Hormel Foods to USDA: Your turkey forecast is for the birds

May 20, 2015 3:13 PM

By P.J. Huffstutter

CHICAGO, May 20 (Reuters) - Hormel Foods' chief executive cast doubt on federal forecasts for as much as 4 percent increase in turkey meat production on Wednesday, due to a devastating outbreak of avian flu that has "significantly challenged" its Jennie-O Turkey Store business.

The U.S. Department of Agriculture's latest supply projections, released on May 12, forecast domestic turkey production would reach 5.979 billion pounds in 2015, a nearly 3.9 percent increase over last year.

But the virulent H5 avian influenza strains continue to spread, reaching 16 states so far. To date, the outbreak has led to the deaths or scheduled euthanizations of more than 38 million birds, including nearly 4.4 million turkeys in Minnesota, the nation's top turkey producer, and more than 650,000 in Wisconsin.

"I am skeptical as to the industry's ability to hit that 3 percent to 4 percent gain number," Hormel Chief Executive Officer Jeff Ettinger said on Wednesday during a call with analysts.

Hormel's Jennie-O business, which accounts for about 18 percent of the company's revenue, drew most of its turkey supply from farms in Minnesota and Wisconsin last year, the company said. It also gets some turkeys from independent suppliers elsewhere.

Hormel is one of the leading players in terms of turkey volume production in the United States.

"I guess I have a hard time seeing how those numbers happen, if we are going to be short 20 percent in terms of at least turkeys coming into our system, and about 15 percent net of the meat we are going to buy," Ettinger said.

Nationwide, at least 4 percent of the total U.S. turkey flock has been impacted by the outbreak, and about 8.5 percent of U.S. egg-laying hens, according to industry data.

Farmers and some trade groups have expressed concern that, with Thanksgiving just seven months away, they may be running out of time to raise enough turkeys - the traditional centerpiece of holiday feasts - to meet the demand. [IN:nL4N0XV3DW]

The economic impact is already being felt in the egg industry, with rising prices and tightening supplies. And Tyson Foods Inc Chief Executive Donnie Smith said on Wednesday that price hikes could be expected in deli products, too.

"Certainly that will have an impact on turkey lunch meat prices," Smith said at the BMO Farm to Market Conference in New York.

Hormel shares were up over 4 percent on Wednesday after reporting better-than-expected results for the quarter ending April 26. (Additional reporting by Tom Polansek in New York and Mark Weinraub in Chicago)