Egg market conditions hurt Cal-Maine in third quarter

Lower market prices and demand for eggs pushed Cal-Maine Foods’ net income and net sales down during the third quarter of fiscal year 2017.

Roy Graber Headshot
(Eduardo Mota Silva | Freeimages.com)
(Eduardo Mota Silva | Freeimages.com)

Lower market prices and demand for eggs pushed Cal-Maine Foods’ net income and net sales down during the third quarter of fiscal year 2017.

The quarter ended on February 25, and the company reported its financial results on March 27.

Cal-Maine Foods, the world’s largest egg producer, reported a net income of $4.1 million for the third quarter, down from the net income of $64.2 million recorded during the same quarter during fiscal year 2016. For the first three quarters, the company reported a net loss of $49.8 million, compared to a net income of $316.4 million during the same time frame a year ago.

“Our results for the third quarter of fiscal 2017 reflect the volatile market conditions the egg industry has experienced throughout this fiscal year,” Dolph Baker, chairman, president and CEO of Cal-Maine Foods stated in a press release. “Our results were affected by lower market prices and weaker demand trends compared with the third quarter last year. Market prices moved significantly higher after Thanksgiving, but dropped back down after Christmas, and our average customer selling prices for the third quarter of fiscal 2017 were down 27.9 percent from the same period a year ago.”

Egg supply ahead of demand

According to Baker, egg markets have remained under pressure, and he does not expect any meaningful improvement until there is a better balance of supply and demand.

After the 2015 avian influenza outbreak led to the deaths of millions of hens, egg producers have since repopulated those farms to levels on par with those levels before the outbreak, Baker said, citing USDA data. The new supply of younger hens has been more productive, he added, which has resulted in a larger number of eggs.

While Baker noted that some export markets that were closed as a result of the 2015 outbreak opened up again, the export potential has not yet reached pre-outbreak levels.

Acquisitions

Cal-Maine Foods’ acquisition of the assets Happy Hen Egg Farms closed shortly after the conclusion the third quarter. The acquired assets include commercial egg production and processing facilities with current capacity for approximately 350,000 laying hens and related distribution facilities located near Harwood and Wharton, Texas. Located near Cal-Maine’s other Texas locations, Happy Hen Egg Farms’ current site is designed for capacity of up to 1.2 million laying hens, and Baker said the company intend to capitalize on specific market opportunities created by this additional production capacity.

Baker said Cal-Maine will continue to examine more “selective” acquisitions, adding that the company has a strong balance sheet to support such acquisitions.

 

 

Page 1 of 1576
Next Page