Turkey breast prices rise as domestic supplies dwindle

Turkey prices experienced serious volatility over the past three years. With supplies shrinking in 2017 and 2018, is a comeback on the way?

The sandwich shop segment of the foodservice industry is a key buyer of turkey meat and will influence prices going forward. | Garuti, Dreamstime.com
The sandwich shop segment of the foodservice industry is a key buyer of turkey meat and will influence prices going forward. | Garuti, Dreamstime.com

In the past three years, few meat and poultry items experienced price volatility like fresh tom breast meat. According to United States Department of Agriculture (USDA) data, prices averaged nearly US$4.60 per pound in 2015, but dropped to an average of US$1.55 per pound in 2017. However, turkey breast prices soared then in large part due to the 2014-2015 outbreak of highly pathogenic avian influenza. Turkey meat supplies are shrinking again, but this time much more gently due to modest, and voluntary, output reductions by key industry players. 

Negative margins lead to production cuts

Slumping tom breast meat values contributed to poor financial returns last year. LEAP Market Analytics estimates processors lost an average of 11 cents per pound on a ready-to-cook basis for all of 2017. This led to cuts at the front end of the supply chain. Poult placements fell by 2.3 percent overall in 2017 to 264.8 million, according to USDA National Agricultural Statistics Service (NASS) figures.    

Slaughter and production levels are trending lower, too. Ready-to-cook production of young turkeys in the U.S. totaled 2.43 billion pounds from January 2018 to May 2018, representing a 0.2 percent decline from the same period in 2017. The deficit should grow in coming months based on poult placements. Ready-to-cook production of young turkeys is projected to drop between 1.0 percent and 1.5 percent from 2017 levels in the rest of 2018. 

Supply trends and recent price response

Declining production is expected to pull domestic supplies lower this year, which follows a modest decline in 2017. U.S. per capita disappearance of all turkey meat is forecast at 12.7 pounds boneless weight in 2018. Since 1988, only 2014 and 2015 featured smaller domestic turkey supplies. This pattern is poised to extend at least into early 2019. 

It seemingly took a while for dwindling supplies to spur a reaction, but fresh tom breast meat finally perked up back in early spring 2018. Spot market valuations advanced further since, topping US$1.80 per pound. This boosted the processors’ financial position considerably, but the market likely needs to rally a bit further before many in the turkey industry feel comfortable again. 

Looking ahead and challenges

Additional supply tightening should help fresh tom breast meat find consistent support above US$2 per pound. However, headwinds exist, making an extended run beyond the US$2.50 mark a challenge near-term. Supply-side support for breast meat should be strong, but the demand side is far less encouraging, and why a return to valuations similar to 2014-15 is unlikely. 

Pork might be the biggest threat. Turkey breasts compete directly with hams in the deli meat space, and domestic per capita disappearance of pork is on track to reach its highest point since the early 1980s. Another concern is the sandwich shop segment of the foodservice industry, a heavy user of turkey breast meat, is facing upheaval. The highest profile member of this group, Subway, is in the process of closing hundreds of stores. Turkey industry players will need to get creative in seeking new opportunities to market breast meat given these hurdles. 

Turkey Supply and Price Chart 2018

The sandwich shop segment of the foodservice industry is a key buyer of turkey meat and will influence prices going forward.

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