Turkey industry shooting for 4 in a row
The turkey industry had its third successive profitable year in 2007; can it sustain both growth and profits in 2008?
Farbest Foods had the largest increase in slaughter of any turkey company in 2007, 52.4 million pounds, 24 percent, and the company moved from ninth in last year's rankings to the fourth spot this year. Farbest added a second processing shift at the company's Huntingburg, Ind., plant in February of last year. The company expects to increase slaughter by 39 million pounds, 14.4 percent, in 2008.
House of Raeford increased its slaughter volume by 2.9 percent in 2007 but still fell into fifth position in the rankings. With a slight, 1.2 percent, increase in volume in 2007, Perdue Farms fell to the sixth spot in the survey. Foster Farms, the USA's seventh largest turkey company, increased its slaughter volume by 25.5 million pounds, 11.5 percent, in 2007, and projects a 10.4 percent increase in 2008.
Virginia Poultry Growers Cooperative increased its slaughter by 20 million pounds, 9 percent, and came in eighth in the rankings. Prestage Foods slaughter increased by 26 million pounds, 12.4 percent, in 2007, and moved to ninth in the rankings. The company forecasts virtually no increase in slaughter this year. Sara Lee's turkey plant in Storm Lake, Iowa, is estimated to have processed 220 million live pounds in 2007, and the company rounds out the top ten in the survey.
WATT PoultryUSA's Top Turkey Company Survey estimates that live turkey slaughter pounds increased 3.1 percent in 2007. The survey is based primarily on data submitted by turkey companies, but some numbers are estimates based on input from industry sources. Last year's Top Turkey Company Survey forecasted 3.8 percent increase in slaughter volume in 2007.
West Liberty Foods opened a new fabrication, cooking and slicing facility in Tremonton, Utah, in 2007. This facility promises to help value-add millions of pounds of turkey each year. Oak Valley Farms' processing plant in Watertown, S.D., ceased slaughter operations in October of last year. According to published reports, live production issues led to this move.
Looking ahead in 2008
Slaughter volume for the USA turkey industry is forecasted to increase by 4.6 percent to 7.41 billion live pounds in 2008, according to the WATT PoultryUSA rankings survey. Butterball projects the largest increase to slaughter volume, 81 million live pounds, 5.9 percent higher than in 2007. Jennie-O Turkey Store expects its slaughter volume to increase by 69 million live pounds in 2008, 5.5 percent more than in 2007. Kraft Foods is expected to expand its second shift and increase its slaughter by 50 million live pounds in 2008, a 23.5 percent increase. The next largest increases are expected at Farbest Foods, Dakota Provisions and Foster Farms with increases of 39 million, 27 million and 25.8 million live pounds, respectively.
The projected slaughter volume for 2007, published in last year's survey, was 7.15 billion live pounds. The industry total for 2007 reported in this year's survey was 7.09 billion live pounds. This continues a recent trend in which the industry has not been able to achieve its projections for increased slaughter. If this trend continues in 2008, the market may be able to absorb this year's increase in volume, profitably.
Turkey in cold storage at the end of November, 2007, was around 1 percent less than what was in inventory at the end of November, 2006, according to USDA data. Cold storage stocks of turkey have been at relatively low levels for the last few years. Low cold storage stocks provide a buffer against prices falling if production exceeds the markets needs, at least in the short term.
Corn and soybean prices climbed late in 2007 and the average prices paid for corn and soybeans were higher than in 2006. According to USDA data, the average price received for soybeans was up 39 percent in 2007 and the average price received for corn increased 27 percent.
Grain prices were on the rise in early January of this year. Soybean futures for March 2008 delivery reached almost $13 a bushel in early January, the highest price ever for soybeans. Corn futures for March delivery reached nearly $5 per bushel, the highest price for corn since June of 1996. Feed costs could be significantly higher in 2008 than in 2007. The coming year promises lots of challenges for the turkey industry, but it also offers the opportunity if things break the right way for a fourth profitable year in a row. The turkey industry has not experienced a run like this since the industry's glory days in the mid-1980s.