Profit predictions strengthen industry confidence

2019 is shaping up to be a good year with more opportunities than challenges, thanks to improving market conditions and greater industry confidence.

(Freeimages.com | Masbro)
(Freeimages.com | Masbro)

2019 is shaping up to be a good year with more opportunities than challenges.

Industry confidence as measured by the WATT/Rennier Poultry Confidence Index (PCI) has been historically and stubbornly high over the last five years and, at times, setting records.

However, confidence slowly declined in the last year or so as respondents anticipated a weakening of profits. Several integrators alluded to what they called weak profits or declining prices as a key driver of lower-than-expected financial performance during 2018. It seems those concerns might well be behind us.

Poultry Confidence Index figures

The Overall Index for the first quarter of 2019 stands at 126, up from 111 in the fourth quarter of 2018 (100-point baseline = 1996). The Present Situation Index remained virtually unchanged at 136, compared to 135 the previous quarter. The Expectations Index climbed to 119 from 96. This latter metric improved in each of the last two quarters after a year of declines.

top-line-confidence-trends

Poultry industry confidence should stay high in 2019 as profitability worries shrink.

The improvement in Expectations was driven by a 172 percent improvement in the Future Profits Index, rising from 67 last quarter to 115 for quarter-one 2019, reversing five quarters of consecutive declines.

What’s behind the turnaround?

Our respondents cited better prices, stronger demand, low corn and soybean meal prices, less meat on the market and the annual observation that summer improves sales and summer prices are better.

These observations mimic recent articles and presentations on the topic predicting that chicken prices are rebounding; the worst is over for the chicken sector and that a gradual recovery of the market will take place throughout the year after a challenging start.

In general, commodity prices are expected to rise. Nevertheless, increases in exports and consumption, reasonable feed prices and only small increases in production are expected to provide benefits during 2019.

A potential labor shortage was a consistent negative. Although these job openings strengthen current opportunities, potential shortages could impact long-term growth. For the moment, however, it’s helping to hold down production increases.

Summary 

The poultry industry remains as optimistic as it has been for the last five years. We anticipate that confidence will remain high in 2019 as profitability concerns are expected to diminish.

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