Bacon Prices Continue To Rise

Today pork belly futures surged again to a record $1.185/lbs. The plunging U.S. inventories of the meat used to make bacon have been contributing to the week-long jump in wholesale prices.

While wholesale bacon buyers are still gasping at the daily sticker shock, some are predicting an end to the increase might be coming sooner; packers shipped less pork last week than they had since June- a sign that the market is starting to reject the higher prices.

Chad Henderson, a market analyst at Prime Agricultural Consultants Inc., told reporters:

I don’t see anyone wanting to push too much more in retail. Pork is starting to look expensive.

However at least one economist disagrees: (via Bloomberg)

“What you have with bacon is what economists call inelastic demand, meaning it doesn’t vary much,” said Chris Hurt, a livestock economist at Purdue University in West Lafayette, Indiana. “If a person wants a BLT sandwich and likes that in summer when their patio tomatoes come on, then it doesn’t make a difference if bacon is $2 a pound or $6 a pound. They’re going to go out and buy it. When it’s in short supply and a lot of people want it, they’ll pay a higher price.”

Customers will probably be seeing this increase at least one place: Wendy's announced today that they will be phasing out cheap bacon, and thus increasing prices on their sandwiches.

Further Reading:
Bloomberg on the continued market conditions
The Toronto Sun on Canada's issues with pork
The SF Gate crunches the numbers

What's With the High Price of Bacon?

You might have noticed that bacon prices are on the rise. Today prices on fresh pork bellies spiked to $1.35 a lb.- this is up over 50% from last year's pricing. What is causing this sudden increase?

MeatPoultry.com offers some insight:

In 2008 and 2009, North American hog producers decided to cut their losses by trimming their herds; this move is now impacting cost pressures faced by supermarkets. Hog farmers were losing money due to high feed prices, a decrease in global demand in the wake of the recession, as well as panic surrounding the H1N1 influenza virus, which initially had been erroneously called "swine flu."

Pair this with the summer demand for bacon (in those great BLT sandwiches), and you have a perfect storm for high prices.

Is there an end in sight? Not for the next few weeks according to Paul Beere, a market adviser at Prime Agricultural Services in Brookfield, Wisconsin. Via Bloomberg: "The bacon market will probably lead pork products higher for the next several weeks."

Pork: 'The Other White Meat' for Not Much Longer

The pork industry says that the public has grown so accustomed to pork as "the other white meat" that the slogan and branding no longer help sell pork.

From Pork.org:

"We have just finished the early stages of our consumer research, and one insight I can share is that pork lovers see the world as full of possibilities," Snyder said. "One not surprising finding is that The Other White Meat is certainly well-known. But we have also found that it is so familiar that it blends into the background. It’s not motivating our customers to buy more pork.

While the National Pork Board promises to, "Protect the Other White Meat’s important heritage both in marketing and legally," consumers can expect the new brand position to debut in March 2011.

Further Reading:
Pork.org's article on the new branding plan.
Madison Daily Leader: Pork Industry tiring of the 'Other White Meat'

Swine Flu & Pork Industry Information

Even though health officials have denied that the "swine flu" came from pig farms, the media seized on the Smithfield plant in Mexico because of its proximity to the initial outbreak. Despite the fact that plant workers or the pigs are still healthy, Smithfield stocks dropped earlier in the week. With fear of losing even more profit in an already tough economy, the pork industry fought back to change public perception and remind people that according to the Center for Disease Control:

Can people catch swine flu from eating pork?
No. Swine influenza viruses are not transmitted by food. You can not get swine influenza from eating pork or pork products. Eating properly handled and cooked pork and pork products is safe. Cooking pork to an internal temperature of 160°F kills the swine flu virus as it does other bacteria and viruses.

Today the Pork Producer's Council released this statement:

“The restrictions should be short lived because U.S. and international authorities have made it clear that the H1N1 virus is transmitted through human contact and that pork is 100 percent safe to consume,” said NPPC Vice President and International Trade Counsel Nick Giordano. “NPPC has been in constant contact with U.S. trade officials, and U.S. Agriculture Secretary Tom Vilsack and U.S. Trade Representative Ambassador Ron Kirk have been busy working the phones with our trading partners. It is imperative that our trade officials stop the export bleeding now.”

The World Health Organization (WHO) today named the virus “Influenza A,” and the World Organization for Animal Health (OIE) said the H1N1 influenza should never have been named “swine” flu and there is no justification for the imposition of trade measures on the importation of pigs or their products. The U.S. Department of Agriculture, Centers for Disease Control and Prevention and the U.S. Department of Homeland Security all confirm there are no food safety issues with the virus and that it is not in the U.S. hog herd.

Swine Flu (or Influenza A) still has no vaccine, but as of this post only 109 confirmed cases have been found in the US, with only one death occuring in the country.

Further Reading:

A Brochure from the CDC about Swine Flu and pigs. (opens a PDF)
Reuters on pork farmers urged to reduce flu risk.
MeatInfoUK on the rejection of claims that pig farms have caused the flu.
BNet on the flu's impact on the pork industry