Turkey farmers see higher demand but rising feed prices

After a rough economic year in 2009, turkey farmers have more reasons to be thankful this year as consumer demand for their products improves, lifting producer prices.

Sacramento County turkey farmer Ken Mitchell, seen here with his son Austin, says good feed quality and mild weather aided in production of turkeys for the 2010 Thanksgiving holiday.

Bill Mattos, president of the California Poultry Federation, said farmers have sold all of their birds that were raised for the Thanksgiving holiday and they are earning profitable prices for them too. But Mattos and others warn that escalating feed costs could dampen recovery in the turkey business.

Consumers shouldn’t see much difference from last year in what they pay for turkeys, as many retailers offer free or discounted turkeys if shoppers buy a certain value of groceries at the store, he noted. Organic turkeys could go for as much as $2.50 a pound, he added.

Ken Mitchell, a Sacramento County producer who raises turkeys for Foster Farms, said he was aided this year by good feed quality and the cooler-than-average weather, which made for excellent growing conditions.

He said there was also a tighter supply of turkeys this year because processors such as Foster Farms had pulled back production in response to lower consumer demand in 2009.

The U.S. Department of Agriculture reports total U.S. turkey production in 2010 to be 241.9 million head, down from 247.4 million in 2009 and 273 million in 2008. California raised 15 million turkeys in 2009 and 2010, compared to 16 million in 2008.

“We had shorter numbers on the ranches,” Mitchell said. “Instead of facilities being fully utilized, we had a longer amount of down time between flocks. We didn’t need the products because we had products in cold storage.”

Week-old poults being raised at Ken Mitchell's turkey farm in Elk Grove will grow to a weight of about 27 pounds by March, when they'll be ready for shipment to Foster Farms.

Those supplies have since moved through the market, he said, and processors are now scrambling to get turkey numbers back up again.

Tom Fry, a producer in Chowchilla who raises turkeys for Zacky Farms, says the ailing economy has also affected his operation in the last two years. Whereas he used to grow heavy toms weighing 38 pounds for further processing, he’s now being asked to grow 22- to 24-pound turkeys for the fresh market.

“We get paid by the pound,” he said, “so our financial status has taken a hard hit because we’re losing 40 percent of our value.

“But they say it’s starting to pick up some, although I haven’t seen it yet,” he added. “It’s starting to sound like the volume of turkeys might be increasing in the next year and also going back to the heavy birds as the economy catches up a little bit.”

Tim Diestel, a producer in Sonora, says demand has returned for his line of specialty and heirloom range-grown turkeys, and his operation is doing better than he expected this year, especially in this fourth quarter.

Like other turkey producers and processors, Diestel Family Turkey Ranch, which raises, processes and delivers its own products, had to cut its production last year due to sluggish sales. With demand back up this year, it’s created a shortage of product that has boosted prices—not just for whole-body turkeys but other turkey meats across the board, Diestel said.

Although he caters to a niche market and his products tend to be more price-stable even in bad years, Diestel says what happens in the entire turkey sector affects his operation “because if all the commodity birds are a little bit short and their prices are up, then it’s good business for us.”

“Things have been pretty topsy-turvy and I think it shifted buying habits,” he said. “A lot of people got scared. They moved away from us and other higher-end products and went more to the Sam’s Clubs, where they felt they could get a better deal or more for less.”

He said even though the economy hasn’t improved much this year, he thinks “people are kind of more used to the situation” and are opting to splurge on food purchases such as the holiday turkey, “which is already a pretty inexpensive protein.”

“Now we see the trend moving back to where it used it be,” he said. “It’s not back to where it was before, but it’s definitely improved, and it appears we’re on the road to recovery. So we are definitely pleased about that.”

However, feed costs have skyrocketed in recent weeks, Mattos noted, and that is creating a huge burden for turkey farmers and other ranchers who produce meat products. Corn is a major food source for turkeys, and it has sold for as much as $5 a bushel.

“Next year could be a challenge for turkey growers if grain prices do not decline,” he said. “About 70 percent of the cost of turkey production is feed.”

If grain costs remain high, producers may choose not to raise as many birds, which would reduce supplies and could cause price increases if demand remains strong, Mattos added.

Mitchell said poultry rations are usually made up of corn, wheat and soybean meal, with most of the corn and all of the soybeans coming from the Midwest by rail.

Although as a contract grower he doesn’t pay for his feed, which is provided by Foster Farms, high feed prices could affect feed quality as feed mills adjust formulations in response to high corn prices. And that could affect the nutrition and health of his birds, he said.

“That will in turn affect the number of birds I might put on my facility in a year or in a flock, the amount of weight those birds will put on and what I sell,” he said. “As we go forward, that’s going to be a very big emphasis of companies such as Foster Farms meeting their bottom line.”

For Diestel, who runs his own feed mill, the current feed prices are not impacting his production yet because he has enough supply to cover him for the short term. But beginning in December and into next year, the higher costs will be an issue, he said.

“I think our good times are going to go away, because feed is already up,” he said. “Next year I think what we’re going to see is increased production costs for everybody.”

And those increases will have to be passed on to the consumer, who will likely see higher food prices, he added.

“Then the question becomes, what’s the consumer willing to bear?” Diestel said.

In light of these uncertainties, he said he doesn’t anticipate ramping up production any time soon, but he does hope the market will continue to trend positively.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com. Reporter Ron Miller contributed to this story.)

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