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Cal-Maine Foods, US officials spar over future of egg prices

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Cal-Maine Foods, the world's top egg producer, sounded a cautious note on prospects for prices extending their recovery from "decade low" levels, even as US officials foresaw stronger values ahead.

Cal-Maine Foods, while highlighting some recovery in US egg prices from lows reached in the March-to-May period, flagged the setback to price prospects from demand setbacks at a time when the US flock has been largely rebuilt from lows prompted by last year's bird flu outbreak.

"While retail demand trends for shell eggs have been favourable, the market has continued to experience demand erosion for egg products and reduced egg exports," the group said.

US egg exports, either whole or as processed, were, at the equivalent of 20m eggs in May, down 23% year on year, undermined by 63% slump to 4m egg in shipment to Canada.

"Based on US Department of Agriculture reports, the laying flock is expected to increase through the end of calendar 2016, creating more supply and the potential for further price declines," Cal-Maine Foods added.

'Prices to strengthen somewhat'

The comments contrasted with an observation from the USDA itself on Monday of "increased demand in the egg market".

The USDA - which last week hiked to $0.96-1.00 per dozen, from $0.78-0.82 per dozen, its forecast for average New York prices for large eggs in the July-to-September quarter – said that values, while "at a low level in June… have rebounded from near-historic lows in May and early June".

And values will see a further recovery ahead from the $0.68 per dozen they averaged in the April-to-June quarter.

"With a generally good domestic economy expected for 2017 egg prices are forecast to strengthen somewhat, even with higher production.

"Prices in 2017 are forecast to average $1.05-1.14 per dozen, an increase of about 11% from the previous year."

'Unprecedented market conditions'

Cal-Maine made its forecast as it unveiled a loss of $376,000 for the three months to May 28, compared with earnings of $46.1m a year before, reflecting the hit from falling egg prices.

Indeed, revenues tumbled by 25% to $303.0m, as Cal-Maine saw its average sales price drop by 22% to $1.152 per dozen.

Volumes also fell, thanks to a loss of a co-packing contract with a "major" customer.

Nonetheless, the group - while flagging "unprecedented market conditions for the egg industry" caused by the bird flu epidemic, and its aftermath – said that its operations, which remained avian influenza free, had "performed very well".

Managers had done "an outstanding job in executing our strategy to be an efficient, low-cost producer".

Shares rise

Indeed, the quarterly loss, which was equivalent to $0.01 per share, was less than the $0.19-per-share loss that Wall Street had expected.

Cal-Maine shares rallied 5% to $46.50 in early deals in New York, by fell back to $44.95 in late deals, a rise of 1.8% on the day.


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