Nation’s Biggest Egg Producer Hurt by Rising Feed, Labor Costs

Cal-Maine Foods reports lackluster earnings, sending shares down

THE WALL STREET JOURNAL // DEC. 29, 2021

Shares in Cal-Maine Foods Inc. CALM +1.22% fell as much as 8% in early trading Wednesday after the egg producer posted lower-than-expected quarterly earnings, hurt by rising feed and labor costs.

The earnings miss came despite Cal-Maine logging higher-than-expected sales of $390.9 million for the quarter. Chief Executive Officer Dolph Baker blamed “higher costs for feed, labor, packaging and delivery” for denting the company’s bottom line.

Rising costs have been weighing on companies across industries this year. Bottlenecks in global supply chains have caused shortages in components needed for finished products, and a nationwide labor crunch has led workers to push for higher wages and better contracts.

Shares of the Ridgeland, Miss.-based company recently fell 4.1% to $36.74. Earlier Wednesday, the stock hit a low of $35.10.

While Cal-Maine’s sales rose 12.5% in the quarter from $347.3 million reported a year earlier, the cost of sales rose at a faster pace, jumping 20% to $347.2 million.

Mr. Baker said in a statement that the results “reflect the current inflationary environment,” adding that farm-production costs per dozen eggs rose 21.6% in the quarter from a year earlier, primarily because of higher feed costs.

Specifically, supply of corn and soybeans, which are used to make chicken feed, were tight in the quarter because of higher export demand and weather-related production shortfalls, Mr. Baker said.

The costs of various crops rose this year for a range of reasons, including surging prices for fertilizer, which is widely applied to soil to boost corn and wheat yields. Wildly unpredictable weather this year has also exacerbated commodity prices, with South America seeing the worst drought in decades, which helped wilt Brazil’s export corn crop, leaving a hole in the global supply.

Mr. Baker said he expects the costs of feed ingredients like corn to remain volatile through this fiscal year, “given the ongoing disruptions related to the Covid-19 global pandemic, weather fluctuations, geopolitical issues and overall reduced carryout levels for primary feed ingredients.”

For the quarter ended Nov. 27, Cal-Maine’s net income fell to $1.17 million, down from $12.2 million in the same period a year earlier. On a per-share basis, earnings were 2 cents, missing expectations for 30 cents, according to analysts polled by FactSet.

The company’s shares closed at a more than six-year low of $30.95 on March 12, 2020, then reached a three-year high of $46.45 on Aug. 14 of the same year.

Shares are down almost 5% this year, underperforming the S&P 500’s rise of almost 28%.

Appeared in the December 30, 2021, print edition as ‘Egg Producer Hurt by Higher Costs.’