Cal-Maine Foods, Inc. Reports Positive Test Result for Avian Influenza at Texas Facility

Rhea-AI Summary

Cal-Maine Foods, Inc. (NASDAQ: CALM) reported a facility in Texas testing positive for avian influenza, leading to the depopulation of 1.6 million hens and 337,000 pullets. The company's total flock was affected by approximately 3.6%. Production has halted temporarily, with efforts to secure production from other facilities. The risk of future outbreaks remains, but human health risk is low. The company maintains strong biosecurity measures and collaborates with government agencies to manage the situation.

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• The avian influenza outbreak caused the depopulation of a significant portion of Cal-Maine Foods' flock, impacting production and potentially leading to financial losses in the short term.

Insights

Market Research Analyst

The outbreak of highly pathogenic avian influenza (HPAI) at a Cal-Maine Foods facility, resulting in a substantial loss of poultry, represents a significant operational disruption for the company. The loss of 1.6 million laying hens and 337,000 pullets, which accounts for approximately 3.6% of the total flock, is not only a setback in terms of animal health but also impacts production capacity and supply chain continuity.

From a market perspective, this incident could lead to a short-term increase in egg prices due to the reduced supply. Investors and stakeholders should monitor Cal-Maine Foods' ability to redistribute production across its network to mitigate this impact. The company's focus on biosecurity and its collaboration with government agencies suggest a proactive stance in managing such risks, which may reassure the market of its resilience and operational risk management.

Long-term implications may include increased operational costs due to enhanced biosecurity measures and potential shifts in consumer preferences if concerns about food safety arise. However, the CDC's assurance regarding the low risk of HPAI to public health and the USDA's confirmation that the virus cannot be transmitted through properly handled and cooked eggs may alleviate some consumer concerns.

Financial Analyst

The depopulation of a significant portion of Cal-Maine Foods' flock due to HPAI is a material event that could have financial repercussions for the company. The immediate costs associated with the depopulation, including the loss of productive assets and potential cleanup and repopulation expenses, will likely affect the company's financial performance in the short term.

Investors should consider the potential for reduced revenue due to lower egg production and possible compensation expenses from insurance claims, if applicable. The company's statement about not providing interim updates unless material suggests that they are not expecting a significant long-term financial impact, which could indicate confidence in their risk management protocols and insurance coverage.

However, the market's reaction to such events can be unpredictable and any future outbreaks, especially during migration seasons, could compound the financial strain. Thus, monitoring the company's quarterly reports for updates on the financial impact of the outbreak and any changes in operational strategy will be important for a comprehensive assessment of the company's financial health.

Agricultural Industry Analyst

HPAI outbreaks are a recurring threat in the poultry industry and can have a cascading effect on supply chains, consumer prices and industry practices. The loss of poultry at the Cal-Maine Foods facility is a stark reminder of the vulnerability of livestock to disease and the importance of biosecurity in agricultural operations.

While Cal-Maine Foods' swift response and adherence to USDA protocols demonstrate industry-standard practices, the incident highlights the ongoing risk of HPAI in the wild bird population and the challenges of preventing its spread to commercial flocks. The company's commitment to robust biosecurity programs is essential, but the unpredictable nature of HPAI, especially with the risk heightened during migration seasons, necessitates continuous vigilance and preparedness within the industry.

Stakeholders should observe how this event influences regulatory discussions and biosecurity investments across the sector. The industry may see a push for more stringent measures or innovative solutions to mitigate the risk of future outbreaks, which could drive up operational costs but also potentially lead to more resilient agricultural practices.

RIDGELAND, Miss.--(BUSINESS WIRE)-- Cal-Maine Foods, Inc. (NASDAQ: CALM) (“Cal-Maine Foods” or “Company”) today reported that one of the Company’s facilities located in Parmer County, Texas, tested positive for highly pathogenic avian influenza (“HPAI”), resulting in depopulation of approximately 1.6 million laying hens and 337,000 pullets, or approximately 3.6% of the Company’s total flock as of March 2, 2024. Production at the facility has temporarily ceased as the Company follows the protocols prescribed by the USDA. Cal-Maine Foods is working to secure production from other facilities to minimize disruption to its customers.

The Company remains dedicated to robust biosecurity programs across its locations; however, no farm is immune from HPAI. HPAI is still present in the wild bird population and the extent of possible future outbreaks, with heightened risk during the migration seasons, cannot be predicted. According to the U.S. Centers for Disease Control and Prevention, the human health risk to the U.S. public from HPAI viruses is considered to be low. Also, according to the USDA, HPAI cannot be transmitted through safely handled and properly cooked eggs. There is no known risk related to HPAI associated with eggs that are currently in the market and no eggs have been recalled.

The Company continues to work closely with federal, state and local government officials and focused industry groups to mitigate the risk of future outbreaks and effectively manage the response.

The APHIS division of the USDA and individual states track and publicly report individual incidents of HPAI by location. The Company will provide updated information in its next quarterly report to be filed with the Securities and Exchange Commission and does not expect to provide interim updates unless material.

About Cal-Maine Foods

Cal-Maine Foods, Inc. is primarily engaged in the production, grading, packing, marketing and sale of fresh shell eggs, including conventional, cage-free, organic, pasture-raised, free-range and nutritionally enhanced eggs. The Company, which is headquartered in Ridgeland, Mississippi, is the largest producer and distributor of fresh shell eggs in the United States and sells the majority of its shell eggs in states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States.

Forward Looking Statements

Statements contained in this press release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on management’s current intent, belief, expectations, estimates and projections regarding our company and our industry. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially from those projected in the forward-looking statements include, among others, (i) the risk factors set forth in the Company’s SEC filings (including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K), (ii) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions and potential for recall), including but not limited to the most recent outbreak of highly pathogenic avian influenza affecting poultry in the U.S., Canada and other countries that was first detected in commercial flocks in the U.S. in February 2022, (iii) changes in the demand for and market prices of shell eggs and feed costs, (iv) our ability to predict and meet demand for cage-free and other specialty eggs, (v) risks, changes or obligations that could result from our future acquisition of new flocks or businesses and risks or changes that may cause conditions to completing a pending acquisition not to be met, (vi) risks relating to increased costs and higher and potentially further increases in inflation and interest rates, which began in response to market conditions caused in part by the COVID-19 pandemic and which generally have been exacerbated by the Russia-Ukraine war that began in February 2022, (vii) our ability to retain existing customers, acquire new customers and grow our product mix, and (viii) adverse results in pending litigation matters. SEC filings may be obtained from the SEC or the Company’s website, www.calmainefoods.com. Readers are cautioned not to place undue reliance on forward-looking statements because, while we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. Further, the forward-looking statements included herein are only made as of the respective dates thereof, or if no date is stated, as of the date hereof. Except as otherwise required by law, we disclaim any intent or obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240402477697/en/

Sherman Miller, President and CEO

Max P. Bowman, Vice President and CFO

(601) 948-6813

Source: Cal-Maine Foods, Inc.

FAQ

How many laying hens and pullets were depopulated due to avian influenza at Cal-Maine Foods' facility in Texas?

Approximately 1.6 million laying hens and 337,000 pullets were depopulated, affecting around 3.6% of the company's total flock.

What actions has Cal-Maine Foods taken in response to the avian influenza outbreak at their facility?

Cal-Maine Foods has temporarily ceased production at the affected facility and is working to secure production from other facilities to minimize customer disruption.

What is the human health risk associated with highly pathogenic avian influenza (HPAI) according to the U.S. Centers for Disease Control and Prevention?

The U.S. Centers for Disease Control and Prevention considers the human health risk to the U.S. public from HPAI viruses to be low.

Can highly pathogenic avian influenza (HPAI) be transmitted through safely handled and properly cooked eggs?

According to the USDA, HPAI cannot be transmitted through safely handled and properly cooked eggs, and there is no known risk associated with eggs currently in the market.

How is Cal-Maine Foods collaborating with government agencies to manage the risk of future avian influenza outbreaks?

Cal-Maine Foods is working closely with federal, state, and local government officials, as well as industry groups, to mitigate the risk of future outbreaks and effectively manage the response.