Everyone has heard the idiom about the light at the end of the tunnel. This saying refers to something which makes you believe that a difficult or unpleasant situation will end. Given recent economic conditions both in general and in the poultry industrywe have certainly experienced the "difficult" and "unpleasant" parts. Current actions could create the light for which we've been longing.
During the inaugural quarter of 2009, the Poultry Confidence Index inched slightly higher although it still remained historically "low." The Index now stands at 64.4 (1996=100), up from 63.1 during the fourth quarter of 2008. The Present Situation Index also rose slightly to 16.9 from 13.5 last quarter (historically "very low"). The Expectations Index was the lone bright spot as this measure grew 0.2 points since last quarter to rest at 96.2.
Although the present situation seems dismal, it still rates better than the general consumer economy. The Consumer Confidence Index reached another historical low in January 2009. Obviously, the general consumer market will have an impact on food purchases.
Respondents were pessimistic about the present situation in the poultry industry, but they were generally optimistic about the future. It's easy to see why the current market yielded such negative ratingshigh energy costs, high grain costs, skittish consumers, bankruptcies, job losses, cancellation of expansion plans and more.
On the horizon, however, respondents saw a few rays of sunshine. First and foremost was a reduction in egg sets. This single factor accounted for most of the optimism we uncovered. Egg sets have been down 6-10% versus a year ago and many have taken notice with comments of "production being cut like never before" and "real cutbacks in placements rather than press releases." Factor in continually-improving grain and energy prices along with the upcoming high-demand summer months and it's easy to see why some are optimistic.
Further cutbacks might accelerate price increases. We have found recent whole-bird prices to be up about 10% versus a year ago, but breasts and leg quarters were down 15-20% over the same time frame. Price increases for produced product can lighten up any gloomy situation.
The biggest negative regarding the future was in the area of jobs and expansion. We received several stories of how consolidation had impacted jobs or advancement, especially in the processing area. Others talked about how cost-cutting measures were eliminating positions or forcing individuals to assume multiple responsibilities. Given the state of the current economy, we don't see this changing anytime in the near future. Any improvement in the job situation will have to be preceded by a rise in prices and profits.
It's not surprising that the PCI remains low. The economy is still in a "rut" and this has impacted nearly every market. Poultry has not been immune. Integrators have aggressively cut production to counteract their economic woes. While these actions negatively impact jobs and other opportunities, many feel it will eventually lead to higher prices and profits. If this scenario matures, then we can indeed see the light at the end of the tunnel.
