Turkey industry sees continued struggle in cold storage clearance, pricing

With the holiday season in full swing, turkey and ham producers are enjoying a momentary high in the markets.

“Thanksgiving is in the rear-view mirror, with the turkey industry anxious for signs that whole bird clearances were good during November,” said the Daily Livestock Report. 

“Retail feature activity for Thanksgiving turkeys, as reported in the USDA Agriculture Marketing Service’s National Retail Report – Turkey got a strong start two weeks ahead of the event at the highest levels in the last four years but was only moderate for the week of the holiday,” DLR reported. “The big kick-off two weeks in front of Thanksgiving probably had an impact on wholesale trade flows for beef, pork and chicken in late October and early November, especially given the early timing of Thanksgiving this year.”

Over the last two years, DLR noted the turkey industry has struggled to manage its cold storage levels, with inventories close to 279 million pounds at the close of 2016 and 310 million pounds at the close of 2017. Historically, prior to 2016, end-of-year inventories remained closer to 200 million pounds. 

“Consequently, whole bird prices at the wholesale level started out 20 percent lower in 2018 than a year earlier, the lowest since 2009,” they commented. “Pricing power has been hard to come by in the whole bird market throughout the year.” 

While DLR asserts that aggressive wholesale-level pricing normally improves consumption to reduce cold storage inventory, response to stimulus in 2018 was “disappointing,” they said.

“Turkey domestic usage during the January to March quarter fell short of a year earlier by five percent or 60 million pounds,” they explained. “It might be reasonable to expect that there would be a delay between pricing stimulus and consumer response, but the dip in consumption during the first quarter extended the problem of too much product in cold storage.” 

Spring consumption also provided some encouragement and a two percent gain this year from 2017 levels, with frozen levels also falling below 2017 for the first time at mid-year. 

“Unfortunately, there was no follow-through during the summer quarter, and turkey usage fell below the prior summer by 18 million pounds,” DLR noted. “Additional declines in cold storage were insignificant.”

The underlying cause, according to DLR, could be a pork industry response in pricing. The pork industry matched ham prices to low prices on turkey, decreasing wholesale prices by 20 percent from a year earlier. 

“Lean beef trimmings prices were also five to 10 percent lower, and chicken breast meat prices were close to 25 percent lower,” DLR said. “This raises the possibility that frozen turkey inventories at the end of the year will increase for the third consecutive years if turkey disappearance during the holiday quarter falls short of a year ago.”

Saige Albert, managing editor of the Wyoming Livestock Roundup, compiled this article from the Nov. 29 edition of the “Daily Livestock Report” produced by Steiner Consulting Group. Send comments on this article to roundup@wylr.net.