October 21, 2020

US analysts say bacon shortage doubtful despite record low U.S. pork belly inventories

Industry analysts in the United States said more pork belly supplies will be available, even after US Department of Agriculture (USDA) data showed a second straight month of record low US pork belly stocks in January, Reuters reported.

USDA data for January on pork bellies showed 14 million pounds of total stock, a record low for the month and 4 million pounds lower compared to December. The five-year average is a 6.6 million-pound gain.

Industry analysts said the low belly stocks was because of prolonged bacon demand, in addition to lower physical storage by speculators after the demise of Chicago Mercantile Exchange belly trading pit.

Fresh pork belly is readily available, from recently butchered swine and not frozen like those stored in inventories, sometimes reaching record high swine production. Higher wholesale pork belly prices could have dissuaded processors from storing the pork bellies in US warehouses.

Dan Vaught, an economist from Doane Advisory Services, said late-2019 saw higher pork and bacon demand. Some consumers could have stored bacon out of shortage concerns that did not happen.

Vaught said the USDA isn't foreasting a pork belly shortage so it's extremely unlikely to happen.

He cited US government swine report that showed swine slaughter increased 4% through spring. USDA data forecast 2017 commercial pork production to increase about 5% from 2016.

January bacon on US monthly retail data was US$5.18 per pound, an US$0.08 increase from December but lower by US$0.47 from one year prior.

Robert Brown, an independent market analyst, said it is difficult to predict bacon prices as it could be pushed higher by demand and processors' interest in purchasing pork bellies to replenish stocks if wholesale prices come down.

-      Reuters