Eggs
More economic concentration means more animals in a smaller area equals more poop which means less clean water. Iowans need to advocate for antitrust laws and antimonopoly policies to break up corporate consolidation to get clean water. This will also lead to more farmers, thriving rural communities, lower egg prices, and clean water for all.
While Iowa is the best producing eggs, corn, and hogs state, the consolidation in egg processors, grain processors, and hog processors have led to more animals and more corn leading to worse water quality. The poop from all three of these industries must go somewhere and due to the lack of economic sense to take far distances, it stays local. While being the top producing state, who has this benefit? It is not small farmers, not hollowed out small towns, and not our water. This consolidation has led to a water ban in central Iowa which leads to a water customer like me buying a reverse osmosis machine. This is a tax on my water usage due to these industries’ corporate consolidation.
Consolidation has been fixed in the past, and it can be fixed again. It is empowering the state and federal level to help break up these industries and make them competitive. While I have written about corn and hogs, it is time to focus on the eggs. It is important to break up the egg industry consolidation. More farmers will make more money, rural towns will thrive, egg prices will be lower, and the water will be better.
This egg industry consolidation is severe, and Farm Action has the facts. Any detailed information comes from them.
For background, all chickens, whether raised for meat or eggs come from the primary breeders. Through generations of breeding, they go on to become broilers (raised for meat) or they go to pullet farms until they reach egg-laying age. At this point, they move on to egg production farms.
When these hens start laying eggs, they either end up in the table egg market (70% of the market) like what you get at the grocery store or the breaker market (30% of the market) which is pasteurized liquid and dried eggs primarily to restaurants, cafeteria, and food processors. This has led to over 55% of the nation’s egg-laying hens being located in the Midwest with Iowa topping the list at 17.3% as of 2016.
The largest producer of egg-laying hens is Cal-Maine which controls around 20% of national egg sales. As of 2020, the largest five egg companies, Cal-Maine Foods, Rose Acre Farms, Versova Holdings, Hillandale Farms, and Daybreak Foods control 36-40% of all egg-laying hens in the United States. This consolidation creates a rickety system. When one company has an issue, the industry is not diversified enough to pick up the slack (i.e., the avian-bird flu).
Due to Iowa’s king of the castle place in egg laying industry, it is not surprising to see two of the top five largest egg producers have a prominent spot as “farmers” on the Iowa Egg Council’s website. Previously mentioned, Versova and Rose Acre Farms assume a prominent spot despite being anything but a farmer. This like if the computer programmer association treated the CEOs of Apple, Google, and Microsoft as a regular computer programmer trying his best in his makeshift office space in his garage.
These companies have taken advantage of the lack of antitrust law. Under the guise of small family farms, these egg companies have led to overproduction, extracting more wealth from rural communities, and the dirtying of water. They are not farmers; they are industry and deserve to be treated as such.
This consolidation across Iowa and the United States has been detrimental to farms and farm income. Between 1900 and 1999, the number of US farms producing eggs dropped from five million to under one thousand. In 1978, Watt Publishing Company reported thirty-four companies owned one million or more egg-laying hens, this represented 27% of the nation’s laying hens. By 2000, 63 companies were above the one million mark. This drastically rose to 78% of the nation’s flock. Eleven companies with five million plus hens also controlled 41% of the nation’s flock. Of approximately 21.5% of the 275 million hens were in the hands of companies with less than one million hens.
This excess market share has led to excess power. Cal-Maine has vertically integrated their business from owning the breeding all the way to processing eggs, owning their feed mills, and using their own delivery trucks to deliver the eggs. Almost all the other twenty largest egg companies have similar vertical capabilities in feed manufacturing and egg processing, leaving few independent egg packing and breaking operators in the market for non-integrated egg producers to use.
From 2010, the data points to no egg producer other than Cal-Maine and Rose Acre Farms have breeder flocks. Everyone comes to them for pullets, or they can go to the layer-hen breeding industry duopoly of Hendrix Genetics and EW Group. Due to its marker power and breed flock power, no company can compete with Cal-Maine’s ability to control egg prices. If a smaller company were to set a lower price, Cal-Maine could turn up their production, depress egg prices, and the smaller egg company may have to close up shop.
Due to this concentration, egg prices have changed from past performance. Typically, higher demand for eggs leads to more egg production. This leads to prices coming back down, and the cycle repeats. Since the relaxation of the antitrust laws and antimonopoly policies in the 1980s, this has not been the case. According to a federal jury in a recent verdict, the dominant industry players developed a cartel to engineer a shortage of eggs between 2004 and 2008. By slaughtering egg-laying hens early, restricting replacement hens lost to mortality, and steering eggs to the export market. This collusion led to the inflation-adjusted index for wholesale egg prices doubling between 2005 and 2008 to which they never came down.
This was not the last time. Thankfully, Basel Musharbash, who also wrote the Farm Action report, has cracked the case. I highly recommend reading his pieces about the egg industry. The short story is that egg production is not much lower and the demand for eggs has declined. Egg exports have also fallen off of cliff which means the high egg prices from the bird flu do not add up. Unless you work for the egg producers adding up all their extra dollar bills from using their market power to obtain excess profits.
It is not only Basel or I cracking the case, it is also the Department of Justice. After the DOJ announced it was looking into the high prices, egg prices began to fall. What is happening with the egg industry is also happening with tariffs. Larger companies can use unexpected events to provide cover to raise revenue and help the shareholder.
The pattern of behavior exhibited by dominant egg producers since the mid-2000s is consistent with longstanding research beginning in the 1970s showing how leading firms in consolidated industries “administer prices” to achieve higher margin “focal points” during economic shocks and periods of inflation. This has led to less chicken farmers and worse downstream effects due to the less farmers and more chicken poop in concentrated on less land. Chris Jones, a much smarter man than me, puts it succinctly in his most recent Substack.
“There is ample evidence that U.S. Cornbelt farmers over-apply nitrogen in manure forms (3,4,5,6). Believe it or not, this is not necessarily wasteful for the farmer; rather, the economics of nitrogen can make it more profitable for farmers to concentrate manure applications on nearby fields and purchase chemical fertilizer for the rest of the farm (7). If you’re looking for a reason why Iowa’s nitrate problem is worse than anybody else’s, this is your prime suspect.
In fact, research (4) conducted in Iowa showed that in some scenarios it makes clear economic sense for large livestock confinements to maximize the N volatilization losses that Dr. Andersen speaks of. In these circumstances, manure becomes a waste product and the practice of squandering manure nutrients is not necessarily economically wasteful (5,8), i.e., the farmer may benefit financially by not fully taking advantage of the fertility benefits available in the generated manure. In other words: Iowa has too many livestock, and farmers profit by polluting your water.”
Whether it is an Iowa politician saying nothing can be done, one who wants to correct the symptom, or one who wants to take voluntary action, the only solution is fixing the problem, not the symptom. To get clean water, Iowan’s need the enforcement of antitrust law. Big business leads to worse water quality.
The current consolidated path has led to disastrous consequences from people leaving rural Iowa to urban Iowans having water restrictions. Breaking up these consolidated industries from eggs to pork will lead to a better outcome of more farmers, lower egg prices, thriving rural Iowa, and cleaner water.
Terse, succinct, direct and accurate explanation of our current predicament. Our leaders in agriculture and government eschew the need for change, resisting even acknowledging the dire situation we face, and ignoring its lethal consequences. Awash in lobbying money and ideological delusions, they’ve told us untruths known for decades. We must not let them get away with this anymore. We need to stop this madness and begin the process of reform immediately. Every single time they accept questions, the sanctity of our air, water and soil should be the story. Carrots haven’t worked for decades, The sticks of legislation, regulations, law enforcement with stifling fines and penalties with meaningful incarceration time is required. They should know this and we should demand it.