In yet another consequence of drought conditions across the much of the globe this past summer, prices for bacon and pork will skyrocket next year, according to Britain‘s National Pig Association.
“The world’s pig farmers are warning of a shortage of bacon and pork next year because pig-feed has become unaffordable following disastrous growing and harvesting weather,” reads a statement from the NPA released earlier this month. “Governments are becoming increasingly concerned.”
A dry summer led to sparse corn and soy crops, driving up the price of hog feed. As a result, many hog farmers are thinning their herds.
“A world shortage of pork and bacon next year is now unavoidable,” the NPA wrote in a separate statement last week. “New data shows the European Union pig herd is declining at a significant rate, and this is a trend that is being mirrored around the world. Pig farmers have been plunged into loss by high pig-feed costs, caused by the global failure of maize and soya harvests.”
The number of slaughtered pigs will go down about 10 percent in the second half of 2013, the NPA says, possibly doubling the price of pork products in the European Union.
And in the United States? “Skyrocket” is overdoing the price impact.
“The headlines say ‘shortage,’ and that isn’t going to be the case,” says Steve Meyer, a consulting economist for the National Pork Board and the National Pork Producers Council, as well as the president of Paragon Economics in Adel, Iowa. “We aren’t going to see bacon lines. You’ll still be able to get it.”
Still, retail prices will rise next year and are expected to set new records. The US Department of Agriculture (USDA) forecasts a rise of 2.5 to 3.5 percent, after an 8.5 percent rise in 2010 and a 1.0 to 2.0 percent rise this year.
Demand will drop, Mr. Meyer says. While some consumers will continue to pay high prices, low-income buyers will cut back on pork and all other animal proteins as well: beef, chicken, turkey, and even eggs.
“There are going to be some people priced out of animal protein,” he says. “When we drive up prices, that’s quite regressive on lower income.”
Already at the wholesale level, dramatic changes are under way. US hog farmers are enduring their worst losses in 14 years. They’re paying an estimated $45 more to feed and raise each hog than they can sell it for, according to Meyer’s projections. So they’re liquidating their herds at the fastest rate in three years. By next year, the USDA projects that the supply of pork per capita will drop to a 28-year low.
There is a year or so of lag time between farmers liquidating herds and shoppers starting to feel the pinch. “We’re making cuts right now that you’ll see in the second half,” Meyer says.
Pork prices hit a record high in 2011, with sliced bacon topping out at $4.84 a pound in June and pork chops averaging $3.64 a pound in September. USDA estimates those prices have since dropped by about 23 cents and 6 cents, respectively. But the effects will be short-lived when the accelerated liquidation ends and the shortage begins to take hold.
So when will pork prices go down? “It’s unusual to have two droughts in a row, and we’ll get some break if the annual South American soybean crop is good,” Meyer says. But lower pork prices won’t come until 2014. For beef, which is also going up, it could be closer to 2016, he says.