NORTH MANCHESTER, Ind. - The massive henhouses plopped into a cornfield here resonate with the clucking of hundreds of thousands of birds. Across the U.S., cash registers beep, ringing up eggs for more than $2 a dozen.

To Bob Krouse, head of the firm that owns the veritable chicken city, those hens are part of the soundtrack to a golden era of record egg industry profits.

For consumers, well, let's just say the Easter Bunny shelled out a lot more green this year: Retail egg prices have been increasing at rates not seen in at least 30 years.

Egg eaters are feeling the pain of soaring chicken feed prices, which egg producers are successfully passing down to the grocery aisle. What's more, the egg industry's normal response to good times, which is to feverishly add capacity until prices drop like a rock, hasn't materialized. That could keep supplies tight and prices high well into 2009.

Producers are wary of adding hens for myriad reasons. They fear overexpanding, an expensive mistake they've made before. Meanwhile, the costs of expansion are rising and credit is tight. Even the tricky issue of animal welfare is in play: Californians will vote this year on banning cages that are standard in the industry, spooking some egg producers.

"It's a perfect storm that's going on, no doubt about it,'' said Scott Beyer, a poultry expert at Kansas State University.

Food prices generally have been rising at an annual rate of nearly 5 percent in recent months, a pace not seen since the early 1990s. Milk prices jumped 11 percent last year; chicken prices 6 percent, according to the Bureau of Labor Statistics.

But neither can match eggs: Prices soared 29 percent in 2007, a pace that has continued this year. Consumers don't like it, but eggs are such a basic item that they don't appear to be changing their habits.

'Eggs are just a staple'

Take Kathy Hayes of Itasca. Yes, she made a special trip to a Dominick's supermarket this week to take advantage of an egg deal: Buy $10 worth of groceries, and a dozen eggs that normally cost $1.89 could be had for 99 cents. But Hayes said she hasn't cut down on buying eggs. "Eggs are just a staple.''

A key reason for the egg price escalation is a surge in commodity prices. Corn has shot to record highs as more of the U.S. crop is used for ethanol, not food, economists say. And corn is the main ingredient in chicken feed, which comprises about 60 percent of an eggmaker's costs.

At Midwest Poultry Services, Krouse's firm, feed costs are about 70 percent higher than they were a year ago. Krouse said he's never seen feed cost so much, and he's been in the egg trade since 1982, when he went to work for Mentone, Ind.-based Midwest Poultry.

Indiana ranks third in U.S. egg production, after Iowa and Ohio. Midwest Poultry, which also has a big facility in Loda, Ill., is the nation's 12th-largest egg producer, according to Egg Industry, a trade publication.

This past week, Midwest's North Manchester facility, the Hi-Grade Egg Producers plant, was buzzing with the Easter rush. The two to three weeks before the holiday are the most intense, volume wise, of the year. "It's like a fire drill,'' Krouse said. "It's a massive amount of eggs we have to get out.''

Even on an ordinary day, the North Manchester plant is no slouch: Its 2.5 million chickens churn out more than 2 million eggs. While the plant has some cage-free production, most eggs made here originate in nine cavernous henhouses filled with so-called "battery'' cages. Krouse describes a state-of-the art house as "a giant machine with chickens in it.''

A din of clucking and clicking

Indeed, cages stacked 10 high create a giant wall of white leghorn hens. Their pink-crowned heads poke out from their pens, as they peck at feed in a trough. Eggs drop from their cages to a conveyor. Manure drops to another conveyor belt. The place is a din of clucking and clicking - the sound of wings beating against steel wire. This Easter, business is about as good as it can get for egg producers like Midwest. "We've never seen profits like this,'' Krouse said, echoing sentiments in the egg industry's trade press.

It's a welcome departure from the grim times of a couple of years ago, when the highly cyclical egg industry was deep in the red. The problem then was a common one: Producers overexpanded in 2004 and a glut of eggs hit the market.

"The industry has always been one where as soon as egg prices got good, everybody went nuts and put in new facilities and then the market would crash,'' said Tom Lippi, general manager at Chore-Time, a Milford, Ind.-based maker of egg production equipment.

But that's not happening this time around. The industry's largest producers have been a lot more "levelheaded,'' wary of overexpanding and swinging back into the red, he said. "They are being very cautious.''

Kansas State's Beyer said that expanding production is increasingly more costly and difficult. Permits for new facilities are harder to get as regulators have increased scrutiny of environmental impacts. Credit markets are tight, making financing more difficult. And most expansions these days mean adopting a newer production method that costs twice as much as the old one.

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Krouse in the midst of investing in the newer technology, though for improving efficiency, not for the sake of expanding Midwest's output. In Manchester, he's converting Henhouse No. 1 from the older "A-Frame'' configuration to the newer "stacked deck'' system. He has done the same with several other henhouses already.

Both A-frames and stacked decks involve piling pens atop each other. But the latter has a conveyor system that allows for manure to be collected efficiently, dried quickly and largely deodorized. In A-frames, which make up at least 80 percent of U.S. henhouses, manure simply accumulates in a giant pile on the henhouse floor, reeking in warm weather and creating a haven for flies.

Also, while the bulk of the manure in an A-frame drops to the floor, some inevitably falls from chickens on higher levels onto birds caged below. The industry's own animal welfare guidelines call for producers to avoid such spillover as they upgrade their henhouses.

Under fire from animal rights groups, United Egg Producers, the industry's trade group, adopted a set of animal welfare guidelines in 2002 and has been phasing them in. The bulk of the nation's eggmakers adhere to the guidelines.

One of the code's key provisions is to give birds more room, gradually increasing a hen's cage space from about 50 square inches, an industry norm in 2002, to 67 square inches by April.

To do that, producers reduce the number of hens: For instance, Midwest is gradually cutting back from eight birds per cage to six or even five, depending on cage size. The cumulative effect is big - tens of millions of hens have been effectively taken out of production, which has put more upward pressure on egg prices. But it hasn't allayed animal rights activists.

"To the extent they are giving animals a little more space, that is a definite improvement,'' said Paul Shapiro, head of the Humane Society of the United States' factory farming initiative. Still, "it's hard to find an example of more egregious cruelty'' to animals than the battery cage system, he said.

The egg industry says its own welfare code is scientifically sound, and that caged egg production is considerably less costly than cage-free, a plus for consumers. It is set to battle the Humane Society over the issue in California this November.

If the measure passes, the industry fears bans would spread to other states. Fear over such bans is another reason for producers to put off expanding capacity, keeping upward pressure on prices, say egg executives and industry observers.

"It's the uncertainty of investing backing into the business,'' Krouse said.

(c) 2008, Chicago Tribune. Distributed by McClatchy-Tribune Information Services.