Dive Brief:
- Cal-Maine Foods is building out its production footprint in anticipation of surging consumer demand, even as a deepening avian influenza outbreak threatens poultry sector earnings.
- The largest U.S. egg producer said in an earnings report Tuesday that newly acquired assets from across the country will help it significantly expand market reach and meet consumer demand trends for cage-free and other specialty eggs.
- Cal-Maine sales in fiscal 2024 declined around 26% from the previous year to $2.3 billion as the marketer faced headwinds from lower egg prices and bird flu outbreaks at facilities in Kansas and Texas.
Dive Insight:
Egg prices soared to record highs in 2022 due to a combination of increased production and feed costs, in addition to a devastating bird flu outbreak that significantly tightened supply. While input costs have since come down from two years ago, highly pathogenic avian influenza continues to trouble producers who sometimes have to kill millions of birds to contain the virus' spread.
Cal-Maine reported two high-profile outbreaks within the last year in Kansas and Texas, forcing the company to temporarily stop production at those facilities and kill 3.1 million egg-laying hens. The Agriculture Department cleared both facilities to resume operations, and Cal-Maine expects repopulation to be completed before the end of 2024.
Still, with the outbreak stretching on for more than two years and no end in sight, the poultry industry has effectively adjusted its operating model to better withstand biosecurity risks as evidenced in part by falling retail prices.
"We have a proven operating model that has served us well throughout the business cycles and external forces that affect our industry, including HPAI," Cal-Maine President and CEO Sherman Miller said in a statement.
Even with bird flu ever looming, Cal-Maine remains focused on growing future production. The company has begun work repurposing assets purchased from Tyson Foods in Dexter, Missouri, with plans to expand shell egg and value-added egg product opportunities.
The producer is also preparing for a significant expansion along the East Coast and Mid-Atlantic following the acquisition of assets from ISE Americas. Cal-Maine on Tuesday named Judd Stevens vice president of operations, giving him responsibility for overseeing ISE assets, including operations in Delaware, Maryland, New Jersey and South Carolina.
Cal-Maine is anticipating demand to rise in fiscal 2025 as consumers begin to see eggs as a more affordable protein option and look for more cage-free or free-range options. Recent studies showing that eggs may not raise cholesterol levels, as previously thought, could also help perception among shoppers.
“We will continue to focus on expanding our production capacity for additional specialty and cage-free eggs that meet current consumer demand trends," Miller said. "Importantly, we have the financial strength to fund our internal expansion projects and to consider acquisitions that complement our operations and support our growth initiatives.”
