TheChek News Flow

Consumer groups and economists accuse agricultural companies of keeping prices artificially high

US egg prices are rapidly declining after a bird flu epidemic pushed them to record highs last month, prompting questions about whether producers had kept them artificially high.

Wholesale egg prices have fallen 54 per cent in the past four weeks to $3.91 per dozen on Friday, according to commodity price information service Expana.

The American Egg Board, a trade group that represents egg farmers, credited a lack of significant avian flu outbreaks in the past month and farmers’ efforts to rebuild their flocks for the plummeting prices.

Yet economists said that the precipitous drop accelerated days after US media reported that the justice department had opened an investigation into price gouging by egg producers. The high price of eggs had come to symbolise the continuing pain felt by US consumers from persistent inflation.

Advocacy groups for small farmers and consumers have long accused the country’s dominant egg producers — Cal-Maine Foods and Rose Acre Farms — of intentionally keeping prices high to increase profits.

“This suggests to me that the prices did not need to be as high as they were,” said David Anderson, a professor of economics and business at Centre College in Kentucky, “if they could be dropped seemingly so quickly and easily.”

Emily Metz, chief executive of the American Egg Board, dismissed the allegations as “conspiracy theories.” Cal-Maine Foods did not respond to a request for comment and Rose Acre Farms declined to comment.

“The egg industry is in the fight of our lives,” Metz said.

The avian flu epidemic began in 2022 but intensified in recent months, forcing farmers to cull some 30mn birds so far this year and creating an egg shortage that Metz expects to last at least until the end of the year. The price rises that followed increased scrutiny of the industry, which is heavily consolidated between a handful of companies.

“They get all they can until someone sees their hand in the cookie jar, and then they will back off real quick,” said Joe Maxwell, co-founder of advocacy group Farm Action.

Maxwell and other advocates say that the largest US egg producers are being significantly slower to rebuild their flocks than they were during the last bird flu outbreak in 2015, arguing that they may have intentionally limited egg supplies to keep prices elevated.

Cal-Maine Foods last month reported $356mn in gross quarterly profits, a fourfold increase from a year prior.

Jeremy Horpedahl, an economics professor at the University of Central Arkansas, said he was “sceptical” that farmers would be able to successfully fix prices without illegally co-ordinating with one another, of which there is no evidence.

Agriculture secretary Brooke Rollins credited the Trump administration’s $1bn plan to lower prices by importing eggs and expanding relief for affected farmers among other measures.

Yet Amy Smith, vice-president at food and agriculture consultancy Advanced Economic Solutions, said it was “still too soon” to see any impact from Trump’s efforts. The imported eggs were enough to “cover brunch for one day in this country”, she added.

While retailers and restaurant owners welcomed the price drop after selling eggs at a loss for months, consumers are still paying near record prices at the grocery store. A dozen grade-A large eggs cost $5.90 last month in US cities on average, a 97 per cent increase from a year earlier and the most in more than a decade, according to the Bureau of Labor Statistics.

Horpedahl said that while grocery store prices had fallen by as much as a dollar per dozen in some places — prices are now closer to $4 per dozen in Texas — it could be weeks before most US shoppers see relief. Current inventories were probably purchased at higher wholesale prices and retailers would want to recoup their investment, he said.

“Everyone is asking if this price decrease is for real and if it is going to last,” Anderson at Centre College said. “No one is sure what is going to happen.”

The great European disentanglement from US stocks has only just started

A long rebalancing of investor portfolios is likely to be under way that could be painful for America

The problem for European investors in disentangling themselves from the US is that, deliberately or otherwise, they are in deep. Portfolios everywhere, retail and institutional, are stuffed to the gills with US stocks.

This can lead you to one of two conclusions: First, that the outperformance in European stocks now under way is fun but ultimately a blip, and therefore the great disentanglement won’t happen. Or second, that we are at the start of a long and painful process for the US. I lean heavily towards the latter.

By now we all know the score: The widespread, almost universal belief among institutional investors that the US would dominate global stocks in 2025 has proven to be badly misplaced. The pro-growth, low-tax, anti-red-tape narrative of Donald Trump’s second presidency has collapsed under its own weight and given way to fears of a recession or stagflation. On-again-off-again trade tariffs and widespread federal jobs cuts are gnawing away at corporate and consumer confidence.

And the depth of the administration’s loathing for supposed allies in Europe has shocked investors there deeply. Fund managers at global investment houses recognise that vice-president JD Vance’s speech in Munich was problematic, but European investors were offended in a way that Americans perhaps have not recognised.

Markets are reacting as you might expect. The dollar is sliding, and European markets are streaking ahead of the US. It’s important to understand just how unusual this is. Germany’s Dax stocks index has outperformed the US S&P 500 in just two of the past 12 years. Analysts at Deutsche Bank point out that at the current pace — and yes, it is still early in the year — this is shaping up to be the best year for outperformance in the Dax in any year since 1960. Similarly, the dollar’s woes are for the history books. It has fallen further by this point in the year only six times since 1969.

Barclays is among those warning against getting overexcited. The rush of money in to Europe-focused funds is substantial, its analysts say, but it will struggle to keep running at this pace. Similarly, Germany’s announcement of fiscal stimulus does point to higher European growth, but Trump’s trade tariffs are likely to pull in the opposite direction — a “tug of war” that means “reports of the end of US exceptionalism may well prove greatly exaggerated”.

What we do know is that European exceptionalism is still a very young investment theme, and US dominance is hard-baked in to the financial system. 

Data from the US Federal Reserve shows that European investors held about $9tn in US stocks at the end of last year — around 17 per cent of the overall value of the US market and not far off the market capitalisation of all the equities in Europe.

This gigantic overallocation to the US has not happened by magic. It has just made financial sense over the long term. Paul Marsh of the London Business School, one of the authors of UBS’s Investment Returns Yearbook — a sacred text for markets nerds — points out that one dollar invested in the US at the start of 1900 was worth $899 by the end of the century in real terms. The same dollar invested in the rest of the world was worth just $119.

The first quarter of the 21st century shows a similar gap. A dollar invested in the US at the start of 2000 was worth $3.28 by the end of 2024, again, after inflation. For the rest of the world, you end up at a rather humdrum $1.63. As a rule, non-US investors who have failed to make a significant allocation to the US have not been doing their jobs properly.

The US has been hard to avoid, in fact. By the end of last year, 10 stocks made up nearly a quarter of the global total of market capitalisation in public equities. Nine of them are from the US. The US makes up 64 per cent of the value of all global stocks, or nearly 73 per cent of developed markets. Any investor tracking a global stocks index such as the MSCI Global may think this is a neutral strategy — a nice, easy way to achieve diversification. It’s not — it’s a nice, easy way to run a massive positive bet on the US. 

“We have argued over time that the merits of the US must be fully discounted,” Marsh said at the launch of his latest yearbook earlier this month. “It’s not that the US will stop being a dominant market or the US will stop being a hugely entrepreneurial country. It’s just that all has to be in the price at some point.”

Investors everywhere are hugely overexposed to the US. That was uncomfortable enough before Trump began his second presidency, and it feels rather more reckless now. It is hard for global investors to shake off more than a century of evidence that buying US assets is simply in the best financial interests of themselves or their clients, but lighter allocations to Trump’s America represent basic risk management at this point.

Trillions of investment dollars can leave the US if the rest of the world chooses to get back towards a neutral position. The question is how easily the rest of the world’s markets can absorb that money. As Trump said in a social media post outlining one of his many sets of trade tariffs: “Have fun!”

Club World Cup: the winner takes all

Fifa has finally answered one of the key questions around the upcoming relaunch of the Club World Cup — how much it pays. On Wednesday the competition organiser revealed its prize money schedule, with payments based both on turning up and actually winning matches. You can read more on the trials and tribulations of Fifa’s $2bn punt here.

Considering the rates were negotiated with the European Club Association, it’s perhaps little surprise that the bulk of the purse is heading to the top European clubs. Some are promised $38.5mn before a ball has even been kicked, with potential earnings for winning the tournament of $125mn when ends on July 13.

Fifa has made a lot of noise about the Club World Cup being a chance to spread some of football’s wealth beyond Uefa’s sphere of influence. The month-long competition will feature 32 teams from around the globe who qualified largely based on performance in regional tournaments.

Yet the financial impact will be felt differently depending on where a team hails from.

Assuming — perhaps unfairly — that Auckland FC fails to win or draw any of its group games against Bayern Munich, Benfica or Boca Juniors, then the only entrant from Oceania will go home with just $3.6mn. Subtract the costs of competing (eg travel), and that probably doesn’t leave a lot of change.

Teams from Asia, Africa, and North America fare a bit better, with each guaranteed $9.55mn for participating. Even if they lose all their games, the tournament will still deliver an annual revenue boost this year of more than 10 per cent for teams the size of the Seattle Sounders and Urawa Red Diamonds.

Fluminense fans will probably fancy their chances of bagging some points against South Africa’s Mamelodi Sundowns and South Korean side Ulsan HD. South American teams will get at least $15.55mn for showing up, while qualification to the second round would bring an extra $7.5mn. That’s more than double the money on offer from winning the Brazilian league, and starts to look similar to the pay-off from victory in the Copa Libertadores — South America’s version of the Champions League.

For top European clubs, the money is decent to start with, but not transformative. Cash for participating equates to around 3.5 per cent of Real Madrid’s annual income, 5 per cent for Bayern Munich, and 7 per cent for Chelsea. A nice boost, but not massive.

Heftier sums come from making progress. Winning all three group stages and reaching the semi-final bags a top club more than $80mn.

For a club like Chelsea that could do with a financial sugar rush to help balance this year’s spending, the Club World Cup will be hugely welcome.

By backloading so much for winners, Fifa has also built in a serious financial incentive for actually lifting the Tiffany-designed Club World Cup. Competition should be fierce.

But it’s worth remembering this event (for now at least) will only take place once every four years. Only a tiny group of teams are virtually guaranteed to qualify again (Real Madrid, Manchester City, Bayern Munich, Paris Saint-Germain) — all of whom already feature in the top five richest clubs in the world.

So yes, there’s some trickle down economics at play. But ultimately, if the Club World Cup succeeds, the world’s wealthiest clubs will reap almost all the rewards. Plus ça change.

It wasn’t long ago—say, two months—that European governments and companies thought nothing of relying on Microsoft software for daily tasks or Amazon.com’s Amazon Web Services for data storage. Not so much anymore.

President Donald Trump, who has proclaimed that the European Union was “formed in order to screw the United States,” is girding for trade warfare over the continent’s moves to tax and regulate U.S. tech giants. A Feb. 21 White House memorandum directs relevant cabinet departments to “defend American companies and innovators from overseas extortion,” with Europe’s digital services taxes as Exhibit A.

“There are serious concerns about America weaponizing digital infrastructure,” says Dimitar Lilkov, senior research officer at the Wilfried Martens Centre for European Studies.

Enter the EuroStack. This concept was fleshed out in a “bold vision for digital sovereignty” recently issued by the Brussels-based Centre for European Policy Studies, with a roster of co-signers from academia and nongovernmental organizations.

Digital independence for Old Europe looks like an uphill climb. The U.S. accounts for 71% of global research-and-development spending on “software and internet technologies,” and 70% of “foundational AI models,” according to the report itself. China is runner-up in both categories.

European catch-up would cost 300 billion euros ($323 billion), the report estimates, while the continent is already scrambling to find huge sums for a defense upgrade. Balkanized European financial markets are no match for Nasdaq and U.S. venture capitalists in nurturing the next emerging genius. “The EuroStack cannot work without a major initiative to deepen capital markets,” says Andrea Renda, director of research at CEPS.

Europe isn’t without its own tech stars, though. German software power SAP just nosed past Danish pharma champion Novo Nordisk as the continent’s most valuable company, largely thanks to a one-third growth in cloud revenue last year. Netherlands-based ASML, a near-monopolist in machines that make the most advanced semiconductors, isn’t far behind.

The EuroStack report points to a deep bench of what might be called second-line tech names, providing the glue between cutting-edge innovation and practical use in manufacturing and energy provision. Scandinavian telecom-equipment giants Nokia and Ericsson have quietly become hot stocks again, both soaring by about 40% over the past 12 months. “Europe is more advanced than the U.S. in the 5G connectivity layers,” Renda says.

France-based Schneider Electric has had a similar run over the past 18 months, due to its potential to supply an anticipated artificial-intelligence data center boom.

Bargains are getting harder to find after a 14% year-to-date bounce in the iShares Europe exchange-traded fund, says Roland Kaloyan, head of European equity strategy at Société Générale. “The market has reached our target,” he says.

Some rough tech gems may still await discovery, though, says Michael Field, European equity strategist at Morningstar. He likes two Dutch-domiciled companies: Infineon Technologies, an Internet of Things pioneer focused on power systems, and NXP Semiconductor, which provides specialized chips to auto makers and other industries. Adyen, a point-of-sale payments provider akin to Square in the U.S., is a sleeper European fintech name, he adds.

Despite its unwieldy structure, the EU has responded rapidly and at scale to two crises in the past five years: first Covid, then Vladimir Putin’s cutoff of Russian gas after he invaded Ukraine. A continuing third shock from a vocally hostile and contemptuous U.S. administration will also spur a response.

Digital sovereignty may be far off, but watch those companies.

How do you solve a problem like Twitter? If you’re Elon Musk, you sell X to xAI.

He did OK on the sale.

In a Friday evening tweet on X, Elon Musk wrote that xAI had acquired X for $33 billion, or “$45 B less $12B debt.”

In his tweet, Musk explained the rationale behind the deal. “xAI and X’s futures are intertwined,” he wrote. “Today, we officially take the step to combine the data, models, compute, distribution and talent. This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach. The combined company will deliver smarter, more meaningful experiences to billions of people while staying true to our core mission of seeking truth and advancing knowledge. This will allow us to build a platform that doesn’t just reflect the world but actively accelerates human progress.”

Musk paid $44 billion for Twitter when he bought it in October 2022. That was essentially all equity. Musk paid $54.20 per Twitter share and financed the deal using debt. The $45 billion value, including debt, means that the total value of X rose under Musk’s sometimes tumultuous leadership.

Musk famously told advertisers leaving his social-media platform to “go f—yourself” in a 2023 interview.

Part of the increase in value was xAI itself. X owned 10% of xAI, according to Rainmaker Securities, a firm that deals in transactions for privately held companies.

The debt financing, X cross-ownership of xAI, and sale of X to xAI show that Musk isn’t only an impressive engineer of cars and rockets, he’s an impressive financial engineer, too.

Musk owned an estimated 80% of X and an estimated 50% of xAI, which he founded in 2023. According to Musk, the deal values xAI at $80 billion. That is likely the pre-X-purchase valuation, so Musk’s stake in the new xAI should be worth north of $65 billion. (That’s 50% of xAI and 80% of the equity value of X.)

X declined to comment on valuation and referred Barron’s to Musk’s tweet. It isn’t hard to get to $80 billion for xAI. OpenAI is valued at an estimated $300 billion. xAI was valued at $50 billion in November.

Musk’s holding in SpaceX is worth some $140 billion based on recent private market transactions. His Tesla stake is worth more than $170 billion, including contested stock options.

The one thing the X-xAI merger does for Tesla shareholders is lower the likelihood that Musk will have to sell Tesla stock to add capital to X. xAI is building AI models to compete with Alphabet and OpenAI and shouldn’t have any problem raising capital.

“This is a game changer and we believe the first step to Musk putting this all together under one hood and Tesla playing a major role,” said Wedbush analyst Dan Ives. “This deal makes Musk a key AI player.”

Combining Tesla with any of Musk’s other business ventures isn’t assured. Investors will be happy that Musk is consolidating some of his CEO jobs.

Shares of Tesla, the only publicly traded Musk company, were down 0.7% at $261.76 in after-hours trading Friday.

This isn’t the first time a Musk company has bought a Musk company. In 2016, Tesla bought Solar City, another Musk company, for $2.6 billion in an all-stock deal.

That business is part of Tesla’s nonautomotive operations, which also include stationary power storage for homes and utilities. Over the past five years, Tesla’s annual nonautomotive sales have grown from roughly $4 billion to $21 billion.