read that one house of 250k hens was infected at Rembrandt ... USDA policy has been to terminate all birds at the facility ... Rembrandt seams to be arguing otherwise? based on their web site looks like these guys are liquid egg processors too ... wondering if they supply Michael ... POST indicated supply disruption from an earlier farm loss, but I don't think it was sunrise
About 10 min into today’s CALM presentation in New Orleans they talk a bit about bird flu … So far about 5 million industry pullets and hens have or will be terminated. Given May to July are the weakest months for egg sales, it probably won’t move price too much … bigger affect may be during holdays with all the baking that goes on.
So the IA facility appears to be a big liquid egg producer. Yolks are about 25% off prior year and whites off more than 40% y/y. Michael Foods, owned by POST buys and sells a lot of eggs and product on formula pricing based in part on feed and other costs to produce and process. If the IA producer sells to POST on contract but can no longer deliver, then POST might need to go to the spot market to replace. That price would have been a lot higher last year … this year the cost – market egg product spread is closer, but with the loss of these hens product prices might rise. If the IA facility is a competitor and not a contractor with POST then POST might be able to get better pricing on their products the next few months. As for McD and others, these guys likely have their price locked in for a while and might be able to ride out the shortage fairly well, or will they have to go to the spot market if suppliers can’t deliver?
Just my thoughts not sure if it’s an accurate assessment. Egg trader might know if the IA company is a contractor with or competitor of Michael.
so sonstegard is an affiliate of sunrise ?? ... and sunrise is listed on CALM's acquisitions target list (basically the whole industry) as having 5 million hens ... can't imagine all those hens are at one location, however, one report said 3.8m hens at the facility ?? even 3.8 seems like a lot of hens at one location... I think these guys are liquid egg guys ... but still ... its taking supply out... interesting to see how this plays out ... also wondering how it plays out for POST (michael foods) ... if sonstegard is a contract supplier to Michael then probably not good as ...as Michael will have to go to the spot market to replace ... but if a competitor then probably good. ... so if anyone knows if sonstegard and Michael have a relationship ... let me know please
btw 1990 also (if I remember right) big bird flu outbreak in the east led to two of the best years to that date for CALM
Investors starting to recognize the value with JBSAY.
What do you get with JBSAY a US$14.5 billion market cap company?
75% of PPC worth about $4.75 billion
About US$45 billion sales depending on the value of the Real … (of which PPC is about US$8 billion)
80% of sales made in U.S. dollars, which is why JBSAY remains strong while other Brazilian stocks have not done so well … check out the ETF EWZ
A family who has grown the business with acquisition after acquisition that NOW wants to step back and:
- Grow organically
- Look for more synergies in the business acquired
- Find ways to reduce taxes
- Reduce debt (Most of their debt is in US $ at lower interest rates but some is in the Real with interest rates as high as 12%
That was disappointing
Missed on earnings … CALM did not capitalize as well on those $2 plus Xmas egg prices as had anticipated.
Missed on feed … off by 3.5 cents
Missed on outside egg purchases … thinking CALM might have been losing $$’s on outside generics purchased for re-sale this Q … not sure
UB has cited the publicity around the new health info on eggs as one of the reasons for the record high Easter prices ...quite honestly I wouldn't think it to be a big deal either ... but UB is usually pretty much on top of what is driving the market ... UB MW Large toped out in the $1.85 range compared to $1.80 last easter ... but still well below the record all time prices around last Xmas in the $2.20 range ... of which the benefit should show up in Monday's report
I would like to see the shorts ready their puke buckets after the report comes out Monday a.m. ... but a mention of health benefits or acquisition would be good too
shorts are betting on overproduction ... they are doing it with chicken companies as well ... SAFM and PPC ... what might be different with CALM is ... IMO ... a demand shift ... per capita egg consumption is on the rise and not just because there are more eggs to be consumed .. protein demand ... new information on health benefits of eggs ... high priced beef ... also the demand shift to cage free should benefit CALM well into the future
hens holding steady at 304.7m as of march 1 ... most of us hold longer term positions here ... but should we make a short term gamble on Q3 earnings out Monday? .... tempting
sno .... I never have been on board for a JBS buy out ... simply because JBS has mostly been looking for further processing food deals like Hillshire .... but man ... you have been a wealth of SEB information this last year ... I erroneously trimmed my position at $4k ... I have more shares that will be one year and one day on Thursday (LT gains) ... may trim some more ... I do not understand the foreign element / strong $ affects and such well enough to hold a large SEB position (5 to 10% of portfolio) .... and my initial reason for purchase is no longer a reason to own ... high hog prices ... but something beyond hogs is happening here ... buffet has never been a big fan of companies subject to commodities risks ... but certainly there is value with SEB .... btw I am very excited that JBS is slowing down with the acquisitions ... this should allow them to reduce debt and the value will start to show up in their balance sheet ratios and the bottom line.
BS … My wife would be surprised .... and a little disturbed to find out there are people like you and your brother that know more about chickens than me!
Get ready for a CALM earnings beat a week from Monday … hopefully ... chillb has the over
Been a good Easter season for demand and prices ….
Atlanta, GA Fri. Mar 20, 2015 USDA Market News
SHELL EGGS: Daily Southeast Regional Eggs
Prices are steady. The undertone is steady to firm. Asking prices for
next week's deliveries are trending higher on larger sizes and Medium.
First a disclaimer … I’m not an expert in ADRs and have not followed BRFS closely … but here is how I understand Brazilian shares.
One share of BRFS traded on the NYSE is = to 1 share traded on the Brazilian exchange (BRFS3.SA)
One U.S. Dollar = .3053 Brazilian Real, currently (but has been dropping)
BRFS trades at $19.18 and BRFS3.SA trades at $62.36
The ADR trades at or about at the S.A. share price times the exchange rate …. Or currently 30.53 cents on the Brazilian Real.
So over the last year BFRS3.SA is up on the Brazilian exchange by about 40% but because the real has lost tremendous value against the dollar, BRFS ADR on the NYSE is about flat. BRFS3.SA is part of the ETF EWZ which is down about 25% for the year due in part to the strong U.S. Dollar.
If BRFS pays costs for product based on the Real and sells or exports product based on the U.S. dollar, that should be really good. If both costs and sales are based on the real, the profit earned is worth less in U.S. dollars now than it was a year ago, which is not so good. If BRFS has operations in the U.S and its costs and sales are based on the U.S. dollar, then it’s great if you live in S.A. but a wash if you live in the U.S.
So I don’t know if that makes sense or if my thinking on that is even right … but that’s my limited understanding. Snogreen has kind of an interesting post on the JBSAY board on this subject.
You are lucky to have had Don Bell as an instructor. I did not know Don personally, but have used and referenced his work extensively over the last 30 years. All egg producers or even investors should be using his work, which lives on at the Iowa State Ag dept. web site. If there was an Egg industry hall of fame he would surely be in it.
Why borrow to pay dividend? ... JBS needed cash ... if JBS borrows money in Reais it costs them 10 plus % ... when PPC borrows its less than 6%
That’s a really good point chill … I’ve read where some producers have just pulled half their flock from battery cages in order to comply with CA Prop 2. Can’t imagine that is very efficient or sustainable.
So if they pull out standard cages and put in enriched colony cages do they now have a specialty egg or will the market treat them as generics? At least if you put in cage free facilities you have a marketable specialty egg.
I think your numbers are pretty good … but here is where my guess differs:
Farm costs – I think CALM could have a 66 cent / dz farm cost on 40 cent / dz feed. The futures prices are actually higher for corn this Q but basis was extremely high last Q as CALM had a lot of that high priced old crop going into the hens in September and into October.
My guess for avg. sale price is $1.56, which is in your range. Your guess of $425m revenue from 279m dz would suggest an avg. price closer to $1.50. Generics should average in the $1.40 to $1.45 range while specialty eggs will likely be near the $2 range, maybe slightly less. UB SE L might average about $1.65 for the Q. The more eggs CALM sold into California, the higher their average dozen price will be, as CA prices were extremely high.
Eggland Best dividend paid to CALM this Q? How much will it be?
My EPS guess is $1.35 to $1.45 ... but hoping that might be too conservative.
Part IX (b) – Big Government
Ever notice how grain producers get tons of government subsidies but egg producers get zip, or next to zip. It is in the politicians best interest to have well fed voters, which means inexpensive food. So why ethanol? What a waste of grain. Great for the farmers and actually great for CALM since they usually make more money when grain prices are high, but for the consumer it is costing more in high food than the “savings”? at the pump IMO.
So government comes up with these wacky laws and regulations that create artificial demand as in the case of corn for ethanol or artificially high prices as Prop 2 did for California egg producers.
So what is next? We know the industry is moving to more room for hens. Has there even been a hen house built in the last two years that had battery cages? I don’t think so. Soon it may be a government mandate, but at least this trend is mostly consumer driven. Might they cap meat prices? Doubt it, but they did it to beef in the 80’s. Limits on imports and exports are always a fun political tool to mess with producers.
If government would quite messing with the food systems, including getting rid of subsidies, I think the grain and meat producers would figure it out and do just fine.
Part IX (a) – Big Customers
Customers want pricing as close to CALM’s cost as they can get it. Some of the major retailers like Wal-Mart and Krogers have such leverage they can keep putting pressing for more and more cents below UB market when pricing their eggs.
Fortunately, I don’t think Wal-Mart wants to be in the egg business. Also, I’m guessing CALM’s cost of production is lower than most other producers, so when CALM sells eggs using a “grain based” formula they are making X, while the less efficient producer is making X – 1, 2 or more cents on the same contract.