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Rough Ride for Turkey Companies This Thanksgiving

by 5m Editor
17 November 2008, at 5:39am

US - With prices little changed from last year, Thanksgiving sales are not expected to provide much hope for producers struggling with debt.

Thanksgiving is bringing turkey producers little to celebrate this year, while diners anticipating the most poultry-centric of holidays may be grateful that they will not see much difference in the cost of their bird, reports News-Leader from Springfield, Missouri.

Meat producers have been struggling this year with higher costs for key ingredients like corn, soybeans and oil, which accounts for much of the recent rises in the costs of beef and chicken. Turkey producers are facing all the same pressures, but do not 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, Ms 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 per cent 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 hotline and is now offering cooking tips via text message as well.

It is prime turkey-eating time in an industry that produced about $13.9 billion worth of product last year. But even the seasonal sales boost will not 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 per cent of all turkey consumed during the year is eaten during the holidays, industry figures show, though that is down from 50 per cent in 1970 as more people eat turkey year-round, especially in the form of sandwiches and ground turkey.

The News-Leader article concludes that the turkey industry has also had to reverse direction &ndash after having a good year in 2006, producers ramped up production the next year and are now having a tough time scaling back, said Keith Shoemaker, chief executive of Butterball.