Fewer turkeys means higher Thanksgiving prices

WEST LAFAYETTE, Ind. — Consumers should count their blessings as they spend a little more for the annual Thanksgiving feast this year because they’re likely to face even higher food prices in 2011, a Purdue University agricultural economist says.

Thanksgiving Turkey Dinner

Thanksgiving dinner might be more expensive this year, but food prices are expected to go even higher in 2011

September’s Consumer Price Index indicates that retail food prices are up 1.4 percent from September 2009, said Corinne Alexander.

“This is what we could consider a fairly modest price increase,” Alexander said. “What I would consider a normal or typical food price increase is somewhere around 2.5 percent.”

Among the holiday staples, turkeys and sweet potatoes will cost more, while retail prices for cranberries and white potatoes will remain stable or be down this season, she said.

“We’ll have about 2 percent fewer turkeys this year. As a result, we’re seeing wholesale prices up about 20 percent compared to last year,” Alexander said. The U.S. Department of Agriculture predicts wholesale prices for eastern market whole turkeys will be between $1 and $1.04 per pound in the fourth quarter of this year, compared with 84 cents per pound last year.

Greater consumer demand is driving sweet potato prices higher this holiday season. Retail prices are 8 percent higher than one year ago, Alexander said.

A bumper cranberry crop — estimated to be the second largest on record — should benefit consumers. Reduced demand for white potatoes translates into 4 percent lower retail prices, Alexander said.

What consumers will actually pay for Thanksgiving dinner depends on where they shop, Alexander said.

“Turkey is a favorite loss leader item at grocery stores,” she said. “They might offer a discount on turkey in the hope that when you come to pick up that turkey you also buy all the other items for Thanksgiving.”

A combination of factors is behind rising food prices, Alexander said. Demand is up for corn and soybeans as livestock feed and for use in biofuels, making it more expensive for farmers to raise livestock. U.S. corn yields are lower than late-season estimates, creating additional supply and demand shortages. And a wheat shortage brought on by a Russian drought and other market forces is taxing supplies of that cereal grain.

Livestock and dairy producers are responding to the feed cost increases by reducing herd sizes or delaying herd expansion, leading to tighter meat supplies, Alexander said.

“Oftentimes there’s a time lag between increases in feed costs and increases in livestock and dairy prices,” she said. “That time lag can be anywhere from six months to a year. We also see that time lag in terms of some of the cereal products and bread prices because a lot of contracts for flour millers tend to be long-term contracts.”

Because of the weak economy and lower consumer spending, supermarkets and restaurants have been hesitant to pass their higher costs onto consumers, Alexander said. There will come a point when retail outlets will have no choice — likely within the next 6 to 12 months, she said.

Not only will consumers spend more for Thanksgiving food, it will cost more to cook the meal or travel to enjoy dinner at grandma’s. Natural gas prices are 3.7 percent higher than last fall, with electricity rates up 1.5 percent. Gasoline is 5 percent more expensive compared with fall 2009.

Despite the pain to the pocketbook, Americans should have plenty to eat this holiday season, Alexander said. She encouraged sharing with those hit hard by the recession.

“Although Americans eat very well, spending less than 10 percent of their average income for food, there are many this year who find their budgets tightened by unemployment, minimal wage increases and continued erosion of fixed incomes by inflation,” she said. “For these, any food price rise is significant. We should remember those who are less fortunate and share our food bounty.”

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