Although confidence declined in four of the five secondary indices during the first quarter of 2022, optimism in the poultry industry remained at or above normative levels.
The WATT/Rennier Poultry Confidence Index's Overall Index now stands at 138 (1985=100), down from 149 in the final quarter of 2021. The Present Situation Index—based on respondents’ assessment of current business and labor market conditions—remained virtually-unchanged at 167, down from 169 the last quarter. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined to 119 from 135.
Cautions
The negative direction of two of the three main indices and four of the five sub-indices is worrisome, especially the 33-point drop in Future Profits from 129 to 96, slightly below the 100-point normative level for the first time in over a year.
In the past, declines in profit expectations reversed in one or two quarters. There is reason to believe a reversal might lag this time.
Costs have risen rapidly in the last few months with prices climbing at the fastest pace in 40 years. This widespread trend affects most market sectors. Many economists think these higher prices will not subside anytime soon.
The Conference Board’s Consumer Confidence Index – which fell for the second straight month in February – echoed these anxieties. According to the board, “concerns about inflation rose again in February, after posting back-to-back declines. Despite this reversal, consumers remain relatively confident about short-term growth prospects.”
The poultry market had similar concerns, citing the rising cost of energy, feed, freight, and labor:
- “Costs continue to rise across the board – freight, feed, labor.”
- “Costs keep increasing and suppliers can’t raise the prices fast enough to compensate.”
- “Rising fuel costs, feed prices rising as well.”
- “Production costs keep rising. There’s less confidence in poultry’s ability to keep up.”
A few respondents cited the discovery of highly pathogenic avian influenza in a handful of U.S. commercial turkey and broiler flocks as an area of potential concern.
Summary
The nearly-across-the-board decline in confidence was worrisome, especially if the trend continues. Of most concern were rising costs due to historic inflation that may affect the industry for all of 2022 (and potentially beyond). HPAI is a wildcard that could rapidly alter next quarter’s perceptions.
