As Thanksgiving preparations arrive, I naturally find my thoughts veering to the evolution of demand for turkey, technological change in turkey production, market concentration in the turkey industry, and price indexes for a classic Thanksgiving dinner. Not that there’s anything wrong with that. [This is an updated, amended, rearranged, and cobbled-together version of a post that was first published on Thanksgiving Day 2011.]

Maybe the biggest news about about Thanksgiving dinner this year is the rise in the cost of the traditional meal. For the economy as a whole, the starting point for measuring inflation is to define a relevant “basket” or group of goods, and then to track how the price of this basket of goods changes over time. When the Bureau of Labor Statistics measures the Consumer Price Index, the basket of goods is defined as what a typical US household buys. But one can also define a more specific basket of goods if desired, and since 1986, the American Farm Bureau Federation has been using more than 100 shoppers in states across the country to estimate the cost of purchasing a Thanksgiving dinner. The basket of goods for their Classic Thanksgiving Dinner Price Index looks like this:

The cost of buying the Classic Thanksgiving Dinner rose 20% from from 2021 to 2022, The top line of the graph that follows shows the nominal price of purchasing the basket of goods for the Classic Thanksgiving Dinner. The lower line on the graph shows the price of the Classic Thanksgiving Dinner adjusted for the overall inflation rate in the economy. The lower line is relatively flat, which means that inflation in the Classic Thanksgiving Dinner has actually been an OK measure of the overall inflation rate over long periods of time, but you can see the distinct rise in the real price of Thanksgiving dinner since 2020.

At least part of the reason for the overall rise in the price of Thanksgiving is supply shock affecting the turkey industry: a surge of Highly Pathogenic Avian Influenza (HPAI). Margaret Cornelius and Grace Grossen of the US Department of Agriculture offer a short overview in the “Livestock, Dairy, and Poultry Outlook: November 2022.” They write: “This year, the turkey industry has faced a particular challenge in supplying Thanksgiving dinner due to an outbreak of Highly Pathogenic Avian Influenza (HPAI), in addition to challenges common to all food industries this year—increased costs of production, a tight labor supply, and transportation constraints.”

The outbreak of HPAI in 2022 has led to a loss of about 8 million turkeys from US production this year: for comparison, this is about 4% of the total number of turkeys “slaughtered” (the USDA term) in 2021. Moreover, turkey farmers have an incentive to slaughter turkeys earlier than usual, to protect against the risk that the turkeys might become infected with HPAI, so the average weight of turkey has also declined in 2022.

Of course, for economists the price is only the beginning of the discussion of the turkey industry supply chain. This is just one small illustration of the old wisdom that if you want to have free-flowing and cordial conversation at dinner party, never seat two economists beside each other. The last time the U.S. Department of Agriculture did a detailed “Overview of the U.S. Turkey Industry” appears to be back in 2007, although an update was published in April 2014  Some themes about the turkey market waddle out from those reports on both the demand and supply sides.

On the demand side, the quantity of turkey per person consumed rose dramatically from the mid-1970s up to about 1990, but then declined somewhat, but appears to have flattened out. The figure below was taken from the website run by the National Turkey Federation a couple of years ago.

The USDA reports that overall US consumption of turkey has been falling in recent years, from 5.38 billion pounds in 2016 to 5.1 billion pounds in 2021.

On the supply side, turkey companies are what economists call “vertically integrated,” which means that they either carry out all the steps of production directly, or control these steps with contractual agreements. Over time, production of turkeys has shifted substantially, away from a model in which turkeys were hatched and raised all in one place, and toward a model in which the steps of turkey production have become separated and specialized–with some of these steps happening at much larger scale. The result has been an efficiency gain in the production of turkeys. Here is some commentary from the 2007 USDA report, with references to charts omitted for readability:

In 1975, there were 180 turkey hatcheries in the United States compared with 55 operations in 2007, or 31 percent of the 1975 hatcheries. Incubator capacity in 1975 was 41.9 million eggs, compared with 38.7 million eggs in 2007. Hatchery intensity increased from an average 33 thousand egg capacity per hatchery in 1975 to 704 thousand egg capacity per hatchery in 2007.

Some decades ago, turkeys were historically hatched and raised on the same operation and either slaughtered on or close to where they were raised. Historically, operations owned the parent stock of the turkeys they raised while supplying their own eggs. The increase in technology and mastery of turkey breeding has led to highly specialized operations. Each production process of the turkey industry is now mainly represented by various specialized operations.

Eggs are produced at laying facilities, some of which have had the same genetic turkey breed for more than a century. Eggs are immediately shipped to hatcheries and set in incubators. Once the poults are hatched, they are then typically shipped to a brooder barn. As poults mature, they are moved to growout facilities until they reach slaughter weight. Some operations use the same building for the entire growout process of turkeys. Once the turkeys reach slaughter weight, they are shipped to slaughter facilities and processed for meat products or sold as whole birds.”

U.S. agriculture is full of examples of remarkable increases in yields over periods of a few decades, but such examples always drop my jaw. I tend to think of a “turkey” as a product that doesn’t have a lot of opportunity for technological development, but clearly I’m wrong. Here’s a graph showing the rise in size of turkeys over time from the 2007 report.

A more recent update from a news article shows this trend has continued. Indeed, most commercial turkeys are now bred through artificial insemination, because the males are too heavy to do otherwise.

The production of turkey is not a very concentrated industry with three relatively large producers (Butterball, Jennie-O, and Cargill Turkey & Cooked Meats) and then more than a dozen mid-sized producers.    Given this reasonably competitive environment, it’s interesting to note that the price markups for turkey–that is, the margin between the wholesale and the retail price–have in the past tended to decline around Thanksgiving, which obviously helps to keep the price lower for consumers. However, this pattern may be weakening over time, as margins have been higher in the last couple of Thanksgivings  Kim Ha of the US Department of Agriculture spells this out in the “Livestock, Dairy, and Poultry Outlook” report of November 2018. The vertical lines in the figure show Thanksgiving. She writes: “In the past, Thanksgiving holiday season retail turkey prices were commonly near annual low points, while wholesale prices rose. … The data indicate that the past Thanksgiving season relationship between retail and wholesale turkey prices may be lessening.”

If this post whets your your appetite for additional discussion, here’s a post on the processed pumpkin industry and another on some economics of mushroom production. Good times! Anyway, Thanksgiving is my favorite holiday. Good food, good company, no presents–and all these good topics for conversation. What’s not to like?