Thanksgiving turkey price forecast

Thrifty Thanksgiving shoppers might have a bone to pick with their local grocery store this year, as the traditional Thanksgiving turkey will likely gobble up a little more of households' budgets. The average cost of a Thanksgiving turkey is set to rise this year after plunging in 2018.

Shifting consumer tastes produced oversupply conditions that held turkey prices consistently lower over the course of last year. This glut culminated in a 10.0% y/y plunge in Turkey prices in November 2018. Although hungry households enjoyed the Thanksgiving gift, turkey producers took it on the beak. In response, they cut back on both turkey slaughter and turkey placements, which reduced current supply and put less on the table for the future—goosing prices.

Domestic consumers have not regained their appetite for turkey. Indeed, domestic consumption of turkey was down 3.5% y/y in August. Instead, the neighbors came to the rescue: higher demand from Mexico has notably boosted turkey export volumes and served up further price gains. However, much like the birds themselves, turkey prices will not fly all that high. Consumer turkey prices have returned to a more traditional seasonal pattern in 2019, rising 1-2% y/y in recent months. This pairs well with the 1.0% y/y October increase in overall consumer prices for groceries. We expect turkey prices this November to increase 7.9% y/y. Retail turkey prices are projected to average around $1.51/pound, up from $1.40 last year, but far beneath the record high of $1.72/pound reached in 2013.

Retailers can be pardoned for raising prices, as their wholesale costs have risen even faster. The wholesale prices of turkey were most recently reported to be up nearly 23% y/y as of the second week of November. But turkeys are a guest of honor at the Thanksgiving table and are used as a loss-leader at many grocery stores, which compete on price to bring shoppers in the door. Lured by cheaper birds, shoppers then pad grocery stores' profits by stuffing their carts full of all the fixings. Grocery stores are likely to eat a large portion of the loss from higher wholesale turkey prices, and shoppers will see prices rise at a sleepier pace. In addition, strong job markets have continued to power steady income growth this year, putting the American consumer in a healthy position. Although the main course will cost a bit more this Thanksgiving, households still have much to be thankful for.