Bacon Is Still Sexy in Food Service

Analysis / Market Intel Jun 26th, 2017

Credit: cyclonebill // CC By-SA 2.0 

Those watching the belly market received one more piece of insight in USDA’s Cold Storage report last week.  Pork belly inventories have been more than 50 percent below a year ago since November of 2016.  May marks the 10th consecutive month bellies in cold storage have been below 40 million pounds. This is the longest stretch below 40 million pounds since the cold storage report began in 1973.  The second longest stretch was in 1977 for nine months.  May also marked the beginning of a seasonal decline in inventory that typically starts in April/May, Figure 1.  The markets reacted by adding another $3.84 per hundredweight on Friday to belly primal value. 

Belly prices are reaching levels not seen since the height of the PEDv outbreak in 2014. The week ending June 23, 2017, added nearly $18 per hundredweight to the primal value, reaching $182.43.  Friday’s price was the highest seen since April 2014, as shown in Figure 2.

This is impressive considering the large volume of hogs being harvested this year.  May was up 8 percent from 2016 and year-to-date slaughter is 3 percent ahead of last year, with 1.7 million more animals.  Bellies typically make up about 19 percent of the carcass cutout and bacon is a large portion of the belly.  This would imply there is more bacon produced this year than last year, leading one to believe this price increase is consumption-driven.  So where is all of this bacon going and who is eating it?

To a large extent, we are! Bacon is still a sizzling food trend that extends well beyond breakfast, sandwiches and burgers.  It continues to be featured on donuts, ice cream, pizza and in sauces.  To a lesser extent, bacon has seen a tiny bump in exports this year.  Exporting bacon is a relatively small piece of the complex, but with stocks being as tight as they are, even this slight increase in exports is adding to the mix.  The U.S. exported about 30,300 metric tons last year.  The monthly data has shown a substantial increase on a percentage basis over early 2016 figures.  January, February and April export data showed a 25 percent gain or more in volume, and year–to-date volumes have increased 21 percent over 2016, Figure 3.  

There is also a bit of a lag in the retail sector.  Consumers are still seeing relatively inexpensive product. Bacon featured today in stores was likely bought four to eight weeks ago.  USDA’s Economic Research Service  monthly retail meat prices, released June 14, 2017, indicate retail prices for sliced bacon are up only 3 percent in May compared to last year, while wholesale bellies have increased 23 percent.  When this bacon was likely purchased, wholesale belly prices were much lower.  March and April bellies were $136.45 and $118.16 per hundredweight compared to $129.43 in May.  Some of the rapid rise in bellies has been attributed to retailers being caught short in face of increased demand, however, the shortness in inventory cannot be overlooked.  Retail bacon prices will likely adjust in the coming months in response to the higher prices being paid in May and June.  

Katelyn McCullock
(202) 406-3623

Share This Article

Credit: United Soybean Board/CC BY 2.0 

In most recent years, Mexico has been the top export destination for U.S. corn, with Japan serving as a close second. Which market is the top destination tends to be a function of timing, exportable supplies from competing producing nations and exchanges rates. Whether Mexico ranks number one or number two in a given year, it is a market of critical importance for U.S. corn. Since NAFTA came into effect in 1994, the U.S. has exported more than 163 million metric tons of U.S. corn, valued at nearly $30 billion, to Mexico. Exports have grown more than 7,100 percent by value and more than 4,700 percent by volume since 1993.

Full Article
Credit: CC BY-SA 2.0 // Ken Teegardin 

The Congressional Budget Office recently released An Analysis of the President’s 2018 Budget, i.e. an analysis of President Trump’s proposed budget blueprint for fiscal year 2018. The CBO analysis found that by 2027 the U.S. would operate at a $720 billion budget deficit and not a $16 billion surplus as projected in the blueprint. Specific to agriculture, recall that in late May the Office of Management and Budget proposed to reduce the U.S. Department of Agriculture budget by more than $230 billion over 10 years. The proposed cuts came in the form of policy changes designed to reduce outlays by $191 billion for the Supplemental Nutrition Assistance Program and $38 billion from various farm programs – including crop insurance.

Full Article