Cedar(and pine, and other aromatic softwoods) emit phenols, which are toxic to most things. Smaller the animal/younger it is/closer to the shavings/fresher the wood/poorer the ventilation... the more of a danger there is.
Some people use cedar bedding as an anti-mite/flea/tick solution for various animals, in a well ventilated area.
Enormous thread on this on backyardchickens.com shows plenty of opinions on this...
http://www.backyardchickens.com/t/99738/who-says-cedar-is-bad-for-chickens
'Theoretically this level of creeping Orwellian dynamics should ramp up our awareness, but what happens instead is that each alert becomes less and less effective because we're incredibly stupid.' - Jerry Holkins
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