Although it is no secret that inflation has been hot, the recent drastic increase in egg prices still surprised many people.
Data from the Bureau of Labor Statistics shows that the average price of a dozen large Grade A eggs in a US city reached $4,250 in December 2022, more than double the $1,788 consumers paid a year earlier.
Bird flu may be a main driver behind the price increase. According to the Centers for Disease Control and Prevention, a highly pathogenic bird flu first detected in January 2022 has led to the death of nearly 58 million chickens and turkeys.
Brian Moscogiuri, a global trade strategist at egg supplier Eggs Unlimited, called the situation “unprecedented”.
“It’s a supply disruption, ‘act of God’ type,” Moscogiuri said.
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Others see a number of factors behind the rising cost of eggs.
“When you look at fuel costs going up, and you look at feed costs going up as much as 60%, labor costs, packaging costs — all of that … there are much, much bigger factors than bird flu for sure,” said Emily Metz, president and CEO of trade group American Egg Board.
Food prices in general have been on the rise. Although it puts a dent in household budgets, it can present an opportunity for savvy investors.
In fact, some food stocks are already helping investors weather the downtrend in the market. Here’s a look at two of them.
Cal-Maine Foods (NASDAQ:CALM) is the largest producer and distributor of shell eggs in the United States. The company has been around since 1957 and sells most of its shell eggs in the Southwest, Southeast, Midwest and Mid-Atlantic regions of the United States
The ongoing 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 would 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, marking a 110% year-over-year increase.
The company also earned a record quarterly net income of $198.6 million, or $4.07 per diluted common share.
“The significantly higher selling prices, our continued focus on cost control and our ability to adapt to inflationary market pressures led to improved profitability overall with a gross profit margin of 39.6% for the second quarter of fiscal 2023, another record for Cal-Maine Foods, said the company’s CFO Max Bowman in a press release.
If egg prices remain high, this entrenched egg producer will likely continue to flourish.
Read more: 4 Easy Ways to Protect Your Money from White-Hot Inflation (Without Being a Stock Market Genius)
Post Holdings (NYSE:POST) is a consumer packaged goods holding company. While the current company came about through a 2012 spin-off from Ralcorp Holdings, its history can be traced all the way back to 1895, when CW Post created a breakfast cereal called “Post Toasties.”
Today, the company has a portfolio of businesses including Post Consumer Brands, Weetabix, Michael Foods and Bob Evans Farms.
Business has been booming. In Post Holdings’ fiscal 2022, which ended Sept. 30, net sales were $5.85 billion, marking a 17.5% increase from fiscal 2021.
The biggest growth driver was the company’s Foodservice segment, which primarily includes egg and potato products. Net sales from the segment rose 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 came in at $735.0 million for fiscal 2022 — a whopping 600.7% increase from the $104.9 million generated the year before.
Just like Cal-Maine Foods, Post Holdings is defying the stock market selloff: shares are up 25% over the past 12 months.
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