Risk Factors - CALM

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Item 1A. Item I. Risk Factors

and

Part II. Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - HPAI

.

Given

historical

consumption

trends,

we believe

that general

demand

for

eggs in

the U.S.

increases basically

in line

with the

overall

U.S.

population

growth;

however,

specific

events

can

impact

egg

supply

and

consumption

in

a

particular

period,

as

occurred with the 2015 HPAI outbreak, the COVID-19 pandemic (particularly during

2020), and the most recent

HPAI outbreaks

starting in early 2022 and

again in late 2023. For fiscal

2024, shell egg household penetration

is approximately 97%. According

to the

USDA’s

Economic

Research Service,

estimated annual

per capita

consumption

in the

United

States between

2019

and

2023

varied,

ranging

from

279

to

292

eggs

which

is

directly

impacted

by

available

supply.

The

USDA

calculates

per

capita

consumption by dividing total shell egg disappearance in the U.S. by

the U.S. population.

The most significant

shift in demand

in recent years

has been among

specialty eggs, particularly

cage-free eggs.

For additional

information, see “Specialty Eggs.”

Prices for Shell Eggs

Wholesale shell egg sales prices

are a critical component

of revenue for the Company.

We sell the

majority of our conventional

shell eggs at prices

based on formulas

that take into

account, in varying

ways, independently quoted

regional wholesale market

prices for shell eggs or formulas

related to our costs of production,

which include the cost of corn

and soybean meal. We

do not

sell eggs directly to consumers or set the prices at which eggs are sold to consumers.

Wholesale shell

egg

prices are

volatile,

cyclical,

and impacted

by a

number of

factors,

including consumer

demand, seasonal

fluctuations,

the number

and productivity

of laying

hens in

the U.S.

and outbreaks

of agricultural

diseases such

as HPAI.

We

believe the majority of

conventional shell eggs sold in

the U.S. in the retail

and foodservice channels are

sold at prices that take

into

account,

in

varying

ways,

independently

quoted

wholesale

market

prices,

such

as

those

published

by

Urner

Barry

Publications,

Inc.

(“UB”)

or the

USDA

for

shell

eggs;

however,

grain-based

or variations

of

cost

plus arrangements

are

also

commonly utilized.

The weekly

average price for

the southeast region

for large white

conventional shell

eggs as quoted

by UB is

shown below for

the past three

fiscal years along with

the five-year average

price. The actual prices

that we realize on

any given transaction

will

6

not necessarily equal quoted market

prices because of the individualized terms

that we negotiate with

individual customers which

are

influenced

by many

factors.

As further

discussed

in

Part II. Item 7. Management’s Discussion and Analysis – Results of

Operations

, egg prices in fiscal 2022 through fiscal 2024 were significantly impacted by HPAI.

Wholesale prices for cage-free eggs are quoted by independent

sources such as UB and USDA.

There is no independently quoted

wholesale

market

price

for

other

specialty

eggs

such

as

nutritionally

enhanced,

organic,

pasture-raise

and

free-range

eggs.

Specialty eggs are typically sold at

prices and terms negotiated directly with

customers and in the case of cage-free

eggs, can be

sold at

prices that

take into

account independently

quoted markets.

Historically,

prices for

specialty eggs

have generally

been

higher due to

customer and consumer willingness

to pay more

for specialty eggs. We utilize several

different pricing mechanisms;

however, the majority of our specialty eggs are typically sold at prices

and terms negotiated directly with customers.

As a result,

specialty egg prices do not fluctuate as much as conventional pricing.

Depending on market conditions, input costs and individualized contract terms, the price we receive per dozen eggs in any given

transaction may be more than or less than our farm production and other costs per

dozen.

Feed Costs for Shell Egg Production

Feed is a primary cost component in

the production of shell eggs and

represented 56.0% of our fiscal 2024 farm

production costs.

We

routinely fill

our storage

bins during

harvest season

when prices

for feed

ingredients, primarily

corn and

to a

lesser extent

soybean meal,

are generally

lower.

To

ensure continued

availability of

feed ingredients,

we may

enter into

contracts for

future

purchases

of

corn

and

soybean meal,

and

as part

of these

contracts,

we

may

lock-in

the basis

portion

of our

grain

purchases

several months

in advance.

Basis is

the difference

between the

local cash

price for

grain and

the applicable

futures price.

The

difference can be

due to transportation

costs, storage costs,

supply and demand,

local conditions and

other factors. A

basis contract

is a common

transaction in the

grain market

that allows us

to lock-in a

basis level for

a specific delivery

period and

wait to set

the futures price at a later date. Furthermore, due to the more limited supply for organic ingredients, we may commit to purchase

organic

ingredients

in

advance

to

help

assure

supply.

Ordinarily,

we

do

not

enter

into

long-term

contracts

beyond

a

year

to

purchase corn and

soybean meal or

hedge against increases

in the prices

of corn and

soybean meal. As

the quality and

composition

of feed

is a

critical factor

in the

nutritional value

of shell

eggs and

health of

our chickens,

we formulate

and produce

the vast

majority of our own feed at our feed mills located near our production plants. Our annual feed requirements for fiscal

2024 were

1.9 million tons of

finished feed,

of which we

manufactured 1.8 million tons.

We currently have the

capacity to store

210 thousand

tons of corn and soybean meal, and we replenish these stores as needed

throughout the year.

7

Our primary feed ingredients, corn

and soybean meal, are commodities that

are subject to volatile price changes due

to weather,

various supply

and demand

factors, transportation

and storage

costs, speculators,

agricultural, energy

and trade

policies in

the

U.S. and internationally, and global instability that could disrupt the supply chain. We purchase the vast majority of our corn and

soybean meal from U.S sources but may be forced to purchase internationally when U.S. supplies are not readily available. Feed

grains are currently

available from an

adequate number of

sources in the

U.S. As a

point of reference,

a multi-year comparison

of the average of daily closing prices

per Chicago Board of Trade for each quarter in our fiscal

years 2020-2024 are shown below

for corn and soybean meal:

Shell Egg Production

Our percentage of dozens produced to sold was 88.8%

of our total shell eggs sold in fiscal 2024.

We supplement

our production

through purchases of eggs from others

when needed. The quantity of eggs purchased will vary based on many factors

such as

our own production capabilities and current market conditions. In

fiscal 2024, 91.2% of our production came from company-

owned facilities, and 8.8% from contract producers. The majority

of our contract production is with family-owned farms for

organic, pasture-raised and free-range eggs. Under a typical arrangement

with a contract producer, we own the flock, furnish

all

feed and critical supplies, own the shell eggs produced and assume market risks. The

contract producers own and operate their

facilities and are paid a fee based on production with incentives for performance.

The commercial production

of shell eggs requires a source

of baby chicks for laying

flock replacement. We

supply the majority

of

our

chicks

from

our

breeder

farms

and

hatch

them

in our

hatcheries

in

a

computer-controlled

environment

and

obtain the

balance from commercial

sources. The chicks

are grown in

our own pullet

farms and are

placed into the

laying flock once

they

reach maturity.

After eggs are

produced, they are

cleaned, graded and

packaged. Substantially all

our farms have

modern “in-line” facilities

which

mechanically

gather,

clean,

grade

and

package

the

eggs

at

the

location

where

they

are

laid.

The

in-line

facilities

generate

significant efficiencies

and cost

savings compared

to the

cost of

eggs produced

from non-in-line

facilities, which

process eggs

that

have

been

laid

at

another

location

and

transported

to the

processing

facility.

The

in-line

facilities

also

produce

a

higher

percentage of USDA Grade A eggs, which sell at higher prices. Eggs

produced on farms owned by contractors are brought to our

8

processing plants to be graded

and packaged. We maintain a Safe Quality Food

(“SQF”) Management Program which is

overseen

by our

Food Safety

Department and

senior management

team. As

of June

1, 2024,

every Company-owned

processing plant

is

SQF certified. Because shell eggs are perishable, we do not maintain large

egg inventories. Our egg inventory averaged

six days

of

sales during

fiscal

2024. We

believe

our constant

focus

on production

efficiencies

and

automation

throughout

our vertical

integrated operations enable us to be a low-cost supplier in our markets.

We

are proud

to have

created and

upheld

what we

believe is

a leading

poultry

Animal Welfare

Program

(“AWP”).

We

have

aligned our AWP

with regulatory,

veterinary and our third-party certifying

bodies’ guidance to govern the welfare

of animals in

our direct care,

our contract farmers’

care. We

continually review our

program to monitor

and evolve standards

that guide how

we hatch chicks,

rear pullets and nurture

breeder and layer hens.

At each stage

of our animals’ lives,

we are dedicated to

providing

welfare

conditions

aligned

to

our

commitment

to

the

principles

of

the

internationally

recognized

Five

Freedoms

of

Animal

Welfare

.

We

do not

use artificial

hormones in

the production

of our

eggs. Hormone

use in

the poultry

and egg

production industry

has

been

effectively

banned

in

the U.S.

since

the

1950s.

We

have

an

extensive

written

protocol

that

allows

the

use

of

medically

important

antibiotics

only

when

animal

health

is

at

risk,

consistent

with

guidance

from

the

United

States

Food

and

Drug

Administration

(“FDA”)

and

the

Guidance

for

Judicious

Therapeutic

Use

of

Antimicrobials

in

Poultry,

developed

by

the

American Association of Avian Pathologists. When antibiotics are medically necessary, a licensed veterinary

doctor will approve

and

administer

approved

doses

for

a

restricted

period.

We

do

not

use

antibiotics

for

growth

promotion

or

performance

enhancement.

Specialty Eggs

We

are

one

of

the

largest

producers

and

marketers

of

value-added

specialty

shell

eggs

in

the

U.S.,

which

continues

to

be

a

significant and growing segment

of the market.

We classify cage-free, organic, brown, free-range, pasture-raised and

nutritionally

enhanced as specialty eggs for accounting and

reporting purposes. Specialty eggs are intended to

meet the demands of consumers

sensitive to environmental, health and/or animal welfare issues and

to comply with state requirements for cage-free eggs.

Ten

states

have

passed

legislation

or

regulations

mandating

minimum

space

or

cage-free

requirements

for

egg

production

or

mandated the sale of

only cage-free eggs and

egg products in

their states, with implementation

of these laws ranging

from January

2022 to January 2030. These states represent approximately 27% of the U.S. total population according to the 2020 U.S. Census.

California,

Massachusetts, Colorado, Oregon,

Washington,

and Nevada, which collectively

represent approximately 20% of

the

total estimated U.S. population have cage-free legislation in effect

currently.

A significant number of our customers have announced goals to either exclusively

offer cage-free eggs or significantly increase

the volume of

cage-free egg sales

in the future, subject

in most cases

to availability of supply, affordability and

consumer demand,

among other contingencies. Our customers typically do not commit to long-term purchases of specific quantities or types of eggs

with us, and as a result, it

is difficult to accurately predict customer requirements for cage-free eggs. We are focused on adjusting

our cage-free production capacity with

a goal of meeting the

future needs of our customers

in light of changing

state requirements

and our customer’s goals. As always, we strive to offer a product mix that aligns with current and

anticipated customer purchase

decisions. We are engaging with our customers to help them meet their announced goals and needs. We have invested significant

capital in recent years to acquire and construct cage-free facilities, and we expect our focus for future

expansion will continue to

include cage-free

facilities. Our

volume of

cage-free egg

sales has

continued to

increase and

account for

a larger

share of

our

product mix. Cage-free egg revenue represented approximately 29.5% of our total net shell egg

sales for fiscal year 2024. At the

same time, we understand the importance of our continued

ability to provide affordable conventional eggs in order to

provide our

customers with a variety of egg choices and to address hunger in our communities.

Branded Eggs

We are a member of the Eggland’s

Best, Inc. cooperative (“EB”) and produce, market, distribute and sell

Egg-Land’s

Best®

and

Land O’

Lakes®

branded eggs

under license

from EB

at our

facilities under

EB guidelines.

EB hens

are fed