Resumed poultry trade with China spikes industry confidence

In late November 2019, Chinese officials announced a resumption of trade with the U.S. This had a profound effect on fourth quarter’s Poultry Confidence Index results.

(Gary Tamin | Freeimages.com)
(Gary Tamin | Freeimages.com)

In late November 2019, Chinese officials announced a resumption of trade with the U.S. This had a profound effect on fourth-quarter 2019’s Poultry Confidence Index results. 

Near record highs

The PCI now stands at 141 (1996 = 100), up slightly from 133 in the third quarter of 2019. The Present Situation Index – based on perceptions of current business and labor market conditions – stayed relatively unchanged to 151 from 154 the previous quarter. The Expectations Index – based on the short-term outlook for income, business and labor market conditions – rose to 133 from 118.

Category-confidence-trends-4Q19

This 2019 fourth quarter’s overall index was the highest since the first quarter of 2018. Results for the 2019 calendar year rivaled the recent highs of 2017, and even challenged 2014 as the most optimistic year ever for the PCI.

The Chinese market

Although poultry production is expected to rise during this final quarter of 2019 and into 2020, it did not dampen enthusiasm. A few respondents cited the impact of the grilling season on the six-month horizon, but most talked exclusively about the resumption of trade with China to support their optimism. The majority expected profits to rise.

The U.S. Department of Agriculture was also bullish on the situation. Although its analysis predicted increased production, it also felt market conditions would continue to support currently-favorable chicken prices now and into 2020.

Finally, the Consumer Confidence Index (CCI) has also remained historically high – although not as strong as the PCI. The October 2019 CCI noted consumers expressed concern about the economy, but confidence remains high and holiday shopping should be strong.

Summary

As predicted, the resumption of trade with China enhanced current optimism and most likely will do so for the next couple of quarters. We do not foresee any near-term events or issues that could derail this pattern. It should be a great start to the New Year.

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