Last quarter’s Poultry Confidence Index (PCI) found industry optimism at its highest point ever. That report concluded, “Much depends on expectations of increased demand, production restraints and an improvement in consumers’ overall outlook.”

As we’ll see from this quarter’s data, most of the key issues did “line up” to boost optimism in the poultry industry to levels not seen in several years. As a result, the components of the PCI either rose substantially or remained significantly above normative levels.

Industry expectations high

The PCI’s Overall Index has risen for four quarters in a row and now stands at 114.0 (1996=100), up from 97.3 last quarter. The Present Situation Index rose to 79.4, up sharply from 27.3 last quarter. This was only the second time in three years that this index even “sniffed” at the norm (100). Finally, the Expectations Index was 137.0 as it remained near record levels.

Is this too good to be true? It was only a short time ago that we experienced record lows. Now we’re setting, matching or rapidly approaching new records. In both broilers and turkeys! What changed? According to our respondents, there were several reasons.

First and foremost, as always, is a brightening supply/demand picture. Optimism always accompanies the summer grilling season as poultry is a featured main dish. Decreased broiler egg sets – at or below year-ago levels (click here to view) – complements the expected increase in demand. Of course, Russian imports (or the lack thereof) could throw a monkey wrench into these predictions, but most felt this situation would be worked out in due time.

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Consumer economy is key

Also driving record-setting optimism was a gradually improving general economy, 7-8% higher prices vs. year ago (click here to view) and increased profits. In general, I agree with these drivers, but question how fast the consumer economy will rebound. After several months of slow, but steady improvements, the Consumer Confidence Index fell in February over concerns about current business conditions and the job market. One respondent said, “Consumers remain pessimistic about their income prospects, and a combination of earning and job anxieties is likely to curb spending.” Even though poultry insiders said jobs and the lack of opportunities was a “big” issue last quarter, most seemed to gloss over any negativities this quarter in light of improvements elsewhere.

Regardless of my thoughts, this quote summarized the rosy outlook held by many: “The laws of supply and demand dictate that low supplies will drive higher prices. We were profitable in 2009 due to incredible cost and performance improvements. We will maintain those efficiencies in better grain and meat markets and have a banner year.”

Top issues for 2010

When asked to select the top-three issues for the poultry industry in 2010 (from a list of 10 issues), two were picked by half of the respondents: the general economy and meat/poultry supply and demand. This closely mirrors the concerns expressed in the PCI this quarter. Four other issues stood out from the rest: export market, grain prices, regulatory issues and environmental issues. Although regulatory and environmental issues were only “middle of the pack,” they produced many heartfelt comments. A select minority predicted that regulatory and environmental issues could have the biggest impact of all before the year is over.

Conclusion

The poultry industry’s bright outlook should bode well for expansion, jobs and profitability. Concerns hinged primarily on continued improvements in the general economy and the ability to keep supply and demand in a positive position. It is the author’s opinion that a lack of jobs or opportunities could dampen rising optimism. Let’s hope that I’m wrong.