While it’s no secret that inflation is running high, the drastic rise in egg prices has taken many people by surprise recently.
Data from the Bureau of Labor Statistics shows that the average price of a dozen large grade A eggs in a U.S. city was $4,250 in December 2022, more than double the $1,788 consumers paid a year earlier.
Bird flu could be a major driver behind the price increase. A highly pathogenic bird flu first detected in January 2022 has led to the deaths of nearly 58 million chickens and turkeys, according to the Centers for Disease Control and Prevention.
Brian Moscogiuri, a global trade strategist at egg supplier Eggs Unlimited, called the situation “unprecedented”.
“It’s a supply disruption, kind of an act of God,” Moscogiuri said.
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Others see a myriad of factors behind the rising cost of eggs.
“If you look at fuel costs that are rising, and you look at feed costs that are going up as much as 60%, labor costs, packaging costs – all of that… those are much much bigger factors than avian flu for sure,” said Emily Metz, president and CEO of trade group American Egg Board.
Food prices in general are on an upward trend. While that puts a dent in household budgets, it could present an opportunity for savvy investors.
Some food stocks are even helping investors weather the downturn in the market. Here’s a look at two of them.
Cal-Maine Foods
Cal-Maine Foods (NASDAQ:CALM) is the largest producer and distributor of shell eggs in the US. The company has been around since 1957 and sells most of its shell eggs in the Southwestern, Southeastern, Midwestern, and Mid-Atlantic regions of the U.S.
The continued market downturn has hurt many stocks, but Cal-Maine Foods investors aren’t complaining. Shares are up 35% over the past 12 months, in stark contrast to the S&P 500’s double-digit decline over the same period.
As you might expect, higher egg prices benefit the egg producer. In the fiscal quarter ended November 28, 2022, Cal-Maine Foods generated record net sales of $801.7 million, an increase of 110% year over year.
The company also earned record quarterly net income of $198.6 million, or $4.07 per diluted common share.
“Significantly higher selling prices, our continued focus on cost containment and our ability to adapt to inflationary market pressures led to overall improved profitability with a gross profit margin of 39.6% for the second quarter of fiscal 2023, another record for Cal -Maine Foods,” the company’s chief financial officer, Max Bowman, said in a press release.
If egg prices remain high, this entrenched egg producer will likely continue to thrive.
Read more: 4 Easy Ways To Protect Your Money From Red-hot Inflation (Without Being A Stock Market Genius)
Mail Holdings
Post Holdings (NYSE:POST) is a consumer packaged goods holding company. Although the current company was created in 2012 by a spin-off from Ralcorp Holdings, its history goes all the way back to 1895, when CW Post created a breakfast cereal called “Post Toasties”.
Today, the company has a portfolio of companies including Post Consumer Brands, Weetabix, Michael Foods, and Bob Evans Farms.
Business is booming. In Post Holdings’ fiscal year 2022, which ended September 30, net sales were $5.85 billion, an increase of 17.5% over fiscal year 2021.
The biggest driver of growth was the company’s Foodservice segment, which mainly includes egg and potato products. Segment net sales increased $29.7%, or $479.4 million for the fiscal year.
However, the bottom line turned out to be even more impressive. The company’s net income from continuing operations was $735.0 million for fiscal 2022 – an increase of a whopping 600.7% over the $104.9 million generated in the prior year.
Like Cal-Maine Foods, Post Holdings is defying the stock market sell-off: Shares are up 25% over the past 12 months.
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This article provides information only and should not be taken as advice. It comes without any kind of warranty.