SIC 0252
CHICKEN EGGS



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.

NAICS Code(s)

112310 (Chicken Egg Production)

Industry Snapshot

According to the U.S. Department of Agriculture, between 1986 and 2002 the number of U.S. egg producers declined from 2,500 to 700. Throughout the 1990s and early 2000s, the largest egg producers had tended to grow in size by acquiring smaller companies. In 2002 a total of 10 egg making companies boasted flocks of more than 5 million; 61 companies had flocks of more than 1 million; and 295 companies 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.

Background and Development

The chicken egg farm industry has been strong since the beginning of the 1990s, although it is subject to fluctuations. The size of the nation's laying flock has varied in the past few decades, with a noticeable effect on price. Although the national laying flock has steadily decreased from 317 million in 1967 to 290 million in 1983 to 258 million in 1998, the production level has increased over the years from 170.5 billion cases in 1984 to an estimated 192.5 billion in 1999.

In 1993, large eggs sold for 76 cents per dozen, but in 1996, prices increased dramatically to a record average high around 90 cents per dozen. By 1998, the price was back down to 78 cents. Egg farmers tried to affect future pricing by slowing the rate of increase of the broiler hatching egg flock, thus reducing production. The flock grew by only a fraction of a percent in 1995 and only 1 percent in 1996, compared with a 6 percent growth rate in 1991. Therefore, prices rose in late 1995 and remained strong throughout 1996.

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

SIC 0252 Chicken Eggs

million eggs a year. The number of farms with 1 million or more hens, or layers, has 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.

However, the factory-style facilities designed to accommodate large flocks frequently attract criticism for the manner in which the birds are treated. Space is at a minimum, and the layers are often literally "henpecked" 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.

Current Conditions

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 245 eggs in 1998 and to 254.6 million by 2002. 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 205 million cases of eggs produced in 2003, 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 exported. Leading export markets include Canada and Hong Kong.

Throughout the early 2000s, the five top egg producing states represented one-half of all U.S. layers. Iowa was the nation's top egg-producing state, followed by Ohio, Pennsylvania, California, and Indiana.

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.

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 2002, 61 eggp roducing companies had more than one million layers; 10 of those had more than five million layers.

Pilgrim's Pride Corporation, based in Pittsburg, Texas, was an industry leader throughout the 1990s and early 2000s. 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 2003, the company reported total revenues of $2.6 billion and employed 24,800 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.

Another major chicken egg producer in the 1990s 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 1,534 people and earned about $12.2 million on sales of $387.5 million in 2003. Finally, Hillandale Farms of Florida Inc. has been a key egg producer. In 2003, the company reported revenues of $87.5 million and employed 250 people.

America and the World

The United States has been one of the world's largest egg-producing countries. Only China, with an annual production of 284 billion eggs, ranks higher. U.S. egg exports in 2003 equaled 1.6 million cases.

The most important markets for U.S. eggs are Canada, Belgium, Hong Kong, Japan and Mexico; combined, these markets accounted for roughly 75 percent of exported eggs in the early 2000s. 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 end of the decade due to escalating production and lower domestic prices.

Further Reading

American Egg Board. "Egg Industry Facts Sheet," 2001. Available from http://www.aeb.org/eii/facts/industry-facts.html .

American Egg Board. "U.S. Production, Population and Distribution," 2003. Available from http://www.aeb.org/eii/facts/us-prod.html .

U.S. Department of Agriculture. Livestock, Dairy, and Poultry Outlook. Washington, DC: 27 January 2004. Available from http://usda.mannlib.cornell.edu/reports/erssor/livestock/ldp-mbb/2004/ldpm116t.pdf .

U.S. Department of Agriculture Economic Research Service. Poultry and Eggs: Trade. Washington, DC: 14 November 2004. Available from http://www.ers.usda.gov/Briefing/Poultry/trade.htm .



User Contributions:

Comment about this article, ask questions, or add new information about this topic: