A couple of days ago, I wrote an article on Vital Farms, and while writing it, I noticed that Cal-Maine Foods’ (CALM) net sales had been steadily declining over the past five years. I know that CALM sells cage-free eggs like Vital Farms (NASDAQ:VITL), so I needed to understand why their revenue decreased.

Cal-Maine Foods is a soft commodities company, and its results depend on highly volatile commodities prices. Its sales depend on shell egg prices, and its variable COGS are correlated with grain prices, specifically corn and soybean. An investor should understand these risks before investing.

The Future Of The Shell Egg Industry

Using information from the United Egg Producers facts & stats website and the U.S. Census Bureau, I forecasted what the Shell Egg industry should look like in 2026. I encourage you to read my article on Vital Foods to better understand how I forecasted the shell egg industry’s future growth.

Figure 1 – Future Of The U.S. Laying Hen Population

Source: United Egg Producers and analyst’s estimates (blue cells)

According to my calculations, I believe the laying hen population should grow at a CAGR of 1.9% during the period. While I was reading Cal-Maine’s 2020 annual report, the company believes that the general demand for eggs will increase on average by 2% a year. In my opinion, their comment makes me more confident in my forecast.

According to my estimates, I believe cage-free eggs will grow at a CAGR of 17.5% from 2019 to 2026. Also, conventional egg production should decrease at a CAGR of 8.5% during the same period.

While reading the company’s 2020 annual report, I learned that specialty egg sales are adversely affected by the decrease in conventional egg prices. It makes sense that at some point, a consumer will pick a