Don’t get the wrong idea. Once again, our panel of respondents expressed confidence in the poultry industry. However, there were some emerging concerns.
All three primary indices within the WATT/Rennier Poultry Confidence Index remained at or well above average levels in the second quarter of 2018. The U.S. poultry industry continued a wave of unprecedented optimism that started several years ago.
The Overall Index now stands at 128, down from 152 last quarter (100-point baseline = 1996). The Present Situation Index fell, to 168 from 187, as did the Expectations Index, to 102 from 128.
Although these metrics were quite good, again well above the average level, it was the first time in several years all three declined in the same quarter.
Reasons for optimism
On the bright side, respondents were most confident about opportunities in the industry, both now and over the next six months. Most attributed this to industry expansion, especially the building of new complexes, the expansion of current facilities or the replacement of outdated ones. Some expressed a concern about a lack of qualified labor somewhat dampening their outlook.
Another positive cited by many was the general improvement in the U.S. economy. The Consumer Confidence Index supports these claims. According to the latest report from The Conference Board Inc., “Consumer’s assessment of current conditions increased to a 17-year high … confidence levels remain at historically strong levels and should continue to support solid consumer spending in the near-term.”
A gloomy future?
Future predictions for industry conditions and profits did not fare as well.
Expansion, while favorable for opportunities, was not so for future conditions. Coupled with increased production from existing facilities, many predicted lower prices. Abundant cold stores and competitive proteins contributed, as did increased fuel prices and conversions to higher-cost, no-antibiotics-ever rearing methods.
Profit concerns from last quarter were once again apparent with the Future Profits Index below the 100-point mean for the first time since the fourth quarter of 2016. The primary culprit was overproduction of all proteins. Decreased usage of chicken as we move out of the summer grilling season was another common concern.
Confidence in the U.S. poultry market remained high, part of an extended period of optimism. Concern was expressed about future conditions and profits, mainly due to potential overproduction of chicken and competitive proteins. Results from next quarter will play a pivotal role in determining the true nature of these trends.
Confidence is still historically high, but key poultry confidence indicators fell in the second quarter of 2018.