管理層發言
Good morning, everyone, and welcome to the Cal-Maine Foods First Quarter Fiscal 2026 Earnings Conference Call. Please note, this call is being recorded. I will now turn the call over to Sherman Miller, President and Chief Executive Officer of Cal-Maine Foods. Please go ahead.
Good morning, and thank you for joining us today. We appreciate your interest in Cal-Maine Foods and the opportunity to share our results and outlook. This is an important milestone for us as it marks our first ever earnings call. It's an important part of our commitment to a more robust Investor Relations strategy aimed at increasing visibility into the institutional investment community and providing stakeholders with increased transparency into our business. Before we begin, I want to remind everyone that today's remarks may include forward-looking statements. These are based on management's current expectations and are subject to risk and uncertainties described in our SEC filings. I want to start the call today with an expression of humbleness and gratitude. I'm humbled each morning in realizing the dedication and strength of our Cal-Maine family. I'm truly grateful to have the opportunity to represent each and every one of them on this call today.
I'd like to recognize a few folks who have been a huge part of building the Cal-Maine foundation, which is the platform that we operate from today. Cal-Maine has always been about people, our over 4,000 employees, our customers, our communities, and our shareholders. Every day, our team demonstrates the discipline, accountability, and frugalness that have defined this company from the very beginning. We stand on the shoulders of our Founder, Fred Adams, and leaders like Dolph Baker, who remains an important guide as Board Chair. Also, there is a long list that have mentored both me and our management team as a whole. I'd like to name just a few. Steve Storm, Bob Scott, Jack Self, David Jenkins, Marc Ashby, all previous vice presidents of operations; Bobby Raines and Tim Dawson, previous CFOs; Jeff Hardin and Ken Paramore, both previous Vice Presidents of Sales; Ken Looper, former President; Joe Wyatt, former Vice President of Feed Mills; Charlie Collins and Mike Castleberry, both former Controllers.
There are many more to thank, but for the sake of time, I just want to say a very simple and humble thank you to all of our employees, both past and present. Each has contributed to building a strong foundation that is in place today. The cornerstones of that foundation are simple. We have broad scale, which provides us significant benefits. Our vertically integrated model allows us to manage every step of production, which keeps costs low, enables supply reliability, safeguards quality and food safety, and gives us the flexibility to optimize output. This is also a significant competitive advantage. Our culture, what we refer to as the Cal-Maine Way, is one focused on operational excellence. We define operational excellence as an unwavering focus on the fundamentals. That means investing in modernization, embedding biosecurity, and applying the Cal-Maine way of accountability across our operations.
With respect to biosecurity, we've invested more than $80 million in equipment, procedures and training to safeguard flock health and mitigate the risk of highly pathogenic avian influenza since 2015. Unfortunately, high-path AI remains a reality for the industry. Financially, we're operating from a position of strength with a great balance sheet and enough cash to opportunistically pursue acquisitions in furtherance of our strategy. Finally, as I mentioned, we have a fantastic team with significant depth and experience. Speaking of our team, I'd like to welcome Melanie Boulden and Keira Lombardo to Cal-Maine. Melanie, who joins our Board of Directors, has deep expertise in the food and beverage industry and nearly three decades of global business management, brand building, and experience at companies like Coca-Cola, Kraft, and most recently, Tyson. Keira was recently appointed as the company's first-ever Chief Strategy Officer.
Like Melanie, Keira has significant experience working with consumer-facing companies. She will work with our senior leadership team to further accelerate and shape enterprise priorities, building on Cal-Maine Foods' leadership role in a rapidly changing marketplace. Our foundation and strong business momentum allowed us to deliver the strongest first quarter in our history and also reflect the benefits of diversification, the strength of our operations, and the progress we've made in positioning Cal-Maine for the future. Specifically, our results were driven by strong growth in specialty eggs and the expansion of our prepared foods platform, supported by solid performance in conventional eggs. Together, specialty eggs and prepared foods accounted for nearly 40% of net sales, underscoring their central role in Cal-Maine's strategy and long-term financial performance. These results show Cal-Maine advancing as a diversified consumer-driven food company.
Our conventional egg business continues to provide stability and scale, while specialty eggs and prepared foods are increasingly shaping the future of our portfolio. Specialty eggs and prepared foods are positioned as growth engines, shifting our mix toward higher-value categories. And across it all, our vertical integration and financial strength ensure that we can execute with discipline and resilience. With that, let me turn the call over to our Chief Financial Officer, Max Bowman, to drill down into our results for the quarter and discuss our capital allocation framework. Max?
Thanks, Sherman, and good morning, everyone. Thanks for tuning into our first live earnings call. This is a new format for us and is part of an increased focus on our part to deliver increased transparency to all of our stakeholders. As a reminder, we published our earnings release and 10-Q this morning. Additionally, we have published a brief earnings presentation on our website. These documents contain detailed information on our financial results. I'll touch on the highlights for the first quarter of fiscal 2026. Net sales were $922.6 million, up 17.4% from $785.9 million last year. The increase was driven by an increase in shell egg sales and from contributions from our recent acquisitions in the prepared foods space. Shell egg sales were $789.4 million, up 6.5%, driven by a 3.9% increase in net average selling price for shell eggs and a 7.5% increase in specialty egg sales volume. Shell eggs represented 85.6% of total net sales, which is down 880 basis points from last year as our portfolio mix diversified into prepared foods.
Specialty eggs generated $283.5 million in sales, up 10% with double-digit growth in cage-free and pasture-raised. Specialty eggs account for more than 30% of net sales. Conventional egg sales generated $505.9 million in sales, up 4%. Prepared foods delivered $83.9 million in sales, an increase of over 800% with Echo Lake Foods contributing sales of $70.5 million. Prepared foods represented more than 9% of our net sales this quarter. This shift in mix demonstrates how specialty eggs and prepared foods are shaping our portfolio towards higher-margin categories. Gross profit was $311.3 million or 33.7% of net sales, up from $247.2 million or 31.5% of net sales last year. This nearly 26% improvement in gross profit was driven primarily by higher shell egg selling prices, growth in our specialty egg sales volume, lower feed costs, and contributions from prepared foods. Operating income was $249.2 million or 27% of net sales compared with $187 million or 23.8% a year ago, a 320 basis point improvement.
Net income was $199.3 million or $4.12 per diluted share, up from $150 million or $3.06 per diluted share last year. These improvements were driven by higher average selling prices for shell eggs and the incremental contributions from prepared foods. Turning to cost and expenses, our feed costs were actually a source of support this quarter. On a per dozen basis, feed costs decreased about 4% year-over-year, driven primarily by lower soybean mill prices. That reduction translated into roughly $6 million of savings in cost of sales. SG&A expenses increased modestly, up about 12% from the prior year. This was largely tied to higher sales volumes and the integration of Echo Lake Foods, which drove higher delivery expenses and other overhead. Marketing was essentially unchanged. Importantly, these added SG&A costs have directly supported growth in both shell eggs and prepared foods. In fact, SG&A as a percentage of sales decreased slightly from the prior year.
On the production side, capacity expansion and rebuild post HPAI is also supporting our growth. Breeder flocks increased 46%, chicks hatched were up 77%, and the average number of layer hens rose 10%. We sold 2.5% more dozens year-over-year, with specialty dozens increasing 7.5%. Our growth is not only driven by pricing, but also by real volume expansion supported by long-term investments in our capacity. We continue to see tangible benefits from our modernization initiatives and in-line facilities. These investments enhance yields, improve our productivity, and reinforce our low-cost positioning. The Cal-Maine Way, embedding best practices and process innovation remains central to our ability to operate efficiently. Operating cash flow was very strong at $278.6 million, more than double last year's level of $117.5 million. We ended the quarter with $252 million in cash and equivalents and $1 billion in investments, and we remain virtually debt-free.
Our capital allocation approach is centered on maximizing total shareholder return, and we view it through five lenses. First, our dividends. Consistent with our standing dividend policy, we will pay a dividend of $1.37 per share payable November 13 to shareholders of record on October 29. Second, share repurchases. We plan to take an opportunistic approach to share repurchases, guided by our broader commitment to disciplined capital deployment. Depending on circumstances, we may use different methods to execute buybacks such as open market purchases, accelerated programs, or prearranged trading plans. Third, earnings per share growth. This is supported by disciplined reinvestment in our business, particularly in modernization, margin expansion initiatives, and efficiency programs. Fourth, M&A. We are focused on related areas, geographic expansion, and opportunities that meet strict financial return thresholds while strengthening our supply position.
Prepared foods is a great example of this, where the best investments is in our sales and the fast-growing subcategories we are building. And finally, multiple expansion. Over time, as we shift our mix and deliver higher quality, more predictable earnings, we believe Cal-Maine Foods will be positioned for a valuation that reflects that improvement. In short, our strong cash generation allows us to fund growth, support our dividend, be opportunistic on repurchases, and pursue disciplined M&A. In turn, these actions create even more cash flow for future deployment. That concludes my review of the financial results. I'll now turn the call back to Sherman for additional commentary on where we are going strategically.
Thanks, Max. Let me close by reinforcing a few themes. Cal-Maine is the largest egg producer in the United States with significant scale and vertical integration that delivers efficiency, lower cost, and supply reliability. But scale alone is not enough; consumers are demanding more choice, more convenience, and more protein-rich foods. Our mission is to meet that demand with a diversified portfolio that ranges from conventional eggs to specialty eggs and increasingly into prepared foods. Specialty eggs and prepared foods are not promises for tomorrow; they are delivering today. Over time, we expect them to continue to improve the quality of our earnings and lead to margin expansion. We are executing a strategy to create a stronger, more predictable Cal-Maine. That strategy, of course, has the strong M&A component embedded in it, supported by a robust pipeline of disciplined accretive opportunities.
Echo Lake is a great example of how we're executing. Since the acquisition in June, utilization has ramped quickly, and we are on track to exceed every financial and operational expectation we set forth at the time of the acquisition. We've already approved a new $14.8 million investment in a high-speed pancake production line at our Burlington, Wisconsin facility, which will expand capacity, add automation, and improve packaging to capture accelerating customer demand. Projects like this will increase efficiency and scale, and they demonstrate our approach to disciplined investments in extensions and subcategories with attractive returns supported by strong consumer demand. We're becoming a house of brands from Egg-Land’s Best, Land O'Lakes, Farmhouse Eggs, 4Grain, Sunups, Sunny Meadow, MeadowCreek Foods to Crepini, reaching consumers across national, regional, and private label programs.
We account for roughly half of all Egg-Land’s Best sales, which remains the #1 brand of specialty eggs in the United States. Our scale, vertical integration, and financial discipline provide a strong foundation, while specialty eggs and prepared foods are proven growth engines delivering higher quality, more consistent earnings. Together, these strengths make Cal-Maine a compelling combination of both value and growth in today's food sector. At the same time, our mission is clear. We provide one of the most nutrient-dense, affordable sources of protein available. That matters today more than ever. Eggs are purchased by 97% of U.S. households and remain one of the lowest cost sources of high-quality protein. Consumers are eating more protein overall with high-protein diets ranking as the most common eating pattern for the third consecutive year. Eggs fit squarely into that trend because they are fresh, versatile, and cost-effective.
Specialty formats and ready-to-eat products extend that value proposition, giving people more ways to include eggs in their diets. This is not just about chasing trends; it's about meeting fundamental needs for nutrition, affordability, and value in the American diet. Looking forward, our strategy is clear. We will, number one, expand specialty and prepared foods; number two, leverage vertical integration and operational excellence to remain a low-cost reliable supplier; and number three, pursue disciplined M&A to drive mix uplift, expand geographically, and create long-term stockholder value. Cal-Maine combines scale, vertical integration, and financial strength with proven growth from specialty and prepared foods. Conventional eggs provide a strong foundation, while consumer demand for protein and the relative affordability of eggs create powerful tailwinds. Our disciplined capital allocation and operational excellence reinforce this advantage.
We are confident that the initiatives we're executing today will translate into durable growth, stronger margins, and higher returns for our shareholders. I want to close by thanking the entire Cal-Maine team for their dedication, our customers for their trust, and our stockholders for their continued support. With that, I'll turn the call back over to the operator to begin the Q&A portion of today's call.
分析師問答
Our first question comes from Heather Jones with Heather Jones Research.
I want to start by expressing my gratitude for your participation in these calls; they are extremely beneficial. My first question is regarding pricing. This quarter, your price capture compared to industry benchmarks was significantly lower than in the past. Could you provide some quantitative or qualitative insights into the changes in your mix regarding cost-plus and market-based pricing? This information would help us make more accurate projections moving forward.
Heather, this is Sherman, and thank you for that question. I'll start, then I'll call on Max to finish up here. But I want to start this conversation just talking about how important our customers are and us keeping their trust and support, and us always thinking about the long term. Each and every customer has their own go-to-market strategy, and there's certainly a multitude of different pricing structures out there. But I think what you're indicating, Heather, is some topside slippage, and what we would encourage you to think about is just balance that with the downside, the mid-cycle uplift that comes with that. Over time, market realization actually improving for the long term, the reduction of volatility, and certainly, the longer-term arrangements that come with that. So we think there's a lot of appeal in this shift. And certainly, it's not complete because if you look in our Q, we do indicate that the majority of our conventional eggs are still priced off of the market framework.
So there's still a lot of our history in our pricing agreements, but certainly, certain customers have different thought patterns on their go-to-market strategy. And once again, upside opportunity is balanced with the downside protection here. And always, we strive for true partnerships to be the type of partner that they can rely upon not only for supply but for meeting their other needs. So Max, I'll pass it to you if you have any other comments to add there.
Sherman, I think you covered it. It's just all about customer alignment and positioning ourselves as best we can for the long term through the cycle.
And then my follow-up is on Echo Lake. Those results were stronger than expected across the board, just the sales and the margins. So just, one, should we be expecting significant sequential revenue growth for that business? And secondly, was there anything related to cost, timing, etc., that affected margins? Or is this a good gross margin to use going forward?
Heather, another great question. And it's hard to express the amount of excitement that we have when you say not only Echo Lake but prepared foods and just the growth opportunity that we have, the focus on higher value, higher quality, more consistent and then margin expansion over time. It opens lots of doors for us for additional organic growth and M&A, and we do feel good. The color that we added in our Q is that we feel very strongly that they're meeting and exceeding all of the initial goals that we set for them. And Echo Lake is strong. We spent a lot of time in due diligence, not only looking at the business but looking at the team, and the team is what I really like to brag about, just an extremely solid team that has a mind for growth, a mind for perfection and achieving goals. So very excited there. Max, I'll see if you have any comments to add.
Yes, Heather. I believe it's in line with or exceeding some of the benchmarks we mentioned in the initial investor presentation for Echo Lake. As Sherman noted, we’re feeling very positive about Echo Lake and its future position. We highlighted the synergies early on, estimating $15 million, and I think we are on track to reach that and possibly exceed it. We are also already focusing on reinvestment at Echo Lake with an additional investment announced.
Yes, and that's significant, Max. It's almost a 10% growth in their annual volume. So you can see how much we're believing in it, Heather.
Our next question comes from the line of Pooran Sharma with Stephens.
Just wanted to say congrats on the quarter and on getting your first earnings call here. Maybe for the first question, wanted to understand a little bit about the supply situation. It looks like we've had a pretty good sequential build back in the layer flock over the last couple of months. I know in our past conversations, we've talked about how long it will take to get back to about 325 million hens. And I think the industry projections called for about 305 million to 315 million by year-end. But we have been hearing some expansion among smaller contract farmers may not be fully captured in the latest USDA figures of about 300 million hens. So just wanted to get your thoughts on how to think about supplies over the next few quarters from here.
Thank you for the question. The USDA hen numbers released on September 1 showed 301.4 million, which is significantly lower than the five-year average. However, it's important to consider the bigger picture. A basic rule suggests that there should be one chicken for each person in the U.S., and with the population around 340 million, we are falling short of the market's potential. There are many factors affecting demand, but we are seeing early signs that high-path avian influenza is still a significant issue, not just in the U.S. but globally. Globally, there are numerous challenges related to this problem. Currently, about 3.1 million hens have been removed from that 301.4 million total, along with multiple turkey flocks. Migration patterns are also raising concerns. We don't have definite indicators about how the situation will develop this fall, but experts express significant worry regarding future high-path avian influenza outbreaks.
It’s crucial to consider both supply and demand dynamics. Seasonality also plays a role. The last few years have been unpredictable, as normal seasonal patterns have been disrupted by bird losses, complicating the situation. Stabilizing supply is essential for effective marketing programs. On the demand side, we are optimistic due to favorable trends. The FDA now permits labeling eggs as healthy, and organizations like the American Heart Association and the American Academy of Pediatrics recommend eggs for their health benefits. People are increasingly seeking clean, unprocessed foods, and eggs are a focus since 97% of households purchase them. The United Nations also advocates for eggs, which fit well with current trends for health and convenience, remaining affordable in terms of protein cost. They also often have low or zero content of sodium, sugar, and saturated fats. We believe the demand side is showing significant momentum, but over the past three years, we have seen a pattern of advancing and then regressing. We hope for a much better fall than the preliminary signs suggest.
I think you covered it, Sherman.
Great. I appreciate the color there. Just wanted to maybe hone in on HPAI. We had the 3.1 million case in Wisconsin. And I think in the northern states, you've been hearing about some turkey flocks that had been impacted by the virus. It seems a little bit earlier than expected, early in the migration period, as you called it. Do you think the industry is better prepared this year than last? I know you talked about your own biosecurity measures, your own investments into your biosecurity. But just from an industry kind of perspective, do you think they're better prepared this time around than last time? And do you think we could see the potential for a similar magnitude just given where the industry is at?
I can't predict the magnitude, but what I do feel confident in is a lot of work has gone into biosecurity and preventing the lateral spread. The big question mark still comes from these point source introductions, and that ties back to not only migrating birds but also the pair of domestic species that are around farms, and just a huge need for concrete epidemiology to know how this virus is not only getting onto farms but getting into chicken houses. And there's work certainly being done on that, but the silver bullet of here's the problem, here's how to solve it is still out there. We've got to find it. And certainly, biosecurity is top of mind. We have invested over $80 million. It's something that we've been very serious about since 2015 and beyond that even. So unfortunately, I can't give you a prediction of how it's going to play out, but the early indicators are that the birds are certainly carrying it as they migrate, and it's certainly a virulent strain that's still well capable of infecting chickens and turkeys.
I think we cannot speak for the industry, nor would we pretend to. However, it's clear that everyone in the industry is taking it very seriously. We continue to focus on what we can control, relying on the scale and diversity of our operations that provide us advantages. At the same time, we must execute and stay diligent every day. You're only as good as your worst day, so consistency is crucial in our operations. All our locations are discussing this literally every day and are focused on it, which will be essential for us moving forward.
Our next question is from Leah Jordan with Goldman Sachs.
Sherman and Max, thanks for hosting this call. Really appreciate all the detail. I wanted to ask about specialty eggs. You called out double-digit growth in cage-free and pasture-raised. Just any more detail on the trends you're seeing in specialty? And how are you thinking about capacity growth for that segment going forward? And ultimately, where would you like to land in terms of mix between conventional and specialty longer term?
Leah, great question. As you pointed out, pasture-raised double-digit growth year-over-year in dollars and volumes. And Leah, one thing that we continue to focus on is the word choice. We want to produce what the customer, the consumer wants to purchase. We focus on a very broad range so that we make sure that we service all customers. We also love to talk about the strength of Egg-Land’s Best, the #1 branded specialty eggs that we produce over 50% of the dozens for Egg-Land’s Best, huge, huge tailwinds for us. The way we think about it is that we want to move at our customers' long-term pace. We don't make short-term decisions. We've been in this business a long time, and we think very forward on how different categories play out, and that circles us right back to choice. So we invest broadly, and we make sure that we're positioned for the long term. But we certainly see growth that's happening both in branded and private label, in pasture-raised and certainly cage-free as well. And we really focus hard on our long-term enterprise value to increase that over time. So we will continue to invest in cage-free, we will continue to invest in pasture-raised as well as the other items, and the customer will be our guide on the pace and scale that we do that at.
Yes. I mean Leah, long term, we focus on capacity growth in specialty, particularly. that's typically around double digits, 10% or so, and we continue to keep focusing there. And over time, it's hard to predict exactly that mix. I mean, obviously, acquisitions could play into that. We've purchased some nice acquisitions in the last three years that had some significant conventional production. So those numbers go up. But over time, we believe and think that the specialty will continue to grow as a percentage of the overall mix.
That's very helpful. And then maybe just sticking with the theme of shifting the mix of your business. I wanted to go back to the Echo Lake discussion. What have been the initial learnings or key surprises over the past few months? And then just on the longer-term growth, any more color there? I guess, how many more opportunities like the recently announced line extension for pancakes are there?
We do believe there are more, which would definitely fall under the organic growth. But the other exciting part of this, we've added a lot of scale to our company through M&A. And this opens the door to a new channel of M&A, and we think there will be some opportunities there. And no surprises with Echo, we knew that there was a tremendous team coming with Echo, and they've absolutely delivered in every area. A lot of key initiatives out of the gate, working on leadership and labor, reliable manufacturing, operational excellence, sales planning, gross margin management, net margin management, market expertise, just everything about the business that we should be touching, the team is driving forward on and extremely exciting. And we're excited about showing the growth that we did this quarter, but we certainly believe that there's opportunities as we mentioned earlier about the approval of $14.8 million for a new pancake line. That's almost a 10% increase in our volume right out of the gate. So good things to come there. Max?
Sherman, you covered it well. I want to remind everyone that we're still in the early stages of this, as the closing date was June 2. We have some exciting meetings planned to engage with the Echo Lake team on their long-term plans. We're particularly enthusiastic about learning more about their capabilities, especially the disciplined and logical approach they're taking to maintain their current business while positioning for future growth. There will be more updates to come, but as we said initially, Echo Lake has met our expectations and perhaps exceeded them. You can refer back to our early investor presentations to see the anticipated margins, which align with what we've shown in this first quarter. We're genuinely excited about the future for Echo and our prepared foods segment. MeadowCreek is also starting to establish a solid foundation, increasing their volumes, and Crepini has some promising developments as well. We will continue to work on growing and investing in our sales in this key area of our business.
Our next question comes from the line of Ben Mayhew with BMO Capital Markets.
I guess just on your comments on share repurchases, you only did the $50 million so far this year. You still have quite a bit left on the authorization. And you mentioned a couple of options in your prepared remarks. So I just wanted to dig into that a little bit more. Do you think share repurchases are going to become a bigger piece of your allocation strategy? And is your goal to defend shares against commodity swings as you grow your value-added business? Or how are you thinking about utilizing that?
I'll start and pass it to Max pretty quick. But Ben, we're excited to have share repurchases in our capital allocation strategy. It's certainly a solid tool, and we know that, I think the investor community is as well. And we've not given any formal guidance on what the buyback criteria will be, but I will assure you that we have our eyes wide open and we've described it as opportunistic. And certainly, we're waking up every morning keeping our eyes wide open and being ready. Max, any other color you want to add?
Yes, Ben, you're aware of the authorization we have in place. As you mentioned, we've utilized $50 million from that authorization. We're focusing on opportunistic open market purchases. We're closely monitoring the situation, as there is a lot going on in our industry, and people are trying to determine our direction. We've discussed various factors this morning that could influence the future, particularly on the supply side, including the impact of HPAI. This is a key consideration for us. Additionally, I want to underscore the importance of the share repurchase program in our capital allocation strategy. It's a valuable tool that we haven't historically used but will continue to leverage. We're also committed to pursuing acquisitions and organic growth, which are essential components of our capital allocation approach.
Great. And then I'll just ask one more. When you think about the relative price of competing proteins, right? So record beef prices, chicken prices that are high relative to historical averages, pork prices that are high. How do you feel about where eggs kind of sit in that relative competitive basis or landscape? And headed into this holiday season, could we see more consumer trade down into eggs? How are you looking at the demand environment over the next 1 to 2 years? Do you think eggs will outperform from a consumer value perspective? And that will be my last question.
Yes. So Ben, great question. And certainly, eggs are competing exceptionally well being the lowest on a per serving protein basis, except for milk. And we feel really good about it because a lot of focus is being put on ultra-processed and of course, eggs are not. You get to crack an egg. And certainly, the products that are created in prepared foods, they're clean, healthy. These things are awesome, the expansion of different formats as well as dayparts. Eggs are good each and every part of the day, and that's one of my favorite things to do at night is to cook an egg. And so I think that carries over well into what you described. There's lots of things going on with other proteins, but the focus is being put on health and ultra-clean as well as sodium, sugar, and saturated fat. It just keeps elevating eggs as a better choice for consumers.
Yes, great comment, Sherman. This is part of the tailwinds we often discuss, and in my opinion, it's one of the most significant ones. We have a large population to feed in this country and globally. Choice plays a crucial role in that, as Sherman has mentioned multiple times today, and we are really enthusiastic about expanding into additional formats and dayparts. Prepared foods provide us another avenue to enhance convenience and accessibility, making it easier for consumers to enjoy eggs. We are excited about that future.
Our next question comes from the line of Heather Jones from Heather Jones Research.
I have two follow-up questions. Firstly, I wanted to ask about the current market. I'm genuinely surprised by how much pricing has dropped considering the numbers you mentioned, Sherman, regarding the layers on the ground. Clearly, there has been a recovery since the spring lows. So, I'm curious if you believe this is due to demand destruction or if perhaps the USDA has underestimated the numbers on the ground. I also have a follow-up to this.
Heather, I would tie it more back to seasonality. I think there's certainly so many disruptions that have happened over the last couple of years. It's kind of easy to forget about normal eating patterns and seasonality. But I think another huge piece of it is just tied back to the supply stabilization factor that to plan business, to plan features, to showcase eggs that are so important with being a $65 difference in a basket in the grocery store if eggs are in the baskets or not in the baskets. I don't see the demand destruction, but certainly, supply stabilization is key because if you're going to market eggs and move eggs, you've got to have #1 eggs on the shelf. And there have been some very strained times over the last few years where there's just simply not been enough eggs. And the price points they're sitting at today should be very attractive for the end consumer, especially paired with all these tailwinds that we've talked about. So I see good things happening. Back in 2015, there was certainly some demand destruction on the liquid side where some reformulations happened, and that was very difficult to get eggs put back in some formulas, but the liquid side has remained extremely strong. So that should have prevented any demand destruction on that side.
The imports of eggs have contributed to the strength of the liquid segment because those eggs were processed and distributed through that channel. Although this hasn't been our primary focus historically, it has helped maintain a balanced supply of eggs. Currently, we aren't seeing significant demand destruction; rather, we believe there are positive factors at play. As we transition out of October and into late October and early November, we expect to see an increase in demand as we enter our normal seasonal periods. It's worth noting that we are in our first quarter, which we usually consider our weakest quarter. Given the current supply levels, we anticipate a strong year ahead.
Okay. And then my follow-up is going back to your comments, Sherman, about leveraging your vertical integration to remain the low-cost producer. And I suspect you're not going to quantify this specifically, but just more of a qualitative idea. Thinking about the Echo Lake, your other prepared foods, your further processed eggs, is it part of your strategy to divert more and more of Cal-Maine's production, owned production into those products and leave less to have to sell in the open market? Or how should we be thinking about that and the cadence of it over the next 2 or 3 years?
Vertical integration is crucial for us as it allows us to maintain control over every stage of the process, creating efficiencies and ultimately ensuring supply for our customers. We view it as a skyscraper approach, where each step adds another level, generating efficiencies and value for consumers, benefiting everyone involved while leveraging lower costs. Our diverse locations provide us with ample learning opportunities that can be shared to enhance our operations. Regarding the Echo Lake acquisition, we honor existing agreements for sourcing eggs and believe our main contribution is stabilizing their supply during unpredictable periods experienced in recent years. We have the capacity to meet their needs, and our priority is to ensure they have the eggs required to support their business growth. We are committed to developing a long-term plan that focuses on ensuring they have a reliable supply.
This will conclude the Q&A session. I will pass it back to Sherman Miller for final remarks.
Once again, thank you, everybody, for their time. We'd look forward to this day to have our first call, and we look forward to having greater visibility going forward. And thanks for all the thoughtful questions today, your continued interest in Cal-Maine Foods. And operator, we're ready to conclude the call.
Thank you so much. This concludes today's conference call. A replay of today's call will be available beginning at 12:00 p.m. Eastern Time on October 1, 2025, for 1 year and can be accessed on the Events and Presentations page in the Investor Relations section of Cal-Maine's website. A transcript of today's call will also be posted in the Investor Relations section. Thank you all for participating. You may now disconnect.