Jennie-O Turkey Store saw its operating profit drop 45 percent and its dollar sales drop by 12 percent during the third quarter of fiscal year 2015. Those drops came as no real surprise, given that the Hormel Foods subsidiary and the second largest turkey producer in the United States lost an estimated 20 percent of its turkey supply during the 2015 avian influenza outbreak.
Some of its losses during the third quarter were offset as Hormel was able to purchase some turkey meat – mostly dark meat – from other suppliers.
Speaking during the Hormel Foods third quarter earnings call on August 19, Jeffrey M. Ettinger, president, chairman and CEO of Hormel, said he estimates the sales to be about 15 percent lower in the fourth quarter, when compared to the same quarter of 2014.
But what happens in future quarters is much more of a wild card as the poultry industry braces for the possible return of the virus during the fall months.
Like so many turkey and egg producers in the U.S. that were hit by H5N2 avian influenza, Jennie-O Turkey Store has is working with government agencies and other groups to recover from infections. The company has busy cleaning and sanitizing its facilities affected by the virus and is well on its way to rebuilding its flocks. Ettinger announced that the company has repopulated about two-thirds of the farms that were previously impacted by highly pathogenic avian influenza, and he expects the company’s repopulation process to be completed during Hormel’s fourth quarter.
“We are filling up the barns, but there clearly is at least a little bit of risk associated with that,” said Ettinger.
“This was an unprecedented incident already. We’re trying to learn from it; the government’s trying to learn from it. It could hit other parts of the country, it could hit during another time of year, it could go away or it could come back in a smaller manner. We’re trying to get ready for any contingency.”
But even if it does return in the fall, Ettinger said because of the length of the growth cycle, it shouldn’t have a great impact on its projected results for the rest of the fiscal year.
“By the time we’re talking again in November [to discuss financial results of the fourth quarter], we should have a much better sense of whether something seems to be occurring on a fall basis this year or not, and what potential impact that might have. Even if nothing happens, we’re expecting volume struggles even in the first half of next year until we cycle through this,” he said.
