On Tuesday, financial services firm Stephens Inc. downgraded Cal-Maine Foods from overweight to equal weight, citing concerns about falling wholesale egg prices.

Stephens research analyst covering the consumer staples, food and agribusiness, and grocery/convenience stores sectors, Ben Bienvenu said on a recent conference call with Urner Barry, a market research firm that makes a monitoring of wholesale food prices, that wholesale egg price trends were “understood more depressed.”

“When we consider what’s currently playing out for eggs, we think we’re better off moving to the sidelines in Cal-Maine, as we think the risk/reward is now more balanced,” the analyst said.

Bienvenu is one of the few Wall Street analysts covering Cal-Maine. He said falling egg prices threaten to depress earnings at the egg producer, which saw revenue last quarter more than double the same period last year. The company’s net income rose more than 700% to $323 million.

Cal-Maine shares are down 19%, the biggest monthly drop since September 2008. The analyst cut his price target from $67 to $60. The stock is currently trading around $49.

On February 6, we were the first to point out: We’ve got big news: wholesale egg prices are ‘crashing’. The wholesale egg price index then dropped from about $4.65 to $2.01. The index now stands at .887 cents.

Bienvenu said a crucial factor for Cal-Maine investors to keep an eye on is the potential resurgence of bird flu:

“While there could certainly still be cases that would have a negative impact on production and consequently result in higher prices, we believe it is prudent at this time to stop recommending more new money to work in the space”.

Retail egg prices in supermarkets have already started to fall after the worst-ever outbreak of bird flu devastated domestic egg-laying bird populations last year.

Now comes egg deflation unless bird flu re-emerges.

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