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For years, eggs have been at the center of discussions about food inflation. On this episode of America’s Nest Egg, we talk with Cameron Whitehead, Chief Operating Officer at Pete & Gerry's, a table egg producer that has been raising hens for generations.
The origins of Pete & Gerry’s started shortly after World War II. Over the generations, the company has grown into one of the largest organic egg producers in the United States, differentiated by its small family farm partnerships and premium eggs.
Of the four main categories of eggs on the market (commodity or caged, cage-free, free-range, and pasture-raised), Pete & Gerry’s and their Nellie's brand are both free-range. Hens have outdoor access around a two-dimensional barn with no cage structure, no vertical structures inside the barn, and hens are free to forage on grass.
“The real differentiator there is the organic feed for Pete & Gerry's organic free-range, and then with Nellie's is the conventional feed, both have the same high standard of animal welfare.”
The demand for free-range eggs is driven heavily by consumers, but laws and regulations also play a role. On the consumer side, people are moving toward healthier options, supporting the better-for-you movement and purchasing from brands that prioritize animal welfare.
“People are making wiser, healthier decisions about what they put in their body and what they put in their family's fridge and that's really moving them up that ladder depending on their economic status.”
For Pete & Gerry’s, the supply chain starts with farmer recruitment. It takes one to two years to put a barn up that meets company standards and clears all permitting, licensing, and financial requirements.
Once a barn is ready, chicks are raised at a pullet farm until they are nearly ready to start laying eggs, about 24 weeks. From there they move to a layer house where they lay about one egg per day.
“Every single week, the farmer will pack [the eggs] into a small cooler attached to his barn and then the real traditional supply chain starts.”
Specialized truck drivers transport the eggs to a processing facility where the eggs are washed, packaged, and then delivered to retail shelves.
“The vast majority of our cost structure exists basically before it even reaches a processing facility. We're paying for the raising of the hen herself, her feed, her welfare, and then for the farmer and their living also.”
Commodity, or caged, eggs are responsible for many of the inflation stories in the news, and their cost is structured much differently than premium eggs. These eggs are priced according to their inputs like anything else, but are also driven heavily by supply-demand dynamics.
“There is an external market creator called Urner Barry which plays in a lot of protein spaces and that dictates the actual price of eggs on a market.”
When demand is high and supply is low – and when there's a very long lead in the supply chain, as has happened recently – prices can increase rapidly.
For premium eggs, price is determined more by simple consumer packaged goods (CPG) economics. Labor costs are up, as are transportation costs. Farmers are spending more on construction materials and increasing mortgage rates. Grain has been a volatile market since the war in Ukraine began, as Ukraine was a major global contributor of corn and soybean.
“There's been some real pressure on one of the largest inputs to our overall components. It's not just us, it's almost everyone in the premium space... It's really just been inflation impacting our overall cost of goods sold.”
Nearly 100 million birds have been impacted by Highly Pathogenic Avian Influenza (HPAI) since January 2022. The disease is hitting the egg industry especially hard.
“It’s an enormous supply shock… These hits are very large as most of them are happening to commodity egg players so you're not losing 10,000 birds worth of production, you're losing 3-4 million at a hit.”
Pete & Gerry’s has been lucky so far, avoiding big hits caused by HPAI by buckling down on biosecurity practices and maintaining a geographical spread that keeps their density low in any given area.
Some speculate that industry-wide vaccination for HPAI is likely in the near future.
“If HPAI continues in the same vein that it is right now, which is just kind of continuously popping up and being a problem for us and causing tremendous economic impacts, I think it's inevitably going to go there. I think we're going to be talking about this in 2025 about how many flocks are vaccinated rather than if any one is vaccinated.”
Despite its rise in price, eggs are still a “home run” when measured by protein per dollar spent.
“Eggs have actually been pretty tame and timid on the premium side compared to what we see in some price increases in other sectors.”
One way Pete & Gerry’s is keeping their costs down is a new focus on subclinical disease management. Conversations on disease management run parallel to subjects of sustainability, regenerative farming, and antimicrobials.
"When you think of a family farm, you don't tend to think of high-tech in most instances, but I will tell you that our farmers are out there with a tablet sending data to the cloud every day. And the reason is we want to be at the earliest possible response team we can be to anything that might be a disease threat.”
New state legislation has some commodity egg producers transitioning to cage free housing in anticipation of future laws and evolving consumer preferences.
Prop 12 in California requires egg-laying hens to be housed in systems that comply with specific standards for freedom of movement, cage-free design, and minimum floor space. In Massachusetts, Question 3 also includes minimum square footage requirements and other animal welfare standards.
Still, it may take some time before we stop seeing commodity eggs on store shelves.
“I think you'll see commodity eggs on shelf for a very long time but I do think that in states where you see maybe a little bit higher socioeconomic ability, you will be seeing these regulations pour through. I also think the cost of cage free is going to be pretty comparable to commodity.”
The US Department of Agriculture (USDA) recently made changes to its organic standards in livestock and poultry in an effort to stop organic fraud and improve animal welfare.
“The overwhelming number one piece of this that we're excited about is that organic hens must be outside. I think that's a huge consumer misconception is that it had an organic stamp on it so that meant the hens were outside and that simply wasn't a requirement… It's a huge success for consumers, huge success for the organic industry overall.”
Powered by Ancera, America’s Nest Egg podcast hosts conversations on food science, safety, sustainability, and more. Listen to our full interview with Cameron Whitehead and other episodes at Ancera.com/podcast.
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