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US egg prices to stay 'very high', says Cal-Maine Foods

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The boost from the avian flu outbreak to US egg values, which have doubled in the key New York market, is not over yet Cal-Maine Foods said, as it unveiled a five-fold surge in earnings thanks to the price surge.

The US egg industry "is still feeling the effects of the substantial reduction in the national laying hen flock" prompted by the outbreak in the spring of avian flu, said Dolph Baker, chairman and chief executive at Cal-Maine Foods, the world's biggest egg producer.

Although the incidence of new bird flu cases has dried up, "we believe that egg prices will remain very high until the supply situation returns to more normal levels," Mr Baker said.

The US Department of Agriculture estimates that US egg production will not, on a quarterly basis, return to showing year-on-year growth until the April-to-June period of next year, and even then, at 1.72m dozen, it would be the weakest performance for the quarter since 2012.

The USDA earlier this month trimmed by 50m dozen to 6.80m dozen its forecast for US production in calendar 2015, representing a 6.4% fall year on year.

'Record prices'

The squeeze, which has spurred a rise in US egg imports in an effort to bolster supplies, sent US egg prices soaring, to an average of $2.74 per dozen last month in New York, a 104% jump year on year, according to the USDA.

Cal-Maine Foods said that it sold its eggs at $2.243 per dozen in the three months to late August, a rise of 66% year on year, which also included some impact from a shift in its sales mix towards more expensive, specialty eggs.

"Average selling prices for shell eggs spiked to record levels," Mr Baker said.

With volumes higher too, group sales soared 71% to $609.9m, some $10m ahead of market expectations.

Short of forecasts

Group earnings soared to $143.0m, from $27.66m the year before, given an extra boost by lower grain prices, which saw Cal-Maine's feed costs fall by 13.3% to the equivalent of $0.419 per dozen eggs.

Nonetheless, the rise in earnings, to the equivalent of $2.95 per share, was a little short of market expectations of a $3.14-per-share result.

Lower feed costs "were offset by the significantly higher prices paid for purchased eggs, increased processing costs, and higher costs for cartons and packaging," Mr Baker said

"In addition, the company had higher expenditures related to enhanced biosecurity measures at all locations," in an effort to ensure its sites remained free of avian flu.


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