Recent declines in the WATT/Rennier Poultry Confidence Index slowed or slightly reversed with little-to-no change in most indices from the previous quarter of 2018. Even with recent drops in confidence, the industry remained historically optimistic according to the fourth quarter 2018 survey results.
Present conditions
The Overall Index for the fourth quarter of 2018 now stands at 111, virtually unchanged from 112 in the third quarter (100-point baseline = 1996). The Present Situation Index fell to 135, from 148 in the previous quarter, while the Expectations Index climbed to 96 from 88.
Present conditions were rated slightly lower, while future conditions fared slightly better, the latter was primarily due to recent or expected cutbacks and a correction in oversupply. This reasoning tracked well with reports of little to no growth in broilers slaughtered during the fourth quarter of 2018 as weekly chick placements have declined since mid-September. The industry altered placements after higher production during the third quarter of 2018. This, coupled with weaker demand, pushed frozen stocks about 17 percent higher than a year ago.
Future outlook
Future opportunities got a slight boost as job growth was expected based on expansion plans and a wave of retirements. However, these optimistic respondents expressed concern that “qualified talent will be difficult to find” and about a “lack of people to fill open positions”.
Future profits posted the largest drop of all the metrics primarily due to oversupply concerns, competitive pressures and an increase in raw material costs exaggerated by inflation. We suspect fears of oversupply will lessen as news of reduced placements becomes more widely circulated. Although the drop in the Future Profits Index was mild in comparison to past movements, this area has recently generated the most pessimism.
Summary
Not much changed in the fourth quarter of 2018 that we didn’t already anticipate from the third quarter. Supply concerns were a double-edged sword leading some to see relief and others issuing warnings. Concerns over profitability continued, but overall, the industry remained generally optimistic.
