[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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