Is Cal-Maine the bad guy in the rising price of eggs?

See There’s a National Egg Crisis, and One Company Is Making a Lot of Money by Patrick Thomas of The WSJ. Excerpts:

"Egg companies argue it’s a classic case of supply and demand, where limited supply and high demand lead to higher prices. The average American eats about 279 eggs a year, and an average hen can lay around 300 eggs a year. There has long been about one hen per person in the country, and the flock has kept up with population growth for years. 

Bird flu scrambled that equation. 

The outbreak has resulted in the death of more than 150 million U.S. chickens since 2022, according to federal data. The avian flu is highly contagious and has a nearly 100% mortality rate in chickens, so if one gets sick, an entire flock has to be culled."

"Cal-Maine didn’t have an outbreak until December 2023 and has lost a smaller portion of its hens to bird flu than most competitors."

"[Chief Executive Sherman Miller] Miller says these claims misunderstand how eggs work as a commodity. “They’re not widgets that we can just go out there and turn up the machine or run an extra shift and produce more,” he says. “It’s a long planning process.”

It takes about six months for a chick to mature to lay eggs.

Inside the Edwards complex, a line of 14 metal barns house about 750,000 egg-laying hens."

"Cal-Maine has dozens of such facilities. That scale, Miller says, can be a blessing and a curse. Even a one-cent change in egg prices can have an outsize effect on its profitability.

Prices for a lot of major commodities like hogs, corn, wheat, soybeans and cattle trade on markets run by exchange operator CME Group. Futures trading in these commodities can help farmers and businesses hedge against price fluctuations.

Eggs are different. 

The egg industry relies on contracts between a customer, like Walmart or Kroger, that wants to buy a certain amount of eggs from a supplier like Cal-Maine.

Instead of producing all the eggs it sells in a year, Cal-Maine has historically handled spikes in demand by purchasing 10% to 25% from other suppliers on private exchanges such as the online Egg Clearinghouse." 

"If Cal-Maine overproduces, the price of eggs could tank and drive some egg companies out of business, industry analysts say. 

Cal-Maine executives say that the flock size is planned about two years in advance and that buying eggs from other producers helps Cal-Maine navigate spikes in demand. Ramping up production would mean hatching and feeding extra chicks, only to have to throw eggs into the landfill when demand ebbs." 

"Historically, eggs tend to retail for $1 to $2 a dozen, and Cal-Maine executives say the sky-high prices probably won’t last. The wholesale price of eggs—those sold to grocers and restaurants—has already started to come down from all-time highs. In the past year, the company increased the laying hens it has by 14% and chicks it can hatch by 24%."