ITEM 1A.
RISK FACTORS
Our business
and results
of operations
are subject
to numerous
risks and
uncertainties,
many of which
are beyond
our control.
The
following
is
a description
of
the
known
factors
that
have
or
may
in
the
future
materially
affect
our
business,
financial
condition or
results of operations.
They should
be considered
carefully, in
addition to
the information
set forth
elsewhere in
this
Annual
Report
on Form
10-K, including
under
Part II.
Item 7.
Management’s
Discussion
and Analysis
of Financial
Condition
and Results
of Operations,
in
making
any investment
decisions
with
respect
to our
securities.
Additional
risks or
uncertainties
that are
not currently known to
us,
or
that we
are aware
of but
currently deem
to be
immaterial or
that could apply to any
company could
also materially
adversely affect
our business, financial
condition or results of operations.
See
“Forward
-Looking
Statements” at the beginning of this
report.
INDUSTRY
RISK FACTORS
Market
prices
of wholesale
shell
eggs are
volatile
and decreases
in these
prices
have
had, and in
the
future may
have, a
materially
adverse impact
on our revenues
and profits.
Our operating
results are
significantly
affected
by wholesale shell
egg market
prices, which
fluctuate
widely and
are outside
our
control.
Wholesale
shell
egg
market
prices
directly
affect
the selling
prices
of
our
products
sold
under
market
-based
pricing
formulas
and
may
indirectly impact
our products
sold
under cost
-based
and
hybrid pricing
formulas
as customers
may
seek to
renegotiate
the
terms
of their
arrangements
during
periods
of sustained
low
prices.
Accordingly,
our
historical
results
are not
necessarily
indicative
of future
performance.
15
Modest increases
in industry supply
or decreases in demand
have resulted in, and may
in
the future have
a material adverse effect
on shell egg
prices. Low
shell egg prices
adversely
affect
our revenues
and
profits.
Market prices
for wholesale
shell eggs
have been,
and in
the future
may
be, volatile and
cyclical.
Shell egg
prices have
risen
in
the past
during periods
of high
demand
such as
the initial outbreak
of the
COVID-19 pandemic
and
periods when high
protein
diets
are
popular.
Shell
egg
prices
have
also
risen
during
periods
of
constrained
supply,
such
as
during
outbreaks
of
highly
pathogenic
avian
influenza
(“HPAI”).
During
times
when
prices
are high,
the egg
industry
has
typically
produced
more
eggs,
primarily
by
increasing
the
number
of
layers,
which
historically
has
ultimately
resulted
in
an
oversupply
of eggs,
leading
to
periods
of lower prices.
As discussed above
in
Part I. Item 1. Business– Seasonality
,
seasonal fluctuations
impact
shell
egg prices.
Therefore, comparisons
of
our
sales
and
operating
results
between
different
quarters
within
a
single
fiscal
year
are
not
necessarily
meaningful
comparisons.
A
decline
in
consumer
demand
for shell
eggs
or
our prepared
foods
offerings
have had,
and in
the
future
may have
,
a
material
adverse impact
our business.
We
believe high-protein
diet trends,
industry advertising
campaigns,
the improved
nutritional
reputation
of eggs and
an increase
in at
-home consumption
of eggs during
the COVID-19
pandemic,
have all
contributed
at one
time or
another
to increased
shell
egg demand.
However,
it is possible that
the demand
for shell eggs will decline
in the future. Adverse
publicity relating
to health
or
safety
concerns
and
changes
in
the
perception
of the
nutritional
value
of
shell
eggs,
changes
in
consumer
views
regarding
consumption
of animal
-based products,
as well as movement
away from
high protein diets,
have had
and in the
future may
have
an adverse
effect
on demand
for shell eggs, which has had
and in the future could
have a material
adverse effect
on our results of
operations
and
financial
condition.
Certain
of our prepared
foods offerings
are generally
subject to changing
consumer trends,
demands
and preferences
as well as
a
modest amount
of seasonality. Trends within
the prepared foods
industry change often,
and failure to
identify and react
to changes
in
these
trends
could
lead
to,
among
other
things,
reduced
demand
and
price
reductions
for
our
prepared
foods
brands
and
products.
We
strive
to respond
to
consumer
preferences
and
social
expectations,
but we
may
not be
successful
in
our
efforts.
Further,
we
could
be
adversely
affected
if
consumers
lose
confidence
in
the
safety
and
quality
of
certain
food
products
or
ingredients,
or the
food
safety
system
generally.
Prolonged
negative
perceptions
concerning
the health
implications
of certain
food products
or ingredients
or loss
of confidence
in the
food safety
system generally could
influence
consumer preferences
and
acceptance
of some
of our
products
and
marketing
programs.
Continued
negative
perceptions
and
failure
to
satisfy
consumer
preferences
could have
a material
adverse
effect
on our sales,
financial
condition
and
results of operations.
Feed costs
are
volatile and
increases
in these
costs
have
had,
and
in the future
may have
,
a material
adverse impact
our
results of
operations.
Feed
costs are
the largest
element
of our
shell egg
production
cost,
typically exceeding
50% of
our total
farm production
costs.
Although feed ingredients,
primarily corn and
soybean
meal, are available from
a number of sources, we do not have control ov
er
the
prices
of the
ingredients
we
purchase,
which are
affected
by weather,
various
global
and
U.S. supply
and
demand
factors,
transportation
and
storage costs,
speculators,
agricultural,
energy
and
trade
policies in
the
U.S.
and
internationally,
and
global
instability,
including
as a result of geopolitical conflicts. For example,
while feed costs declined during fiscal 2026,
we saw higher
prices for corn
and soybean
meal over the last
four fiscal
years as a
result of
weather
-related shortfalls
in production
and
yields,
ongoing
supply
chain
disruptions,
and
geopolitical
conflicts
and
their