The Poultry Confidence Index reached a 17-year high in Q2 2014. Confidence in the industry has been trending upward since the middle of 2012.
Although the Future Opportunities and Future Profits indices were down slightly, they were still well above the historical norm. Other indices basically were equal to Q2 2014. All in all, optimism still abounds.
The Overall Index now stands at 146.8 (1996=100), down from 156.3 in Q2 2014. The Present Situation Index was essentially unchanged at 176.7 versus 172.7, while the Expectations Index decreased to 129.5 from 142.7 in Q2 2014 (the latter was a decline of 12 percent).
Reasons for poultry industry optimism
The Q2 2014 PCI cited several reasons for the continued rise in optimism. These continued to fuel positive perceptions during Q3 3014:
- Less competition from beef and swine
- Lower feed prices
- Higher profits
- Growing consumer economy
Poultry has benefited greatly from reduced competition in the protein market. As beef and swine supplies have contracted recently for different reasons, demand for poultry has increased. A recent National Chicken Council survey of consumers reported a 17 percent increase in meals or snacks that contained chicken.
This increased demand, along with higher prices for less-abundant beef and pork, has allowed the poultry industry to increase their price as well. Coupled with falling grain prices, bottom-line profitability has benefited.
A shortage of breeder birds –– due primarily to drawdowns back in 2011 when corn reached record highs, but also due to to reduced fertility in Ross males –– should guarantee profitable conditions well into 2015. It will take the poultry industry that long to significantly increase broiler placements.
Predictions for stronger economy
Consumer confidence increased during July for the third consecutive month to reach its highest level since October 2007. Predictions are for a continued strengthening of the overall economy in the second half of 2014. A thriving consumer economy greatly benefits the poultry industry.
A decrease in projected broiler exports by the USDA was the only negative indicator on the horizon (excluding breeder supplies which have some positive benefits). Due primarily to Russia’s restrictions on imports of U.S. poultry, USDA lowered its 2014 estimates for poultry exports from 7.36 billion pounds to 7.22 billion pounds.
Confidence remains at historical highs. Strong positive conditions continue to significantly outweigh the few negatives. Restraints on placements along with decreased supplies of competitive proteins should keep prices high and profits in the black for the remainder of 2014 and well into 2015.
