Large Beef, Pork and Chicken Supplies Squeeze Turkey Consumption

Turkey consumption is on a path to decline by about 1% this year compared to 2016’s. First quarter 2017 domestic use was up 4-5% year-over-year, but since then volumes have dropped by 3-4%. Preliminary indications for the current quarter suggest that consumption is down half a percent. The slowdown in consumption has resulted in an accumulation of whole birds and parts in frozen inventories. Turkey prices have been pressured downward.

Turkey production profitability in 2017 will be the lowest since 2009. Wholesale whole bird prices are 30% higher than they were in that timeframe, but prices of parts and deboned items are at similar values to 2009’s. Feed costs were 3% higher in 2009 than they are this year. In the wake of these poor economic returns, 2010 turkey production slipped by less than 1%. Annual turkey consumption this year is pegged at 5.2 billion pounds by LMIC, down from 5.3 billion pounds in 2016, a decline of 2%.

Turkey inventories in freezers at the end of this year are on a path to be the highest since December 31, 2008. Increasing production of beef, pork, and chicken that is projected for next year will keep prices for these meats on the defensive, so there is little reason to expect turkey consumption next year to change from this year’s amount. Flat turkey consumption trends and large frozen inventories at the start of the year are the framework for lower turkey prices for 2018, at least for the first few months.

Lower turkey prices for an industry already struggling with profitability points to the probability that production next year will be less than this years. Turkey hatchery output in October was up 3% from the prior October, but was down 1% in September. Turkey eggs in incubators on November 1 were up 5% from a year earlier. A reversion to a declining trend for turkey hatchery output is likely before the end of this year. An annual production decline of 3-4% next year could help to reduce frozen product inventories and support higher prices. That would lead to a recovery in industry profitability in the second half of the year.