Talking Turkey
Posted: November 25, 2008
The turkey industry has been one of the most vocal opponents of corn for ethanol production in the last year. So, it’s not surprising to see that the cost of the turkey is the largest contributor to the overall increase in the cost of the 2008 Thanksgiving dinner, according to the American Farm Bureau Federation’s annual survey.
The cost of a 16-pound turkey, at $19.09 or roughly $1.19 per pound, reflects an increase of 9 cents per pound, or a total of $1.46 per turkey compared to 2007. Meanwhile, a bushel of corn has decreased 21 percent from $4.28 on Nov. 21 last year to $3.39 on the same day this year (prices are for Dec. 2008 futures). However, big food companies are still blaming increased use of corn for ethanol production for the higher cost of Thanksgiving dinner.
What’s wrong with this picture? The Renewable Fuels Association did the math and found that only 1.4% of price for the typical holiday meal for 10 this Thanksgiving can be attributed to the U.S. ethanol industry’s demand for corn.
Here’s how they did the math: First, they determined the amount of corn required to produce the common Thanksgiving dinner items – including turkey, stuffing, peas, cranberry sauce, rolls and milk. About 31.5 pounds of corn, with a market value of approximately $2.50, would be required to produce those food items – since only the turkey and the milk require corn. The value of corn required to produce these products accounts for roughly 7.1 percent of the total retail price.
Finally, we examined ethanol’s impact on the price of corn, and in turn, on the price of the Thanksgiving meal. An October 23 Reuters article stated that the consensus among analysts is that the ethanol industry’s demand for corn has accounted for “around 20 percent” of recent corn prices. Thus, only 20 percent of the $2.46 worth of corn required to produce a Thanksgiving dinner for 10 can be attributed to ethanol.
The result is less than 50 cents – about 1.4 percent – and that is of the TOTAL retail price for the dinner.
Incidentally, the less than 6% increase in the Thanksgiving meal this year is still a bargain in anybody’s book. This year’s average cost of $44.61 is equivalent to $20.65 in 20-year inflation-adjusted dollars, according to Farm Bureau. That means the actual dollar cost of the Thanksgiving dinner has declined more than 8 percent since 1988.
Definitely something to be thankful for this year.