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December 24,1976
National Bird
While roast goose reigns in
England, baked ham in France and
roast pig in the Philippines, most
Americans look to the turkey as the
gastronomic centerpiece of their
Christmas dinners. On Christmas,
the turkeys who survived the
Thanksgiving massacre will com
plete their collective march from
the nation’s turkey farms to their
final destination on festive holiday
tables. For as the data show,
Americans have tripled their per
capita turkey consumption over the
past generation, and altogether,
consume about two billion pounds
annually— roughly half of that in
the last several months of the year.
The holiday season will close a hap
py bicentennial year for bargain
hunting turkey consumers, but a
less prosperous one for producers
of what Benjamin Franklin labelled
the national bird. Production for
1976 has been averaging about 11
percent above year-earlier levels,
causing downward pressure on
prices—and this situation has been
aggravated by the heavy supplies of
broilers, pork and beef overhang
ing the market. The New York
wholesale price of young hens has
been running about 14 percent
below last year, and the National
Turkey Federation claims that
growers are losing 4 to 6 cents on
each pound of turkey they sell.
Higher feed costs—which account
for two-thirds of total production
costs—and lower turkey prices are
simply not consistent with
profitability.
Turkey’s life
If the turkey producer’s life is
sometimes difficult, the turkey itself
has an even bleaker fate. The
human community has decided
that the turkey community shall
have but one purpose in life—to
gain as much weight in as little time
as possible. Produced by artificial
insemination and nurtured in the
egg by artificaJ in c u b a tio n , the
young turkey, or poult, soon finds
himself surrounded by thousands
of other young turkeys on one of
the nation's turkey farms—very
likely in Minnesota or California
which together produce almost a
third of the nation’s turkeys. For 4
to 6 months, he will be automatical
ly fed a scientifically-designed,
minimum-cost ration, consisting of
ground corn, alfalfa, feathers, fish
and crab shells blended with a dash
of tranin, methionine and calcium
propionate and an occasional touch
of penicillin.
After his stay on the turkey farm,
the fattened bird—weighing 8-16
pounds for hens and 14-25 pounds
for toms— is transported to the
processing plant, where his soul is
sent to turkey heaven and his body
prepared for turkey dinner. He has
a 50-50 chance of coming out the
other end of the processing plant as
a whole turkey. Otherwise he will
end up as turkey parts or even (a
(continued on page 2)
Opinions expressed in this newsletter do not
necessarily reflect the views of the management of the
Federal Reserve Bank of San Francisco, nor of the Board
of Governors of the Federal Reserve System.
new marketing triumph) disguised
as hamburger or some other meat
substitute.
Producer’s life
The industry has shown a great deal
of Yankee ingenuity in handling the
all-American bird in recent
decades, beginning with attempts
to iron out the distorted seasonal
pattern of consumption, which has
forced them to operate their
slaughter plants at less than half
capacity over much of the year. In
the 1940's and 1950's, the industry
began to transform the whole
turkey from a perishable commodi
ty into one that could be stored
during periods of excess produc
tion. The trick, of course, was sim
ply freezing and accumulation in
cold storage. (Currently, about 80
percent of all turkeys are sold
frozen.) This technique also ex
panded the market geographically,
since frozen birds can be sold
nationally as well as locally.
More importantly, the industry has
developed and promoted a host of
processed turkey products, begin
ning with cut-up turkey parts,
turkey pot pies and frozen turkey
dinners. But the most spectacular2
2
advances have occurred only in the
last few years, with the develop
ment of turkey ham, turkey franks,
turkey burgers, turkey pastrami and
turkey bologna, to cite only a few
new products.
Claiming “fowl play,” red-meat
producers argue that turkey
producers should at least change
the names of their new products to
forestall any mis-identification. But
consumers seem to be attracted by
the fact that these ersatz products
are lower in fat and cholesterol,
higher in protein, and also cheaper
than their red-meat prototypes. As
a result, the processed share of total
turkey output has jumped from 11
percent to almost 50 percent over
the past decade and a half. While
these efforts have not made every
day a Thanksgiving, they have
begun to even out the seasonal
consumption pattern, so that the
fourth quarter now accounts for
about 47 percent of annual
consumption—down from a 56percent share just fifteen years ago.
Towards concentration
Along with increased diversification
has gone increased concentration.
In earlier years, ownership of the
turkey changed hands several times
along the way from the primary
breeder, the hatchery, the turkey
farm, and the processor to the
wholesale and retail distributor;
today, ownership frequently
changes hands only at the
processor-to-distributor stage. The
turkey industry appears to be
following in the footsteps of the
broiler industry, which produces
close to 95 percent of all its
chickens under vertically integrated
arrangements. In 1970, about 54
percent of all turkeys were farmed
either by or under contract for
various agribusiness corporations,
and the figure probably approaches
75 percent today. In California’s
Central Valley, almost one-third of
all turkey farms reportedly have
closed down or sold out to bigger
operations over the past few years.
Of course, this is only one aspect of
a general trend throughout
agriculture; over the past 15 years,
the total number of farms has fallen
by almost one-third, while the
average size of farms has risen by
one-third.
Another aspect of this trend has
been an increasingly efficient use of
feed and labor. Between 1965 and
1972, the amount of feed required
to produce a pound of turkey fell
from 4.8 to 4.1 pounds, and the
labor requirement per pound of
turkey fell by a dramatic 50 percent.
Because of these productivity gains,
the price of turkey has remained
relatively low and competitive with
red meats. Indeed, over the past
decade, the wholesale price of
turkeys rose only about half as fast
as the wholesale price of beef.
The processing stage of turkey
production has also become more
concentrated and more efficient
over time, although several studies
indicate that the average-sized3
3
plant is still only about one-third
the size of the minimum-cost plant.
In a modern turkey-processing
facility, the high degree of
specialization makes Adam Smith’s
pin factory look like an exercise in
job enrichment. A typical plant
which kills, defeathers, guts and
chills turkeys may have some 40
separate work stations, with birds
passing by workers at the rate of 15
per minute. Meanwhile, as the
processing industry becomes more
efficient, it also becomes more con
centrated; between 1960 and 1972,
the share of federally inspected
turkeys slaughtered by the eight
largest firms rose from 32 to 46 per
cent.
While 1976 may be less than rosy for
turkey producers, the industry’s
future looks relatively bright, es
pecially in view of the steady up
trend in per capita consumption
and growing consumer acceptance
of new processed products. On the
other hand, many small indepen
dent producers may lose their in
dependence or go out of business
altogether as the turkey industry
marches up the steep, vertically
integrated path already traced by
the broiler industry.
Michael Gorham
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BANKING DATA—TWELFTH FEDERAL RESERVE DISTRICT
(Dollar amounts in millions)
Selected Assets and Liabilities
Large Commercial Banks
Amount
Outstanding
12/08/76
Loans (gross, adjusted) and investments*
Loans (gross, adjusted)—total
Security loans
Commercial and industrial
Real estate
Consumer instalment
U.S. Treasury securities
Other securities
Deposits (less cash items)—total*
Demand deposits (adjusted)
U.S. Government deposits
Time deposits—total*
States and political subdivisions
Savings deposits
O ther time deposits!
Large negotiable C D ’s
92,424
70,012
1,604
22,821
21,360
11,959
9,359
13,053
91,685
27,044
240
63,035
4,660
29,848
26,305
10,298
Weekly Averages
of Daily Figures
Week ended
12/08/76
Member Bank Reserve Position
Excess Reserves (+)/Deficiency (-)
Borrowings
Net free(+)/Net borrowed (-)
Federal Funds—Seven Large Banks
Interbank Federal fund transactions
Net purchases (+)/Net sales (-)
Transactions of U.S. security dealers
Net loans (+)/Net borrowings (-)
Change
from
12/01/76
-
+
+
+
-
+
+
+
-
+
-
+
+
+
302
357
768
206
35
53
78
133
627
216
56
707
14
349
317
330
Change from
year ago
Dollar
Percent
+ 3,582
+ 4,012
252
459
+ 1,729
+ 1,490
680
+ 250
+ 2,420
+ 2,188
176
+ 970
1,484
+ 7,934
4,082
- 6,158
Week ended
12/01/76
+ 4.03
+ 6.08
13.58
1.97
+ 8.81
+ 14.23
6.77
+ 1.95
+ 2.71
+ 8.80
42.31
+ 1.56
24.15
+ 36.21
13.43
- 37.42
Comparable
year-ago period
0
+
+
+
54
+
+ 1,349
+
643
+ 2,351
+
-
10
+ 1,154
+
+
52
0
52
+
827
54
72
1
71
■
“ Includes items not shown separately. ^Individuals, partnerships and corporations.
Editorial comments may be addressed to the editor (William Burke) or to the author. . . .
Information on this and other publications can be obtained by calling or writing the Public
Information Section, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco 94120.
Phone (415) 544-2184.
@FedFRASER