Iowa Public Television

 

Thanksgiving Little Blessing for Turkey Industry

posted on November 21, 2008


MILWAUKEE (AP) -- Thanksgiving is bringing turkey producers little to celebrate this year, while diners anticipating the most poultry-centric of holidays may be grateful that they won't see much difference in the cost of their bird.

Meat producers have been struggling this year with higher costs for key ingredients like corn, soybeans and oil, part of why the cost of beef and chicken has risen so much. Turkey producers are facing all the same pressures, but don't have the same economies of scale and have to plan a year in advance for the one day a year they count on most.

Some 46 million turkeys will be eaten on Thanksgiving Day, about the same as in previous years, said Sherrie Rosenblatt, spokeswoman for the National Turkey Federation.

"That's basically most Americans having turkey at the center of their plate," she said.

Consumers will see good prices this year, Rosenblatt said, since retailers will again heavily advertise turkey at prices where they may not make any money on the deal in hopes that shoppers drawn in by the lower price will buy lots of other products.

The American Farm Bureau Federation estimates a Thanksgiving meal for the average gathering of 10 will cost $44.61 this year, up 5.5 percent from last year. That includes a 9-cent a pound increase for turkey, the group said this week, noting that the cost of the meal was still less than the same meal 20 years ago, when stripping out inflation.

Jennie-O is again touting its Oven Ready product line, featuring turkeys that go from the freezer to the oven already cleaned, seasoned and sealed in a cooking bag. Butterball, the market leader, will again be running its telephone hot line and is now offering cooking tips via text message as well.

It's prime turkey-eating time in an industry that produced about $13.9 billion worth of product last year. But even the seasonal sales boost won't ease the industry's sagging profit margins.

Too much meat on the market, high prices for commodities and fuel and weaker demand from restaurants have sliced into profits. Pilgrim's Pride Corp., the nation's largest chicken producer, is sagged by debt and using temporary credit lines to stay afloat. Some observers worry that Tyson Foods Inc., the world's largest meat producer, may also have too much debt.

Turkeys are likewise in trouble, but on a smaller scale since people eat more beef, chicken and pork overall. Turkey producers say prices edged up slightly, but not enough to recoup the costs of raising the gobblers this year.

Major producers like Butterball LLC and Hormel Foods Corp., which has the Jennie-O Turkey Store, are cutting production to help raise prices. But analysts say those moves are coming too late to help the industry during its biggest selling season.

About 29 percent of all turkey consumed during the year is eaten during the holidays, industry figures show, though that's down from 50 percent in 1970 as more people eat turkey year-round, especially in the form of sandwiches and ground turkey.

Turkey producers must plan far in advance for the Thanksgiving holiday, where they sell the majority of whole birds for the year, said Keith Shoemaker, chief executive of Butterball. The eggs for the turkeys being consumed this Thanksgiving were laid in July just as commodity prices approached record highs.

"In 2008, it was kind of the perfect storm. Corn prices were high, there was oversupply and speculation helped to drive it more," Shoemaker said. "Ethanol helped to drive it more and the value of U.S. currency made it cheaper for other people to import grain, and also import turkey."

The turkey industry has also had to reverse direction - after having a good year in 2006, producers ramped up production the next year and are now having a tough time scaling back, Shoemaker said.

Just like beef, pork and chicken companies, turkey producers have been announcing production cuts as a way to boost prices. But those won't take effect in time for the holiday.

Hormel, based in Austin, Minn., said in August it was cutting Jennie-O's production by 5 percent after its turkey segment saw feed and fuel costs rise $53 million in the third quarter.

Butterball, a joint venture between pork producer Smithfield Foods Inc. and Maxwell Farms, shut down slaughtering operations at a plant in Longmont, Colo. this year, eliminating about 490 jobs.

Shoemaker wouldn't say how much the Garner, N.C.-based company is cutting back. Overall, he said the industry will cut 6.5 percent to 7 percent of production, which reached 7.4 billion pounds last year. But given the amount of turkey meat in storage, it will take until at least April or May to get all that out of inventory.

Christopher Bledsoe, an agribusiness analyst at Barclays Capital, agreed that the cuts won't be realized until next year because turkeys take about twice as long as chickens to produce, meaning any production cuts require longer to take effect.

"I think that this Thanksgiving will be somewhat lost to the producers," Bledsoe said. "I think the fundamentals will remain challenging for the processors."


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