By: Eric Mittenthal 

The social media world has been panicking over the last week…a bacon shortage is imminent! “It’s pork-ageddon” according to one reporter. “The apocalypse is nigh” said another. It brings smiles to our faces here at AMI that so many people are as passionate about bacon as we are. The good news is that you will be able to find bacon on store shelves here in the U.S. The September 26 CME Group Daily Livestock Report (DLR) sums up the situation well. If you’re worried about a shortage, meaning bacon cannot be found or you have to wait in long lines for your bacon, then you have nothing to worry about. In fact, the rumors of a shortage came from the National Pig Association of the United Kingdom and UK bacon isn’t the same as U.S. bacon. According to the DLR, “Bacon in the UK and bacon in the U.S. are very different things. UK “bacon” is also called “back bacon” and includes a thin slice of the loin eye muscle as well as a thin slice of the pig’s side — the part that goes to bellies and cured bacon in the U.S. 

So we can consider this “crisis” averted, but the quantity of pork available to consumers in the U.S. and the rest of the world will decline in 2013 due to high feed costs and significant financial losses by producers. 

The hog and pork markets will require supplies to be reduced in order for prices to rise enough to cover these higher costs.  This process has been ongoing since 2006 due to higher grain prices caused first by the rapid growth of corn-based ethanol production and, more recently, by drought-shortened crops worldwide this year.

Consider some of this data. You’ll notice how much prices and production have changed in recent years, much of it due to ethanol policy.

The average cost of production for Iowa farrow-to-finish operations, as estimated by Iowa State University are 71% higher than those of 2006.  2013 forecast costs are 82% higher.

U.S. per capita pork consumption (or, more accurately, pork availability) has fallen from a high of 51.9 pounds in 2003 to only 46.0 pounds this year and is forecast to fall to 44.6 pounds next year.   This figure was 50.8 as recently as 2007.  The 2012 and 2013 levels will be 10% and 12%, respectively, lower than the 2007 level.

According to USDA’s Foreign Agricultural Service, world pork availability peaked in 2010 at 33.48 pounds per person.  It fell to 32.8 pounds in 2011 and is forecast to increase to 32.94 pounds per person this year.  USDA will not release its forecasts for 2013 world pork production until October 11.  A 2% reduction for world per capita availability would put 2013 at 31.95 pounds, the lowest level since it hit 31.6 pounds in 2007.

Lower per capita pork availability/consumption here in the U.S. resulted in a new record retail price of $3.561 per pound in September 2011.  The average retail pork prices was $3.526 per pound in August so any reductions in per capita supplies in 2013 are virtually certain to push retail prices to new record levels.

The bottom line is that supply is down and that means prices are going up, so you may have to pay a bit more for your bacon in 2013, but there will be plenty to go around so there’s no need to run out and “hog” the supply.

 

 

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