Chicken Eggs

SIC 0252

Companies in this industry

Industry report:

This category includes establishments primarily engaged in the production of chicken eggs, including table eggs and hatching eggs, and in the sale of cull hens.

Industry Snapshot

In the early 2010s, the United States was the world's second largest producer of eggs. According to the U.S. Department of Agriculture (USDA), in May 2010 there were 337 million egg layers. Egg production in 2009 was 90.4 million eggs, a slight increase from 90.0 million in 2008. About three-fourths of all domestic eggs are designated for the table-egg market (i.e., for human consumption), the remainder hatched to produce chickens to populate egg-laying flocks or to produce broiler chicks. The top five egg-producing states are Iowa, Ohio, Pennsylvania, Indiana, and Texas. Almost all U.S. eggs are consumed domestically. U.S. per capita consumption of eggs and egg products is approximately 250 eggs annually.

Background and Development

The chicken egg farm industry was strong during much of the last half of the twentieth century, although it was subject to fluctuations, and the size of the nation's laying flock varied, with a noticeable effect on price. Although the national laying flock steadily decreased from 317 million in 1967 to 290 million in 1983 and 258 million in 1998, the production level increased over the years from 170.5 billion cases in 1984 to an estimated 192.5 billion in 1999.

The production rate on some egg farms is impressive in comparison with other livestock farms. Some farms have 1.5 to 2 million laying hens, producing about 400 million eggs a year. The number of farms with 1 million or more hens, or layers, increased in the 1990s. "Large complexes of a million or more layers are one result of increases in layer productivity and feed conversion rates, and developments in egg handling and processing technology," according to the U.S. Department of Agriculture (USDA). Sources in the business claim that the number of large egg farms (more than 75,000 layers) has grown by 20 percent since 1980, whereas the overall number of farms has declined. This move toward larger facilities, to take advantage of economies of scale, is expected to continue.

The factory-style facilities designed to accommodate large flocks, however, frequently attract criticism for the manner in which the birds are treated. Space is at a minimum, and the layers are often literally "hen-pecked" by frustrated fellow birds; they also are given antibiotics to reduce the diseases that spread easily in this environment. It is this type of farming, though, that allows for high levels of production and low prices. The alternative is "free-range" eggs produced by hens that are allowed to roam freely and are not confined to a cage. However, because production is limited, "free-range" eggs are more expensive than factory-produced ones.

In larger "corporate" chicken farms, eggs are collected via machinery and conveyor belts that transport the eggs directly from the layers to cleaning stations where they are washed, ridding them of bacteria, dirt, and blood spots. Even though the USDA has not established a storage time limit, eggs are generally stored for one to seven days prior to being shipped to stores. Throughout the storage and transportation period (pre-market), eggs are refrigerated to ensure freshness and safety. Due to the grand scale of production, modern egg farms require extensive capital investments in the form of environmentally-controlled shelters, computerized egg flow controllers, and packaging machinery.

Although annual per capita egg consumption fell substantially throughout the 1980s and early 1990s (from 275 in 1980 to 225 in 1992), it rose to 254.6 by 2002 and leveled out at 253.8 in 2007. Analysts have attributed egg consumption growth to the fact that more people are using more egg products due to positive news regarding egg health and cholesterol. Broken shell egg production and consumption also has continued to increase. For example, 63 million cases of eggs were used in the manufacture of liquid, frozen, or dried egg products in 2003, compared to 53 million cases in 1997.

Egg products are regarded as more versatile and safer than shell eggs since they are pasteurized to eliminate bacteria. According to the USDA, "Eggs are increasingly being broken and used in liquid, dried, and frozen form by food manufacturers, as well as by hotels and restaurants. Part of this increase reflects restaurants buying liquid pasteurized eggs instead of shell eggs. It also reflects growth in supermarket sales of convenient, value-added products in forms other than shell eggs." Increased demand for egg products has led many egg farmers to build egg breaking and processing plants on their properties. Several farmers have also introduced a production process dedicated to egg products, where eggs are automatically transported by conveyor belt from the hens to breaking and processing stations.

Since the mid-1990s, egg production in the United States has grown steadily. Of the 211.1 million cases of eggs produced in 2007, more than half were sold at the retail level, roughly one-third were processed, and the remainder were either sold to food service operations or were exported. Leading export markets include Canada, Hong Kong, Japan, and Mexico.

Throughout the first decade of the 2000s, the five top egg-producing states represented one-half of all U.S. layers. Iowa was the nation's top egg-producing state in 2007 with 52,598 layers, followed by Ohio with 25,587 layers, Indiana, Pennsylvania, and California.

Prevention of salmonella poisoning from eggs was a major concern of the industry. Of the 67 billion eggs consumed by Americans each year, the Federal Drug Administration (FDA) estimates that one in 20,000 carries salmonella bacteria. Date-stamping on egg cartons and better consumer education were two recommendations from the government. In August 1999, Rose Acre Farms became the first producer to print "laid on" dates directly on their eggs. In 2003, Sauder's Eggs began listing "sell by" and "use by" dates as well.

Throughout the 1990s and the first decade of the 2000s, the industry experienced significant consolidation as the largest egg producers grew by acquiring smaller companies. Between 1986 and 2002, the number of U.S. egg-producing companies declined from 2,500 to 700. In 2007 there were approximately 250 egg-producing companies with flocks of 75,000 or more hens; these companies represented about 95 percent of all the layers in the United States. In 2007 a total of 12 egg-making companies boasted flocks of more than five million; 60 companies had flocks of more than one million; and 245 companies (50 fewer than in 2002) housed 75,000 or more hens. As a result, overall production was heavily consolidated by a few companies who ran massive operations; upwards of one million birds was not uncommon at these farms.

Current Conditions

The egg industry in the early 2010s was completely different from that of the 1960s, when fresh eggs were raised on family farms and transported to local grocers. Most eggs were now produced in large operations where hens are contained in large facilities. This close containment produces higher risk of disease and, thus, the need for great vigilance. As a result, the egg industry in the late years of the first decade of the 2000s and into the 2010s continued to address environmental, animal rights, and consumer concerns over the design and implementation of their egg production facilities. In 2010, a coalition of academics, environmentalists, human rights activists, and industry insiders were gathering to examine the environmental, animal welfare, and economic impact of different housing structures, including modern caging, cage-free aviaries, and colony housing.

In June 2010 the Humane Society of the United States (HSUS) filed suit with the Federal Trade Commission against Rose Acre Farms, the nation's second largest egg producer, to force the company to stop advertising regarding its friendly and humane treatment of its animals. Based on footage secretly taped at a Rose Acres facility, the HSUS released a statement that the conditions at the facility included "birds trapped in the wires of battery cages, unable to reach food or water, birds with broken bones and untreated, prolapsed uteruses, the mummified corpses of hens in cages with live hens, and abandoned hens that had fallen into manure pits." As this type of bad press continued to follow the large producers, high-welfare eggs grew in popularity, such as eggs from free range hens (i.e., hens not confined to laying facilities), from hens that are antibiotic free, and from hens that have been fed particular diets that are free from certain byproducts.

The USDA expected egg production for 2010 to be very close to 2009 egg production and per capita consumption to be slightly under 248 eggs recorded in 2009. Prices for 2009 averaged $0.803 per dozen, which were expected to increase to around $0.830 per dozen in 2010. Long-term projections by the USDA suggested that the egg industry would remain relatively stable through 2019. Production was anticipated to increase from 7.57 billion eggs in 2010 to 8.25 billion in 2019, and per capita consumption from 247.7 eggs in 2010 to 249.5 eggs over the same time period. Price was expected to increase to approximately $0.964 per dozen by 2019.

Industry Leaders

Like most aspects of the poultry business, the egg farm industry is dominated by a few major players. In recent years, the tendency toward huge egg factories has become even more pronounced. By the late years of the first decade of the 2000s, 60 egg-producing companies had more than one million layers; 12 of those had more than 5 million layers.

Pilgrim's Pride Corporation, based in Pittsburg, Texas, was an industry leader throughout the 1990s and the first decade of the 2000s. With the purchase in 2003 of the chicken-processing assets of ConAgra Inc. and another purchase, in late 2006, of Gold Kist for $1.2 billion, Pilgrim's Pride Corp. became the world's largest chicken company. Founded in 1963 by CEO Lonnie A. (Bo) Pilgrim, the vertically integrated company is totally involved in the poultry business, with the production of chicken eggs being just one of its concerns. The company's chief markets are the western United States and Mexico; it also exports to Eastern Europe and the Pacific Rim. In 2009, the company reported total revenues of $7.1 billion and employed 41,000 people.

Although an industry leader, Pilgrim's Pride has had financial problems. Until the mid-1980s, the company's sales grew by about 20 percent annually. However, this growth was financed by massive debt, equivalent to four times the value of the company's equity. In the mid-1980s, the company started reducing its debt, but suffered badly from falling prices for its products. To protect itself, Pilgrim's Pride entered the prepared chicken market in 1986.

After reaching an all-time financial low in 1988, the company rebounded in 1989. Its decision to surrender the ailing retail market and concentrate on the food service industry had proven savvy. It also benefited from entry into the Mexican market. As a result, its net sales increased by 30 percent to give the company a profit-to-sales ratio of more than 3 percent. Sales continued to rise through 1991 due to Pilgrim's Pride's expansion within the Mexican market, increased export sales, and steady demand for its further processed and prepared chicken products. Pilgrim's Pride's profits, however, did not keep pace, but instead fell by 21 percent.

In 1992, Bo Pilgrim sold off 18 percent of his stock to the Archer Daniels Midland (ADM) Co. as part of a deal that enabled Pilgrim's Pride to extend its loan maturities. Pilgrim controlled approximately 65 percent of the company. As part of the agreement, Pilgrim's Pride agreed to indemnify ADM against losses for an unspecified period of time. The deal also stipulated that ADM cannot control more than 20 percent of the firm.

In addition to rescheduling loans in 1992, Pilgrim's Pride attempted to deal with its financial woes by appointing a new president, Monty Henderson, to replace William Voss. Henderson sought to postpone the company's loan repayments, consolidate its indebtedness, and improve Pilgrim's Pride's operating and financial flexibility.

Rose Acre Farms was the country's second largest egg producer in the early 2010s. Rose Acre is a 125-year-old company in Seymour, Indiana. Rose Acre was the first company to begin using laser technology in 1999 to imprint its eggs with a date to indicate the day it was laid (later changed to a "used by" date). The family-run, private company employed more than 800. Another major chicken egg producer in the first decade of the 2000s was Cal-Maine Foods Inc., based in Jackson, Mississippi. Its primary classification is as a producer of chicken eggs. It is also involved in raising hogs and beef cattle. The company employed about 2,100 people and reported sales of $928.8 million in 2009. Hillandale Farms of Lake City, Florida, also has been a key egg producer. Now a subsidiary of Cal-Maine Foods, in 2009 Hillandale Farms reported revenues of $29.6 million and employed 200 people.

America and the World

The United States is the world's second largest egg-producing country (In 2008, China had an annual production of 22.7 million metric tons, compared to 5.3 million metric tons in the United States). The United States imports only about 1 percent of its eggs. The most important export markets for U.S. eggs are Canada, Belgium, Hong Kong, Japan and Mexico; combined, these markets account for roughly 75 percent of exported eggs. Many other countries also rely on the United States for their eggs. Increased demand in the European Union has created a new market for U.S. eggs. Analysts predict egg exports will continue increasing through the 2010s due to escalating production and lower domestic prices.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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