Turkey farmers cope with high feed prices

Issue Date: November 14, 2012
By Ching Lee
Tim Nilsen, surrounded by six-week-old turkeys on his Sacramento County ranch, says he has had a good year raising turkeys for Foster Farms, despite high feed costs that have hurt many livestock farmers.
Photo/Ching Lee
These 13-week-old turkeys from Nilsen Farms in Wilton are raised for turkey products such as deli meat and ground turkey. Turkeys that are sold at times other than the holidays now make up about 60 percent of the year’s business.
Photo/Ching Lee

Record-high feed costs this year have not been kind to many farmers who raise livestock, but turkey producers say healthy demand for their product has helped them weather the storm.

Bill Mattos, president of the California Poultry Federation, said the holidays are always "a good time for the turkey industry," because of the whole-body birds that are sold—about 40 percent of the year's business—and he expects the state will once again sell all of its turkeys this year.

The state supplies about 35 percent of the nation's turkeys, he said. That means consumers who want a California-grown fresh turkey will need to act fast, because California birds tend to sell out long before out-of-state birds, he added.

Mattos noted that while U.S. poultry producers have had to reduce their production of chickens this year, turkey farmers matched supply to demand, and that has kept prices strong.

Foster Farms has raised prices about 10 percent this year due to feed costs, he said, but he does not think the increase will deter consumers.

"Maybe you'll pay $5, $10 more, but that's a minuscule amount of money when you look at a 30-pound turkey that can feed your entire family," he said.

Despite the good business during the holidays, Mattos said the cost of feed "is still a very concerning issue" for turkey producers

"I'm looking at it as a positive year for sales," he said. "It's just that we have a lot of expenses, so it's not going to be as profitable as previous years."

As the largest contract producer for Foster Farms, Tim Nilsen, who runs three growing facilities in Sacramento County, said he's insulated from the volatile feed market because the company supplies the feed, allowing him to focus on raising the birds.

He raises three flocks a year—heavy toms that weigh as much as 50 pounds, virtually all of which go to further processing for turkey products such as deli meat and ground turkey or are sold as individual parts.

"For me, it's actually been a decent year," he said, noting that Foster Farms has kept his barns full and his operation has been growing at capacity. "But just because we're maxed out, it doesn't necessarily mean the industry is strong. We're maxed out because of potential failures elsewhere."

Fresno-based Zacky Farms, the second-largest turkey producer in the state, filed for Chapter 11 bankruptcy protection last month, blaming rising feed costs for its financial troubles.

Sacramento County producer Ken Mitchell, who also raises turkeys for Foster Farms, noted that the company lost one of its larger contract growers this spring, leaving the remaining ranches to pick up the slack.

Mitchell said California livestock producers are at a disadvantage when it comes to feed because most of it has to come by rail from the Midwest, adding to the cost. He said while growers make up some of that cost with better production because of the state's mild weather and excellent growing conditions, the poultry sector "has struggled to find its footing in the last couple of years" due to uncertainty of the feed market.

Terry Branigan, who raises free-range turkeys in Yolo County, said escalating feed costs have hit his operation particularly hard. Unlike other commercial turkeys that are raised for 12 to 15 weeks, Branigan raises his birds for 25 to 27 weeks to acquire a particular desired finish. With corn prices where they are, feeding his birds has become very expensive, he said.

Branigan said he has not changed how he raises his turkeys, but he has cut production from 20,000 birds to 18,000 in the last five years. He added that even though he has not been shy about passing on his costs in the past, this year he's been reluctant to raise prices.

"With the economy, we're afraid to go up," he said. "We took a pretty good absorption this year, and it was absolutely out of fear that we'd lose some of our market. This is one of those years where we're going to make a lot less on a turkey."

Branigan said since the recession, his direct, over-the-counter sales have not changed much, but he did lose some large accounts with companies that used to make turkey purchases, such as for employee giveaways, a significant part of his business. This year, Branigan said he focused his strategy on trying to attract new customers by offering special deals and being more aggressive with retailers.

"So far I think it's worked," he said. "Our numbers seem pretty good."

But he also noted that if feed prices remain at this elevated level, he will have to pass on the cost.

Tim Diestel, who raises heritage and organic turkeys in Tuolumne County, said despite having to raise turkey prices about 10 percent this year, his sales have been solid.

"It may not be a real profitable year, but I'm happy with flat right now," he said. "There are a lot of people who don't have anything. We consider ourselves very fortunate, so I'm not complaining. It's just not as fun as it could have been."

About 20 percent of his production is organic, and he noted that part of his business is now growing, after sluggish sales during the recession a few years ago.

Organic feed is very expensive, however, and not easy to come by, he said.

"It's in short supply, and you better have it lined up or you won't have it," he said. "And, you don't argue about price. It's a matter of: 'This is the price. Do you want it or not?'"

Diestel said despite the "substantial" cost for organic turkeys, he thinks they will continue to sell "really well" if the economy improves.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.