Podcast Transcript

Crystal Zulauf: Good morning, Jim. Do you know what time it is?

Dr. Lowe: Um 11:00?

Dr. Lowe: Yeah, that’s- My pants say that’s not the best time of the year.

Crystal Zulauf: Then you buy stretchy pants.

Dr. Lowe: Oh, yeah. I’m not gotten into the stretchy pants trend yet.

Crystal Zulauf: You need to get the stretchy pants. They help you with Thanksgiving.

Dr. Lowe: I’m not really a big Thanksgiving guy because it’s too much turkey.

Crystal Zulauf: We don’t actually eat turkey at Thanksgiving. We eat ham, but everybody else eats turkey.

Dr. Lowe: Now that’s my style right there. Let’s eat the ham and not the turkeys for Thanksgiving.

Crystal Zulauf: That’s right. We get the big ham for Thanksgiving, but everybody else gets the big turkeys.

Dr. Lowe: That is true.

Crystal Zulauf: Yeah.

Dr. Lowe: Hi, I’m Dr. Jim Lowe and welcome to The Round Barn.

Crystal Zulauf: So I feel like we should talk about turkeys.

Dr. Lowe: Okay we can talk-

Crystal Zulauf: Because we’re probably the oddballs out here.

Dr. Lowe: That’s probably true. So what do we want to talk about turkeys?

Crystal Zulauf: Well, okay, so I was thinking about this. You know, Thanksgiving is, I don’t know, two weeks away from now. So I would like to know when did my turkey- when- how far in advance did they have to start, you know, planning for Thanksgiving for everybody to eat these turkeys?

Dr. Lowe: Last Thanksgiving.

Crystal Zulauf: They started last Thanksgiving?

Dr. Lowe: Well, not really, but- Right, so when we think about the food supply chain, whether that’s turkeys or ham or anything else, right, we don’t- we consume things not on a regular basis.

Crystal Zulauf: Right.

Dr. Lowe: But we tend to raise things on a regular basis. So we produce, kind of, turkeys all year long and we produce hams all year long. But we don’t need those same products all year long. So when we think about, and I’m not particularly well versed in the Turkey industry, right, but it takes, you know, six-ish months to raise a turkey.

Crystal Zulauf: Okay.

Dr. Lowe: And so-

Crystal Zulauf: How big will that turkey be in six-ish months? Is that for like a every day, Thursday night, dinner? Is that for a Thanksgiving turkey?

Dr. Lowe: Well, that depends, right. So we tend to sell- So they’re really small birds, but they don’t sell very many of those. Right. So those kind of really lightweight birds. But most of those are 20-ish pound birds, right? So it depends if they’re hens or toms. And so, toms are bigger than hens and, you know, they grow them out and they try to hit that product mix. Because when we think about it, in the grocery store, right, some people want a 25 pound turkey and some people want an 18 pound turkey. And so that’s a bit of a different growth time. It’s not a huge amount of growth difference, right? But it’s a bit of a different growth time. So if you look at what we have for turkeys in the store, we don’t just put turkeys on feed to harvest for the Thanksgiving market.

Crystal Zulauf: Okay, that makes sense.

Dr. Lowe: I mean, we- They do that. They place more turkeys then. But turkey- turkey hens lay eggs all year long. And so they- you know, right? “Well, we got to use those eggs,” and they don’t set all of them and they do differentially set. But we produce turkey all year long. So there’s a lot of uses for turkey, right? We put it in turkey sandwiches, and ground turkey, and yada, yada, and the big turkey legs at the state fair.

Crystal Zulauf: They’re delicious.

Dr. Lowe: So in the summer, we need a lot of turkey legs and we use those from breast meat. Right? And we need more whole turkeys in the fall. And so we have that mix, but we also store a lot of turkey. So when we think about any of these products, we use a freezer a lot. So you go to the store, you buy a frozen turkey. That turkey may not have been harvested two days ago. That turkey was probably- could have been harvested six or seven months ago and put in cold storage in freezing. Then we pull that out to eat at Christmas, right? Or eat at Thanksgiving or whatever. So that- that’s kind of how we flex that supply chain coming in. And then people want for us turkey, I mean, right? That’s a big thing. Those tend to be a slightly smaller bird, but those are harvested really really close to Thanksgiving, because a fresh bird doesn’t keep that long, right? We’ve got a week or something, right.? Okay, we got to keep them cold, but we don’t- and we can’t just leave it around. So we’ve got to harvest those. And that’s why those are a lot more expensive. Because I’ve got to pull that bird to the market at the last minute. So that’s got to be planned and set around. And a frozen bird- Those birds are cheaper because we can produce those, kind of, all year long and put those in the freezer and pull them out when we need them, which is what we do. And the same thing happens in the ham market. So your family’s going to eat hams. And the ham discussion is- it’s really interesting. So we have different hams during different times of the year. Now, we have ham- most of the ham today is boned out. So we take the back leg off and bone it to make my ham sandwich at lunch. But the other hams we make- So at Christmas we need a slightly smaller ham than what we have at Easter. So the U.S. market, right- So we use a smaller hem at Christmas. And I think the general belief is, is that at Christmas we have another meat, so we have turkey and ham at Christmas meal.

Crystal Zulauf: Yeah.

Dr. Lowe: So I don’t want a giant ham. And at Easter, I’m only going to have ham. So I want a bigger ham. Even if it’s the same set of people coming to- coming to the dinner table. So again, you know, we just don’t make 18 pound hams at Christmas. We make 18 pound hams all year long, and we make 22 pound hams all year long and so we’ve got to put those products in storage and pull them back out of storage so that we can differentiate that into the market. Because, again, the consumer wants different things during the time of the year. So it’s- it’s a really complicated dance and it seems simple, “okay, I raise turkey, I harvest turkey, I put turkey on table.” And if that’s a fresh turkey, that’s a pretty simple process. Or, you know, if I go to my local store and I want to buy a local turkey, that’s really what happens. Okay. We put the turkey on feed and, you know, right? I can speed up and I can slow the turkey down. And, you know, depending on how much I feed him, I can limit feed or I can full feed. Okay. Well, if I’m buying in from the local store, it’s a local bird and they harvest that bird. Okay, that’s kind of how that little supply chain works. But when we think about that, that’s really hard to do to feed society, because that level of timing- that level of timing, right, just doesn’t work. What do we- If I’m only raising turkeys to harvest at Thanksgiving, what do I do the rest of the year? And so- the turkey plant needs to work all year long to make that cost. That’s why the world- that’s why we have super efficient food production. And so I’ve got to produce turkeys all year long. And so it’s a really complicated, intricate dance of- raising the turkey is just the start of that supply chain. And the interesting bits of that supply chain are after the turkey gets harvested. And how do we get it from- how do we get it from- from walking around gobbling to on your dinner table? And that’s a fancy, intricate dance. It’s pretty, pretty fun to look at.

Crystal Zulauf: What- what size turkey do most people need for Thanksgiving? Is it different or is it like, “we’re going to grow 22 pound turkeys for Thanksgiving?” Because you talked about how the ham sizes are kind of different between Christmas and Easter. Is that also true?

Dr. Lowe: We’re not supposed to talk about things that I have no idea what I’m talking about. And this might be that category. But yeah, we think of it, right- I think people tend to buy turkeys depending on how many people are going to be at the- at dinner. People want leftovers, right? Yada, yada, yada. But- so there is a mix of product size we need in that marketplace at the end of the day. And thinking about that, and how do you segregate that. And that’s the interesting part because that’s really where retail has to understand their customer. And so, New York City might be different than central Illinois. I don’t know. I’m making this up. But if you think about that, even if I’m a retailer- if I’m Kroger and I have stores across- stores from coast to coast, what I need in Champaign, Illinois, might be different than what I need in Chicago, might be whatever. What I need in Des Moines, might be different than what I need in California under their Ralph’s brand. And so understanding that level of sophistication- that’s a really fascinating part of the food chain to me. That they understand not only what’s purchased in the store, but who’s purchasing it, and how do we incent that mix together, right? I mean, I’ve been fascinated- being in the grocery store, Walmart-ish type places here, you know, once or twice in the last three weeks, and that all the Thanksgiving stuff was out.

Crystal Zulauf: Yeah.

Dr. Lowe: And there were dinner rolls out.

Crystal Zulauf: Yes.

Dr. Lowe: And you’re like, “who’s buying this?” This was maybe three weeks ago. Two weeks ago. And I’m like, “who is buying a dinner roll?”

Crystal Zulauf: Me.

Dr. Lowe: For Thanksgiving? That sucker will be stale.

Crystal Zulauf: No, I buy the frozen dinner rolls. And you- what I’ve learned is you have to buy them in advance because they sell out. Now, we buy the special Beef House rolls from The Beef House restaurant.

Dr. Lowe: No, these were generic, square, flat-

Crystal Zulauf: Oh, they were already baked.

Dr. Lowe: Already baked. Yeah, yeah, yeah. No, no, no. The ones that come in the paper tray, you know, if you put in the oven, they burn. Like, that- that was famous growing up stories. When we go to family- we had an aunt that would- doesn’t matter how much you paid attention, like- it was the- the curse of Thanksgiving. The burnt-

Crystal Zulauf: The burnt dinner rolls.

Dr. Lowe: The burnt dinner rolls. I laugh with them every time, but- but as you look at that- right? So why are they out three weeks ahead of time? Well, okay. People are in the mood. They starting to incent. And so how do we put those things together? So answering that question of what turkey mixes do we need, that’s a really- it’s a hyper local decision even at a store. And so companies like Walmart would understand that- that the Walmart on the east side of Urbana and the Walmart and Savoy and the Mart in the north side of Prospect- So our three WalMarts locally here in our little community. We’re a little over 100,000, right, 150,000 of the here in this- 100,000 people in the county. We have three Wal-Marts, and yet they would have a different product mix depending on where they’re at. I think Meijer does the same thing with our two stores and certainly as you go to different bits and if you look at Hy-Vee, the mix of product at Hy-Vee across Iowa is different depending on what community they’re in. And so that really understanding of retail that- the retailers understand, listen, “I want to- I’m going to sell this product,” and they don’t view it as a turkey. They view it as a SKU. Right? It’s like a product number. It doesn’t matter if it’s toothpaste or a turkey. I’m selling a product. And so what is the mix of those products that my customers want to buy today? And so, as we’ve gotten more sophisticated in our- in our food supply, retailers are getting better understanding, “hey, what do- what does my customer want to purchase?” To your specific question, do they want an 18 pound turkey or 20 pound turkey or 22 pound turkey, and what’s the mix of those things that I need to have? Light, heavies, and mediums or whatever those numbers are, right? And then, how do I supply those at the right time for the right bit? And how do I put complementary things around that to get people to- why are dinner rolls out? Well clearly people are thinking about it, and they’ll buy them- and they’ll turn around and buy them again for Thanksgiving because four weeks later they’re-

Crystal Zulauf: Going to eat them by then.

Dr. Lowe: Right. So it’s that mix of the supply chain that’s really fascinating. And we think about where value is created. That’s really where value gets created in the supply chain is that understanding of saying, “what does Crystal want to buy and how do I make sure she- we have it so she can buy it?” And I don’t have an outage and I don’t have and it’s- you know? We think about price, but it’s really is it available is the first question. And so what do you want to buy and can I have that available? That’s the job of a merchant. And so that becomes complicated all the way back down the supply chain. And we tend to think of it from live side and say, “Oh, well, I got to make this kind of pig, or this kind of calf, or this kind of turkey.” But what we don’t do really well today is adapt our supply to what the customer wants. What our retailer- our retailer customer wants or needs. And so we kind of make it, and then sort it, and hope we have the right number of things so that we can sell it.

Crystal Zulauf: That makes sense. So what does- what does that supply look like? You know, if we’re thinking about the turkey, how do they get from egg to the freezer? Is that a very straightforward, linear process or is there some, like, back and forth?

Dr. Lowe: Oh, it’s as linear is linear gets.

Crystal Zulauf: Okay.

Dr. Lowe: So, lay egg, egg hatches, hatchling is- is- is raised in a- in a barn.

Crystal Zulauf: Okay.

Dr. Lowe: And then at some point they’re moved out of that barn into a grower barn.

Crystal Zulauf: Is that on the- like, the same farm or are they going from one place to another?

Dr. Lowe: Could be the same farm. I think a lot of times it’s the same farm, but it could be another farm. So I don’t know. There are some medium- I don’t exactly know what the weight to the buggers are, right? But they go- they when- these- these hatch barns where they go in and they grow those birds. And that’s different than chickens. Because in chickens, we take a chick and we put it in a broiler house and it stays there its entire life. It’s- it’s literally once it’s hatched, it goes in there and it stays. Because turkeys need a lot more space, they just use two buildings for that to happen. So they go in, then they grow, and then they go to the harvest plant, harvested, chilled. And then that’s an intricate dance of what happens. And how do you segregate that? And okay, “these birds are too heavy for the live- the whole bird market. So we’re going to bone those birds out. We’ll make turkey breast out of those or will make ground turkey out of those or whatever.” Right? I mean, there’s this whole segmentation. So we think about, “oh, turkey goes in front door, whole turkey comes out back,” and that’s not really what happens.

Crystal Zulauf: Okay.

Dr. Lowe: So we raise this bird. [unintelligible] Harvest him and then- then the sophistication begins, for lack of a better word. So we segment that product by saying, “what do we need, where do we need it, what are the orders by our retailers and how do we sort that product to make it happen?” So sometimes those are whole birds, sometimes those are boned out birds. Sometimes that’s ground. And what are we doing with the bone out? Are we putting that in bags to make turkey for lunch meat or reselling whole turkey breast? Or are we selling out, literally, a whole breast, right? With the bone still in it. Without the legs and the thighs on it, and back. And so, that sophistication- and that happens based upon what the orders are from retail. So I have orders for X, Y and Z today because- think about all the ways you can buy turkey in a grocery store. Let’s say- how many of the ways we can buy turkey breasts in a grocery store?

Crystal Zulauf: Right?

Dr. Lowe: I can buy turkey breast as a whole turkey. I can buy turkey breast just as turkey breast. Just muscle, right? Uncooked, raw turkey breast.

Crystal Zulauf: Right.

Dr. Lowe: I can buy turkey breast in lunch meat. I can buy turkey breast cooked in a meal at the counter, today, in a ready to eat take on meal. That’s probably the biggest way, right? I mean, there’s all these permutations on that, but- right? One particular piece of muscle can get sold in many, many ways. And if you think about, “oh, I’m thinking about lunch meat.” Well, there’s how many brands of lunch meat? Do I want a whole breast lunch meat or do I want pressed lunch meat, where I take multiple breasts and put them together like you would ham and slice that off? That tends to be lower cost, but people want that. And so, it’s this sophistication of how we take a bird and make food out of that. That’s- that’s fascinating to me. And the same thing happens with a ham, right? “Okay. How do we sell a ham?” The turkey breasts and ham or not that different, right? We’ve got 19 ways to Sunday how we’re going to sell that. I can smoke it. I can blah, blah, blah. And so that sophistication is- is- it’s- If we make a car, it’s an assembly process. I bring a whole bunch of parts and out comes a car. In the meat business, we take a bird, in this case, and out comes not one product, but hundreds of different products. And the permutations on a individual- It’s not just that that individual bird ends up in 19 different products. It’s that it can end up in all the permutations of all that individual muscle as we disassemble that carcass. And that’s- that’s how value’s created. [unintelligible] we have all this variety. I just can’t go to the store and buy a whole turkey today. I can go buy turkey breast in, what? Four or five, six, eight, twenty different permutations. Flavored, you know, blah, blah, blah.

Crystal Zulauf: Are there any disruptions in that supply chain based like, the shipping costs? Is that- is that a pain point at this point?

Dr. Lowe: Five dollar diesel or five and a half dollar diesel’s a big pain point. I think if we look at grocery inflation, right? We know- what is it? $0.07 or $0.08 worth of wheat in a loaf of bread. But the loaf of bread has gone up more than- I mean, wheat prices is up 20%. Okay, so if it went from $0.08 to $0.10- the loaf of bread is up more than $0.02. And I think a lot of that is, you know, we’ve got labor to make the bread. There’s a lot of transportation costs in a loaf of bread. And I think- if we look at Thanksgiving, yes, transportation cost is a big deal. The other big driver, really, this year, right- We’ve had an animal health event. We’ve had high path avian influenza.

Crystal Zulauf: Mhm.

Dr. Lowe: And so, I think I saw some number- 50 million birds today that have had to be destroyed because of high path AI in the United States. And that’s ongoing. Where- we had it in 2015. And it went on about four or five months and it got quashed. And what happens with High Path AI is- it’s waterfowl. Wild birds that introduce it into turkey populations or into chicken populations. And so the wild birds continue to introduce it this year, which has gone on a lot longer. But we’re continue to have- so it’s infected a lot of turkeys in the Mississippi Flyway. Think, Iowa, Minnesota.

Crystal Zulauf: Okay.

Dr. Lowe: And that’s a huge turkey production area for the United States. Quite a few are raised North Carolina and in the south where we raise chickens, but we raise a lot of turkeys in the upper Midwest, and that’s right in the heart of the waterfowl flyway. And so as those animals have moved, they’ve continued to introduce influenza into those populations. And so, I don’t know exactly the number of- of turkeys we’ve lost. But there’s been a lot of turkey flocks lost. So, part of the turkey cost inflation is we’ve cut supply this year because of- of AI. So, we’ve got- avian influenza. We’ve got challenges, right, around transportation costs.

Crystal Zulauf: Right.

Dr. Lowe: We’ve got labor cost challenges. Right. We know labor cost has gone up everywhere. We’ve got feed cost up. So, it’s more expensive- corn cost is up so it’s more expensive to raise the turkey. Feed costs are directly related. And then we’ve got this whole, “hey, there aren’t as many of them around.” And so, supply and demand is a little out of whack. So I don’t know what turkey prices are up this year, but you’d certainly would project that it’s- the meal is going to be expensive. Now interesting, if you look at- numerous of the grocery stores in the last two or three weeks, in the news, have announced that, “ehh, we’re going to roll prices back.”

Crystal Zulauf: So, are they eating that cost?

Dr. Lowe: Absolutely, they’re eating that cost. And that’s a- the loss leader idea. And they’re saying, “listen, we’re willing to sell you turkeys at no profit, or at a loss, or willing to sell you potatoes,” or whatever. They’ve got a list of things, right? This- these are core ingredients for Thanksgiving dinner. And so, “we’re going to sell those to you to at 2019 prices.” And part of that is- is out of the goodness of our heart that they don’t want people to be hungry or not have Thanksgiving meal. But quite frankly, that’s not their game. Their game is, “hey, I’m going to reduce the price of that because I think when you come in the store, you’re going to buy some other things.”

Crystal Zulauf: Which is probably true. At least when I go in the store.

Dr. Lowe: It’s true for all of us.

Crystal Zulauf: I may have a list, but I’m buying a lot more that just-

Dr. Lowe: Yeah, but you can’t-

Crystal Zulauf: That just catches my eye as I’m walking through.

Dr. Lowe: If you go in hungry- you run into grab this and you’re hungry, and then- yeah. And so, that’s- this idea of loss leader has always been a thing in grocery, right? I mean, that’s how you get people in the store. That’s why you have- you know, you get this idea that they’re using that Thanksgiving meal, this year, as a loss leader to say, “how do we get people in the store and how do we do it?” I think it’s going to be interesting to watch what happens to grocery prices over time. I don’t see any reason that those things are going to come down.

Crystal Zulauf: Yeah.

Dr. Lowe: All the macros-

Crystal Zulauf: They can charge more, people are still buying it.

Dr. Lowe: Well- and diesel isn’t coming down. Grain prices isn’t coming down. I realize it’s not a huge component in grocery prices, but diesel and labor are not going to get cheaper any time soon. And those are big components of grocery prices. And so unfortunately, I think we’re probably in for a relatively long slug of- of high food prices because of, kind of, these underlying things that drive- drive cost, which are not necessarily the raw ingredients.

Crystal Zulauf: Right.

Dr. Lowe: What else are you having with your turkey, Crystal?

Crystal Zulauf: We’re having – well, I already said the dinner rolls. I love the dinner rolls. I usually make noodles.

Dr. Lowe: Oh?

Crystal Zulauf: Yes. And we have cheesy potatoes instead of mashed potatoes. What about you?

Dr. Lowe: Gravy.

Crystal Zulauf: Gravy?

Dr. Lowe: Gravy. And dressing. Actually, if I could just have gravy and dressing, just skip the rest of it, I’d be fine. I really like dressing and I really, really, really like gravy.

Crystal Zulauf: I think that’s fair. That sounds like a fantastic Thanksgiving dinner. Do you like desserts, too? I really like the desserts. But not everybody in my family cares.

Dr. Lowe: No, because I’m so full from the gravy and dressing that I really can’t eat the dessert. And the turkey’s edible if you drown it in enough gravy. If you have some turkey with your gravy, it actually is quite nice. So, you just, kind of, make this soup of gravy and- and dressing, and clog your arteries, and get on with it. It’s fantastic.

Crystal Zulauf: You know, I heard a trick that if you cook the turkey upside down, then it makes your breast meat more moist. Like, all of that, kind of, drains into the- the turkey breast. I don’t know if it’s true or not and we’re not gonna eat the turkey but-

Dr. Lowe: It’s still turkey.

Crystal Zulauf: Have a ham and that fixes your Thanksgiving dinner.

Dr. Lowe: I know, but it’s, like, tradition. And if you don’t eat the turkey- we have to support the turkey guys are once a year, right? And then- then we can escape that at Christmas. I mean, that’s the good news. We escape the turkey at Christmas now because we tolerated it at Thanksgiving.

Crystal Zulauf: You ate it at Thanksgiving and you checked that box and now you can move on.

Dr. Lowe: Yeah, we can move-

Crystal Zulauf: Once a year?

Dr. Lowe: Unfortunately- I’m probably the one who has the anti-turkey view in our family, so I don’t- I don’t necessarily get- I get outvoted by a lot of people.

Crystal Zulauf: Okay, well, enjoy your Thanksgiving turkey and then you can move on to ham for Christmas.

Dr. Lowe: And you enjoy your Thanksgiving ham.

Crystal Zulauf: I will very much.

Dr. Lowe: Thanks, everybody.

Crystal Zulauf: Thanks for joining us. We hope you enjoyed listening and we’d love to hear from you, too. Find us on Twitter. Our handle is @TheRoundBarn1. We may even share your comments on our next show. Please subscribe and tell your friends about the show. It’s available on iTunes or the podcatcher your of your choice. One last thing. We also offer a wide range of learning opportunities for folks who work with livestock and veterinarians, too. You can learn more at online.vetmed.illinois.edu. See you soon!