Turkey tails and mayo prices increase, chicken and fresh eggs decline
High demand along with reduced supply is among the reasons for the increase in price of turkey tail products sold in American Samoa last month, while the decline in the price of fresh eggs is attributed to possible over supply, says Commerce Department director Keniseli Lafaele.
In the Basic Food Index report, released Nov. 2nd, DOC said the BFI for October 2017 is registered at 104.6 points — a decrease of 0.04% from the September Index of 104.7 points.
Furthermore, the BFI report said eight food commodities — chicken legs, fresh fish, rice, pork ribs, eggs, sugar, butter and ice cream — contributed to the decline in the food index.
“Fresh eggs registered a substantial decline of 3.1% and the rest with minimal decreases of less than a percent each,” it says.
The decline in the price index is of help to local consumers, who seek to gets the lowest price in some of the basic commodities, such as chicken, rice, and sugar, according to local two local business officials, who also told Samoa News that with the economy faced with many challenges — the major one is that some 1,600 cannery workers are temporarily without jobs — any drop in price is helping families deal with their purchases.
The BFI report also says that turkey tails increased by 2.3% in October while mayonnaise has continued to rise since August this year — with another 0.5%.
DOC notes six major food outlets were selected by the monthly survey.
However, DOC doesn’t provide any other details, or an explanation on why the increase in turkey tails and mayonnaise. Samoa News raised questions with Lafaele to get a better picture regarding contributing factors for not only the increases in price, but, any decreases.
Since early September up to last week, a case of turkey tails, has increased slightly while a case of chicken has a slight decrease in cost, according to three local retailers contacted by Samoa News last week in an effort to get more details on these popular food items for local consumption.
For example, an average price for a case of turkey tails was about $14 but has increased to nearly $15 as of last week. For a case of chicken, it dropped to an average of $12 last week compared to about $13 in the latter part of September into October.
“Perhaps very important now to consumers are prices of the food items, with the approaching holiday season,” said one of the store officials contacted by Samoa News. “Food will become a priority purchase for the holidays.”
Responding to Samoa News inquiries, Lafaele explained that the variations in both domestic and international supply and demand, account for the monthly increases and declines in each price category.
“It is important to note that the cost of importing goods, and eventually the prices paid by consumers, are heavily influenced by the price of other commodities, such as crude oil,” he further explained. “The drivers of the price increases on the goods that you specified in your request are summarized below, along with related commodities.”
Regarding crude oil, Lafaele said the price of crude oil “is explicitly tied to the cost of transportation and freight… Relative to prices paid for much of the time between 2007 and 2014, petroleum product prices are up significantly since their recent lows in early- 2016.”
He continued, “In fact, the price of crude oil has been trending up over the last several months,” adding that the futures price of a barrel of Brent Crude Oil grew from approximately $46 in July 2017 to more than $60 by the end of October 2017 — an increase of over 30%.
The DOC director points to the price of crude oil as one of the main contributors to the increase in prices of turkey tails and mayonnaise.
The reasons for the “month-over-month increase” in the price of turkey tails is two-fold — “higher demand for the product that has become ubiquitous with the culture of the Samoan Islands, along with a reduced supply, as a result of external factors,” Lafaele told Samoa News yesterday.
He said the recent increases in the global price of petroleum products has put upward pressure on transportation costs for all goods, including premium cuts of beef, pork, and poultry.
Therefore, increased transportation costs are passed on to wholesalers, retailers, and eventually consumers.
Furthermore, higher prices for premium cuts — “Premium Goods” — tend to drive consumers to more affordable cuts of meat (Normal Goods) in an effort to maintain purchasing power in other spending categories.
“This is sometimes referred to as the ‘Substitution Effect’,” he explained. “Because turkey tail is a normal good, higher prices in the premium cuts of beef, pork and poultry typically lead to increased demand for turkey tails, exacerbating the rise in prices.
“Additionally, the regional supply of turkey tails has been somewhat restricted in recent months, as a result of bird flu outbreaks in areas that supply poultry to the South Pacific Islands.
“In our competitive economy, where market prices are largely set through a delicate balance of supply and demand, both the marginal increase in demand for turkey tails over the last few months, along with a decrease in the supply from producers over a similar period of time, prices rose to a level that is more consistent with market equilibrium,” he explained.
In the coming months, he said, it is anticipated that turkey tail prices will continue to rise on the back of increased transportation costs.
“Supply is expected to normalize, which should help to offset some of increased costs of transportation,” he added.
Regarding to the increased price of mayonnaise, Lafaele said the hike “was almost exclusively due to an increase in the cost of inputs to the producer. Specifically, the global price of commodities, such as soybeans and other ingredients used to produce mayonnaise have been on the rise. The increased costs to the producer is passed on to wholesale buyers, and eventually to retailers and consumers.”
However he points to the rise in price of petroleum being the main factor.
“With the forecast increase in the price of Crude Oil over the next few years, it stands to reason that the prices of these commodities will also experience some upward pressure over the same period of time, though the extend of the pressure is unknown at this time,” he said.
Regarding the decline in eggs, Lafaele said the decrease could be attributed to a current over-supply of egg-producing chickens in the areas that provide the South Pacific region with fresh eggs.
“Interestingly, the supply of chickens being raised for meat is relatively low at this time, which has led to recent increases in the price of whole chickens,” he said. “This has created a quasi-paradox, in which the price of eggs is decreasing while the price of whole chickens is simultaneously increasing.”
“Because poultry, such as chicken, have relatively short gestation periods, and time to sexual maturity, the lopsided supply of egg-laying chickens and meat chickens is anticipated to begin to rebalance over the next several months, as producers execute revised breeding and culling plans,” he points out.
For more information on the BFI contact the DOC Statistics Division at 633-5155 or online www.doc.as.gov