Some consumers and lawmakers upset over high egg prices believe they’ve found a villain: Cal-Maine. The little-known company produces one out of every five eggs sold in the U.S. And in the midst of a national egg shortage and a bird flu epidemic, Cal-Maine has been raking in the profits. But are the accusations against Cal-Maine fair? WSJ’s Patrick Thomas investigates. Annie Minoff hosts. Further Listening: -An Eggspensive Dilemma -Bird Flu and the High Price of Eggs Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: Why are egg prices so high?
CalMain didn't lose as many chickens and eggs as its competitors, and that put them in an enviable position. Because of the low egg supply, prices were soaring. And unlike some of the competition, CalMain still had plenty of eggs to sell. The result was a windfall for the company.
What came first, the chicken or the egg? Well, the egg came first in this story. CalMain Foods, the egg company, shares are soaring this year up 64%.
So they've made a lot of money and are on track to make about a billion dollars in their fiscal year in profit. In their latest quarter, they had a profit of more than $500 million, which is their biggest ever. And their stock has been one of the best performers on Wall Street. It's, you know, their market value's doubled in two years.
High prices haven't just benefited CalMain. It's benefited the family who originally founded the company and still hold a lot of its stock.
Basically, family members are cashing out their shares for at least $100 million per member, which tallies up to about $500 million. So they're cashing out at a pretty good time.
Family members declined to comment. It's pretty paradoxical. Here they are, like, at the center of a crisis for their industry. And it's a bonanza.
Yeah. And that's where the critics come in. That's why you have some groups scratching their heads saying, how is that possible?
The critics who say that Cal Maine is a bad egg, they're next. As CalMain's profits soared during a national egg shortage, the company found itself cast as the egg villain. TikTokers were accusing it of price gouging. And politicians have also been critical, like Congressman Ro Khanna.
CalMain had over $350 million that they made just last quarter. Let's hold the big producers accountable so that we can lower egg prices for Americans.
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Chapter 2: What is Cal-Maine's role in the egg industry?
Calmain says that adding hens takes time. It's about six months before a chick is mature enough to lay eggs.
Hens aren't just a sink that you can turn on and off, basically. You can't just call them up off a bench and put a jersey on them and put them into the game. You can't quite do that. Once you get them on board and in production, you can't turn them off. They're laying eggs. So we might have a shortage in a high-demand period during a holiday stretch, for example. Okay, but what about right now?
Like here in May, there's a bit of a lull in egg demand. We would have an oversupply because we just built so many egg production. We brought in more hens online. You would be producing more eggs than Americans could actually consume. And so their point is you would have eggs going into landfills.
It's interesting. I hadn't thought about how, you know, I think I understand that it's hard to ramp up production of eggs. You need hens, but you also can't turn them off when you want to. That's right. CalMain has increased egg production somewhat. In the past year, it's added 14% more hens and upped the number of chicks it can hatch by 24%.
But if CalMain increases production too much, it could find itself in a tough spot if demand eventually falls. The company could find itself sitting on too many eggs.
Analysts say that that would tank the price of eggs. So you would be going below the cost of production. and they would be losing a ton of money. So it's a careful balance, is what they're trying to say.
Miller says that CalMain has done everything it could to supply eggs under circumstances that it can't control. Another criticism levied against CalMain is that the company is price gouging. But Miller says CalMain doesn't set the price of eggs. When it negotiates with a grocer, say Kroger, it does that based on something called the benchmark price for eggs.
The benchmark price is kind of like a market price. A research firm sets the benchmark based on supply and demand for eggs across the country. CalMain uses that price to determine what it'll charge for its eggs. As Miller told Patrick,
We are price takers, not price makers.
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