Thanksgiving: Why your turkey cost 20% more

A classic Thanksgiving dinner for ten now costs an average of $64.05, according to the American Farm Bureau Federation's annual survey, twenty per cent more than it did a year ago. Most of the increase comes from the turkey, whose wholesale price has climbed sharply. The holiday headlines will blame food inflation in general. The more interesting story is about lopsided supply shocks and the way food companies defend their margins.

The main cause is the worst outbreak of highly pathogenic avian influenza in US history, which has little to do with loose money or eager shoppers. Since the first cases turned up in commercial flocks in early 2022, the virus has forced the culling of more than fifty million birds in forty states, and turkey breeders and growers have taken a disproportionate share of the losses. When fixed seasonal demand meets a supply cut enforced by disease, prices do not drift higher. They jump.

Worse than 2015

The previous record outbreak, in 2015, also hit Midwestern turkey and egg farms hardest and also cost around fifty million birds. It was concentrated in the spring, however, and largely over within months, which gave producers time to restock before the holiday season. This year's strain has spread along wild-bird migration routes in both spring and autumn, so farms that had cleaned out and restocked after the first wave have been hit again as birds flew south.

That second wave is what turned a bad year into a costly one. Minnesota, the country's largest turkey-producing state, and its neighbours lost flocks as the autumn migration began, exactly when growers needed birds to reach weight for the holiday market. A shock early in the year can be partly absorbed; one that arrives in the final months before peak demand cannot.

Turkeys take time to grow

Poultry production runs on biological timetables that no amount of capital spending can speed up. A broiler chicken reaches market weight in six to seven weeks. A commercial hen turkey needs sixteen to twenty weeks of heavy feeding to reach the standard retail size of fourteen to sixteen pounds. Once a breeding flock is infected and culled under federal quarantine rules, the producer faces months of compulsory cleaning and testing before a new generation of chicks can go in.

Because of that delay, turkey processing went into the important autumn season more than ten per cent below normal. Grocers have to secure frozen birds for their holiday displays months in advance, so competition for wholesale supply grew fierce. Wholesale turkey breast prices rose to records above six dollars a pound, and retailers had to choose between swallowing big margin losses and passing the whole shock on to shoppers at the till.

Feed and diesel add to the bill

The disease hit a farm economy already squeezed by rising costs at every step between farm and shop. Throughout 2022 war in Eastern Europe and drought across the Midwest pushed corn and soybean meal, the main poultry feeds, to multi-year highs. Feed usually makes up nearly seventy per cent of the cost of raising a turkey, which leaves growers fully exposed to swings in global grain markets.

The grain shock has a clear origin. Russia's invasion of Ukraine in February cut off, for a time, one of the world's largest exporters of corn and wheat, and prices jumped before the United Nations-brokered deal to reopen Black Sea shipping in July. That deal was extended again this month, which has calmed markets, but American feed costs remain far above their pre-war level after a dry summer in the western Corn Belt.

Then there is transport. Processing and delivering tens of millions of frozen turkeys within a three-week holiday window takes a great deal of cold storage and a fleet of refrigerated lorries. Diesel has stayed above five dollars a gallon and electricity tariffs for refrigerated warehouses have risen sharply, so the cost of moving birds from Midwest processing plants to shops on the coasts rose unusually fast. The price on the label is the sum of all these energy and transport surcharges.

Who absorbs the shock

The burden is spread unevenly along the chain. Integrated processors with their own flocks can capture the higher wholesale price on the birds they still have, while those whose barns were culled lose both the flock and the season. Grocers traditionally sell turkeys close to cost, or below it, to bring shoppers into the store for the rest of the holiday basket, so many will accept thinner margins on the bird and recover them on side dishes, drinks and desserts.

Households bear the rest, and the turkey arrives on top of a wider squeeze. Food bought for eating at home cost more than 12 per cent more in October than a year earlier, and lower-income families, who spend a larger share of their budgets on groceries, feel that most. Last year's dinner in the survey cost $53.31, and this year's increase far exceeds the rise in average wages over the same period.

Where the survey overstates

The survey has a known limitation. It is collected in the first weeks of November, before many supermarkets launch their deepest holiday discounts, and it records the price of a whole frozen bird that grocers often use as a loss leader. Shoppers who buy in the final days before the holiday may pay less than the survey suggests, and the turkey's share of the increase may be smaller at the till than on paper.

That caveat changes the size of the bill, not its cause. The wholesale shortage is real, and it will not be fixed by promotions that simply move the cost from the turkey to the cranberry sauce. The United States Department of Agriculture's monthly reports on poultry placements and cold-storage stocks will show how quickly the flock is being rebuilt.

The 2022 Thanksgiving turkey is a neat small-scale model of cost-push inflation. Hit at once by disease, record feed costs and expensive energy, turkey producers and grocers have protected their margins by handing the whole bill to shoppers, and holiday birds will probably stay dear until the culled flocks are rebuilt, which takes months. For millions of households the meal shows that while supply shocks from disease and geopolitics persist, everyday living costs will keep rising whatever the Federal Reserve does with interest rates, and the spring migration will decide whether next year's holiday birds are any cheaper.