The U.S. economy, and, subsequently, the poultry market, continue to rebound from lows seen during the recession, but the extent of that rebound in 2016 for chicken meat, turkey and eggs depends largely on the influence of other countries, namely China. These were the projections for the poultry market over the coming year from Dr. Paul Aho, speaking at the 2016 International Production & Processing Expo in Atlanta, Georgia, on January 27.
From 1992 through 2012, the commodity price index grew from 50 to nearly 200 — a bubble which has burst, meaning the poultry market is now dealing with both the good and bad effects.
Feed costs down, market outlook positive
Currently, the cost for corn and soybean meal is down, which Aho projects should last for a while thanks to greater production in other countries, specifically Argentina, Brazil and Paraguay. In Argentina, for example, producers were hoarding soybeans prior to the election of a new leader, who arranged a deal with producers to sell their goods. This flood of commodities on the world market is beneficial for producers currently purchasing poultry feed, he said. However, Aho projects that oil prices, currently situated below the cost of production, will begin to rise in 2016, which will likely also cause grain prices to rise in the next two to three years.
The market for poultry also has a positive short-term outlook. After suffering from lower chicken consumption from 2006 through 2010 during the recession, total chicken consumption per capita surpassed that of red meat in 2015. Yet, median income levels — a good number on which to judge total meat use — still have not fully recovered to highs seen in 2007. In 2014 to 2015, the industry saw a surge of chicken production, but with weekly chick placement at the same point as in 2015, Aho says the rate of broiler production is slowing. The U.S. Department of Agriculture (USDA) is projecting just a 2.2 percent increase in U.S. quarterly broiler production for 2016.
The outlook for turkey and eggs depends largely on the impact of avian influenza in the U.S. If avian flu does not have the same impact on producers in 2016 as it did in 2015, Aho projects turkey production to increase robustly in the latter part of the year, which may result in an oversupply of meat. Egg production is also expected to rebound if the impact of avian flu is minimal.
Economic growth depends on China
Will this economic growth last? Aho says this depends on China, whose economy is the second largest in the world. “If they stumble, then we are in deep trouble,” he said. Aho said everything points to a recession in China’s future, which will cause a world recession. Although U.S. poultry producers may fair better than others in the rest of the world, their profitability will also be impacted. If China can bring itself out of trouble economically, then the U.S. economy should also do well.
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