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Cal-Maine enters joint venture to build cage-free facility


Cal-Maine Foods has found more room to maneuver, you might say, in what it calls the “uncertain regulatory framework”  in the egg industry.

The Jackson-based firm, the largest producer of eggs in the nation, announced April 9 a joint venture with Rose Acre Farms Inc. to build a “cage-free aviary” in Bogata, Texas that will initially accommodate 1.8  million hens with potential for up to 2.9 million.

Cal-Maine currently has about 34 million hens, Chief Financial Officer Tim Dawson said in an interview. It employs 2,500

The facility will begin operations by August, the company said in a news release.

Cal-Maine decided not to join in litigation against a new law in California that requires a larger space for laying hens in that state, and also for hens in other states whose eggs would be sold in California.

But ventures such as the one with Rose Acre Farms, based in Seymour, Ind., will position the company when it gains access to a part of the huge California market.

California consumers buy about 9 billion eggs annually, with 5 billion produced in the state and 4 billion bought from out-of-state producers. They are feeling the effects of the protectionist law passed after voters approved Proposition 2 last fall, according to published reports.

An egg shortage in California has caused a spike in prices,  the Birmingham News reports.

Alabama is one of six states still fighting the requirement. The others are Iowa, Kentucky, Missouri, Nebraska and Oklahoma. The states lost a court fight to keep the law from going into effect Jan. 1. But they are appealing the decision in the U.S. Court of Appeals for the Ninth Circuit in San Francisco.

Dawson said that the United Egg Producers, which says its membership, including Cal-Maine, makes up about 95 percent of the egg production in the country, decided against joining the litigation.

The association had been working with the Humane Society of  the United States to craft federal legislation, but dropped the effort after the law was passed in California requiring room for laying hens to move around, Dawson recounted.

Dawson declined to say how much the joint venture with Rose Acre would cost the company.

But Dolph Baker, chairman and chief executive of Cal-Maine, said in the release that “considering the uncertain regulatory framework in our industry right  now, it made sense to partner with Rose Acre Farms to share the costs and mitigate the risk of such a large-scale aviary style egg production facility.”

California does not currently play a large part in Cal-Maine’s sales, according to Dawson, but it stands to get bigger.

Last summer, however, Cal-Maine entered into a marketing venture with Hickman’s Egg Ranch based in Buckeye, Ariz.

“As part of that, we acquired some franchise areas for Egg-Land’s Best, which are specialty eggs [including cage-free, nutritionally enhanced and organic]. So we have the right to sell Egg-Land’s Best in some areas of Southern California, Arizona and Nevada,” Dawson said.

Cal-Maine shares were down a penny on Thursday, closing at $38.98 on the Nasdaq stock market.

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