All of the Poultry Confidence Index (PCI) indicators in the first quarter of 2017 exceeded the 100-point baseline for the first time in two years, which proves a truism about forecasting – it’s always wrong. The deviation is usually a matter of degrees, but sometimes you’ll error in direction as well.
Recent examples include Brexit, the election of President Trump, and although to a much lesser degree, my suggestion in the fourth-quarter 2016 PCI column that confidence in the U.S. poultry industry might begin to wane based on multiple quarters of declining expectations.
The Overall Index now stands at 144.4 for the first quarter of 2017, up from 120.7 during the fourth and last quarter of 2016 (100-point baseline = 1996). The Present Situation Index climbed to 169.4 from 152.5, while the Expectations Index spiked to 127.1 from 83.5.
The Overall Confidence Index for the poultry market rose in the first quarter of 2017 from the last quarter of 2016.
This strong showing at the start of the year runs counter to past predictions of increased protein supplies, especially in the beef segment, and falling poultry prices due to overproduction and weaker demand.
Many things, however, have changed since the last quarter of 2016, which has apparently altered perceptions. Paul Aho, Poultry Perspective, summed up some key changes at the Market Intelligence Forum at the International Production and Processing Expo (IPPE) in late January 2017:
- Grain prices, fuel costs and interest rates are highly favorable. Regarding feed prices, Aho commented, “This really is a sweet spot for the poultry industry. We’re really enjoying these prices. This is as good as it gets.”
- The U.S. economy can absorb the expansion of chicken and turkey production.
- The profitability of the poultry industry has rarely, if ever, been better.
There is agreement from other prominent figures, including Pilgrim’s Corp. Executive Bill Lovette, who in a fourth-quarter 2016 earnings call said he expected an improving economy and higher exports to support the chicken sector’s profitability in 2017.
Like Lovette, PCI respondents predicted a strong U.S. economy in the coming months, with several crediting the election of President Donald Trump. The Consumer Confidence Index also agreed - “...Consumers remain confident that the economy will continue to expand in the coming months.”
Poultry Confidence Index respondents also cited high-profile expansions resulting in new facilities and job opportunities. The skepticism they expressed last quarter about the potential benefits of these projects apparently has faded.
Overall confidence is higher among broiler industry respondents (144.2) than turkey industry respondents (117.4).
Summary: Confidence has surged forward at the start of 2017. Economic conditions are highly favorable, input costs are low and profitability is high. Several cited the election of President Donald Trump as a contributing factor when predicting an upswing in general economic conditions. A forthcoming article will examine these perceptions of President Trump in more depth.
The Overall Index now stands at 144.4 for the first quarter of 2017, up from 120.7 during the fourth and last quarter of 2016 (100-point baseline = 1996).
