During the fourth quarter of 2017, I ventured that the U.S. poultry industry ushered in a ‘second wave’ of optimism, strengthening a trend commencing in 2015. Based on several general economic articles I’ve read in the interim, it seems others are asking the same question: How long can the good times last? The Federal Reserve considered this issue by signaling a potential rise in interest rates to calm a potentially “overheated” economy (whatever that is).
Quarterly PCI results
With that in mind, the WATT/Rennier Poultry Confidence Index once again documented another quarter of high optimism, although there were slight concerns about future profitability. The Overall Index now stands at 151.8 for the first quarter of 2018, up from 146.2 during the last quarter of 2017 (100-point baseline = 1996). The Present Situation Index rose to 186.2, up from 168.6 during the fourth quarter of 2017, while the Expectations Index held steady at 128.9, up from 131.2 the previous quarter.
Our findings slightly outpaced the most recent Consumer Confidence Index, which found “consumers’ assessment of current conditions decreased slightly, but remains at historically strong levels,” and “consumers remain quite confident that the solid pace of growth seen in late 2017 will continue into 2018.”
The outlook for poultry profitability declined during the first quarter of 2018, from 129.2 in quarter four of 2017 to 116.1 this quarter (down, but still well above normative levels). A looming increase in bird numbers was the most often cited reason for this concern.
Oversupply concerns
With predicted increases of 3 percent annually from 2019 through 2021, driven by new complexes, the respondents were “nervous the industry will oversupply in the near future”. There were also some concerns of rising grain and transportation costs, the latter casting a wide net over all inputs.
To the contrary, several economists recently surmised that a continued growth in the U.S. economy should absorb these increases. Total meat consumption rose in each of the last three years and is expected to rise again in 2018. A relatively weak dollar should help U.S. export markets, too.
Finally, commodity prices might rise during 2018, but experts predict these will be manageable and should not disrupt the market.
Summary
As for the last three years, confidence in the poultry industry was strong again. Concerns about overproduction dampened the profit outlook for some, but economists assured us the U.S. market should handle the increased output.
Read more:
US poultry regulations remain top concern for 2017
