Economists say Bacon shortage ‘baloney’

By JIM SUHR

Associated Press

ST. LOUIS — Bacon lovers can relax. They’ll find all they want on supermarket shelves in the coming months, though their pocketbooks may take a hit.

The economics of the current drought are likely to nose up prices for bacon and other pork products next year, by as much as 10 percent. But U.S. agricultural economists are dismissing reports of a global bacon shortage that lent sizzle to headlines and Twitter feeds last week. Simply put, the talk of scarcity is hogwash.

“Use of the word ‘shortage’ caused visions of (1970s-style) gasoline lines in a lot of people’s heads, and that’s not the case,” said Steve Meyer, president of Iowa-based Paragon Economics and a consultant to the National Pork Producers Council and National Pork Board.

“If the definition of shortage is that you can’t find it on the shelves, then no, the concern is not valid. If the concern is higher cost for it, then yes.”

Fears about a scarcity of bacon swept across social and mainstream media in recent weeks after Britain’s National Pig Association said a bacon shortage was “unavoidable,” citing a sharp decline in the continent’s pig herd and drought-inflated feed costs. The report caused much consternation over a product that used to be merely a breakfast staple, but nowadays flavors everything from brownies to vodka.

The alarm was quickly dismissed by the American Farm Bureau Federation as “baloney.”

“Pork supplies will decrease slightly as we go into 2013,” Farm Bureau economist John Anderson said. “But the idea that there’ll be widespread shortages, that we’ll run out of pork, that’s really overblown.”

The stubborn drought in the U.S., the world’s biggest supplier of feed grains, undeniably will affect pig production. The Corn Belt’s lack of moisture twice has prompted the U.S. Agriculture Department to slash its forecast for this year’s corn output. It expects U.S. production of the grain to amount to 10.8 billion bushels, the least since 2006.

On Monday, a spokesman for the British pork trade group maintained its position that “there will be a significant tightening in the global pigmeat supply” in the second half of next year, because “the vast majority of pig producers around the world are losing money on every pig they sell.”

“Given the huge amount of interest in the United States created by our earlier press release maybe more producers will now hang on in production, in the hope of recovering their losses next year and in 2014,” Digby Scott told The Associated Press in an email. “We agree with the view of some economists in the (United) States that supplies will tighten and prices will rise BUT maybe you won’t see ‘standing-in-line’ shortages in supermarkets. Time will tell.”

Those lowered expectations sent prices of corn — also used in ethanol, further squeezing supply — to record highs through much of the summer. Feed generally makes up about 60 percent of the expense of raising a pig. Rather than absorb the higher costs, swine and beef producers often have culled their animals by sending them to slaughter.

As of Sept. 1, the nation’s inventory of hogs numbered 67.5 million head, up slightly from a year earlier, the USDA reported Friday. But the USDA suggested that pork supplies will tighten next year as the nation’s breeding stock and intended farrowings — birthings of litters of pigs — likely will drop due to high feed costs.

“I think we’re going to (still) see pretty substantial liquidations” of livestock, Meyer said, guessing that 3 percent of the nation’s breeding pigs could be sent to slaughter by next March. “And by my estimation, that’s a big move.”

The USDA said the breeding inventory of sows and boars stands at 5.79 million head, down slightly from last year and off 1 percent from the previous quarter.

Such liquidations could mean a temporary glut of pork on the U.S. market, depressing pork prices before the oversupply eases and the volume of pork drops again next year, causing hog prices to rebound, said Ron Plain, an agricultural economics professor at the University of Missouri in Columbia. Consequently, he estimates, the higher costs will be passed along to consumers, who could end up paying 10 percent more for their bacon.

As of Friday, the USDA said, a pound of sliced bacon cost an average of $4.05 at the nation’s supermarkets, down 22 cents from a week earlier.

Pig producer Phil Borgic is banking on high prices. With 3,400 sows near Nokomis in central Illinois, Borgic figures he’s had to spend $2 million more this year for the 600,000 bushels of corn he feeds his pigs.

Rather than sell off animals on the spot market, the 56-year-old farmer is hedging his bets by contracting them out for slaughter over a staggered period — what he sees only as a break-even proposition.

“The previous couple of years have been good to us,” he said. “Then the drought changed the ballgame on a worldwide level.”

He waves off the concerns about consumers facing shortages.

“The U.S. has plenty of pork, and we won’t run out here,” he said. “We’ll have some price inflation, but we have plenty of supply.”