Poultry industry confidence remained consistently high throughout 2015, and this fourth quarter was no exception. Avian Influenza was still top-of-mind for many but not enough to dampen overall optimism, although profitability continues to be somewhat of a concern.
The Overall Index now stands at 122.8, down slightly from 124.3 during the third quarter of 2015 (100-point baseline = 1996). The Present Situation Index remained virtually unchanged from 165.2 to 164.9 since last quarter, while the Expectations Index fell slightly to 94.0 for the fourth quarter from 97.0.
The Poultry Confidence Index fell from 171.1 in the first quarter to 122.8 in the fourth quarter of 2015.
These findings parallel the Consumer Confidence Index, which also posted small declines from September 2015 to October 2015. Consumers rate current conditions favorably but do not expect economic strengthening in the near future.
One-year and two-year moving averages for the Poultry Confidence Index are near record highs after peaking one year ago. All in all, the poultry industry is having a solid, sustained run of confidence. As a commodity-driven market, the keys to market success have been present for some time – high demand, adequate supplies and favorable costs. Avian influenza dampens this optimism, but most seem to have weathered the effects of this illness and anticipate doing better if it makes another run.
Although the poultry industry remains bullish due to favorable economic conditions, reasonable growth and related expansions, there were two areas of soft concern: 1. profits, in general, and 2. turkeys, in particular.
Some think the broiler industry is growing too rapidly and pointed to a potential "oversupply" of poultry meat. The turkey industry is dealing with a shortage of poults that will not correct itself until early the summer of 2016. Avian Influenza leaves everyone cautious as its return in spring could set the industry oft-kilter and wipe out current profits. Finally, some think that costs would rise after several favorable seasons.
Confidence levels in the U.S. broiler sector weakened during 2015, while confidence levels in the turkey sector finished start-of-year levels.
Summary. As we found in the third quarter of 2015, optimism remains historically high, although recent memories and a possible return of avian influenza continues to negatively color the thinking of many in the poultry industry. Profitability concerns intensified during this fourth quarter and should be closely watched going forward. All in all, 2015 will be remembered as a remarkable year when the industry was generally running on all cylinders. Let’s hope 2016 will be even better!