Bacon Prices Skyrocketing

Posted by Jeff Carter
on July 12th, 2011

Here is a link to a chart on pork belly prices. They are through the roof. Hog producers culled their herds in response to the extremely high feed costs. It will take a while to rebuild the herd. Prices will remain high for an extended period of time. High feed costs are the result of the Federal government’s ethanol subsidy program.

Frozen pork bellies are traded at the CME ($CME). The problem is they don’t do a lot of volume($PB_F). The industry has gone to a fresh belly skin off standard. $CME bellies are frozen, skin on.

The other culprit in the high pork belly price is China. There is huge Chinese demand for American pork. The Chinese cannot let their people go hungry-or they risk revolt. Let them eat cake won’t work for them any better than it worked for Marie Antoinette in France back in the late 1700′s!

To combat the problem of high bacon prices, as a service to you I have found a video on how to cure your own bacon. You can get a whole pork belly at any reputable butcher.

Great thing about the things that go into cured belly. They are also found in BEER!

I should add that bacon prices will be extremely volatile without a futures contract to hedge. This will lead to boom and bust cycles in bacon, and generally make bacon more expensive because the producers will have to absorb the volatility.

They banned onion trading years ago. What’s more volatile, onions or crude oil($CL_F)? Here is a chart.

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