All my eggs in one basket. This is the $CALM before the storm. Mostly YOLO, but with a lil micro DD

DD:

Egg demand is famously inelastic, Americans keep eating an average of ~1 egg per day across a year, almost no matter what. Price is therefore primarily driven by supply. Chickens are very consistent creatures – we get about an egg per hen per day. So price is just a reflection of how many egg-laying chickens we have, and we need about a chicken per person.

When that ratio changes, we bid up the price of eggs quite high before people don’t want to buy them anymore. When the price goes up, Cal-Maine goes up. As the largest egg producer in the USA, $CALM is tightly correlated to the wholesale egg price.

Last year, egg prices skyrocketed to above $8.5/dozen wholesale after the rapid loss of about 30million egg laying hens to the Highly Pathogenic Avian Influenza (HPAI; avian flu). While so many other companies lost their flocks, Cal-maine remained HPAI-free, made massive profits, and started this year with over a billion in straight up cash.

After last year, the egg people raised production for this year, hoping to do what cal-maine did. In response, egg prices dropped to historic lows ($0.36/dozen wholesale), with the oversupply. $CALM dropped of course, and hit it’s price floor of P/TBV at ~$73.

I think there will be a massive HPAI storm and I think $CALM will be perfectly positioned for that.

1. The storm.

HPAI is spread by nature’s drone attacks – it stays active amongst wild bird populations and falls from the sky on chicken littles as ~3.5 billion birds migrate over commercial facilities and across the country in the spring.

HPAI was low early on this year because colder weather kept waterways frozen and migration halted. We are seeing the same amount of migration compressed now into a shorter window starting the last week. This window overlaps with the highest period of demand for eggs – easter. I have been using [Cornell’s Bird-cast](https://birdcast.org/migration-tools/migration-forecast-maps/) and [Ducks Unlimited migration map](https://www.ducks.org/migrationmap) to monitor the migration patterns. Both sources agree that migration has begun and we are not yet at full force.

Meanwhile, according to the [USDA APHIS page](https://www.aphis.usda.gov/livestock-poultry-disease/avian/avian-influenza/hpai-detections/commercial-backyard-flocks), in just the last 30 days, almost 14 million birds have been culled already for HPAI infections. Across the last 2-3 weeks, we have been losing about 3-4 million chickens in the egg supply chain per week.

The top 3 egg producing states – Indiana, Iowa, Ohio – are beginning their migration season and already seeing accelerating numbers of small backyard operations and smaller commercial operations get hit (mostly turkeys and ducks which are more susceptible and often hit first). The fourth most productive egg state, Pennsylvania is already getting wiped out, having lost 7.4 million egg laying birds this year already.

2. $CALM

Cal-maine survived last year when HPAI was at its worst and has already survived the hardest part of this year – their operations are mostly in the south, where migratory birds have been spending the long winter. Their biosecurity protocols are working and the viral load is shifting north, which means they are likely to capitalize on any supply shock that happens this year.

They are sitting on an absurd amount of cash. They started the year with 1/4 of their whole market cap in cash. They have authorized share buybacks with $375million remaining for buybacks.

No egg company can survive forever when eggs are as cheap as they were this year, but Cal-maine will outsurvive them all and then buy them all. Like they did with Creighton Brothers and Crystal Lake recently.

3. This is a potential safe haven in a world where there are few of those. alternative places to park cash are risky right now with government debt spiraling, and many of the other commodities having already run up or for industrial materials, subject to fall in global recession. Eggs don’t rely on global trade, have inelastic demand, and a nearterm catalyst that may drive substantial returns.

3. My targets:

We won’t realistically drop below 73. The massive profits of last year raise all the stock prices we should see given the same scenario as last year because of the cash pile factoring into their valuation. If HPAI spread continues at this rate, I think we see 115. If it accelerates, I could see it hitting 130. If no new cases, it probably trades sideways.

Oh I love this

omg putting all your eggs in one basket while betting on eggs is actually kinda genius lol.

why not vital farms?

WTF is micro DD! 😭

You know, you got a point, preggy good idea and insane bet

This written so regarded so I’m 100% sure it’s not AI