Egg-tra Costly: How Soaring Egg Prices Impact Producers and Stocks
Aiming for a market share of over 90%?
In the land of the free, it seems egg prices aren't free anymore. Up, up, and away, the cost of a dozen Grade A eggs has skyrocketed – reaching a whopping $3.65 by last November, a staggering 48% increase from the beginning of 2024.
The USDA offers a tidbit of insight, reporting a four percent dip in egg production compared to last year, along with a three percent reduction in laying hens. New cases of avian flu have dealt a harsh blow to farmers' livestock, and that's one flock-tastical reason behind the price surge. Hell's not just aflame; apparently, it's spreading its heat to our kitchen omelets.
Analyst Kevin Bergquist of Wells Fargo anticipates a slight decline in egg prices after the 2024 peak but warns that consumers might be scratching their heads over above-average egg prices well into next year. But for some producers, the golden yolks could mean greener pastures.
Egg-ceptional Stock Opportunities
Rising egg prices and plummeting feed costs make for the perfect recipe for profit margins, and for the producers who manage to keep their flocks intact, it's a winning combination – even on the stock market.
One such beneficiary could be Cal-Maine, who supplies approximately 20% of the entire U.S. market and sells to mega store, Walmart. Unsurprisingly, the food manufacturer's stock has been shredding it lately. With a 90% gain on the stock market in 2023 and a 24% beating of the US S&P 500 index, Cal-Maine has been laying golden eggs.
The company posted impressive second-quarter sales figures, soaring 82% to almost $1 billion, a feat that far outshone Wall Street's predictions of $751.5 million. But before you dive headfirst into the Cal-Maine stock, think hard – and listen up to the experts.
Shell Game: Is Cal-Maine a Good Investment?
So, is Cal-Maine's stock worth cracking? Expert Pooran Sharma cautions that the stock might be overpriced at the moment. After the avian flu subsided in 2023, egg prices took a tumble again, and that could happen once more in 2025.
On the flip side, economic expert David Trainer of New Constructs sees the Cal-Maine stock as a golden investment, offering an upside of 10 to 20%. "You'll continue to see a company that outperforms its competitors," he said.
For those keeping an egg-eye on the stock, the Cal-Maine (WKN: 907664) should remain on your radar. Just be prepared for the occasional plummet in egg prices that might spoil the party.
Enrichment Data
Cal-Maine Foods (CALM)- Position in the Market: Cal-Maine Foods is a leading producer and distributor of high-quality egg products in the U.S. shell egg market.- Recent Performance: The company's stock price has shown a positive trend, recently rising to $98.13 from $95.67, with a 3.28% gain over the past two weeks[5].- Analyst Forecasts: Analysts have varied opinions on Cal-Maine, with some holding a "hold" rating and others seeing potential for short-term gains[5].
"Investing in Cal-Maine Foods, a leading egg producer, could present profitable opportunities due to rising egg prices and reduced feed costs, as suggested by analysts like David Trainer of New Constructs."
"Despite Cal-Maine's impressive financial performance, caution should be exercised as expert Pooran Sharma believes the stock might be overpriced, considering the potential for egg prices to drop again in the future."
