Last quarter’s Poultry Confidence Index (PCI) was upbeat on all fronts except jobs and opportunities. Now, with a vast improvement in this quarter’s Present Opportunities Index, the U.S. poultry industry could be poised for a complete turnaround.
Not everything, however, is on the upswing yet. The Overall Index now stands at 85.0 (1996=100), down slightly from 88.1 last quarter. And while the Present Situation Index increased substantially to 64.3 from 37.6, the Expectations Index fell to 98.8 from 121.7 (a sizable decline, but still near the historical average of 100).
But the biggest news this quarter is that Present Opportunities climbed to 73.3 after barely eclipsing double digits for several quarters. This is a significant turnaround.
Employment headed up?
One PCI respondent noted his company had “hired two new flock supervisors recently…opportunities are there for qualified individuals.” Another said, “Profit begets expansion, in birds and in number of people employed.” Still another echoed these thoughts: “The improving economy will lead to greater consumption and consequently to greater volume growth, leading to employment expansion internally and grower expansion externally.” Finally, someone said, “There is always demand for good managers in the poultry business.”
There are parallels to this recovery in the general economy. The most-recent Consumer Confidence Index (CCI) “bounced back” primarily due to a more upbeat job outlook. According to Lynn Franco, director of the Conference Board Consumer Research Center, “Consumer confidence, which had posted back-to-back monthly declines, appears to be back on the mend…The Present Situation Index increased slightly, mainly the result of an improvement in consumers’ assessment of the job market.”
Has this improved consumer sentiment translated into higher poultry prices? Unfortunately, at the time this article was written, broiler prices were headed downward even though historically they should have been holding steady in this period. However, broiler egg sets have remained 3% to 4% below year-ago levels, so the fundamental economics should be sound for the near future.
PCI question on antibiotics
A government committee recently raised the possibility of banning the use of all preventative antibiotics (i.e., growth promotants) in food production operations including poultry. PCI respondents were solidly against any such ban. Nearly three-quarters (74%) said that a ban would negatively impact their business with about half of these saying it would hurt them “a lot.” Furthermore, only 9% thought the ban was a necessary move to protect consumers. Rather, 50% thought it could “potentially harm consumers and decrease food safety,” while 41% said “it was a political move that would have little-to-no impact on consumers.”
Hopefully, politicians and regulators will take this informed opinion into consideration before enacting any policy.
The bottom line. Jobs and other opportunities rebounded strongly in the third quarter. This is a good sign as this area was the main drag on recovery. However, with job growth and opportunities comes the possibility of increased production which could impact future prices. It’s the dance the industry plays on a regular basis. Right now, the industry seems to be fluently executing its dance moves.