Egg prices, the be-all and end-all for Cal-Maine Foods (NASDAQ:CALM), are still under pressure. As a result, the big egg producer's stock hasn't been able to churn out any gains for investors this year. The company reported fiscal first-quarter sales up 9.6% on Monday, but the stock was up only about 1% by 3:30 p.m. Let's take a look at what's going on with Cal-Maine.

Flipped and fried over well

Egg prices have been struggling since 2016. The 2015 avian flu wreaked havoc on the national hen flock, reducing supply of eggs and causing the value of eggs to spike. As the hen population recovered, though, the resulting younger flock was more productive than before. Prices reversed course, and Cal-Maine shares followed suit.

CALM Chart

Data by YCharts.

Cal-Maine says it is the "largest producer and marketer of shell eggs in the United States," selling more than 1 billion dozen shell eggs in the last fiscal year, which it estimates to be roughly 20% of domestic shell egg consumption.

In Cal-Maine's first quarter of its new fiscal year, selling prices were up 6.8% over the same period last year. In the last fiscal year, though, average selling prices were down 42%. As a result, the bottom line came in at a $0.33 per share loss for the quarter, compounding a $1.54-per-share loss for the last fiscal year.

While data would suggest the oversupply of eggs is beginning to moderate, Cal-Maine management said it couldn't foresee when the industry would begin to recover. In fact, according to the United States Department of Agriculture, it looks like egg production could tick higher in 2018, keeping a lid on a rebound in prices.

U.S. egg production has spiked over 10% since 2015, while consumption has remained relatively flat. That has pushed prices down to under $1.00 a dozen.

Chart by author. Data source: U.S. Department of Agriculture.

Egg innovation to the rescue?

One bright spot in Cal-Maine's operations is revenue from specialty egg production. The specialty division consists of cage-free, organic, and nutritionally enhanced eggs.

Specialty revenue was 43.6% of the total last year, compared with 29.1% the year before. The first quarter's revenue was 40% specialty products. The average selling price for specialty eggs is typically higher than conventional eggs, and that trend has been especially helpful for Cal-Maine as of late.


Q1 Fiscal Year 2018

Fiscal Year 2017

Fiscal Year 2016

Average conventional egg selling price (dozen)




Average specialty egg selling price (dozen)




Chart by author. Data source: Cal-Maine Foods.

While the conventional egg industry continues to struggle, management sees specialty as its biggest opportunity. The reason, as Cal-Maine reports, is that food service and restaurant chains across the country have made it a goal to exclusively offer cage-free products in the near future. The company has been investing to keep up with the demand, and the higher prices fetched have helped offset some of the pain experienced in the last year.

“Our specialty egg business remains an important area of focus for our growth strategy, and we have made investments in our operations and production capacity to meet expected demand trends," said CEO Dolph Baker in a company press release. "We have adjusted our production levels in line with current customer demand for cage-free eggs, and we are well positioned to increase our capacity when demand trends change."

A flock of brown egg-laying hens.

Image source: Cal-Maine Foods.

Dividend still off the table

Cal-Maine management has said it still cannot foresee any meaningful rebound in the business. Egg prices remain depressed, and although exports have picked up, overall demand is still well under all-time highs from a few years back.

The company also has a big hole to dig itself out of. When operations slipped into unprofitability, the dividend that pays out a third of profits was suspended. As of Sept. 2, 2017, the end of the first quarter of the new fiscal year, losses that need to be recovered before the dividend can begin anew were at $90.6 million.

What investors can hope for is tight control over costs to offset low selling prices and increased reliance on the specialty division. Outside of those areas, there isn't much going on at Cal-Maine, and it's hard to imagine the stock moving much higher without national egg supply falling.