BACON SCARE STORIES AIMED AT PROP 12
-August 27,2023-
Several financial news outlets are floating stories about the price of bacon blaming California’s Proposition 12 animal welfare rules. “Bacon is about to get even more expensive as wholesale pork belly prices approach record highs.” says a CNBC report this past week following up on a recent Wall St Journal article.
Fortune writes that “Wholesale prices for bacon have nearly tripled this summer” and TheStreet says “ Your Favorite Breakfast Staple May Soon Be Twice as Expensive.”
The apparent freakout over pork prices continues as California’s Proposition 12 rules approved in 2018 finally kick in.
Target is selling one pound of bacon for $4.39 this week
Here is how the CNBC story reads.”Breakfast lovers who pig out on bacon are finding it’s becoming an expensive proposition, and one onerous state law may be driving prices sky-high.
Currently, wholesale pork belly prices (the main driver of bacon costs) stand at approximately $2.15 per pound. That’s their highest level in the last 12 months.”
California’s Proposition 12 bans the sale of pork from farms that confine pregnant sows in tiny enclosures, and spaces that are less than 24-square-feet.
This part of the law came into effect on July 1, even though other parts of the proposition — which stipulated minimum usable floorspace requirement for breeding pigs and egg-laying hens — were implemented earlier.”
This freak out over pork may well be tied to efforts to overturn Prop 12 in Congress now that the Supreme Court has allowed the law to take effect.The Wall St Journal subheadline tells it all “Wholesale pork-belly prices nearly triple as the state’s animal-welfare measure takes effect.”
But are pork belly prices-where they get bacon- really up? Pork belly is just one cut from the hog carcass. The entire hog is priced in general as the “pork cutout ” index that includes all the cut pieces.
So is the pork cutout price up or down? The industry pork cutout website says it is actually down 4% from a year ago as of Aug 25. Trimmed pork loin is down 8% year over year and hams are 6% lower in price. As for belly- it’s down 20% from a week ago to $1.87 from $2.33.On yearly basis that $1.87 is up 1% from $1.85 on the same date in 2022. And if you want a deal – try St Louis spare ribs – they are down 15% says the pork industry website.
So how do these articles paint a picture of scary sky-high prices?
Here is a chart that shows the seasonality of pork prices (Pork Belly Chart) from the meat industry. They are down in the winter and spring and head high in the summer as can be seen in this 3-year chart. Come late June every year, pork prices head up. But by Sept – they fall just as hard.Note the green line that shows prices started up in mid May 2023 from about $1 per pound,historically very low compared to 22′ and 21′ when they were around $2 lb at that same time So of course, on a percent basis, they jumped more this year. They have dropped to $1.61 as of Aug 25 in a matter of days.
What about pork belly prices that the article claimed were $2.15, highest in a year. That was a few weeks ago. In this USDA chart ,as of Aug 23 they are down 20% to $1.81 and on Aug 25, down to $1.23 following a seasonal swing according to Chart 1 for all cuts including Belly.The 5 day average is $1.69. No doubt this is a volatile commodity.
So when the article says “Pork belly prices rose over 100% year-to-date from 131.59 cents per pound to 270.89 cents at the end of July.” they don’t acknowledge the seasonality of prices or the fact pork belly prices are way down to $1.23 as of Aug 25, per USDA.
Retail prices for pork have declined by 5.0% over the past 12 months, while beef prices are up 6.2% and broiler prices are up 2.0% from June 2022, says one report. So If that bacon cheeseburger is more expensive this summer, it is just as likely you should blame beef prices.
Are bacon prices sky high? One study says retail bacon prices are not so volatile averaging $6.67 so far in 2023. Retail bacon prices averaged $7.31 in 2022- that was the highest annual average price on record.
Let’s talk about the average retail price for bacon instead of pork bellies.Bureau of Labor Statistics says July 2022 shoppers paid an average of $7.41 for one pound of bacon. The price a year later- July 2023 was $6.23. No reason to freak out.
Today a wise shopper can find bacon on sale for a reasonable price. This week Target is selling one pound of bacon for $4.39, similar to Ralphs.
YahooNews reported this week that “For now, shoppers can find bargains. Prices for bacon and related products fell nearly 11% in July from a year earlier, the largest drop since 2015, according to Bureau of Labor Statistics data released Thursday. Milk fell the most in five years while eggs costs declined further, easing what has been the worst food inflation in decades.”
Graph: Wholesale egg prices in California about half what they were year ago.
These same critics blamed California for high egg prices too. Today egg prices nationwide and even in California are cheap – $2.99 at Trader Joes.
The bottom line – your breakfast is getting cheaper.
The U.S. Supreme Court has ruled that California’s Prop 12 legislation will hold, it became law starting July 1, 2023. Prop 12 was voted into law in 2018. Compliance will be self-certified until the end of the year.
In May the WSJ reported US pig farmers “after years of rapid expansion” left “the $54 billion U.S. pork industry oversupplied” even as demand wanes.