Pan fried bacon.
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Bacon is set to get even more expensive as wholesale pork prices hit record highs amid California’s animal welfare law, as well as peak summer demand.
At 279.97 cents per pound in August 2021, pork prices increased more than 100% from 131.59 cents per pound in January to 270.89 cents per pound at the end of July. A collection of facts. This is an increase of 106%.
Wholesale pork prices are currently trading at 270.89 cents per pound.
And consumers are about to see higher prices for pork, which is mostly pork.
More space for pregnant seeds
“In general, I expect pork specifically, but pork in general is going to be very expensive in California,” said Brian Earnest, lead protein industry analyst at Cobank.
Analysts speaking to CNBC attributed the increase in pork prices in part to the recently implemented animal welfare regulation in California that took effect on July 1.
California’s Proposition 12 prohibits the sale of pork from farms that confine pregnant sows to small enclosures and less than 24 square feet.
That part of the law went into effect on July 1, although other parts of the proposal — including a minimum usable space requirement for breeding pigs and egg-laying chickens — were implemented earlier.
According to the National Pig Producers Council (NPPC), pig farmers were not properly consulted.
“Proposal 12 was developed without input from pig farmers, veterinarians or others with expertise in animal care and food safety,” he said.
Piglets gather around a sow to be fed at Centennial Farm in California. Proposition 12 is legislation that prohibits the keeping of pregnant chickens in small enclosures.
Register via Medianews Group/orange County Getty Images | Medianews Group | Getty Images
New construction of a suitable housing facility is estimated to cost $3,400 to $4,000 per sow, which the association predicts is about 40% more expensive than a gestation barn holding the same number of pigs.
These costs are set to prevent many pork producers.
“Many small and medium-sized farms will not be able to afford the significant capital investment. Any costs incurred by Proposition 12 will also be passed on to consumers,” the NPPC said.
This sentiment is echoed by Cobank’s Earnest.
“Given the economic environment, pork producers will be reluctant to build Prop 12 housing,” Earnest said, adding that buyers clamoring for pork products ahead of the July 1 deadline are “fueling the fire” for higher pork prices.
Urner Barry pork market analyst Ryan Hojnowski said supply played a “major role” in the 12 price increases.
As a result, pork sellers will want to maintain their profit margins — so a jump in wholesale pork prices will translate into higher retail and food service prices, he said.
“It certainly makes pork more expensive for the consumer,” Hojnowski told CNBC in an email.
One of the pork categories sold, 11-13 pound skinless bellies, increased 157% from the week of June 5 to the week of July 31, according to data from commodity firm Urner Barry. Prices rose from 99 cents per pound to 255.2 cents per pound on a wholesale basis during that period.
Emphasize the effect of the law coincides with low pork production at this time of the year.
August is commonly referred to as “BLT season,” Earnest said, referring to the popular bacon, lettuce and tomato sandwich often consumed during the summer when the tomato harvest is in full swing.
A BLT with fries at a restaurant in Colorado.
Glenn Asakawa | Denver Post | Getty Images
“Seasonally, pork prices typically peak in July and August. This year is following a similar pattern,” said Lee Schulz, associate professor of economics at Iowa State University.
Last August, pork prices traded at a relatively high 222.69 cents per pound compared to the rest of the year, according to FactSet.
Lee added that “pork cuts are going down steadily.” which coincides with this time of year. However, he expects prices to typically begin to decline toward the second half of the year.
Urner Barry’s Hojnowski similarly said summer pork production is at its lowest point of the year, tightening the supply of fresh pork bellies on the open market.
The United States is the world’s second largest pork exporter after Spain.
For the week ending Aug. 24, sliced pork prices at major U.S. retailers were 6% higher than a year ago, according to the U.S. Department of Agriculture.