurway said.

Iowa, the nation's largest egg-producing state, was hammered this spring by bird flu, which led to the deaths of almost 25 million hens — at least 40 percent of the state's egg-laying capacity. In Minnesota, 5 million commercial turkeys and 4 million egg-laying chickens were killed.

Rembrandt Foods was hit particularly hard. Its Rembrandt, Iowa, facility, with about 5.5 million birds, was the single largest casualty of the bird flu this spring, while the company's roughly 2 million birds in Renville were also wiped out. A third plant in Iowa was spared.

The company won't begin to restock its stricken farms until the end of the year, and birds there will remain in conventional cages, Spurway said.

Rembrandt's cage-free announcement came only a month after McDonald's announced it will phase in cage-free eggs by 2025. "It had nothing to do with McDonald's," Spurway said of Rembrandt's timing. The fast-food behemoth and egg buyer extraordinaire isn't a customer.

Still, for the egg industry, McDonald's announcement appears to be a tipping point for cage-free production. Starbucks, Burger King, Kellogg and large institutional food suppliers Sodexo and Aramark have all preceded McDonald's in announcing cage-free phase-ins over the next five to 10 years.

In July, Golden Valley-based General Mills, a big egg user in its baking products, joined the pack, though it didn't set any timetable.

As for the egg industry, Rembrandt is the second of the top 10 U.S. producers to publicly say that future expansions or renovations will be cage free.

Litchfield-based Sparboe Farms, the 13th-biggest U.S. egg producer as ranked by Egg Industry magazine, expects to double its cage-free production in the next three to five years, said company spokeswoman Britta McGuire.

Post Holdings, which owns the nation's sixth-largest egg producer, Minnetonka-based Michael Foods, didn't respond to requests for comment.

The egg industry is of two minds about cage free.

The industry "endorses, accepts and completely recognizes" that consumers and customers can choose between conventional cages, cage-free and anything in between, said Chad Gregory, president of United Egg Producers, whose members (including Rembrandt) own 95 percent of the country's egg-laying hens. "All are produced in a humane manner."

But the United Egg Producers has fought state-imposed bans on conventional caged egg production, including a referendum currently proposed in Massachusetts.

A California referendum in 2008 resulted in a law that prohibits the sale of eggs from birds that can't freely lie down and flap their wings. In at least five other states, legislation has been passed to regulate housing for hens.

Gregory said that to start from scratch, group housing for hens costs a producer $30 to $35 per bird, twice as much as for new caged housing. Using that figure, if Rembrandt Foods tried to replicate its super-complex of 5.5 million chickens in Rembrandt, Iowa, the price tag would be around $150 million.

Rembrandt's Spurway wouldn't disclose cost details. "There is a cost implicit to going to cage free and that will be shared between us, the customer and the consumer at the end of the day," he said.

Mike Hughlett • 612-673-7003