Cal-Maine Foods Inc (CALM) Left With Egg on Its Face

Page 1 of 2

Here’s something to get a little bit eggs-cited about: Cal-Maine Foods Inc (NASDAQ:CALM) agreed to settle a class action price-fixing lawsuit for about $28 million. The country’s largest fresh egg producer clucks that it did nothing wrong, but rather that it has agreed to put the matter behind it in the interests of its shareholders.

Cal-Maine Foods Inc (NASDAQ:CALM)

Under the apparent guise of giving their chickens better living conditions, Cal-Maine Foods Inc (NASDAQ:CALM) and other egg producers represented by the United Egg Producers trade group — which accounts for approximately 95% of all the egg-laying hens in the U.S. – allegedly hatched the idea to raise prices by killing off their flocks and limiting the supply of eggs. The supposed scheme succeeded by inflating prices by as much as 40% in 2008.

But the chickens came home to roost for the cartel when food service giant Sodexo squawked that the producers were a bunch of bad eggs. Having bought some $250 million worth of eggs from them over an eight-year period between 2002 to 2010, Sodexo weighed in with a lawsuit in 2011, followed later that year by other consumer goods companies, including Kraft Foods Group Inc (NASDAQ:KRFT), General Mills, Inc. (NYSE:GIS), and Kellogg Company (NYSE:K), which also had their feathers ruffled by the higher prices.

They contended that not only did the egg producers kill off their flocks and not replace the layers with new ones as quickly as they otherwise might, they were so cock-sure of themselves that if a producer tried to fly the coop they’d dissuade retailers like Wal-Mart Stores, Inc. (NYSE:WMT) and Albertsons from buying from them by withholding the UEP’s certification stamp, which is viewed as a stamp of quality.

For its part, Cal-Maine Foods Inc (NASDAQ:CALM) says those who ended up suing are giving a cock-and-bull story, as they were well aware and supportive of the industrywide animal welfare guidelines it was following. Moreover, it claims that the Agricultural Department was aware of the strategy it was pursuing as well.

The problem is that the number of commercial-size egg producers — those with flocks of 75,000 or more hens — has shrunk from 2,500 companies in 1987 to a little more than 200 by the time the complaint was filed. The price-fixing scheme also followed on the heels of the collapse of the Atkins Diet and other low-carb fads that saw egg producers profiting from the high-protein binge.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!