One year ago the poultry industry was expressing confidence in its future. A subsequent drought then brought high grain prices. Optimism quickly faded.
Confidence has returned. However, unlike a year ago, the current fundamentals suggest a run of good fortunes rather than a momentary blip.
The Overall Index for the WATT/Rennier Poultry Confidence Index for the second quarter of 2013 now stands at 140.0 (1996=100), up from 113.1 last quarter. The Expectations Index rose to 144.2 from 107.0 while the Present Situation Index increased to 137.2 from 117.2.
Why are these PCI numbers so improved from a quarter ago? We can point to three factors:
The result has been 10 percent higher Georgia dock prices for whole chickens versus a year ago. Prices for boneless breasts were recently 14 percent higher and rising.
These positive fundamentals –- declining input costs, high prices for poultry meat, growing consumer demand and constrained production –- are why Rabobank has flagged the poultry industry as “good profitability.” Validating this prediction was Sanderson Farms’ mention that “improved market conditions” were responsible for the company’s better-than-expected results.
All together, these findings strongly suggest that the poultry industry could be entering into a period of high and sustained profitability.