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Fewer Turkeys Means Higher Thanksgiving Prices

by 5m Editor
12 November 2010, at 9:17a.m.

US - Consumers should count their blessings as they spend a little more for the annual Thanksgiving feast this year because they're likely to face even higher food prices in 2011, a Purdue University agricultural economist says.

September's Consumer Price Index indicates that retail food prices are up 1.4 per cent from September 2009, said Corinne Alexander.

She explained: "This is what we could consider a fairly modest price increase. What I would consider a normal or typical food price increase is somewhere around 2.5 per cent."

Among the holiday staples, turkeys and sweet potatoes will cost more, while retail prices for cranberries and white potatoes will remain stable or be down this season, she said.

Dr Alexander said: "We'll have about two per cent fewer turkeys this year. As a result, we're seeing wholesale prices up about 20 per cent compared to last year. The US Department of Agriculture predicts wholesale prices for eastern market whole turkeys will be between $1 and $1.04 per pound in the fourth quarter of this year, compared with 84 cents per pound last year.

What consumers will actually pay for Thanksgiving dinner depends on where they shop, Alexander said.

"Turkey is a favourite loss-leader item at grocery stores," she said. "They might offer a discount on turkey in the hope that when you come to pick up that turkey you also buy all the other items for Thanksgiving."

A combination of factors is behind rising food prices, she explained. Demand is up for corn and soybeans as livestock feed and for use in biofuels, making it more expensive for farmers to raise livestock. US corn yields are lower than late-season estimates, creating additional supply and demand shortages. And a wheat shortage brought on by a Russian drought and other market forces is taxing supplies of that cereal grain.

Livestock and dairy producers are responding to the feed cost increases by reducing herd sizes or delaying herd expansion, leading to tighter meat supplies, Dr Alexander said.

"Oftentimes there's a time lag between increases in feed costs and increases in livestock and dairy prices," she said. "That time lag can be anywhere from six months to a year. We also see that time lag in terms of some of the cereal products and bread prices because a lot of contracts for flour millers tend to be long-term contracts."

Because of the weak economy and lower consumer spending, supermarkets and restaurants have been hesitant to pass their higher costs onto consumers, she added. There will come a point when retail outlets will have no choice – likely within the next six to 12 months.