It turns out that turkey pricing is not much tied to commodities prices. Instead, other factors, like tight margins for farmers and perceptions of value, play a much bigger role.
For most of us, the price we pay for our turkey bears little relation to what it costs to raise it.
A frozen Shady Brook Farms turkey at my local Stop Shop in Stamford, Conn., was advertised this week for 58 cents a pound. That would put the cost for a standard 16-pound turkey at $9.28. At the A. P. up the street, an unnamed frozen bird was on sale for 49 cents a pound.
This is price competition at its fiercest — and both below cost. Cody Brokmeyer, agricultural statistician in charge of turkeys at the National Agricultural Statistics Service, said the average cost of a live turkey in October was 77 cents a pound. But processing adds another 40 cents or so a pound. Then, there are the shipping costs. And those ads cost something, too. In other words, there is no way a turkey costs 49 cents a pound.
“It’s very competitive at the retail level, and that turkey gets someone through the door,” said John Anderson, senior economist at the American Farm Bureau Federation.
Contrast that with the high-end turkey, whose price is determined as much by scarcity as allure. Heritage turkeys — essentially, old-fashioned varieties that are much bigger and take longer to reach maturity — are becoming increasingly popular, and they command top dollar. Heritage Foods USA, based in Brooklyn, sells a 16-pound turkey for $114 plus shipping.
Here is a look at some of the numbers behind the bird, for those of us picking up our turkeys in the next few days. They may influence your purchasing decisions, or at least help you appreciate how a turkey can cost more than $100.
COMMODITIES AND PRICE The two main commodities that go into a turkey are feed corn and soybeans. Prices for both have gone up sharply in the last year.
Since feed is typically 60 to 70 percent of the cost of raising a turkey, I figured there would be a commensurate rise in turkey prices. But I found out that while the price of a turkey has risen this year, it has increased only moderately.
David Harvey, poultry analyst at the Agriculture Department’s Economic Research Service, said the price for a bushel of feed corn was $6.69 in September, up 54 percent from $4.32 the year before. He attributed the increase to a combination of greater demand for feed ingredients here and abroad but also to increased use of ethanol, which is made from corn. He said the spot price for processed turkey in September was $1.10 a pound, up 7 percent from the previous year.
While it would seem easy for farmers to raise prices for Thanksgiving — what else are people going to eat? — the market is not as inelastic as I thought. “Just because your inputs go up, you can’t just dump it on the consumer,” Mr. Brokmeyer said. “There’s only a certain amount that people will pay for turkey.”
The price is also driven by contracts throughout the supply chain, with farmers, processors, distributors and stores.
Mary Pitman, of Mary’s Turkeys in Fresno, Calif., which raises free-range, organic and heritage turkeys for stores and restaurants on the West Coast as well as some Whole Foods stores, said she negotiated the price of her turkeys in February and did not take into account the possibility of such an extreme spike in commodities prices. Her farm will lose money on turkeys this year.
IMPACT ON PRICE Most of the grocery stores and the large, commercial turkey producers I called did not want to discuss how they set their prices. One exception was Stew Leonard Jr., the president and chief executive of Stew Leonard’s grocery stores in Connecticut.
He said he expected to make no money on the 1 million pounds of turkey he will sell for Thanksgiving. Where he makes money is on the side dishes that round out a Thanksgiving dinner.
He stocks a fresh bird for $1.49 a pound and one that is free of antibiotics and hormones for $2.79 a pound.
Article source: http://feeds.nytimes.com/click.phdo?i=c610a190ba5fa66ad1e9e4806e3fd191
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