Oversupply keeping turkey profits down
By Claudia Carpenter
Bloomberg News Service
Minnesota turkey farmer Dave Burkel Jr. and other U.S. producers are enduring the lowest prices in 11 years, extending the industry's slump for a third year.
As Americans prepare for traditional turkey dinners tomorrow, producers are being squeezed as meat production rises faster than consumption.
Farmers will sell turkeys for an average of 61.7 cents a pound this year, the lowest since 1992 and down 4.3 percent from 64.5 cents last year, the U.S. Department of Agriculture said. Prices have fallen each year since the average reached 71 cents in 2000.
"Prices have been going down because there's a lot of poultry on the market, and the export market was very soft," said David J. Harvey, an agricultural economist with the USDA's Economic Research Service.
Burkel, a fourth-generation turkey farmer in Frazee, Minn., said he's making 60 cents to $1 profit per bird, barely enough to prevent losses.
"You can't replace your operation for the kind of profits we're seeing today," said Burkel, whose biggest buyer is Hormel. "In other words, you wear your operation out and then you have nothing. We're in survival mode. That's all."
A truckload of 950 turkeys from Burkel's six farms in Minnesota and North Dakota fetches $14,000, down 9 percent from $15,400 last year.
"I don't think enough people have cut production," said the 41-year-old, who reduced his flock by 35 percent this year to 1.5 million birds and closed a farm in North Dakota. "Basically, there's still too much turkey meat on the market."
A slump in the U.S. turkey business, which produced about $3.7 billion worth of birds last year, has hurt the largest U.S. processor, Hormel Foods Corp., and others such as Pilgrim's Pride Corp. and the Butterball unit of ConAgra Foods Inc.
"Profitability has been decimated in the past year because of the oversupply," said Jonathan Feeney, an analyst at Wachovia Securities in New York.
The increase in feed prices hasn't helped. Soybean meal is up 34 percent this year and corn is up 2.2 percent. Turkeys eat a mix of them for 14 to 20 weeks before they are slaughtered, and feed accounts for as much as to two-thirds of the cost of raising them.
"All areas of the livestock industry have cycles, and the turkey industry is just in a down cycle," said Karen Zimmerman, president of P&J Poultry Products Co. in Northfield, Minn.
"... Supply is getting tighter, so next year will probably be better."
