Source: MEATINGPLACE, 2/2/17

The poultry industry is sitting in an economic “sweet spot” where the alignment of low inputs and healthy demand are “as good as it gets,” said Poultry Perspective industry consultant Paul Aho.

Speaking at the Poultry Market Intelligence Forum, part of the International Production and Processing Expo (IPPE) here this week, Aho discussed where the poultry industry is in the commodity cycle, interest rate cycle, trends in median household income and prospects for growth.

Commodity prices. The most recent bubble in commodities burst in 2012, Aho said, and reached a low point in 2015 and ’16, and prices are poised to begin rising again. An upswing isn’t likely to be as steep as it was in 2011 and ’12, when rising Renewable Fuel Standard levels tightened demand on the crop. But the amount of ethanol produced annually has “stabilized,” Aho said, and so is less of a factor in corn prices currently.

On the other hand, recent low prices provide little incentive to plant more corn. In fact, some acreage in 2017 is expected to be converted to soybeans.

Interest rates. Although the cycle is far longer in scope than commodity price swings, interest rates also are heading higher, albeit slowly. Aho also said he doubts rate will rise to the mid-double-digit levels of the early 1980s — the peak of the most recent cycle.

Median income. U.S. households are getting more of a financial cushion as median household income recovers from the steep drop-off from 2009 to 2012. Meat consumption correlates closely with income, and has been recovering along with that datapoint over the last four years. As long as the economy continues to regain its health, demand for meat products of all kinds also will grow, Aho predicted.

Aho calculated that the volume of poultry production in the U.S. can continue to grow by about 4 percent this year, barring an unforeseen event such as drought. This, despite expected record amounts of pork expected to go into production, with new, large fabrication facilities being built, and moderating beef prices.

The increase in supply “isn’t a problem as long as economic growth continues,” he said. 

This year, consumption of red meat overall is likely to surpass the volume of poultry on Americans’ plates once again, but Aho thinks poultry will permanently surpass red meat consumption in the next industry cycle.

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