Our investment team spends a lot of time thinking about global food prices, so I asked them about the price of turkey. It turns out the price of frozen turkey has increased 25 percent over the past year. Is this another example of surging demand from the developing world? Well, sort of.
It’s no surprise that the U.S. is the largest global producer of turkey, about half of the world’s production. We also consume the most, at 46 percent. So we do export a little, but not to China. While Chinese turkey consumption has increased 50 percent over the past four years, they consume just 31,000 metric tons — versus the U.S. at 2.3 million metric tons!
(By the way, the Chinese do lead the world in pork consumption, at 50 million metric tons versus the U.S.’s 8.4 million tons — pork is not yet our new “other white meat.”) All these figures are from the USDA.
The reason turkey and other meat prices are increasing is almost entirely due to the higher price of grains. Turkey feed is comprised of 70 percent corn, and corn prices are up 47 percent over the past year.
In fact, according to United Nations data, some one-half of the world’s calories come from the three big grains: wheat, corn and rice. Each of these grains are under stress. Wheat prices nearly doubled over the summer when Russia, a big producer and exporter, experienced severe droughts and limited exports. Rice is the primary staple for over 3 billion people and severe weather is putting exports at risk from major producers overseas. Corn prices are stressed both from increased demand for protein production (turkey, pork, beef, chicken) as well as the 30 percent of the U.S. crop that goes into ethanol.
As you’re enjoying your turkey this Thursday, you might appreciate the price too. It turns out most grocers are absorbing part of the turkey price hike so they can sell us more cranberry, stuffing, and pies. This week let’s say a “thanks” to the grocery stores too.