The highly pathogenic avian influenza (HPAI) outbreak has hindered volumes and sales for Hormel Foods subsidiary Jennie-O Turkey Store, but Hormel executives are cautiously optimistic the situation will change later this fiscal year.
Hormel CEO Jim Snee and Chief Financial Officer Jacinth Smiley shared thoughts on HPAI’s impact on the business while announcing the financial results of the first quarter of fiscal year 2023. The two spoke during a March 2 conference call with analysts.
Snee said Hormel’s net sales for the first quarter were $3 billion, a 2% decline when compared to one year ago. Primary drivers of that decrease were lower commodity pork and lower turkey volumes due to the HPAI outbreak.
Snee added that turkey exports were down due to HPAI-related trade restrictions, as well as a limited supply. He estimated that commodity turkey volumes for export declined almost 80% when compared to the first quarter of FY 2022.
Turkey supplies improving
“Turkey supplies have improved since the fall,” Smiley said. “We anticipate more normalized volume comparisons for the remainder of the year, barring a return of HPAI in the spring.”
Smiley said Jennie-O’s turkey supply had not been hit since December 2022, but added that HPAI remains a “significant risk” for the company, particularly as wild bird migration begins along the Mississippi flyway.
“Assuming current conditions hold, reduced production volume in our turkey facilities is expected through the end of the second quarter before steadily improving in the back half of the year. This should be supportive of our turkey business as demand for general turkey products remains strong. Turkey markets have become less favorable as breast meat prices have steadily declined over the last month. Additionally, historically high feed costs remain a headwind for our business,” Smiley said.
“Considering these factors, we expect to improve meat availability in the back half of the year to drive higher sales volumes for our turkey business, offsetting the impact of market declines and higher feed costs.”
Jennie-O ‘still in a very favorable position’
Snee acknowledged that the turkey breast meat market isn’t as strong as it previously was, but added that Hormel’s turkey business is “still in a very favorable position.”
"Turkey demand is strong. The value-added portion of the business continues to do well, and as we get more meat, we'll be able to fill more of that. We know that whole birds cleared really well this holiday season, and that bodes well as we head into the next holiday season," said Snee.
Automation at Faribault plant
Also during the call, Smiley spoke of modifications made to the Jennie-O plant in Faribault, Minnesota.
The project is now completed and is representative of a trend to add automation to Hormel Foods facilities.
“The project automates more than 30 difficult, highly repetitive jobs at the plant, further aiding our efforts to improve employee retention and satisfaction,” Smiley said.
To learn more about HPAI cases in commercial poultry flocks in the United States and Canada, see an interactive map on WATTPoultry.com.
Read our ongoing coverage of the global avian influenza outbreak.
