    [Senate Hearing 112-695]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-695

                      S. 3239--EGG PRODUCTS INSPECTION ACT

                  AMENDMENTS OF 2012: IMPACT ON EGG PRODUCERS
    =======================================================================

                                    HEARING

                                   before the

                           COMMITTEE ON AGRICULTURE,

                             NUTRITION AND FORESTRY

                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JULY 26, 2012

                                   __________

                           Printed for the use of the
                Committee on Agriculture, Nutrition and Forestry

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                COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY

                     DEBBIE STABENOW, Michigan, Chairwoman

    PATRICK J. LEAHY, Vermont            PAT ROBERTS, Kansas
    TOM HARKIN, Iowa                     RICHARD G. LUGAR, Indiana
    KENT CONRAD, North Dakota            THAD COCHRAN, Mississippi
    MAX BAUCUS, Montana                  MITCH McCONNELL, Kentucky
    E. BENJAMIN NELSON, Nebraska         SAXBY CHAMBLISS, Georgia
    SHERROD BROWN, Ohio                  MIKE JOHANNS, Nebraska
    ROBERT P. CASEY, Jr., Pennsylvania   JOHN BOOZMAN, Arkansas
    AMY KLOBUCHAR, Minnesota             CHARLES E. GRASSLEY, Iowa
    MICHAEL BENNET, Colorado             JOHN THUNE, South Dakota
    KIRSTEN GILLIBRAND, New York         JOHN HOEVEN, North Dakota

                 Christopher J. Adamo, Majority Staff Director

                  Jonathan W. Coppess, Majority Chief Counsel

                        Jessica L. Williams, Chief Clerk

                  Michael J. Seyfert, Minority Staff Director

                    Anne C. Hazlett, Minority Chief Counsel

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page

    Hearing(s):

    S. 3239--Egg Products Inspection Act Amendments of 2012: Impact
      on Egg Producers...............................................     1

                                  ----------

                            Thursday, July 26, 2012
                        STATEMENTS PRESENTED BY SENATORS

    Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan,
      Chairwoman, Committee on Agriculture, Nutrition and Forestry...     1
    Roberts, Hon. Pat, U.S. Senator from the State of Kansas.........     2

                                   Witnesses

    Feinstein, Hon. Dianne, U.S. Senator From The State of California     4
    Lathem, David, Chairman, United Egg Producers, Lathem Farms,
      Pendergrass, Georgia...........................................     7
    Benson, Eric, President, J.S. West & Companies, Modesto,
      California.....................................................     9
    Herbruck, Greg, Executive Vice President, Herbruck's Poultry
      Ranch, Saranac, Michigan.......................................    11
    Baer, Amon, Owner, Mendelson Egg Company, Lake Park, Minnesota...    13
                                  ----------

                                    APPENDIX

    Prepared Statements:
        Grassley, Hon. Charles.......................................    24
        Thune, Hon. John.............................................    25
        Feinstein, Hon. Dianne.......................................    26
        Baer, Amon...................................................    29
        Benson, Eric.................................................    35
        Herbruck, Greg...............................................    38
        Lathem, David................................................    40
    Document(s) Submitted for the Record:
    Roberts, Hon. Pat:
        American Farm Bureau Federation, prepared statement..........    44
        National Veterinary Organizations, Joint Letter Requesting
          Non-support for S. 3239....................................    45
        Various Organizations, Joint Letter Requesting Non-support
          for S. 3239................................................    46
    Feinstein, Hon. Dianne:
        Egg Bill Master Endorsement list, the Egg Products Inspection
          Act Amendments of 2012.....................................    48
    Grassley, Hon. Charles:
        Southwest Iowa Egg Cooperative, prepared statement...........    61
    Humane Society of the United States, prepared statement..........    63
    United Egg Producers, prepared statement and attachments.........    68
    Question and Answer:
    Stabenow, Hon. Debbie:
        Written questions to David Lathem............................    95
        Written questions to Greg Herbruck...........................    93
        Written questions to Eric Benson.............................    90
        Written questions to Amon Baer...............................    88
    Roberts, Hon. Pat:
        Written questions to David Lathem............................    96
    Thune, Hon. John:
        Written questions to Hon. Dianne Feinstein...................    86
        Written questions to David Lathem............................    98
        Written questions to Eric Benson.............................    91
        Written questions to Greg Herbruck...........................    93
        Written questions to Amon Baer...............................    88
    Feinstein, Hon. Dianne:
        Written response to questions from Hon. John Thune...........    86
    Baer, Amon:
        Written response to questions from Hon. Debbie Stabenow......    88
        Written response to questions from Hon. John Thune...........    88
    Benson, Eric:
        Written response to questions from Hon. Debbie Stabenow......    90
        Written response to questions from Hon. John Thune...........    91
    Herbruck, Greg:
        Written response to questions from Hon. Debbie Stabenow......    93
        Written response to questions from Hon. John Thune...........    93
    Lathem, David:
        Written response to questions from Hon. Debbie Stabenow......    95
        Written response to questions from Hon. Pat Roberts..........    96
        Written response to questions from Hon. John Thune...........    98

                      S. 3239--EGG PRODUCTS INSPECTION ACT

                  AMENDMENTS OF 2012: IMPACT ON EGG PRODUCERS

                            Thursday, July 26, 2012

                                  United States Senate,
              Committee on Agriculture, Nutrition and Forestry,
                                                         Washington, DC
        The Committee met, pursuant to notice, at 9:35 a.m., in
    room 328A, Russell Senate Office Building, Hon. Debbie
    Stabenow, Chairwoman of the Committee, presiding.
        Present: Senators Stabenow, Klobuchar, Roberts, Boozman,
    Grassley, and Thune.

    STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE
     OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION
                              AND FORESTRY

        Chairwoman Stabenow. Good morning. We will call the
    Committee to order, Conservation, Nutrition and Forestry--
    excuse me--Agriculture, Nutrition and Forestry Committee, and I
    know we do have other members that are planning to join us,
    but, Senator Feinstein, in the interest of time, and I know you
    have many commitments as well, we want to move ahead this
    morning.
        This is a very important hearing. We appreciate your being
    here. We appreciate everyone being here today. There is
    tremendous amount of interest, as we can see from an overflow
    crowd today. We are here to consider S.3239, Egg Products
    Inspection Act Amendments of 2012, which is a bipartisan bill
    that is led by Senator Dianne Feinstein.
        We all know that breakfast is the most important meal of
    the day, whether you are running a farm, taking your produce to
    market, leading a Committee hearing, eggs are as much a part of
    our mornings as juice or coffee or the bacon on our plates, or
    the milk or grains in our cereal. So when we talk about this
    important nutritious product, it is very much a part of America
    and our nutrition and food system.
        Eggs are an important staple of the American diet. The
    average person consumes 250 eggs per year. I think I am
    probably above that actually. They are also an important part
    of the agricultural economy. Every year, eggs generate nearly
    $15 billion for our economy. So it is incredibly important that
    our producers have certainty as they produce the eggs that we
    need for so many of our food products.
        This bill we have before us is driven by a coalition of
    industry producers who have come together to request these
    changes, and it is designed to give producers certainty from
    regulations. Senator Feinstein, the bill's author, is here to
    testify today, as I indicated, as well as egg producers from
    across the country.
        This bill represents a compromise for egg production
    standards. It was proposed by the industry and has the support
    of the Humane Society of the United States. We will hear today
    from those who are in favor of the bill and the agreement, and
    we will hear from those who have concerns. I look forward to
    the testimony from Senator Feinstein and from the producers who
    have taken the time. Thank you to each of you for taking the
    time to join us, to be able to be here for this very important
    discussion on a very important issue.
        I will now turn to my friend and Ranking Member, Senator
    Pat Roberts, for his opening remarks.

     STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF
                                 KANSAS

        Senator Roberts. Madam Chairwoman, thank you for calling
    this hearing this morning, giving us an opportunity to hear
    directly from egg producers regarding a bill that would, for
    the first time ever, put the Federal Government in charge of
    the standards under which eggs are produced in this country.
        And I truly appreciate the chance to hear from my friend
    and colleague, Senator Feinstein. Senator Feinstein and I have
    put a lot of years in on the Intelligence Committee and I thank
    her for standing up in behalf of our country, our national
    security, and the long years of effort that you have put on the
    Intelligence Committee. We have no greater obligation than the
    national security of our country and I thank you for your
    service.
        Senator Feinstein. Thank you, sir.
        Senator Roberts. First let me say that I firmly believe
    that farmers and ranchers are good stewards of the animals
    under their care. One of the fundamental principles of the
    animal husbandry profession is that your animals get fed,
    watered, and taken care of the night before you actually head
    for the house.
        There is absolutely no excuse for animal cruelty, in
    particular, given the multitude of training programs and
    educational efforts about animal care and handling for those
    who work with and around animals. Producers understand that the
    better they take care of their animals, the more productive
    those animals will be.
        Second, let me say that Senator Feinstein and the egg
    producers of California have a real challenge. There is no
    doubt that California's Proposition 2 has created some
    uncertainty in the industry. That comes with leadership.
        I am not sure this agreement between the United Egg
    Producers marketing cooperative and the Humane Society of the
    United States, HSUS--I guess everything has to be an acronym, I
    apologize for that--is a solution that addresses the unintended
    consequences we as policy makers need to consider.
        When this Committee considers any change in policy that
    will impact animal agriculture, there are a wide range of
    factors that should be taken into account. Considerations like
    food safety, animal health and welfare, the economics of food
    production, environmental issues, our international trade
    obligations, and most importantly, science. What is the best
    possible science available to govern the manner in which our
    food supply is produced in this country? Is this legislation
    based on that kind of science?
        Put simply, when we deviate from science-based decisions,
    we end up making the very problems we are trying to resolve
    worse. If the science eventually says that a smaller cage is
    better, will this alliance of producers and HSUS be back before
    this Committee in a year or two petitioning for a change in the
    law when the science changes?
        I also hope to learn why egg producers were solidly against
    any agreement with HSUS before they were for it. What changed
    in the issue to bring about such a reversal in their position?
    I understand there are also class action suits involving
    antitrust issues that are at the forefront of many challenges
    that egg producers are dealing with right now. Is this
    agreement somehow viewed as an escape hatch from those
    discussions?
        I wish, Madam Chairwoman, that we had the Department of
    Agriculture with us here this morning to explain how they would
    actually enforce this agreement were it ever to become law. In
    addition to questions regarding the implications of this
    agreement on interstate commerce and our international trade
    obligations, I am also concerned about how this agreement will
    affect the price that consumers will pay for eggs.
        European consumers are dealing with these challenges right
    now. European consumers saw their supply of eggs drop 10 to 15
    percent soon after the government implemented its version of
    this law, a decrease which led to a 55 percent increase in the
    price of eggs.
        At the Federal level, this Committee must examine what
    effects a dramatic price increase like this would cause to our
    programs like the WIC program and SNAP or food stamps. A 55
    percent increase in egg prices would significantly reduce the
    purchasing power of the recipient of these programs. I do not
    think we want that.
        Madam Chairwoman, I have letters in opposition to this
    legislation from the American Farm Bureau Federation, a group
    of four national veterinary organizations, and a letter signed
    by 94 state and national organizations representing egg, milk,
    sheep, wool, turkey, pork, and beef producers that I would like
    to enter for the record.
        Madam Chairman, thank you and I look forward to this
    morning's discussion.
        Chairwoman Stabenow. Thank you very much. We will enter
    those documents into the record without objection.
        [The information from Hon. Pat Roberts can be found on
    pages 44, 45 and 46 in the appendix.]
        Chairwoman Stabenow. Again, welcome to our very
    distinguished colleague, as Senator Roberts mentioned, the
    Chair of the Intelligence Committee. We owe you all a debt of
    gratitude for the hours that you spend, literally, every day in
    efforts to protect our country and all of us as Americans. So
    thank you for that. We also thank you for being here as the
    lead author of S.3239, the Egg Products Inspection Act, and we
    would welcome your comments in relationship to the bill.

    STATEMENT OF HON. DIANNE FEINSTEIN, U.S. SENATOR FROM THE STATE
                             OF CALIFORNIA

        Senator Feinstein. Well, thank you very much, Madam
    Chairman and Ranking Member Roberts, and I want to thank you
    really for the time to discuss this amendment which would be to
    the Egg Products Inspection Act.
        I want to just begin by pointing out that this is a
    bipartisan bill. It is co-sponsored by yourself, Senators
    Leahy, Blumenthal, Scott Brown, Cantwell, Collins, Kerry,
    Lautenberg, Lieberman, Menendez, Merkley, Murray, Saunders,
    Schumer, Vitter, and Wyden. Unfortunately, Senator Leahy could
    not be here this morning. He has a mark-up, as does Senator
    Klobuchar and myself at ten o'clock. I am also delighted to see
    the Ranking Member of the Judiciary Committee, Senator
    Grassley, here this morning as well.
        The United Egg Producers represent approximately 90 percent
    of the eggs sold in the United States, and the Humane Society
    of the United States is the largest animal welfare organization
    in the country, I believe with 11 million members. These two
    groups came together to forge a compromise agreement that can
    ensure the future of the egg industry and result in a better
    product.
        You are right, Senator Roberts. In 2008, California passed
    Proposition 2, which among other things created a requirement
    that hens be able to stretch their wings and turn around. This
    initiative passed with an overwhelming majority. Similar
    measures were also put in place in Michigan, Arizona,
    Washington, Ohio, and Oregon. The result of these individual
    state-level initiatives is now a patchwork of standards that
    make it hard for egg producers to know the rules of the road
    and to conduct interstate commerce.
        Egg farmers nationwide are stymied as they attempt to
    upgrade their infrastructure and develop new enterprises. Why
    grow when the rules of the road might change and invalidate
    your investments? Why develop a new market if that market might
    not be open to you in a few short years? This legislation
    addresses these problems. The agreement establishes a single
    national standard for the treatment of egg-laying hens and the
    labeling of eggs.
        Now, you are going to hear a lot in detail about it from
    the next panel, but let me just quickly, briefly explain what
    the bill does. The size of hen cages is increased over the next
    18 years and enrichments like perches and nests are added so
    that chickens can engage in natural behaviors. The practice of
    depriving hens of food and water to increase egg production is
    outlawed.
        Minimum air quality standards are put in place for henhouse
    protecting workers and birds. And clear requirements for egg
    labeling are created so consumers know whether the eggs they
    buy come from hens that are caged, cage-free, free range, or
    housed in enriched cages.
        Now, there are some who have concerns about the bill, and I
    just want to be clear on a few points. This legislation only
    applies to egg producers and is the result of careful
    negotiation between animal welfare groups and the only industry
    that is affected. No other is affected.
        Secondly, I have heard concerns that the bill would hurt
    small producers. That is simply incorrect. Farmers with 3,000
    birds or fewer are specifically exempted from the provisions of
    this legislation.
        Organic, cage-free, and free range egg producers will also
    be unaffected by the housing provisions, except that they may
    see increased sales as consumers are able to more clearly tell
    what is available on store shelves as a result of the labeling
    provisions. And for those who are affected by our bill, there
    is a long phase-in period, up to 18 years. In this period of
    time, most producers, I am told, will replace their cages in
    any event.
        Next, the science behind the legislation. This legislation
    is endorsed by the leading scientists in the egg industry, the
    American Veterinary Medical Association, and the two leading
    avian veterinary groups. Studies show that these new cages can
    result in lower mortality and higher productivity for hens,
    making them more efficient for egg producers.
        Finally, I want to set the record straight with regard to
    the cost of the bill. The CBO scores the legislation as having
    no cost, and a study by Agrilytica, a consulting firm, found
    that this legislation would not have a substantial price effect
    on consumers. It is also important to note that this bill
    reflects what is already happening because of consumer demand.
    McDonald's, Burger King, Costo, Safeway, and other companies
    are already phasing in new humane handling requirements for the
    production of the food they sell.
        Further, a study by an independent research company, the
    Bantam Group, indicates broad support from consumers.
    Specifically, they found consumers support the industry
    transitioning to larger cages with enrichments like perches, by
    a ratio of 12 to 1, and I would like to submit for the record
    13 pages of endorsements from organizations in virtually most
    major states in the country, if I can.
        Chairwoman Stabenow. Without objection.
        Senator Feinstein. Thank you.
        [The information from Hon. Dianne Feinstein can be found on
    page 48 in the appendix.]
        Senator Feinstein. You can tell how important this bill is
    to the egg industry because farmers have come from all across
    the United States to attend this hearing and show their
    support. You will meet several on the next panel, including
    Eric Benson from my State of California whom I would like to
    welcome. Other farmers are here as well in the audience. Let me
    just mention a few.
        Jim Dean from Iowa. Since 30 percent of the eggs in
    California grocery stores come from Iowa, farmers in Iowa have
    a strong interest in seeing this bill pass so that rules of the
    road are clear and they can be productive and grow and access
    this huge consumer market.
        Dolph Baker from Mississippi. He is CEO of Cal-Maine Foods
    which operates egg farms in multiple states. Cal-Maine will
    find it more and more difficult to comply with conflicting
    state standards unless we can pass this bill.
        Arnie Riebli, also from California. Peter, David, and Gary
    Forsman from Minnesota. They are here representing smaller
    scale operations. Marcus Rust, Bob Krouse, Ron Truex, and Roger
    Seger from Indiana. They have enacted state level production
    standards. They are having to make decisions about what
    infrastructure to invest in and wondering if they are going to
    be locked out of their neighboring markets.
        Molly Weaver from Ohio. She is trying to cope with new
    regulations imposed by her home state and figure out how she
    will compete with eggs produced more cheaply by her neighbors
    just across state lines. Now, there are many producers who
    could not even get into the room today and they are sitting in
    overflow rooms around the corner, but they have all come to
    Washington to be heard.
        I would also like to add that the most recent list of
    supporters--well, I said that--is 13 pages long. It includes 14
    agriculture and egg-producing groups, the four major veterinary
    groups who look at eggs and egg-laying hens, five consumer
    groups, and many more.
        Now, this compromise represents something very unique in
    animal agriculture. This is an animal welfare group and a major
    industry working together to forge an agreement that is
    practical and contains reasonable time frames for producers to
    implement new cage sizes, 18 years; new protections for the
    animals and workers; and clearer labeling.
        This is a practical, fair-minded resolution that I think
    solves a real problem for the egg industry. I encourage the
    Committee to support this bill. I thank you very much for this
    opportunity.
        [The prepared statement of Hon. Dianne Feinstein can be
    found on page 26 in the appendix.]
        Chairwoman Stabenow. Thank you very much for your
    comprehensive testimony. We look forward to working with you,
    and as we move forward in discussing this issue, I believe at
    this point we will, unless someone has a question for Senator
    Feinstein, that we will move forward to our other panel. But,
    Senator Grassley, you look like you might have a question.
        Senator Grassley. I wonder, because we have all got to go
    to Judiciary, I would like to put a statement in the record,
    some questions to submit, and I would also like to submit a
    letter in opposition from the Southwest Iowa Egg Cooperative on
    the legislation.
        Chairwoman Stabenow. Without objection.
        [The information from Hon. Charles Grassley can be found on
    page 61 in the appendix.]
        Chairwoman Stabenow. Thank you again. We look forward to
    working with you----
        Senator Feinstein. Appreciate it.
        Chairwoman Stabenow. --and appreciate your comprehensive
    remarks.
        Senator Feinstein. Thank you.
        Chairwoman Stabenow. We will ask our second panel to come
    forward at this point.
        Well, good morning. We appreciate so much all of you taking
    the time to join us today. Let me introduce each of our
    witnesses and then we will ask each of you for five minutes of
    verbal testimony. We certainly welcome any other written
    testimony you would like to leave with the Committee as well.
    And then we will do a round of questions.
        First let me introduce our first panelist. David Lathem is
    the Chairman of United Egg Producers and is an egg farmer from
    Pendergrass, Georgia. We are very pleased to have you with us
    today.
        Our second panelist is Eric Benson from Modesto,
    California. Mr. Benson is President of J.W. West, a diversified
    agricultural company started by his family in 1909. So that is
    terrific. Welcome.
        I am particularly pleased to have the next witness from
    Michigan, Greg Herbruck, who manages Herbruck Poultry Ranch
    along with his son and two brothers. They are the third and
    fourth generation involved in this family farm, very well-
    respected leaders in agriculture in Michigan, and it is great
    to have you here.
        And then finally I am going to turn to Senator Roberts to
    welcome our final witness.
        Senator Roberts. Thank you, Madam Chair. I would like to
    introduce Amon Baer, second generation ag farmer from Lake
    Park, Minnesota. In this Committee, the term family farmer is
    volleyed back and forth with some poetic license, but when you
    look at the number of Baer family members that are actually in
    the business of farming, you quickly appreciate that Amon may
    have farmed out of necessity so that he had enough food for his
    family and all the mouths congregating around the dinner table.
        Amon Baer and his wife of 38 years, Camille, are owners and
    family farm operators. They have nine children, all of whom are
    involved in the farming operation. Together with two of their
    five sons, they own 300,000 laying hens and they grade, carton,
    and market 6 million dozen eggs per year. And believe it or
    not, Madam Chairman, this is not a big operation.
        Additionally, the Baers raise hogs and grow corn, soybeans,
    and wheat in Minnesota as well as Laramore and Dakota, North
    Dakota. To the south, Amon and one of his sons are partners in
    a farm near New Effington and Rosholt, South Dakota. And not to
    be outdone, one of his 14 siblings, three of Amon's brothers,
    Amos, Joel, and Jonah, are also farming in the Red River Valley
    region.
        You cannot get any more farm family than Amon. Mr. Baer, if
    there was any more family in your farming operations, we may
    have trouble fitting them all into this room. Welcome. We
    appreciate your coming here today to share your thoughts on
    this legislation.
        Chairwoman Stabenow. Thank you. And welcome to each of you.
    We will start with Mr. Lathem. Good morning.

      STATEMENT OF DAVID LATHEM, CHAIRMAN, UNITED EGG PRODUCERS,
                   LATHEM FARMS, PENDERGRASS, GEORGIA

        Mr. Lathem. Good morning. My name is David Lathem. I am an
    egg farmer from Pendergrass, Georgia, and I am Chairman of the
    United Egg Producers. UEP represents farmers who market
    approximately 90 percent----
        Chairwoman Stabenow. Excuse me, Mr. Lathem. We are going to
    ask you just to move. Either the mic is not on or just move it
    a little bit more towards your mouth. We want to make sure that
    everybody has a chance to hear you.
        Mr. Lathem. Is that better?
        Chairwoman Stabenow. That is better. Thank you.
        Mr. Lathem. Okay. UEP represents farmers who market
    approximately 90 percent of all eggs sold in the United States.
    I am pleased that in the hearing room and overflow room, we
    have egg producers who have come to Washington for this hearing
    and manage almost half of the nation's laying hens. UEP
    strongly supports S.3239 and we appreciate the Committee having
    this hearing.
        Speaking personally, I believe that long-term viability of
    my family farm is in jeopardy without S.3239. Our farm is not
    among the very largest. We cannot set up different production
    systems to meet conflicting and inconsistent standards of every
    state. We need a production standard that is for everyone and
    is fair for everyone.
        S.3239 allows us to plan for our future. It lets us, as
    producers, take charge of our own destiny. This bill has the
    overwhelming support of our industry. Not unanimous, because
    nothing important is ever unanimous, but overwhelming.
        We as producers realize that we are living in the 21st
    century when the American public is interested as never before
    in where its food comes from and how it is produced. We should
    see this as an opportunity rather than a threat. UEP believes
    that S.3239 represents the sustainable future for all of us,
    but we are not the only ones.
        This bill has scientific support from the American
    Veterinary Medical Association and other professional
    societies. It has the support of Consumer Federation of America
    and the National Consumer's League. Egg producer groups at the
    state level have come out in support from the Rocky Mountain
    Farmer's Union to United Farm Workers. This bill has wide
    support.
        However, some do oppose it. I would like to engage in
    argument seriously and explain why we disagree. Some simply
    attack the Humane Society of the United States. They say, You
    cannot trust HSUS. It is no secret that our organization and
    HSUS have been adversaries. We have disagreed and fought on
    animal welfare use for years.
        But once we started to explore whether there might be
    common ground, they realized that we did care about the welfare
    of our hens and we realized that they did care about the
    survival of our farms. And so we began to do work, what
    everyone says you should do, look for common ground, seek
    compromise, try to find solutions.
        So the main complaints some people have against us in the
    egg industry, look for common ground, we plead guilty to that
    charge. Opponents of S.3239 also assert that this bill
    represents a slippery slope, a precedent that will inevitably
    force other animal industries into similar settlements. This is
    not true. There are two basic reasons why.
        First, we are all here because we as producers want this
    agreement. With all due respect to HSUS, if they were for the
    agreement and we were against it, I do not think we would be
    having this hearing today. If other livestock sectors did not
    want a legislative settlement with HSUS, it is not going to
    happen.
        The slippery slope argument says that if you approve this
    bill for eggs, you will inevitably follow up with similar laws
    for pork or beef. This assumes you as legislators are incapable
    of making distinctions between commodities. The problem with
    this argument is that it is completely at odds with what
    Congress has actually done over the years.
        You have, in fact, always looked at each commodity
    separately. You do not, for example, legislate the same program
    for cotton as you do for peanuts. Dairy is an animal product
    that has price supports, but you have never seriously
    considered price supports for beef, pork, or eggs. Eggs have
    always been regulated differently from other animal products.
        The Food and Drug Administration has on-farm safety
    authority for our farms, but not for beef, pork, or turkey
    operations. USDA has civil penalty authority for eggs, but not
    for other livestock species. By contrast, USDA Packers and
    Stockyards Act applies to beef, pork, and broilers, but not to
    eggs.
        The slippery slope argument ignores this clear history and
    replaces it with hypothetical fears. The reality is that
    Congress and Federal agencies have always made distinctions
    among commodities. I hopefully you will forcefully reject this
    argument.
        Madam Chairwoman, I genuinely believe that the survival of
    my farm and other farms are hanging in the balance. We need
    Senate Bill 3239 in order to provide a fair operating
    environment for all American farms. I strongly urge this
    Committee to advance the legislation and I thank you for
    letting me speak today.
        [The prepared statement of Mr. Lathem can be found on page
    40 in the appendix.]
        Chairwoman Stabenow. Thank you very much. Mr. Benson,
    welcome.

      STATEMENT OF ERIC BENSON, PRESIDENT, J.S. WEST & COMPANIES,
                          MODESTO, CALIFORNIA

        Mr. Benson. Good morning and thank you for having us here,
    Senator Stabenow, and other Senators. We appreciate your
    attending.
        I am here today representing J.S. West here in Modesto,
    California. Our business was founded in 1909. We are family
    owned and operated, third and fourth generations of the West
    and Benson families now providing management for the company.
    We believe in providing the highest quality products to our
    customer and contributing to the communities in which we live
    and operate, for example, by offering high quality and
    retirement benefits to all 300 of our employees.
        You have heard about the problems in the egg industry, the
    growing patchwork of inconsistent animal welfare statutes that
    began with Prop. 2 in California. Our family was deeply engaged
    in the debate on this. I have always believed that the
    marketplace should make most economic decisions through
    consumer demand and preferences. That is balanced by a belief
    in the political process to help set standards that our society
    believes in.
        The dilemma we face today is that today's consumers will
    vote with their hearts and buy food with their pocketbooks. We
    as a society need to decide how we are to treat our food before
    it is food. I think Government's role is to set a standard. We
    are willing and able to produce competitively under most all
    conditions as long as the playing field is fair and the rules
    are clear.
        I am here to tell you the best solution to our industry's
    problems in this area is S.3239, the bill that our Senator,
    Dianne Feinstein, has sponsored along with 15 of her
    colleagues. We are very proud of the leadership our Senator has
    shown in standing tall as a champion for our industry and for
    improved animal welfare as well. The two are not incompatible.
        I would like to spend my brief time talking a bit about the
    system which would become a national standard if the bill
    passes. Under S.3239, producers would make a multi-year
    transition to enriched colony systems. At J.S. West, we have
    installed two production houses with this system and have taken
    a flock through the complete laying cycle with two more flocks
    currently in production.
        So if you want to know what the egg industry will look like
    if S.3239 passes, you can watch our web cam at jswest.com. It
    lets anybody with access to the Internet look at our hens live
    and in real time. The enriched colony system is not an
    experiment. These enclosures are the standard for caged egg
    production in the European Union.
        However, not many of these systems are in place in the
    United States yet, so you might be interested in some of our
    results. First, what exactly is it? It is larger than the
    conventional enclosure. In our case, each colony contains about
    60 hens, measures 5 feet by 12 feet. Each colony is furnished
    with a nest box, perches, scratch areas.
        Hens can express more of their natural behaviors and, of
    course, there is substantially more space per animal than in
    conventional enclosures, and you can see an example of these
    hens enjoying themselves with their perches and everything else
    right over here with our photograph that was taken out of our
    hens in the new system.
        Our results in this system have been very encouraging. Hen
    mortality is lower, meaning that the small portion of hens that
    die during the production cycle is lower than other systems.
    Our egg production is somewhat better than in conventional
    systems. Hen feed consumption is a little bit greater, but we
    think that is because of the higher activity levels and the use
    of feed in the scratch areas. And the birds definitely use the
    enrichments.
        S.3239 wisely provides for a multi-year phase-in of
    enriched systems. There are undoubtedly incremental capital
    costs associated with moving to the new system. However, that
    being said, manufacturers have told us that more than 80
    percent of new equipment today is capable of conversion to
    these enriched colony systems.
        That means that S.3239 will not necessarily require most
    producers to make capital investments they were not already
    planning to make, albeit somewhat at a higher level than
    before. When you consider the cost of any investment, you
    always consider what the returns will be and what the
    alternatives are.
        If you really believe that you can maintain current
    conventional cage systems forever, there is a cost to enriched
    cages. In California, we are pretty sure that is not the case.
    If we cannot gain a consensus in favor of this enriched colony
    system at densities that society agrees is acceptable, the
    future will lie with those egg producers with the highest
    density of hens per square foot and the cheapest possible
    approach to food safety in a state where no rules exist and
    little concern is given to society's standards on hen welfare.
        I am not here to criticize any particular production system
    or density level, but I am convinced that this colony system
    and the standards that support it are the best compromise for
    the future of our industry. This system has higher production
    efficiency and better animal welfare than cage-free, free
    range, or conventional systems, and reflects the best welfare
    standard for egg production moving forward.
        I salute HSUS for their willingness to be open on
    compromise in this issue in supporting this legislation. The
    Humane Society of the United States, as Senator Roberts so
    succinctly put, without using the acronyms, they recognize that
    you can improve animal welfare within the context of an
    economically sustainable cage production system if it is
    designed right.
        What does make sense is a national production standard that
    is fair to everybody, that treats everybody the same, and that
    reflects our country's ideas of fairness and humanity. That is
    what is required here and that is what S.3239 provides, and we
    strongly urge you to support it. Thank you very much, Senator.
        [The prepared statement of Mr. Benson can be found on page
    35 in the appendix.]
        Chairwoman Stabenow. Thank you very much. Mr. Herbruck,
    welcome. It is good to see you.

         STATEMENT OF GREG HERBRUCK, EXECUTIVE VICE PRESIDENT,
              HERBRUCK'S POULTRY RANCH, SARANAC, MICHIGAN

        Mr. Herbruck. Good morning and thank you for the chance to
    testify today. My name is Greg Herbruck and my brothers and I
    own and manage our egg farm in Michigan. Four generations of
    our family have been in the egg business and we struggle with
    the same challenges as other egg farmers and livestock
    producers.
        For example, more than half the cost of producing eggs is
    feed. In the current drought, we have seen costs go through the
    roof. As projected yields have fallen over much of the nation,
    grain prices have soared, and the vast majority of our feed
    cost is the corn and soybean meal. And yet, in some ways, the
    situation I will describe to you today is even more serious for
    us than the drought.
        Over the years, we have always tried to meet the needs of
    our customers. For example, we have been part of the growing
    organic egg industry and we partner with 28 other farms, many
    of them very small scale, to supply a wide range of eggs
    through different production systems.
        We also produce conventional eggs where the hens are kept
    in cages. There were good reasons our industry moved to this
    production system many decades ago: Animal health, protection
    from predators, and economic efficiencies. But we have to
    acknowledge that in the last few years, keeping hens in cages
    has become extremely controversial.
        As producers, we believed we had science on our side,
    having implemented the welfare recommendations of an
    independent scientific advisory committee. However, we have
    learned that consumers and voters do not make the decisions
    based simply on science.
        Most are several generations removed from the farm, and
    whether you call it values or emotion, the way they form their
    views of animal welfare issues is not the same as ours. They
    are our customers and in any business, if you do not listen to
    your customers, you are headed for trouble.
        Egg farmers got a dramatic wake-up call when California
    voters passed Proposition 2 by a two to one margin in 2008.
    This ballot initiative made the conventional cage system
    illegal. Under the threat of similar ballot measures, other
    states moved to establish their own standards for egg
    production. Madam Chairwoman, you are aware that our State of
    Michigan was one of those.
        In just a few years, egg farms in Michigan will be required
    to provide more than twice as much space for each bird as the
    current industry standard. The future of our industry on the
    current path is a patchwork of state animal welfare laws that
    are inconsistent, contradictory, and ultimately unworkable.
        In many, if not most, cases, these laws will not just
    affect the producers in a particular state. They are written to
    apply to all eggs sold in the state, no matter where they are
    produced. This means that a farmer in Iowa will have to comply
    with California state standards because some 30 percent of the
    eggs sold in California currently come from Iowa.
        This helps you understand why we have a problem. Eggs move
    across state lines every day. This is how our business works.
    Virtually all states are either in surplus, meaning we produce
    more eggs than the population consumes, like Michigan, or in
    deficit, meaning that most farms are incapable of producing
    what the state consumes, like New York or South Dakota.
        Our farms cannot maintain a separate henhouse standard for
    every state where we want to sell eggs. And yet, that is pretty
    much where we are headed where the current patchwork of laws
    keeps expanding. Even already passed laws. Michigan's standard
    is different from Ohio's, which is different from Washington's,
    which is different from Oregon's, which is different from
    California's. It actually gets worse.
        We sell to major food service and grocery customers who
    have outlets in these states. It would be an impossible task to
    keep track of which eggs were produced in which states, to meet
    all the different standards of every state where they have a
    store or a restaurant. You can see we are on a road to chaos.
        I also urge you to examine the House version of the Farm
    Bill. There is an amendment which encourages the exact opposite
    approach to a national standard. If Herbruck's has to produce
    to a specific food safety and welfare standard and neighboring
    states do not, this will constitute an economic death sentence
    for our farm.
        The situation is the same for producers in California,
    Oregon, Washington, Ohio, and Arizona, and other states with
    similar standards. Unfortunately, the private sector alone
    cannot solve this problem. No matter what we do as producers
    voluntarily, we cannot avoid the threat of future ballot
    initiatives, and 24 states have them.
        So we are at the mercy of the next activist group that
    wants to mandate cage-free production in our state. We are
    convinced the only solution to this problem is a national
    production standard, as contained in Senator Feinstein's bill,
    S.3239. This bill is the best solution for hen welfare, food
    safety, and consumer choice.
        It is essential to the Michigan egg industry that this
    legislation be passed as quickly as possible so we can stay in
    business. We strongly urge this Committee to support S.3239.
    Thank you.
        [The prepared statement of Mr. Herbruck can be found on
    page 38 in the appendix.]
        Chairwoman Stabenow. Thank you very much. Mr. Baer, thank
    you, welcome.

      STATEMENT OF AMON BAER, OWNER, MENDELSON EGG COMPANY, LAKE
                            PARK, MINNESOTA

        Mr. Baer. Thank you very much, Madam Chairwoman, Senator
    Roberts, thank you for the kind introduction, and other
    distinguished Senators of the Committee. Thank you for the
    opportunity for me to be able to testify today on behalf of Egg
    Farmers of America, to our opposition to S.3239.
        Egg Farmers of America is an association of over a dozen
    small and medium-sized egg family farming operations, including
    cage-free operators located throughout the Midwest. Senator
    Roberts did a very nice job of introducing me, so I will not
    re-introduce myself. Thank you.
        We have five primary reasons we are opposed to this bill.
    The bill will essentially kill the small family egg farmer. The
    bill will result in a dramatic increase in cost to consumers.
    The bill is not necessary. You would be establishing a
    precedent that could virtually affect all of the livestock
    industries. And S.3239 is not justified by science.
        Killing the small family egg farm. Egg production is a
    cyclical, high volume, very low margin business. This bill, if
    passed, would benefit the 180 or so mega-sized operations to
    the detriment of the 1,800 other family farms. The experience
    of my nephew is an example of why this is the case. He has just
    installed new housing for 200,000 layers, investing almost $2.5
    million.
        That equipment system has a useful life of over 30 years.
    If S.3239 becomes law, he will be required to tear all of that
    equipment out and essentially start over just as he is getting
    his first set of equipment paid for. His replacement cost then
    to maintain his current production standards would be almost $5
    million. In my 40 years in the egg business, I can tell you
    there is no way that young man will be able to raise that kind
    of money in 18 years.
        Cost to the industry. In 1999, the European Union issued a
    similar directive requiring conversion to enriched housing over
    a period of 12 years. As anticipated, many producers waited
    until January and simply closed their operations due to the
    higher operating costs and capital investment required.
        European consumers have seen supplies cut by 20 percent and
    prices soar up to 55 percent higher. We can expect similar
    results in this country. UEP's own economic analysis indicates
    that by 2029, 65 percent of the production will still be in
    conventional cages at 67 inches.
        This law is unnecessary. Today, any egg producer who
    currently wants to produce eggs in enriched colony housing has
    the freedom and ability to do so. They do not need a Federal
    law to require them to produce eggs at that level. The Federal
    law is needed to push the small farmer out of business so there
    is less production.
        It sets a bad precedent. As a lifelong UEP member and UEP
    Board member, I am very sympathetic to the unfortunate
    situation faced by the egg farmers in California. Eric Benson
    mentioned that a lot of money was spent. My family sent
    thousands of dollars to help California try and defeat
    Proposition 2. But the problems of one state, even a handful of
    states, does not justify a Federal mandate in all 50 states.
        I agree with the California Congressman who recently said
    during the House Ag. Committee consideration of the Farm Bill,
    quote, We have a terrible situation created by the voters of
    California with the egg situation. Now that I am a retiring
    member, I can say that I do not always agree with what the
    voters do, and they in California made an awful mistake with
    regard to the poultry and egg situation. I certainly agree with
    that Congressman.
        After the 1999 EU directive, as many as 27 separate food
    safety studies were performed in Europe and the United States.
    None of the science conclusively points to improved food safety
    as a result of enriched housing. Additionally, the U.S.
    Department of Agriculture stated last July, Hens can experience
    stress in all housing types and no single housing system gets
    high score on all welfare parameters.
        On January 26th of this year, the American Veterinary
    Medical Association noted in a statement that, quote, Each of
    the additional features in an enriched colony has the potential
    to malfunction, causing injury, harboring disease vectors or
    parasites, or provoking aggression.
        Before concluding my remarks, I would like to state for the
    record that I personally, as well as others who oppose this
    legislation, have received threats in an attempt to force our
    support rather than oppose this legislation. We are evaluating
    those threats with lawyers and law enforcement officials. I
    wanted this record to reflect our concern so that its absence
    is not used against us in later legal proceedings. Thank you,
    Madam Chairwoman, for the time.
        [The prepared statement of Mr. Baer can be found on page 29
    in the appendix.]
        Chairwoman Stabenow. Thank you very much. We will move to
    questions at this point. Mr. Herbruck, could you respond a
    little bit more to the challenge of patchwork of different
    state regulations? I know certainly in Michigan the state
    legislature, as you mentioned, passed a law that takes effect,
    I believe, like 2020. What Mr. Baer is talking about, a
    voluntary effort, why can we not just do this voluntarily as
    opposed to what is happening and how it affects the management
    decisions for you as an egg producer looking at the patchwork
    of different regulations across the country?
        Mr. Herbruck. Well, as I mentioned, we sell eggs in roughly
    30 other states, and with this continued expanding of
    individual state standards, we could have to have a chicken
    house for every state. And it is just impossible to manage that
    type of operation, as well as the logistics of moving eggs
    through a system, of what it takes to keep track of Ohio eggs
    versus West Virginia eggs versus Michigan eggs.
        And that is our concern, is that we will be having to do
    the logistics of that. Then our customer. If it is a
    centralized warehouse, they have got to say, Well, this egg has
    to go to Ohio or West Virginia or Michigan, and that is a real
    concern of where that patchwork is leading.
        Chairwoman Stabenow. Thank you very much. And I also want
    to thank you because you have been really at the forefront of
    proactively reacting to consumer interest, and so we appreciate
    that.
        Mr. Lathem, could you talk about the issue around prices
    for eggs that has been raised in terms of what this does to
    food prices and so on? If S.3239 becomes law, what will the
    consumer level impact on egg prices be and are there provisions
    in the bill that would ensure that egg prices do not
    dramatically increase as a result of what is proposed in these
    changes?
        Mr. Lathem. Well, of course, egg prices always fluctuate.
    You know, the last two years, eggs have been as cheap as 75
    cents a dozen. The market today, they are probably $1.60. We
    are affected a lot by the cost of our ingredients, and as we
    all know, corn and soy have gone very high, so we have always
    had a lot of prices.
        But we did have a study from Agrilytica Consulting and the
    work they did shows that over the 18-year phase-in time period,
    there is only about one-and-a-half cents per dozen, 1 percent
    extra cost from implementing this program. Even when we get
    through that phase-in period, we are looking at approximately 9
    cents per dozen when everybody is in enriched cages. And we
    think that is a very reasonable number. It is less than a 5
    percent increase from where we are today and we think that is
    very reasonable.
        Chairwoman Stabenow. And could you speak at all to the
    price increases in the European Union and what they have
    experienced?
        Mr. Lathem. Yes, definitely. You know, we have done a lot
    of work on this legislation, and one of the things that we
    wanted to do is ensure that we did not have what happened in
    Europe. So we have a phased-in tiered approach where there are
    dates that we will raise the square inches per chicken, and
    unlike Europe, which did not do that. Europe had one final date
    that you had to go from existing housing to new enriched
    housing. So our legislation is much, much better, well thought
    out and well planned so that we will not have price spikes.
        Chairwoman Stabenow. Thank you. And Mr. Benson, in talking
    about the price differences from the standpoint of a producer,
    when you look at things like a depreciation schedule and so on
    for the traditional hen cages, what provisions are included in
    the bill to make the transition compatible with what you would
    do in the normal course of business as you make decisions?
        Mr. Benson. We currently have a couple of houses on our
    ranch. I think my cousin put them in 1992 or 1993, and the
    equipment in those houses is in desperate need of replace right
    now. We do not know what we can put in there. That is obviously
    part of the uncertainty issue. But if you take a look at that,
    it is about 20 years.
        The legs to the bottom of the cages are starting to rot
    away, the roll-outs where the eggs rolls out from underneath
    the hens is getting more wavy than it should, the belt feeder
    that goes down is going up and down and it is a much higher
    level of checks. It is time for us to replace the equipment in
    our Hilmar houses 3 and 4.
        So from that experience--and that was good quality
    equipment that we purchased--other people may have different
    experiences, I do not know, but from our experience, we have
    got to do this in 20 years. The equipment is just not as
    efficient. Today's equipment is a lot better, it is designed
    stronger, the Dutchman equipment we put in is designed to last
    a long time, but once again, beyond 20 years, I just--I do not
    think it is practical. We need to do it anyway.
        As far as depreciation schedules, you know, a lot of people
    say, Well, what does it cost? I have to say ongoing operating
    costs are very similar to what we are going to have today.
    People costs, a little different. The biggest difference is
    possibly a little bit higher feed costs. The biggest thing is
    the capital. At some point, you are going to have to get that
    money, but it is not--the rest of it is really no different.
        Chairwoman Stabenow. Thank you very much. Senator Roberts?
        Senator Roberts. Limited time. Amon, as a UEP Board member,
    did anybody from UEP give you any notice or contact you to tell
    you that UEP was negotiating this agreement?
        Mr. Baer. As a Board member, I was notified, but the UEP
    membership as a whole was not notified about the negotiation of
    this. I have a brother who has been a UEP member for 20 years
    and he knew nothing about it.
        Senator Roberts. After the deal was reached, were you ever
    formally polled to see if you supported the agreement?
        Mr. Baer. I am sorry. Somebody coughed behind me.
        Senator Roberts. That is allowed.
        Mr. Baer. But I am getting old. My hearing is not good
    anymore.
        Senator Roberts. Well, that is allowed, too. After the deal
    was reached, were you ever formally polled to see if you
    supported the agreement?
        Mr. Baer. No. The UEP membership as a whole was never asked
    to vote on this.
        Senator Roberts. All right.
        Mr. Baer. The only votes taken were Board members.
        Senator Roberts. If the Federal Government mandates the new
    standards described in this legislation, what will happen to
    your business? I think you pretty well answered that with your
    nephew who has expended 2 million bucks to basically modernize
    his operation, and you are indicating it could cost him $5
    million. The folks to your left will say--your right, my left--
    will say, but they have got 18 years to do it. Any comments?
        Mr. Baer. Yes. I guess I would just like to say that my son
    is also looking at taking over my operation. I would like to
    sell it to him. My nephew, because he put equipment in two
    years, can produce eggs at 67 square inches up until 2029. My
    son, if he takes over my operation and puts new equipment in
    now, he will have to produce eggs at 78 square inches, at 90
    square inches, at 101 square inches, 113 square inches, and 124
    square inches in three-year increments.
        And because he is starting two years later, he will be
    locked into a more inefficient egg production system that costs
    more per dozen than his cousin, and he will be competing with
    his cousin at a two or three or four cent a dozen disadvantage
    for that entire period.
        My son will not be able to take over my operation and
    produce eggs for 18 years at that big a production cost
    deficiency. He is going to be competing with his cousin and the
    70 percent of the other producers who are able to produce them
    at 67.
        Senator Roberts. You not only are into egg production, you
    have got a very diversified farming operation. Do you have
    concerns that a regulation like this will just lead to even
    more consolidation in what is already a very consolidated
    industry?
        Mr. Baer. Absolutely. My son is a prime example. He will
    simply not be able to borrow the money to put these new cages
    in if he has to be at a competitive disadvantage to 70 percent
    of the industry.
        Senator Roberts. Actually that was another question that I
    had. How have others responded to your opposition? Are you
    getting along with those folks on your right?
        Mr. Baer. I have a great deal of respect for all of my
    fellow producers. This one issue we disagree on entirely. I
    agree with all the points they made. I just do not think this
    is the proper solution.
        Senator Roberts. All right. You raised hogs. You mentioned
    in your testimony you are worried about the precedent that this
    legislation will set. Would you talk a little bit about your
    concerns?
        Mr. Baer. Yes. Proposition 2 did not only cover laying
    hens. It also covered hog gestation stalls, and that same issue
    is being played out in the hog industry right now. If Congress
    steps in and starts the process of regulating on-farm
    production practices, I do not think that HSUS or the animal
    rights groups or anybody else that is advocating for that will
    stop. They will continue to try and advocate and have the
    Federal Government set standards for all livestock.
        Senator Roberts. Mr. Lathem, UEP controls 90 percent of egg
    marketing. Is that about right?
        Mr. Lathem. Yes, yes, sir. That is correct.
        Senator Roberts. UEP also has the UEP certified program
    that sets welfare standards.
        Mr. Lathem. Correct.
        Senator Roberts. If you control 90 percent of the market
    and you have a welfare standard that should be available,
    knowledge to all consumers, why do you need the Federal
    Government to set a new standard?
        Mr. Lathem. Well, what I think we found out in the egg
    industry is that truly the public is interested in our industry
    like never before. We do have an excellent program. It is size,
    space. It has been very well accepted.
        But what we have seen now is that people, our consumers, we
    see that through ballot initiatives, through our customers
    developing their own plans. We see that people want to be
    involved in how their food is produced. And what we need is a
    consistent, level playing field, everybody on the same program.
    We do not feel like it is right for some producers to stay in
    business while some others go out because they live in the
    wrong state or because the luck of the draw.
        We feel like that eggs should be produced humanely and
    consumers are going to have a right to say in that. And the
    main thing is, is something that we all can live with, and I
    think that is very, very important.
        Senator Roberts. If this bill were enacted into law and
    cage size is increased, what is the benefit to human, to human
    health from a food safety standpoint?
        Mr. Lathem. Excuse me. Would you repeat that question?
        Senator Roberts. If this bill is enacted into law and cage
    size is increased, what is the benefit to human health from a
    food safety standpoint?
        Mr. Lathem. Well, I think we produce very safe eggs today,
    the safest they have ever been, and I do not see that changing.
    I think we have safe eggs today. We will continue to have safe
    eggs.
        Senator Roberts. The hen housing requirement in the
    proposed rule calls for 116 square inches. Why are we
    considering a law that calls for 144 square inches for white
    eggs or, for that matter, 130 or 150? Who decided on this
    number? How do you know this is exactly the right number of
    square inches?
        Mr. Lathem. Well, we actually are not doing--it is actually
    124 inches, is the number. I think the other number that you
    quoted was for brown hens. For white hens, it is. That was a
    negotiated number, but there is a lot of science behind that.
    You know, this is not a new system for Europe. They have been
    working on this system for years, and we have relied on them
    and their number is 116. So we negotiated 124, which is very,
    very close to the 116 number that there is a lot of science
    that supports.
        Senator Roberts. You commissioned a report that says the
    investment cost for enriched cages was 24 bucks per hen for new
    construction, $20 per hen for renovation, plus another dollar
    per hen for perches and scratch pads. So that would equal
    roughly $8 billion to convert U.S. egg-laying houses over to
    the enriched system.
        Is this argument in favor of the bill, that no one will
    notice such a dramatic cost increase if they are spread out
    over several years, or what? That is 8 billion bucks. That is a
    lot of money.
        Mr. Lathem. Well, I think, number one, $8 billion is a
    little on the high side. I do not come up with that figure and
    I build hen houses----
        Senator Roberts. What do you think, six or seven?
        Mr. Lathem. I think it could be as high as 6 billion.
        Senator Roberts. Six billion.
        Mr. Lathem. But I also think it is very important that you
    realize that over the next 15 to 18 years, we are probably
    going to spend 3 billion anyway. So the incremental cost, I
    would say, would be closer to the 3 billion number. And when
    you spread that over the number of eggs, it comes up to one-
    and-a-half cents per dozen over the transition period and
    approximately nine cents when we totally complete the
    transition. Nine cents is about 5 percent of the cost of a
    dozen eggs.
        So we think it is very reasonable when, at the end of the
    day, all farmers are here to please the public and produce what
    they want. We do have to listen to the public and we hear what
    they want.
        Mr. Benson. I can say, Senator Roberts, that our experience
    is around those numbers. $20.50 is the bid that I got to
    replace the equipment in our houses three and four, and 24 is
    about right to build from scratch the kind of scale we are
    talking about. But we do not plan to spend it all right away.
        Senator Roberts. Mr. Benson, you got that right. You
    indicated that egg production costs are pretty stable and that
    as a consequence you could probably figure out what would
    happen in 18 years. Are you aware of the drought that is going
    on here nationwide, Midwest, North Dakota down to Texas, second
    year for Kansas? We have pretty well burned up, and cattle and
    poultry are affected dramatically.
        I would expect that those consumer implications, while not
    immediate, that over the next year could be considerable. Note
    I should could be. We do not have all of the USDA figures. The
    Chairwoman and I are very concerned about that. Have you
    figured that? You do not know what is going to happen in
    regards to your cost of production. Of course, that is an
    impossible thing to determine.
        Mr. Benson. Well, I mean, I think the cost of feed is the
    one of our biggest costs, and yeah, that is a real uncertain
    portion of what is going to happen going forward, but we live
    in a very competitive marketplace, and I know that the 5
    percent that we are talking about or that we have talked about
    in the Agrilytica study, over an 18-year period is a fairly low
    number compared to the amount of money that--or the amount of
    prices of eggs that have gone up and down over the last couple
    of weeks.
        These short-term fluctuations are one thing, but I also
    know something about the long-term trend. The long-term trend
    has been towards better technology, better production
    efficiency, and more room for the hens. It is how long the
    equipment lasts, 18 to 20 years, like I said. We are pretty
    aware of some of the longer term trends. And quite frankly, if
    there is money in this business, people will expand production.
        Senator Roberts. Madam Chairwoman, I think they have
    already talked about the situation in the EU. When Europe
    implemented this and that, it was a 13-year phase-in, egg
    supplies. Apparently they waited until the last and then tried
    to implement it. Typical situation in the business community
    with a regulation, but that egg supplies plummeted 20 percent,
    egg prices soared 55 percent. I certainly hope that does not
    happen in the United States.
        Chairwoman Stabenow. Thank you very much. Before concluding
    the hearing, I would like to ask each of you, from your
    perspective, what the biggest challenges are for egg producers
    in the United States and what you see as the future of the
    industry over the next 20 years. Mr. Baer, would you want to
    talk about what you think the biggest challenges are from your
    perspective?
        Mr. Baer. Certainly the short-term challenges will be the
    feed costs, as Senator Roberts explained. The feed costs this
    year, who knows where they are going to end up at, and it is 65
    to 70 percent of our total costs of production.
        On a long-term basis, there is going to continue to be
    consolidation. This type of a bill would accelerate that. It is
    just much easier for the big operators, the multi-million bird
    operations, to convert small percentages of their farms over.
        That works to the detriment of individual family farms like
    my nephew and my son who, when they make the conversion,
    basically because they have got one barn, they have to do 100
    percent of the conversion right now. And that is why it does
    not work for the small family farmer, and other concerns long-
    term, certainly as the activism from animal rights advocates
    and all the issues that surround that. Thank you.
        Chairwoman Stabenow. Mr. Herbruck.
        Mr. Herbruck. Good morning again. The corn prices and the
    grain prices are significant, but that is going to be impacted
    whether we have a conventional or an enriched cage. We will be
    dealing with that. Really the biggest concern is the
    uncertainty. I have a family. We are all family members and we
    hope to have a business we can share with our children and
    grandchildren for the future.
        Right now we have an uncertainty. As I mentioned, in
    Michigan, we are in a tough spot. If we do not do something to
    change the path, we could be significantly competitively
    unprofitable because if our peers in the neighboring states do
    not have to do things and we do have to follow a new standard
    that doubles our capacity, our customers love us, but they will
    move on. For a few pennies, they will move on.
        And so, the uncertainty. That is why we need this as a
    certainty so we can all make plans for our futures.
        Chairwoman Stabenow. Thank you. Mr. Benson.
        Mr. Benson. I am afraid Mr. Herbruck has taken my major
    point and it is that uncertainty, especially in California. It
    is not just the various rules we have for various states. It is
    also the way that they are going to be interpreted, and the
    uncertainty that we have in whether or not what we are planning
    on doing complies with ill-written initiatives from various
    states.
        If the rules are not clear, much less whether or not there
    is a level playing field, but if the rules are not clear, we do
    not know what to do going forward and that puts our family in a
    difficult bind.
        Chairwoman Stabenow. Thank you. Mr. Lathem.
        Mr. Lathem. I would say that they stole my point, too, but
    I really look at it a little different. I think it is really--
    that is why we are all here. That is why almost 50 percent of
    the U.S. production is represented here today. We are unified.
    We do need to know that we have a future. We need a level
    playing ground.
        The number one thing that scares me is, what kind of house
    do I build? Will my customers change their mind? Will I not be
    able to ship eggs? Will somebody from Iowa ship eggs to Georgia
    because they cannot go to California? We, as farmers and
    producers, our job is to look after consumers, to do a good
    job, to produce abundant, cheap, quality, high quality food
    that is safe, and that is what we want to do.
        But we deserve and want a level playing ground and that is
    why we are here today. Thank you.
        Chairwoman Stabenow. Thank you very much. And thank you to
    each of you. This is a very challenging issue because of what
    the states are doing, and I certainly know from Michigan's
    standpoint, Mr. Herbruck, what you are talking about in terms
    of our Michigan producers and the patchwork effort that is
    going on across the country right now.
        So we thank you very much for being here. Mr. Lathem, you
    talked about coming together, of differing views, folks that
    normally would not be on the same side coming together and
    finding common ground. We are used to doing that in this
    Committee. We sit around this table and do that. That is how we
    got a bipartisan Farm Bill and we are proud of that and how we
    were able to pass it in the Senate.
        So I am hopeful that we will be able to come together and
    find common ground on this very important issue for the egg
    producers across the country.
        Mr. Lathem. It is important and we do appreciate the
    opportunity.
        Chairwoman Stabenow. Thank you very much. The hearing is
    adjourned.
        [Whereupon, at 10:41 a.m., the hearing was adjourned.]

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                                A P P E N D I X

                                 July 26, 2012

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                       DOCUMENTS SUBMITTED FOR THE RECORD

                                 July 26, 2012

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                             QUESTIONS AND ANSWERS

                                 July 26, 2012

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