New detections of highly pathogenic avian influenza (HPAI) in Minnesota affected the supply chain for Jennie-O Turkey Store, meaning the company will continue to face supply constraints until at least January 2023.
The HPAI situation and its impact on Jennie-O Turkey Store was discussed often during the Hormel Foods third quarter earnings call, held on September 1. Hormel is the parent company of Jennie-O.
The earnings call was held just one day after the Minnesota Board of Animal Health (MBOAH) announced that HPAI was confirmed in two commercial turkey flocks in Meeker County. Collectively, 174,849 turkeys were lost.
“With the positive cases reported earlier this week in our supply chain, we expect the impact of HPAI to reduce production volume in our turkey facilities through at least the end of the first quarter of the fiscal year 2023,” Hormel Foods Chief Financial Officer Jacinth Smiley said.
Hormel’s third fiscal quarter ended on July 31, which would mean its fourth quarter will end at the end of October and its first quarter of 2023 will conclude at the end of January 2023.
Smiley said that the impact of HPAI during the third quarter amounted to about a 20% decrease in production, and she projected that it will be down about 30% in the fourth quarter. Because of the young age of the birds in the flock, Smiley said the impact of the two new cases won’t be measured in the fourth quarter.
Hormel CEO Jim Snee said he did expect the “turkey supply to normalize,” but he added that the company is closely watching the situation with HPAI’s resurgence.
“At this point, it’s too early to tell what the impact will be,” Snee said.
Third quarter performance
Despite the losses of turkeys to HPAI, Hormel’s Jennie-O Turkey Store segment had a profitable third quarter.
“The Jennie-O Turkey Store team significantly outperformed our profit expectations for the quarter, and the team effectively managed limited turkey supply and maximized operational performance, all while working to restore the impacted turkey farms across the supply chain,” Snee said.
Volumes were down for the quarter 20%, and net sales were down 8%, and Smiley said those declines were “less than expected.”
However, despite those declines, the segment achieved a profit of $316.4 million, a year-over-year improvement of 537.3%.
In a press release, Hormel stated that foodservice and whole-bird sales increased due to favorable pricing, but that was partially offset by lower commodity and retail sales. Higher commodity prices also drove the substantial improvement in segment profit.
