Melinda Peer started the mini rout by putting up on Forbes a headline about feed costs eating into profits and then mentioning two compnaies. The first is Tyson which lost money and the next is CALM which doubled its profits. So she put CALM second, after the detail that justified the headline but in a story about companies that are suffering from feed costs when in fact CALM is not suffering from feed costs but rather profiting from higher feed costs.
This is simple dishonesty. Not the kind you go to jail for (in this country you have to prove that you intended to do harm).
If you move the whole discussion to that of a gun in a crowded school you have to prove that you knew you would cause harm if you shot your Ouzi in a school cafeteria while blindfolded.
Of course nobody has a problem with that. We all agree that person should wind up in the cooler for life.
But if a nice little blonde reporter from Forbes write a piece about companies losing money and happens to include CALM second with merely a phrase that it doubled its profits the only thing people see are the headline and the ticker symbol.
Lyndon Johnson once told his press aid to let leak that an adversary of his in Congress was a homosexual. The aide said, "But Mr. Johnson, So and So is NOT a homosexual." Johnson said, "I know that. But let him deny it for two weeks."
I generally try to be civil, but you know nothing.
Here's a copy of an email reply I received in April...
1. We do have our own feed mills to blend the finished feed for our
chickens. We must buy the corn, soybean meal, and other
ingredients in the open market.
2. [other comment]
Delores McMillin, Assistant to Fred Adams, Jr.
Cal-Maine Foods, Inc.
3320 W. Woodrow Wilson Ave.
Jackson, MS 39209
Calm does not want to diversify into supplemental feed growth, too far of a reach from the company's mission. It would take 300,000 decentralized acres to feed the 30 million plus chicks. For right now, they have no interest. Immediately, more interested in further acquisitions.
There is a video on Cal-Maine's main web page. However, this video states they "manufacture" their feed using their 15 feed mills. Manufacturing is different than growing. Hence I do not believe Cal-Maine grows any of their feed. They simply by the corn from other farmers and mill it to their specs in their feed mills.
The overhead of growing corn would probably make it rather costly to produce for them.
If you were to look at the quarter by month you'd see that May was losing money and that trend probably didn't change in June as egg prices dropped right along with feed costs.
Generally and historically speaking, higher feed costs have worked to improve profits, supposedly through slower output growth due to financing restraints on the smaller yet numerous producers. This caused a larger incremental increase in egg prices (due to slower supply growth) than an incremental increase in feed costs.
CALM will be under selling pressure this week. Will re-enter long when it's time.
if you experience higher costs quietly it is hard to pass on those costs in a competitive market. but if the whole world is reeling from higher petroleum costs and the headlines are everywhere and the citizens are incensed about $85 tanks of gasoline and you are selling eggs for a few pennies a dozen and your costs go up you can jack up the prices of your incredibloy cheap commodity (eggs are still incredibly cheap per gram of protein, and easy to cook) not only to recoup your costs but to add margin to those costs.
That is what CALM and every other egg producer has done. The people who raise chickens for meat have not been able to do that. But egg producers have.