Sky-high inflation and a persistent outbreak of the viral avian flu is driving up the costs to produce turkey this year while threatening the supply.
In Meeker County, Minnesota, at the end of August, 180,000 turkeys infected with avian flu had to be killed.
Farmers were raising the birds for Hormel’s Jennie-O brand, the country’s second-biggest turkey supplier. The outbreak in the rural community, 70 miles west of Minneapolis, is still ravaging flocks.
“We’ve worked really hard,” Hormel CEO Jim Snee said during the company’s Sept. 1 earnings call. “But, clearly, this is still an issue.”
This year, the flu has killed 44 million birds, including 4.5 million turkeys, or 2.5% of U.S. turkey production. Coupled with the highest inflation in 40 years, which has hit the meat case at double the rate of other consumer products due to higher feed prices and more expensive fuel, analysts predict Thanksgiving will cost more this year because of the flu-diminished turkey supply.
The U.S. Department of Agriculture’s most recent data show an “alarming” low level of turkeys in cold storage, according to investment banker Walter Kunish, who tracks the market for HTS Commodities. Most turkeys eaten at Thanksgiving are harvested throughout the year and frozen, which is one reason why the virus’ eight-month-long spread has had such an impact. With 2022 turkey production estimated to be off more than 4% compared with 2021, whole 8- to 16-pound wholesale prices are expected to rise 23% higher than last year.
“With the spike in turkey prices we believe that a decline in consumption during the holidays can occur,” Kunish, a former economist for the USDA who has worked at top meat processors Cargill and Tyson Foods, told Forbes. “That disease has really wreaked havoc on turkey supplies.”
The average price per pound for turkey at supermarkets and other retailers is now about 60% higher compared than last year, or just under $3 per pound, according to NielsenIQ data, which scans prices and receipts across the majority of U.S. food retailers.
Meat has been one of the categories “most severely impacted by inflation,” said Carman Allison, a vice president and economist at NielsenIQ. In the last year, meat prices are up an average of 12%, while turkey prices have increased even more – 14%.
A worker tests a sample for avian flu, a highly transmissible virus which has killed about 44 million birds.
Scott Olson/Getty Images
At last year’s Thanksgiving, fresh turkey prices were 10% more expensive compared with 2020, and as a result, turkey sales per pound declined by 6%. “With prices continuing to rise and the threat of a consumer recession looming, we can expect a similar decline over this holiday season,” Allison said. “Shoppers might buy their turkey earlier if it’s on sale or seek out stores with the lowest prices. Some shoppers will also look for more affordable alternatives, such as chicken or a turkey breast, rather than the whole turkey.”
On Hormel’s September 1 earnings call, Chief Financial Officer Jacinth Smiley said avian flu will limit Jennie-O’s supply for Thanksgiving by as much as 30% compared with last year.
“Lower industry-wide turkey supplies are expected to keep prices higher near-term,” Smiley said.
Butterball, the biggest U.S. turkey seller, will actually have slightly more turkeys for sale this Thanksgiving compared with last year’s. Avian flu has hit around half a percent of the company’s contracted supply. Within the industry, Butterball accounts for less than 3% of the total impact.
The main reason is geography. Jennie-O has been hit harder than Butterball partly because most of Jennie-O’s production is based in Minnesota, which is in the middle of a wild bird migratory flyzone. That’s been fueling the spread. Butterball, however, mostly draws its turkeys from the South, with farms mostly in North Carolina and a few sprinkled throughout Missouri and Arkansas.
“There’s 97-plus percent of the rest of the industry that has really had to absorb the brunt of that,” said Butterball CEO Jay Jandrain. “We’ve been impacted very little, relatively speaking.”
Farms like this one in Erlanger, Kentucky, where turkeys are packed close together inside can spread avian flu quicker.
JEFF DEAN/AFP/Getty Images
Highly concentrated and confined production facilities are key factors that drive the spread of the virus. Stress due to overcrowding has also contributed. Research published in February by the investor network Farm Animal Investment Risk & Return, or FAIRR, which is based in the U.K. and backed by $48 trillion in assets, found that 63% of the world’s 60 largest meat, fish and dairy firms aren’t taking steps to prevent the next pandemic from incubating on one of their farms. Bird flu can transfer to humans, and there have been several cases this year of workers who got sick.
The 44 million birds killed by flu this year is fast approaching the record set in 2015, when 50 million birds were killed in the largest U.S. avian flu outbreak ever recorded. Back then, the virus burned off in the summer and didn’t come back in the fall, so the impacts on Thanksgiving and holiday birds were limited.
This year, after a short respite from major outbreaks earlier this summer, cases came roaring back. About 3 million birds, including egg-layers and chickens, have been infected and killed so far in September alone.
Usually, infected birds are killed by turning off the airflow in the houses where thousands live, cranking up the heat and letting the birds suffocate. More turkeys have contracted avian flu than broiler chickens, partly because they take longer to raise and so they have more time to contract the virus.
“That disease has really wreaked havoc on turkey supplies”
Shoppers who want a certain type of turkey should buy early, experts say. One solution for Thanksgiving cooks could be to switch main courses. While prices for meat in general are up, turkey’s 14% increase is greater than the rise in spiralized ham, which is 10%. If celebrants are dead set on the traditional bird, however, the American Turkey Federation said high prices will be softened by discounts that grocers will use to attract holiday shoppers, even if the retailers take a loss on turkey sales.
“We’re still expecting those deals,” said American Turkey Federation President Beth Breeding. “It’s not easy being a farmer, especially when there’s something like this going on. Very stressful, especially when you’re in an area of a lot of cases. They’ve been through a lot.”
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Source: https://www.forbes.com/sites/chloesorvino/2022/09/13/high-turkey-prices-to-dominate-thanksgiving-2022/