LDN - Business

Bacon fans take heart as wholesale pork belly prices plummet

[September 16, 2017] CHICAGO (Reuters) - Fans of BLT sandwiches, take heart: U.S. retail prices of bacon, which soared to record highs this summer, should begin to ease soon, according to livestock analysts.

It could have been worse.

Wholesale prices of pork bellies surged to over $200 per hundredweight in July after starting the year at roughly $116, caused by stronger-than-expected consumer demand and tight supply, according to government data and industry watchers.

But consumers did not feel the pinch sooner because it usually takes about six weeks for changes in belly prices to be seen at the supermarket, industry experts said.

From December 2016 through most of 2017, storage of pork bellies in public, private and semi-private cold storage warehouses stayed at record lows, even as U.S. farmers took advantage of lower feed prices to build the domestic hog herd to record highs, according to industry and government data.

When U.S. consumer demand did not ease and retail prices remained steady, the industry found itself in a short-term supply quandary, said Doane Advisory Services economist Dan Vaught.

"I really would have thought the industry would have been more aggressive in storing bellies for use this summer, which obviously wasn't the case because the amount in product in storage really lagged historical levels pretty badly all year," Vaught said.

"When end-users needed those bellies they weren't there, despite the record production overall for summer, so we ended up with a shortage."

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Bacon is fried up in a pan in a kitchen in this photo illustration in Golden, Colorado, October 26, 2015. REUTERS/Rick Wilking

Wholesale U.S. pork belly prices hit their highest ever of $227.54 per cwt (or $2.28 per pound) on July 26, before sinking to the lowest for the year on Friday, to $101.63 per cwt, according to U.S. Department of Agriculture data.

As summer progressed, shoppers started to see the ripple effect. The average August retail bacon price reached an all-time peak of $6.24 per pound, up 7.3 percent from July and 14.5 percent higher than the year-ago period, according to USDA retail price data released this week.

What goes up must come down, said food and livestock analysts. The retail bacon price spike dampened consumer and food service sales. That, in turn, has sent wholesale pork belly prices falling about 50 percent in the past few weeks, said Steve Meyer, a pork analyst at Indiana-based EMI Analytics.

"That pushback is the primary reason that belly primal prices are now at $104 per cwt," Meyer said. "These low wholesale values will encourage storage and attract end users back when the pricing is eventually passed along."

(Reporting By Theopolis Waters in Chicago; Additional reporting by Michael Hirtzer in Chicago; Writing by P.J. Huffstutter in Chicago; Editing by Richard Chang)

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