Wholesale turkey prices at Thanksgiving for the past two years have been sharply lower than in years past, but the U.S. Department of Agriculture’s latest “Livestock, Dairy & Poultry Outlook” noted that lower wholesale prices don’t always mean lower turkey prices at the grocery store.
“While wholesale and retail turkey price movements are historically correlated on a yearly basis, seasonal factors can disrupt this correlation,” USDA economists Kim Ha and Alex Melton noted.
In the past, USDA said retail turkey prices in the Thanksgiving holiday season were commonly near annual low points, while wholesale prices were near yearly highs.
According to the report, the November markup from wholesale to retail turkey prices was 18%, compared with an average 38% markup over the entire three-year period. Beginning in 2017, however, USDA said wholesale turkey prices began a sustained decline that was not reflected in retail price movements.
The retail markup in November 2017 reached 75% and remained high at 70% in November 2018. Melton and Ha said the markup is expected to remain high in 2019 but should contract slightly due to rising wholesale prices in 2019.
“The data suggest that the past relationship between wholesale and retail Thanksgiving turkey prices may be fading, as retail prices appear to have become less responsive to downward movements in wholesale prices,” they said.
Turkey production up slightly
USDA reported July 2019 turkey production at 491 million lb., a 1% increase from July 2018. On a daily average slaughter basis, however, production was down 3.6% relative to a year earlier.
Hatchery report data were mixed for July, showing a year-over-year decline of 5% in poults placed, a 2% decrease in poults hatched and less than a 0.5% increase in the number of eggs in incubators on Aug. 1.
“Although production remains down year to date relative to the same period in 2018, turkey ending stocks in cold storage have been below 2018 levels since April,” Melton and Ha reported.
Ending stocks at the end of July 2019 were 6% lower than in July 2018. USDA decreased the 2019 turkey production forecast to 5.866 billion lb., down 20 million lb. from last month’s forecast and less than 0.5% below 2018. Turkey production in 2020 is expected to total 5.930 billion lb. If realized, production would be 1% higher than 2019, Ha and Melton said.