VIDEO: Inflation's impact on the poultry industry and consumer

The worst inflation in recent times could drive the U.S. economy toward recession.

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Poultry industry analyst Mark Jordan offers his insights on recent issues impacting the U.S. poultry sector. (Photo courtesy of Mark Jordan)
Poultry industry analyst Mark Jordan offers his insights on recent issues impacting the U.S. poultry sector. (Photo courtesy of Mark Jordan)

The worst inflation in recent times could drive the U.S. economy toward recession. 

In a WATT Poultry Chat interview, Mark Jordan, executive director of LEAP Market Analytics, explained inflation's impact on fuel prices and food prices. Chicken demand could sag in the coming months, he said. 

Austin Alonzo: Inflation is on everyone's mind as gas and food prices surge. How's inflation effecting the U.S. poultry industry?

Mark Jordan: I think the thing to think about here is this is really something of a double whammy. Because poultry producers are getting hit on the front end in terms of costs, there's a lot of energy, specifically diesel to run all the trucks. There's live haul trucks, egg trucks, feed trucks running around, and as diesel prices skyrocket, that's really hit their bottom line from that end and of course expand that out. Consumers are getting hit with higher energy costs as well. And that's forcing some difficult decisions with regard to protein consumption and demand. And so we're starting to see a more cautious consumer as well. 

Now, chicken is still broadly positioned well in this kind of environment. But you're certainly seeing the consumer start to retrench and be much more guarded in terms of eating out and even grocery store purchases, paring back any excess spending that they can to save a buck. 

Looking at this, I think there's something to keep in mind. I've got a chart here just looking at a fuel index provided by U.S. Department of Agriculture-National Agricultural Statistics Service, and it's specifically a survey they take from farmers. And it's kind of a composite of all fuels, and gives a bit of a perspective here on the run up that we're seeing right now. And looking back over the past, say 15 years, and one comparable period and gets referenced a lot is the run-up in fuel and energy, beginning sort of in 2007, and extended into 2008. And it really kind of kicked off the Great Recession. I think one thing to keep in mind is this this, this run-up is very similar in some respects. 

Now, this index is based in nominal terms, I think if you make some adjustments, for inflation, broader inflation then compared to now, energy's not quite as expensive. But the difference now is inflation is more comprehensive across all sectors. So consumers are getting hit more broadly, beyond just these fuel pressures that they're getting now compared to what happened back in 2007-2008. 

So that is very problematic and concerning, I think, for all of us. Producers, consumers, and certainly fueling more concern about a slipping into a recessionary environment. 

Looking at this next chart, I wanted to highlight something from then and maybe some faults about where we might go from here and looking at the 2007,2008 and 2009, highlighting those years, relative to a much broader timeline of kind of the price and quantity relationship of chicken. 2007 was actually a fairly strong year of chicken demand and then those higher inflationary pressures for fuel, leading to, you know, basically weaker demand over the next couple of years. 

Of course, we know that that was also accompanied by a broader economic downturn. And of course, we again find ourselves in a very strong demand environment and fuel rising like this, and certainly much, much broader inflation leads to concern that we we will probably be looking at and on a composite basis, weaker chicken demand at some point over the next 12 to 18 months.

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