Meat+Poultry - October 2018 - 72

INDUSTRY OUTLOOK

Respondents' gross
annual sales, 2017
Less than $50 million

Capital
investments
29%

48%

90 respondents

Upgrading/retrofitting existing plants

36%

$50 million to $99 million
33 respondents

$100 million to $499 million
55 respondents

$500 million+

32%

22%

Plant expansion(s)

13%

74 respondents

17%

New plant construction

49%

Nearly
of respondents
affirmed current
US immigration
policy will
negatively impact
labor, making
it one of the
industry's top
concerns.

end of May and beginning of June.
The potential implications of such
inflammatory actions introduce a
measure of necessary prudence with
more than one-third sharing concern
for possible business implications of
the imposed tariffs. Thirty-six percent
of respondents reported the trade war
as being bad for business, no matter the
size of the company.
With possible interconnections
between multiple industries, processors
must consider the impacts caused by
a standstill in pork exports to China.
Although the President announced
distribution of aid to those affected by
the trade wars, farmers will not be the
sole consideration. Declining exports

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also affect cold storage warehouses
that can no longer send meat and
poultry products to China. Suppliers
who choose to hold the estimated 2.5
billion lbs. of meat and poultry within
the US, will create a potential boon for
consumers with subsequent impacts to
the industry.
Existing steel tariffs and associated
tariffs on vehicles and auto parts
could result in additional ramifications
including higher shipping and freight
costs for producers. Considering
the many unknowns of a potential
trade war, participants projected just
under 2 percent expected growth in
international sales for 2018, compared
to almost 6 percent expected during
the 2016 study. Currently, 55 percent
of companies export products with 8
percent of sales as exports, compared
to 57 percent exporting products in the
2016 study.

IN-PLANT ISSUES
Caution is also the norm when it
comes to plant labor decisions. Nearly
60 percent of respondents affirmed
current US immigration policy will
negatively impact labor, making it
one of the industry's top concerns.
Coupled with an ongoing skills
gap for workers, the industry must
navigate changing labor needs with
tightening immigration measures.
On the positive side, processors are
experiencing fewer regulatory issues

with only a third of processors citing
concern versus 50 percent two years
ago. Similarly, worry regarding global
economic conditions has lessened,
dropping from nearly 40 percent in
2016 to 19 percent in 2018.
Considering the industry's growing
optimism and positive 2018 capital
investment plans, Cypress Research
cited additional opportunity for the
industry in the form of new federal tax
code incentives for capital investing.
Hellmer noted only about a third of
industry leaders planned to increase
this year's capital spending because
of the reformed tax code. It fell to
only 21 percent planned 2019 capital
spending increases due to the favorable
tax code, leaving close to 50 percent
for whom the tax code had no impact,
she concluded.
"Perhaps this reflects the
industry's vulnerability and the need
for additional time before company
leaders feel comfortable reinvesting at
full steam," she said. "Given that the
meat and poultry industries have been
challenged since the Great Recession
ending in 2009, it's great to see nearly
90 percent of processors holding a
positive economic outlook this year,
up a whopping 38 percent from the
2016 outlook."
A copy of the complete M+P
Processor Confidence Study research
findings is available by sending a request
to meatpoultry@sosland.com.
http://www.meatpoultry.com
Meat+Poultry - October 2018

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