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Cal-Maine still suffering effects of previous bird flu outbreak

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US egg company Cal-Maine Foods is still suffering from the after-effects of the last bird-flu outbreak, even as concerns about new cases mount.

Cal-Maine shares fell over 6% in pre-market trade after the egg distribution company reported lower than expected earnings.

Dolph Baker, chairman and chief executive officer of Cal-Maine, ascribed the results to "volatile market conditions"

Falling egg price

"Our results were affected by lower market prices and weaker demand trends compared with the third quarter last year," Mr Baker said.

The average selling price of eggs was down 28% year-on-year over the three months of February 25.

"The egg markets have remained under pressure, and we do not expect to see any meaningful improvement until there is a better balance of supply and demand," Mr Baker said.

Demand slow to recover

Egg prices are under pressure from rebounding production, after a sharp reduction from the 2015 bird flu outbreak.

"United States Department of Agriculture data showed that the egg industry repopulated farms and laying hen numbers were reported to approach pre-bird flu levels," Mr Baker said.

"The younger, more productive hen population has resulted in a greater number of eggs."

But while production has bounced back, demand has remained supressed.

Mr Baker noted that many commercial buyers have "reformulated their products to use fewer eggs when prices spiked and have been slow to resume previous egg usage".

"Together, these factors have created an oversupply of eggs, with continued pressure on market prices," Mr Baker said.

Little risk from current outbreak

But Mr Baker downplayed the risk from recent cases of bird flu in the US, noting that flock biosecurity has been enhanced since the last outbreak.

"Over the past month, there have been reported outbreaks of avian invluenza in certain poultry operations located in southeastern states," Mr Baker said.

"None of these outbreaks has affected the commercial table egg layer flock, and there have been no positive tests for avian influenza at any Cal-Maine Foods locations."

Profits, earnings miss expectations

The egg company reported a net income of $4.1m over the three months to February 25, compared to $64.2m a year ago.

Earnings per share were $0.09, compared to analyst expectations of $0.20 a share.

Revenues also missed expectations, at $306.5m, compared to analyst forecasts of $325m, down from $449.8m in the same period a year ago.

Cal-Maine will not pay a dividend for the quarter.

By William Clarke

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