Competition for the consumer dollar has most local grocers keeping Thanksgiving turkey prices significantly below their wholesale costs.
The retail prices of whole frozen birds are comparable to their 2009 price despite a 20 percent year-to-year increase in wholesale cost.
"Turkey production is down 2 percent from last year," said Purdue University Agricultural Economist Corrine Alexander. "Any time you see production down, you see prices go up."
Currently, the wholesale price per pound of eastern market whole turkeys is from $1 to $1.04 a pound compared with 84 cents a pound last year, she said.
Yet, local grocers are selling the 12- to 18-pound frozen birds for about 50 cents per pound for the holiday, with most stores adding a minimum purchase requirement. Premium turkeys are selling for about double that price per pound.
"The price you pay at the grocery store depends on the grocer's decision," Alexander said. "It's largest item in the Thanksgiving basket, so most use it as a loss leader for the holiday and it's priced below cost. Retailers are very aware of how tight consumers' budget are and the effect of the poor economy. They're very reluctant to raise prices."
Dave Harvey, U.S. Department of Agriculture economist for the poultry industry, said 2010 is likely the second year in a row to see lower turkey production and correspondingly higher prices.
"In 2009 production was down 9 percent," he said. "We're forecasting that it will be down slightly again this year with it down 2 percent for the first nine months."
The lower production level relates to 2008 when there was a huge spike in grain prices, causing a decline in poultry production that continued. Grain is the largest variable cost for poultry producers, Harvey said. The lower production along with an about 5 percent increase in turkey exports has caused the price spike, he said.
Harvey said at Thanksgiving there's really no connect between wholesale prices and what retailers are offering.
What shoppers pay for their Thanksgiving turkey depends on where they shop, Alexander said.
"They offer the big discount on your turkey in the hope that when you come to pick it up you also buy all the other items for Thanksgiving," she said.
Don Weiss, president of WiseWay, said although turkeys cost the grocer more than during 2009, it ordered more birds this year and is selling them for less.
Although the chain has a plentiful supply of birds, Weiss said consumers should be aware there is a smaller supply of the very large birds, those larger than 18 pounds.
"If they want that size, they should shop early," he said.
Joe Kolavo, vice president of perishable operations for the Highland-based Stack & Van Til chain of 16 Strack's, 13 Ultra and two Town & Country stores, said his stores' turkey prices are similar to 2009.
"Prices are very consistent compared to last year even though wholesale prices are higher," Kolavo said. "So there's a bigger loss to retailers."
The chain budgets a loss on the million pounds of holiday turkeys it sells, he said.
"It's such a big promotion you know you'll lose a substantial amount of money," Kolavo said.
To minimize its losses, the chain "booked and locked up" Thanksgiving turkey prices as far back of February of 2009. Plus, as a larger chain, it can bear losses better than its smaller competitors, he said.