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What Thanksgiving Can Teach Us About the Economy

Can you imagine a Christmas ham on your Thanksgiving dinner table in place of the traditional turkey? My guess is you can’t, but it’s a scenario many economists have been worrying about for months.

Many commentators feared that ordinary Americans would be driven to this holiday mix-up by that wonderful tool that helps allocate scarce resources—prices. Thankfully, the price disruption isn’t as bad as was predicted.

The concerns came from a massive outbreak of avian flu this summer. The disease ravaged states that are crucial to the production of our beloved holiday birds, leading to the loss of over 7.5 million turkeys. The outbreak has cost turkey farmers around $500 million, stoking concerns that turkey prices would rise dramatically.

At the same time, pork production is approaching an all-time high. But a strong greenback has been dampening international demand for American pigs, driving ham to its lowest seasonal price in six years. This led some onlookers to wonder whether price-conscious families might substitute ham for turkey this year at the Thanksgiving table. Should President Obama pardon a pig this week instead of following tradition?

Thankfully, the effect on turkey prices wasn’t nearly so dramatic. The U.S. produces 228 million turkeys each year, and the sick birds represented around 3% of the total. And many of the Thanksgiving birds had already been frozen before the disease took hold. In fact, while fresh turkey prices are up about 10 cents per pound, frozen turkey prices are actually slightly cheaper this year.

Frankly, it’s the side dishes that you should worry about. They are poised to hurt your pocketbook more than turkey. Prices for sweet potatoes are up 28% this year and regular potatoes are up 8%, while eggs will cost you a dollar extra. And while dessert might add a bit to your waistline, it has the potential to leave your wallet lighter. In one extreme case, a two-pack of a sold-out Walmart sweet potato pie is for sale on eBay for $12,000 after a video review of it went viral. Walmart had been selling the pie for under $4.

Analysts estimate this year’s meal will cost an average of 6% more than last year’s.

Prices fluctuate from year to year, and we can’t plan for random events like a flu outbreak. But stepping back and looking at a longer time horizon can help us prepare for the future. For instance, it seems virtually certain that the global middle class is going to be larger 15 years from now than it is today. And this expanded universe of consumers will drive a massive increase in demand for food—some experts predict a 35% increase in demand for food by 2030.

This rise will be particularly pronounced for protein. When people get more money, they tend to consume more meat. This increase in demand will ripple through the entire meat value chain, from the grain fed to animals to fertilizers used to support grain yields. These structural forces may lead to a steady rise in your Thanksgiving meal bill for years to come, independent of random yearly events.

Of course, a variety of factors could counteract this trend. For example, we could see a dramatic downshift in demand for protein due to health concerns. Just think about the World Health Organization’s recent warning about a link between processed meats and cancer. We could also see a massive increase in food production efficiency thanks to the adoption of alternative protein sources or genetic modification of ones that are already popular. Scaling back food-for-fuel policies might increase supply while increasing affordability. We should watch these developments closely.

Even the Thanksgiving dinner table is a vivid reminder of the complexity and uncertainty surrounding every aspect of the modern world. As the outlook for protein suggests, a booming middle class may soon be gobbling up turkeys and hams alike. So this year, as always, let’s be thankful that we can take a day to sit with family and enjoy a meal together—and remember those who can’t.

Vikram Mansharamani is a Lecturer at Yale University in the Program on Ethics, Politics, & Economics. He is the author of BOOMBUSTOLOGY: Spotting Financial Bubbles Before They Burst (Wiley, 2011). Visit his website for more information or to subscribe to his mailing list. He can also be followed on Twitter or by liking his page on Facebook.

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