Cal-Maine Foods Reports on Q4 and FY 2020

In a press release dated July 20th Cal-Maine Foods (CALM) announced results for the 4th quarter and Fiscal 2020 ending May 30th 2020.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS)

• Dozen shell eggs sold: 282,422,000 (254,722,000; +10.8%)
• Average selling price of all shell eggs: $1.57 per dozen; ($1.08 per dozen; +45.3%).
• Average selling price of specialty eggs calculated from data released: $1.93 cents per dozen; ($1.80 per dozen; +7.2%).
• Average selling price of generic eggs calculated from data released: $1.46 cents per dozen; ($0.80 cents per dozen; +82.5%).
• Differential between generic and specialty eggs: $0.47 cents per dozen; ($1.00 per dozen; -53%)
• Specialty eggs as a proportion of volume sold: 24.4%; (24.5%; +0.4%)
• Specialty eggs as a proportion of sales value: 9%; (44.1%; -32.2%)
• Proportion of eggs sold actually produced by Cal-Maine flocks: 86.0%; (87.6%; -1.8%).
• Feed cost per dozen 40.5 cents (41.1 cents; -1.5%)

*Assumes that 98 percent of sales value derived from shell eggs.

In commenting on results for the quarter and year Dolph Baker, Chairman and CEO of Cal-Maine Foods, Inc., stated, “Fiscal 2020 demonstrated Cal-Maine Foods’ resiliency in the face of challenging business conditions and volatile egg prices. After three fiscal quarters characterized by an oversupply of eggs and depressed market prices, demand for eggs increased and market prices rose 62.4 percent during our fourth fiscal quarter over the average price for the first three quarters, as consumers purchased more eggs for preparing meals at home in response to the COVID-19 pandemic. This demand trend also coincided with higher seasonal demand during the peak Easter season. As a result, our sales volumes were up 10.9 percent compared with the fourth quarter of fiscal 2019.

The Southeast large market average price for conventional eggs for the fourth quarter of fiscal 2020 increased to $1.71 compared to $0.86 for the fourth quarter of fiscal 2019, with a high of $3.18 and a low of $1.02. For fiscal 2020 the Southeast large market average price for conventional eggs was $1.22 compared to $1.23 for fiscal 2019, with a high of $3.18 and a low of $0.62.

"Specialty eggs are an important part of our growth strategy, and we strive to provide a favorable product mix in line with consumer demand. We have continued to position Cal-Maine Foods to meet the expected additional demand for cage-free eggs. California, Colorado, Washington, Oregon, Massachusetts, Rhode Island and Michigan have all passed minimum space and/or cage-free requirements, mandating sale of only cage-free eggs with implementation of these laws ranging from January 2022 to January 2026. These states represent approximately 22.9 percent of the U.S. total population according to the U.S. Census Bureau. Legislation is also pending in Arizona and Hawaii for cage-free requirements. We have invested over $371.7 million in facilities, equipment and related operations to expand our cage-free production starting with our first facility in 2008. Throughout the next two years, additional cage-free capacity will come online in Florida, Texas and Utah, which will provide significant additional processing, pullet and production capacity in time to meet expected customers’ needs.

Operating income was $76.1 million in the fourth quarter compared to an operating loss of $30.4 million in the prior-year fourth quarter. We also benefitted from a more favorable effective tax rate in fiscal 2020 and in the fourth quarter, as we recorded a tax benefit of $2.4 million related to the carryback provisions of the Coronavirus Aid, Relief and Economic Security Act of 2020 (CARES Act). Overall, our farm production costs per dozen were down 0.8 percent over the fourth quarter of fiscal 2019, reflecting a 1.5 percent drop in feed costs. We believe we will continue to have an adequate supply of ingredients in fiscal 2021. However, current ongoing uncertainties and supply chain disruptions related to the COVID-19 outbreak, weather fluctuations and geopolitical issues surrounding trade agreements and international tariffs may lead to further price volatility.

 As the coronavirus continues to spread and reach more rural communities where we operate, it is critical that we provide a safe working environment, and we continue to implement appropriate protections taking into account protocols recommended by the Centers for Disease Control (CDC) and other government health agencies. For fiscal 2020, we incurred expenses of approximately $2.8 million related primarily related to supplemental pay. We are committed to making the necessary investments to support and protect all Cal-Maine Foods employees.

Baker concluded “while we are facing an uncertain environment, we will continue to execute our growth strategy in fiscal 2021 - provide a favorable product mix, including cage-free and other specialty eggs, invest in our operations, identify acquisition or other growth opportunities that enhance our production, and manage our operations in a responsible and sustainable manner.

The USDA Economic Research Service issued an updated forecast of egg production on July 16th 2020 revising the previous June 18th 2020 report. The volume of eggs produced and per capita consumption for 2020 were lowered by 1.9 percent and 2.6 percent respectively compared to the May report taking into account current trends. The July projection for 2020 production and per capita consumption were revised downward to reflect a reductions of 3.4 and 3.8 percent respectively from 2019. The discrepancy between production and consumption will be offset by the substantial but transitory rise in price in March and April. The 2020 benchmark New York unit price for 2020 was increased 29.3 percent from 2019, a 13.8 percent downgrade from the June projection by USDA. Revised production data for 2016 and 2017 should be compared to 2015, impacted by the Spring outbreak of HPAI in the upper-Midwest. The price elasticity of eggs is denoted by the disparity in the decline in the New York price benchmark relative to volume of production in 2019. The USDA forecast to be revised in August will provide greater clarity on reopening of the economy, that is still depressed with high unemployment exceeding 60 million claims since March.

For 2021 the USDA forecast production to attain 8,135 million dozen, up 2.2 percent from 2020 production with a corresponding 2.5 percent decrease in per capita consumption to 285.8 eggs.

July 2020 data is shown in the table below:-

Source: Livestock, Dairy and Poultry Outlook –July 16th 2020

*Impacted by Spring 2015 HPAI outbreaks. Consumption in 2014, 267 eggs per capita

Subscribers to EGG-NEWS are referred to the postings depicting weekly prices, volumes and trends and the monthly review of prices and related industry statistics.

Export of Shell Eggs and Products January-May 2020.

USDA-FAS data collated by USAPEEC, reflecting export volume and values for shell eggs and egg products are shown in the table below comparing the first five months of 2020 with the corresponding period in 2019:-

U.S. SHELL EGG AND EGG PRODUCT EXPORTS DURING JANUARY-MAY 2019 COMPARED WITH JANUARY-MAY 2020

Source USDA-FAS/USAPEEC

OVERVIEW

The July 10th 2020 USDA WASDE Report was updated from the June edition reflecting corn and soybean harvests based on projected yield and planted area. The corn acreage to be harvested is currently estimated at 84.0 million acres, down 6.6 percent from the June WASDE report. Soybeans will be harvested from 83.0 million acres, up 7.1 percent from the 2019 crop harvested from 77.5 million acres in 2019.

The July 2020 WASDE estimate of corn yield was unchanged at 178.5 bushels per acre, (168.0 bushels per acre in 2019). The projection of soybean yield was retained at 49.8 bushels per acre compared to 47.4 bushels per acre for the 2019 crop

The July USDA projection for the ending stock of corn was reduced by 20.3 percent to 2.648 million bushels. Due to increased supply the ending stock for soybeans was raised 7 percent to 425 million bushels.

REVIEW OF JUNE 2020 EGG PRODUCTION COSTS AND STATISTICS.

HIGHLIGHTS

• June 2020 USDA ex-farm blended nest-run benchmark price was 50.7 cents per dozen, 20.1 percent lower than in May and 60.5 percent lower than the high April value of 128.5 cents per dozen. The downward price trend during May and June is attributed to restoration of normal consumer purchasing patterns. This followed COVID-19 panic buying during late March into early April. The supply pipeline was re-filled in April and consumption declined thereafter.
• June 2020 USDA average nest-run production cost was 0.3 cents per dozen lower than in April 2020 at 58.2 cents per dozen.
• June 2020 USDA benchmark nest-run margin attained a negative value of 7.5 cents per dozen compared to a positive margin of 3.0 cents per dozen in May 2020.
• May 2020 national flock in production (over 30,000 hens/farm) was down 5.7 million hens or 1.8 percent to 305.9 million. There are still 14.1 million hens in or returning from molt.
• May 2020 pullet chick hatch was down 13.7 percent from April 2020 to 26.4 million.
• May 2020 export of shell eggs and products combined was down 14.3 percent from April 2020 to710,000 case equivalents representing the theoretical production of 10.3 million hens.

INTRODUCTION.

Summary tables for the latest USDA June 2020 prices and flock statistics made available by the EIC on July 8th 2020 are arranged, summarized, tabulated and reviewed in comparison with values from the previous June 5th 2019 posting reflecting May 2020 cost and production data.

COSTS & REVENUE

Components of USDA 6-Region 1stCycle nest-run Cost of Production:-

* Adjusted January 2020 and used as a rounding factor

Ex Farm Margin (rounded to nearest cent) according to USDA values reflecting JUNE 2020:-

50.7 cents per dozen1- 58.2 cents per dozen = -7.5

(May 2020 comparison 60.91 cents per dozen – 57.9 cents per dozen = +3.0 cents per dozen.)

Note 1: USDA Blended egg price

EGG-NEWS summarizes and comments on data and trends in the monthly USDA Cage-Free Report, summarizing the information posted weekly in the EGG-NEWS Egg Weekly Price and Inventory Report.

The USDA Cage Free Report for the month of June 2020 released on July 7th 2020 documented a 0.6 percent increase in the population of hens producing under the Certified Organic seal to 15.8 million, unchanged from the average in Q2 2019. In contrast cage free flocks increased by 2.5 percent in June to 62.6 million representing an 11.2 percent increase from the average during the first quarter of 2020. The respective numbers of hens in organic and cage-free flocks should reflect the realities of supply and demand in the market over successive quarters.

Average flock production was raised to 78.5 percent for both categories of non-caged hens reflecting the depletion of older flocks and higher relative production from chicks placed during late December 2019 and in January 2020.

Based on the importance of cage-free production, the USDA-AMS issues their report on volumes and prices at monthly intervals for the information of Industry stakeholders. There is some doubt as to the accuracy of the individual monthly flock numbers especially when reports show either no change in the cage-free flock for sequential months or a large difference for the preceding month after the end of a quarter. It is suggested that USDA consider a quarterly report with more accurate and consistent data to be more useful to the industry.

Subscribers are referred to weekly USDA wholesale and retail prices posted in the EGG-NEWS Egg Price and Inventory Report E-mailed each Friday. The previous Monthly Cage-Free Report is available under the STATISTICS Tab.