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Cal-Maine warns over US egg price rebound, as losses beat forecasts

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Cal-Maine Foods, the world's biggest table egg group, cautioned over a revival in US egg prices that caught out officials, warning over demand for exports and food producers, as the group revealed a bigger-than-expected loss.

The Mississippi-based group flagged "solid retail demand" for eggs, and a recovery in US exports, helping a revival in prices.

Cal-Maine Foods said that the price it had sold eggs for had risen by 6.8%, to $1.017 per dozen, for its fiscal first quarter, ending September 2.

Furthermore, US market prices "have significantly improved since the end of the quarter and are currently trending well above levels from a year ago", said Dolph Baker, the Cal-Maine chairman and chief executive.

'Stronger-than-expected prices'

The comments echo those two weeks ago of the US Department of Agriculture which, explaining an upgrade to its forecast for domestic egg values, said that "recent egg prices have been stronger than expected".

"While prices earlier this year were in the range of 2016 prices, recent prices have approached the levels seen in 2013 and 2014," the USDA said.

With "supply trends at similar levels this year" to last year, when egg output was boosted by a rebuild in the US laying flock from losses prompted by a bird flu outbreak, the rebound in prices "may indicate stronger demand", the USDA said.

'Reduced demand for specialty eggs'

However, Mr Baker was cautious over the price gains continuing, saying that "while overall market conditions are more favourable than a year ago, we do not expect any sustained improvement in pricing until we have a more stable supply and demand balance".

He flagged that on exports, while US shipments of shell eggs "have returned to historical levels since the beginning of calendar 2017", they are "still below the peak levels reached prior to the avian influenza outbreak".

In the US market, Mr Baker also highlighted "lower institutional demand for egg products", and weakness in the specialty egg market, on which Cal-Maine has been shifting its own output, in an effort to boost its margins and exploit the consumer shift towards trends such as output from cage-free hens.

"The higher price gap between conventional eggs and specialty eggs has resulted in reduced demand for specialty eggs," he said, adding that Cal-Maine had curtailed its own output plans in response to the slowdown.

"We have adjusted our production levels in line with current customer demand for cage-free eggs."

Share reaction

The comments came as Cal-Maine Foods unveiled an after-tax loss of $15.9m for the quarter, equivalent to $0.33 per share, on revenues up 9.6% at $262.8m.

While the loss was down by 49% year on year, it was above the figure of $0.22 per share expected by investors.

Cal-Maine shares plunged 6.3% in early deals, they had recovered nearly all lost ground within an hour of trading to stand at $40.80, down 0.7% on the day.

By Mike Verdin

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