Nov. 12 (Bloomberg) -- Americans will be paying more for their Thanksgiving turkeys this month after rising feed costs led to reduced output in the U.S.
U.S. wholesale, frozen turkeys jumped to $1.09 a pound on average yesterday, the highest price ever and up 28 percent from a year earlier, according to Russell Whitman, the vice president of the poultry division at commodity researcher Urner Barry in Toms River, New Jersey.
At the end of September, stockpiles of turkey meat slid 23 percent from a year earlier, government data show. Production will decline 1.3 percent this year to 5.514 billion pounds (2.5 million metric tons), the U.S. Department of Agriculture said on Nov. 9. Before today, the price of corn, which makes up about 70 percent of turkey feed, was up 47 percent in the past year.
“The fundamental reason why you’re seeing record-high turkey prices is the fact we’re seeing record-high costs of raising turkeys,” said Tom Elam, president of FarmEcon LLC, an agriculture and food-industry consultant in Carmel, Indiana. “When both stocks are down and production is down, then you get a double hit on the amount available to be consumed.”
Retailers in the U.S. sold whole frozen turkeys for an average of $1.57 a pound in September, up 7.7 percent from a year earlier and the highest level since at least 1980, the Labor Department said on Oct. 15.
Higher Retail Price
While those government statistics don’t capture the holiday discounting by grocers this month, retail prices probably will be up 20 percent from Thanksgiving last year, said FarmEcon’s Elam.
The birds are traditionally the main course for meals on Thanksgiving, an annual holiday that Americans will celebrate on Nov. 25 this year. Stores usually cut prices to spur sales on accompanying items for the holiday dinner including cranberry sauce, green beans or stuffing mix, Elam said. Retail prices, even with specials, will be higher this year, he said.
Last year, Wal-Mart Stores Inc., the world’s largest retailer, cut prices on turkeys, selling whole 12-pound (5.4 kilogram) turkeys for 40 cents a pound. That level of pricing probably won’t be around this year, Elam said.
Bentonville, Arkansas-based Wal-Mart won’t disclose its turkey pricing until Nov. 17, Melissa Hill, a company spokeswoman, said in an e-mail.
Some retailers probably are going to lose money because customers still expect discounts, Whitman said.
“Retailers stand the very real possibility of losing more money than last year due to high wholesale prices,” Whitman said. “The consumer has really come to expect low-price turkeys even during the most popular time of year for it.”
Most grocers secure their supply in February and March, and they had an incentive to do that this year because stockpiles were expected to be tight by November, Elam said. For those who didn’t buy early or need more now, they will be forced to pay “top dollar” to preserve customer loyalty by making sure there is enough turkey at Thanksgiving, Whitman said.
“They’ll be enough to go around,” said Kelly Zering, associate professor and extension specialist in the department of agricultural and resource economics at North Carolina State University in Raleigh. “It might be that if you wait until the last minute, you might have fewer to choose from than you had last year.”
Per capita consumption will be 16.2 pounds this year, the lowest level since 1988, according to the USDA. That is down from 16.9 pounds in 2009. The main reason for the decline is lower turkey output, said David Harvey, a USDA agricultural economist in Washington. Record grain prices in 2008 led some producers to reduce their flocks, he said.
Tighter Corn Supply
The U.S. corn crop will be 1 percent smaller than forecast a month ago, the Department of Agriculture said on Nov. 9, after flooding in June and hot, dry weather in August lowered Midwest yields. Feed is about 25 percent of the retail cost of turkeys, Elam said.
Turkey producers have seen their profits dwindle after the jump in feed costs, and some may lose money during a seasonal drop in demand in January, Elam said. Some may trim or abandon plans to expand, he said.
To contact the reporter on this story: Elizabeth Campbell in Chicago at firstname.lastname@example.org
To contact the editor responsible for this story: Steve Stroth at email@example.com.