Generic egg prices back to break even …even a bit above
Inventories creeping back up again
EP imports winding down
Exports still weak
Corn prices tanking
CALM will beat EPS estimates for Q4 IMO.
Industry setting up for a very disappointing holiday season ... worst in years
Key number in upcoming 10-k .... specialty egg price realized per dz.
1158 for Monday's report .. a good number ... i imagine there has been some extreme layer hen carnage over the last two weeks ... bottom is in on egg prices ... for 2016 anyways ... egg prices up about 25% last week ... maybe another 10 plus cents this week ... part of the problem with this egg rally is that it is producers taking hens out instead of grocers lowering prices and moving more eggs ... thus rally may run out of gas as egg prices approach break even ... usda forecast for egg prices into 2017 continues to go down .... and are not very promising ... but those forecasts are rarely accurate ... still usda price forecasts match my thinking ... chicken and egg report was interesting .. hatch was high as were eggs in incubators ... lumps of coal in xmas stockings for shareholders ... this year anyways.
So this is where CALM traded before bird flu … but a lot has changed … new U.S. production capacity has created over supply … imports have decreased significantly … and egg producers selling generics at spot market are losing $$’s
On the other hand CALM has added about $4 to book value … Added or in the process of adding about 4m hens … and feed prices are rising
Waiting … waiting … waiting
This Q's earnings might not be as bad as everyone thinks, and may even cause the stock to spike higher for a bit ... My buy point is dependent on hen numbers ... after the build up ... which is not done ... there might be a precipitous reduction in hens ... not sure if it happens in a year .. two ... five .. ten ... who knows where the stock will be trading at that tipping point ... 50, 40, 30, 20 ... but it will be a buy
Here my updated EPS Guesses … all lower on lower egg prices and higher feed… the thought of even the slightest erosion in cage-free egg prices is a bit scary
Q4 2016 – 23 cents with $.90 UB and 41 cent feed
Q1 2017 – (26) cents loss with $.75 UB and 43 cent feed
Q2 2017 – 17 cents with $.95 UB and 44 cent feed
Q3 2017 – 64 cents with $1.1 UB and 43 cent feed
Q4 2017 – 21 cents with $.93 UB and 43 cent feed
As expected … CALM did beat Q3 2016 lowered estimates
Once again I believe analysts have cut their estimates too much with their guess loss of 9 cents for Q4
My FYE 2017 guess is now only 76 cents compared to the current $2.33 analyst estimate. We have both dropped guesses significantly since my last guess.
The reason analysts have been missing estimates IMO … is that they do not recognize CALM sells using cost plus pricing for some of their generics… As a result, analyst miss to the high side when egg prices are high and to the low side when prices are low …. We are on the low side and I think analysts have dropped Q4 EPS estimates by about 30 cents too much … also I believe there is egg price lag in that CALM continues to earn higher egg prices in a dropping market and lower in a rising market … thus the big Q1 2017 loss guess. I expect rising egg prices by month end…. For specialty, my price guess stays at $1.95 to $2 for now ....
I am more pessimistic about the egg price rebound that will happen here soon … Just feel there is so much cage free capacity coming on line that it will keep generic prices depressed for a long while ... look at CALM hen numbers 34m last year i think ... about 36m now and another 2m next year ... they're not the only ones rushing into cage free production .... RA hickman rembrandt etc.... here is another wild prediction CALM hen numbers rise over the next ten year ... RA has more hens in ten years ...also i predict a big acquisition by end of FYE 2017 ... it will excite investors ... it will not excite EPS any time soon
presentation was surprisingly informative.
Many good comments about cage-free transition, egg prices, and thoughts on direction of feed prices.
Mostly blamed the EP guys for low egg prices …. EP buyers contracted for / maybe still contacting for significant imports … I agree ... they anticipate a pullback in grain prices … cage free prices now subject to downward pressure due in part to lower generics … talked about May chicken and egg report … they expect a slow summer for egg prices then improvement last half of 2016…. CALM very excited about acquisition opportunities … Dolph even seemed to hint of something specific... Seriously … I sensed a tone of Giddiness in Dolph’s comment …. It was almost like a I know something you don’t know comment …. as a poker player .. i kind of know these voice tells... but then again i'm not a great poker player so maybe just me reading into something that’s not there … ... etc etc … seriously you must listen to this presentation
IMO … if they do buy something they will hopefully only pay about $15 or less per layer... including mills and processing … Dolph and Tim seemed much more optimistic about the rebound in generic egg prices than me… but what do they know …
Ok i'm ready to call the bottom on the egg market at USDA SE L 42-45 cents.... kind of a no brainer call ... as do producers really want to pour 40 cents of feed into birds to get a dozen eggs they sell for 50 cents? Not to mention raising processing cartons admin etc...plus its June ... traditionally the second worst egg price month.
Export report came out today ... Industry was still importing a S-ton of EP from the Netherlands in April ... that should change as cheap shell eggs are now available to the breaker guys
exports still lag a year ago ... that may not change anytime soon ... Canada and Mexico just don't need as many eggs ... Canada shifting to cage-free so will need fewer conventional? maybe... Mexico over their own bird flu hump ...
judging by current inventory and prices ... May import / export situation may not have improved much.
Rising grain prices couldn't come at a better time ... These prices should encourage producers to pull marginally producing hens early and send egg prices up disproportionately more ....
Still ... i don't think we see $1 USDA SE L in 2016 .... not even at xmas and maybe not ever again ... ever! ... i hope i'm wrong about that
I did read that article yesterday … so sounds like some of their facilities were nationalized by the Russians … I used to follow their stock price which tanked with the conflict … so the idea might be that less supply might improve US exports … or maybe more importantly give other countries better market opportunities than sending eggs to the US … maybe … I have also been watching the feed crisis in South America … that too could reduce world egg production … also hog and chicken … definitely something to keep an eye on … track it with the USDA import / export report that comes out monthly … the total egg equivalent import number is a big part of the extremely low egg price story right now… EP guys who lost birds to AI have been importing product instead of buying cheap eggs and processing .. it’s a month old when released but still has good info.
Shell egg 1334 down 1% but breaking stock up 11% ... so that's where all the extra eggs are going ... specialty egg inventory is down ... so that is good ... according to last chicken and egg report producers are adjusting as hens were down a bit from last month at 302m ... first down tick since bird flu ... but it will be hard to keep that number down as new cage free production continues to come on line ... we may not see $1.25 UB MW L again .... EVER .... at least not until UB starts quoting cage-free ... which they will have to do if they want to stay relevant ... then what does that do to the flat $2 per dz CALM gets ... or what ever the flat rate for cage free is ... interesting times