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> Cal-Maine’s gross profit jumped 10-fold from one 26-week period in 2021 to the same period in 2022, according to the company’s most recent quarterly financial
by jmholla 4y ago
> Cal-Maine’s gross profit jumped 10-fold from one 26-week period in 2021 to the same period in 2022, according to the company’s most recent quarterly financial statement. For the 26-week fiscal period ending in November 2021, gross profits were $50.4 million. In 2022 for the same period, gross profits were $535.3 million.
This is pretty damning especially given the more deadly avian flu of 2015 did not cause prices to rise so significantly.
Collusion of the biggest producers would also explain why the more expensive eggs at the store did not rise as much as the cheaper brands.
- lostlogin 4y ago> Collusion of the biggest producers would also explain why the more expensive eggs at the store did not rise as much as the cheaper brands. Why would that be the case?
- throwaway1777 4y agoBecause smaller independent and family farms aren’t colluding?
- lostlogin 4y agoBut they are already more expensive. Does that mean they were colluding previously? Couldn’t you argue that their pricing is more inflation resistant as their margins already allow for fluctuations in eg fuel prices?
- azinman2 4y agoOr their costs are a lot higher. When you don’t pack the chickens in a dense a space, you have more expensive feed, and you have a lot less chickens in the first place, then I’d expect it to cost a lot more.
- krustyburger 4y agoTheir costs are higher as it is more expensive to raise chickens using their methods. So one would expect these eggs to be more expensive.
- scarby2 4y agotheir costs are almost certainly not higher in proportion to their costs. There is almost without a doubt a premium because the people that they are selling to are not price sensitive.
- lostlogin 4y ago> their costs are almost certainly not higher in proportion to their costs. Do you mean “their costs are almost certainly not higher in proportion to their profits.” I’m struggling to understand.
- freejazz 4y ago>But they are already more expensive. Does that mean they were colluding previously? how is that your conclusion?
- lostlogin 4y agoI don’t think that. I’m trying to understand why the parent comment thinks high priced eggs meant no collusion in the past, but means collusion now.
- freejazz 4y agoSo your best guess as to why small-farm pastured eggs are more expensive must be that they colluded? It's because they cost more - how is that not obvious? How did you skip past that to the other is what everyone was wondering.
- deleted 4y ago[deleted]
- calvinmorrison 4y agoHow is it damning if it's gross profits? If eggs get 5x more expensive, and you sell the same amount of eggs, shockingly, you will now have 5x gross profits, no?
- GalenErso 4y agoMost elite HN CPA.
- lostlogin 4y agoThe profit margin isn’t that insane relative to other industries. “egregious profits reaching as high as 40%” (from the article).
- quickthrowman 4y agoYou’re assuming that producing an egg costs 5x more in 2022 than 2021. I can’t think of any input cost increase that could account for a 5x production cost. A hatchery takes in chicken feed and spits out eggs (and macerated male chick slurry), it’s a pretty simple business.
- calvinmorrison 4y agoA lot of chickens died for those eggs you ungrateful consumer
- deleted 4y ago[deleted]
- flextheruler 4y agoChicken food comes from corn, wheat, oats, some fish. It’s delivered by truck. The cost of fertilizer is at record highs. The cost of fuel has increased. I’m not justifying the exact increases but supply chains are never simple, especially in the modern economy.
- voisin 4y agoEggs don’t just get 5x more expensive on their own. Competition should keep gross margins in a mean-reverting band over periods of time.
- chihuahua 4y agoRegarding that last point, if it wasn't for the relentless media coverage, I wouldn't even have noticed that prices went up. The price that the milk-and-eggs home delivery service charges hasn't changed (organic, free-range, access to outdoors), and the pasture-raised certified humane eggs at Costco still cost the same.
- nickpeterson 4y agoYou’re buying the top end and are not price sensitive. This isn’t a criticism, but I would wager you dont feel a $1 increase in most groceries at all, compared to someone who has to choose between that item and heating their homes.
- anamexis 4y agoIt's not a matter of price sensitivity - the top end hasn't changed prices.
- mtalantikite 4y agoHave they not? I buy pasture raised eggs which at my local Whole Foods used to be $5.99/dozen and lately have been $7.99/dozen. Granted, the $5.99 was cheaper than my other local grocery store, where they've been $7.99 all along (and I'm not sure what they've been charging recently).
- anamexis 4y agoI also only have anecdotes, but the prices of prices for free range eggs near me has been stable around $6/dozen for a long time.
- nickpeterson 4y agoAccording to this they did: https://www.shefinds.com/collections/shoppers-crying-costco-raising-prices/amp/ https://www.shefinds.com/collections/shoppers-crying-costco-...
- Alupis 4y agoLiterally everything manufactured got more expensive in 2022. Everything. Why would eggs be any different? It's not like they pop out of the chicken and land on your plate - there's a ton that goes into getting them into the store just so you can buy them. Assuming egg production didn't experience significant cost increases seems precarious without evidence. It's in the food industry - which suffered some of the most draconian restrictions on personnel and safety measures available at the time. For all we know, half of that cost increase could have gone to just sheets of plastic to hang all over the place and single-use disposable masks, gloves, boot coverings, hair nets and more that all had to be changed several times per day. It's not Price Gouging simply because we don't like it folks... > Collusion of the biggest producers would also explain why the more expensive eggs at the store did not rise as much as the cheaper brands No, not at all. It simply indicates the more expensive brands had enormous margins before covid and were able to keep pricing more stable against rising costs. Your cheap brands had nowhere to go, except raise prices when costs increase. This is so obvious and basic, it's weird it needs to be said. Additionally, government policies don't happen in a vacuum folks. Policies made it difficult to produce and manufacture, and shocker - prices went way up. This is not rocket science...
- pfhayes 4y agoHow does that lead to the 10x increase in profits (not revenue) cited by OP?
- Alupis 4y agoSomeone is playing fast and loose with the word "profit". The claimed amounts are gross profits - which do not account for majority of a company's overhead expenses, such as personnel, insurance, compliance, etc... ie. the things that increased in cost the most during covid. Net Profit would be far more interesting, but even there we would expect an increase if prices were raised due to costs. It just won't be as sensational as the number currently being tossed around. Not to mention we're comparing data to 2021, which had most things shut down. A better comparison would be to compare to 2019...
- darkwizard42 4y ago
- HDThoreaun 4y agoThis really isn't damning at all. Egg supply was hit hard by the bird flu, while demand didn't change. In order to keep the shelves stocked prices necessarily must go up, but the suppliers costs didn't change. Surprise surprise, charging more for your product leads to increased profits. Egg demand is quite inelastic, so reducing quantity demanded by just 10% could easily force prices to double as we have seen, which would explain the large profits. If prices hadn't increased you wouldn't be able to buy eggs. Is that really better? There simply are not enough eggs to satisfy demand at last years prices. The fancy egg prices weren't affected as much because those chickens live in better conditions and are therefore less likely to fall victim to a flu outbreak.
- l33t233372 4y agoYou say > Egg supply is quite inelastic But right before that you say > Egg supply was hit hard by the bird flu Then you say > reducing demand by just 10% could easily force prices to double I’m totally confused. Are you mixing up supply and demand?
- HDThoreaun 4y agofixed, thanks
- theRealMe 4y agoIt’s still not correct tho. Now it says that if demand drops by 10%, that means price goes up. But that should be the opposite of what happens.
- HDThoreaun 4y agoDemand curve is unchanged, quantity demanded changes as prices change.
- pishpash 4y agoIf prices didn't increase you could allocate eggs by lottery, or limit quantities. Some stores did limit quantities. Charging more for a product to allocate demand doesn't necessarily increase profits. If the profits aren't invested to raise production at the remaining farms, e.g. if supply is inelastic, which it might be in the short run (raising new chickens at farms that got bird flu would take just as long as at healthy farms, you can't force existing chickens to lay more eggs, etc.), then the profits ought to be rebated back. In fact, retaining profit can be a sign of price gouging. It means you've run into inelastic supply and there's no place to spend that money to solve a short-run problem. On the other hand, maybe they'll reinvest it next year or over the long term into expansion, and you might want to reward investors and management at well run farms; but if this flu is a freak accident of nature where equally run farms might get it or not, then no.
- fasthands9 4y agoI'm open to either possibility. It also seems completely possible to imagine a scenario where 15% of all eggs set to be produced never get maid. If you are a producer who had no damage to your chickens you are now getting bids in from grocery stores and areas that had never contracted you - and your profits increase. My local Trader Joe's was out of eggs yesterday. Presumably because prices have actually gone down and people are hoarding. But nonetheless, stores definitely were selling out because the prices actually did not reflect demand.
- ALittleLight 4y agoCal-Maine had an unusually bad year the previous year, lost money one quarter and made a few million on 1.5 billion revenue. Cal-Maine was not affected by avian flu and many of their competitors were. They had a good year in '22.
- runako 4y ago> why the more expensive eggs at the store did not rise as much as the cheaper brands. Recently, I was stunned to find that the cheapest eggs in my area, by far, were at Whole Foods. Order of $2-$3 less per dozen than at other supermarkets.
- jeffwask 4y agoAfter watching the oil companies rake everyone over the coals why wouldn't every greed board abuse consumers. We have no consumer protections and half of our legislative branch is filled with obstructionist who have no interest in helping consumers and the other half is filled with people who only pay lip service to helping consumers.
- volfied 4y agoThey are super happy to pay that lip service while saying "look, we're the reasonable ones here, can't do anything cause of the other guys!" and reap the profits.
- MikeTheGreat 4y agoThis sounds like Murc's Law [0] [0] https://www.lawyersgunsmoneyblog.com/2017/12/great-moments-murcs-law#:~:text=Murc%E2%80%99s%20law%2C%20for%20the%20uninitiated%2C%20is%20the%20widespread,now%20present%20the%20definitive%20example%20of%20the%20genre%3A https://www.lawyersgunsmoneyblog.com/2017/12/great-moments-m...
- aisengard 4y agoOf course, this is not really a useful (or provable) criticism as long as the actual obstructionists are obstructing! Much more useful to oust the obstructionists, then you can work on holding the alleged lip-servicers accountable.
- jeffwask 4y agoAlso, supporting candidates who refuse corporate and PAC money
- dangwhy 4y ago> After watching the oil companies rake everyone over the coals What i don't understand is that why don't oil company stocks don't reflect these record profits. exxxon stock seems to be at 2014 levels. If we know oil companies are price gouging then why won't we just buy those stocks and get in on the action.
- drstewart 4y agoWhy didn't they collude in 2015?
- deleted 4y ago[deleted]
- notfbi 4y agoIt seems the 2015 flu was limited to the US, while this one has hit Europe and Asia hard too. The global markets might have softened 2015s price impact, see how exports from US dropped and imports increased: https://www.statista.com/statistics/196095/us-total-egg-imports-and-exports-since-2001/ https://www.statista.com/statistics/196095/us-total-egg-impo... With very little additional detail, this says it's worse than 2015: https://foodinstitute.com/focus/bird-flu-cull-surpasses-2015/ https://foodinstitute.com/focus/bird-flu-cull-surpasses-2015...