Over the last 12 months, grocery prices soared 13. The Bureau of Labor Statistics said Wednesday that the 1.1% increase was the biggest annual rise since the end of the fiscal year in March 1979.
The price of eggs has gone up by 2038 percent, and other goods’ prices have also gone up: flour is up 22 percent. 7%, chicken 17. 6%, milk 15. 6%, ground beef 9. 7% and bacon 9. 2%. Fruits and vegetables got 9. 3% more expensive.
Food prices have gone up because of a number of things. The deadly avian flu has caused fewer eggs to be laid in the US, a severe drought in Brazil has destroyed coffee crops, and the war in Ukraine caused wheat prices to rise in the spring.
While commodity prices are falling, it will take time before those lower costs pass through to consumers. A lot of other costs for producers have also been high, like fuel, labor, and packaging.
Crispy, savory bacon is a breakfast staple for many Americans. But in recent months, prices for everyone’s favorite pork product have reached unprecedented highs.
Bacon now costs around 28% more than it did a year ago. When accounting for inflation, bacon prices are the highest they’ve been in over 40 years.
So what’s behind the skyrocketing costs of bacon? In this article we’ll explore the array of factors driving up bacon prices and what it means for consumers.
Surging Demand Outpacing Tight Supply
The fundamental economic principle of supply and demand is a key reason behind increasing bacon costs
During the pandemic, demand for bacon surged as consumers stocked up on groceries and breakfast foods. But at the same time, COVID-19 disruptions constricted pork production and processing capacity.
With demand outpacing supply, bacon inventories dropped. This supply-demand imbalance put upward pressure on prices as demand exceeded bacon availability.
Bacon production closed out 2020 about 2% lower than the prior year. With limited supply, prices climbed dramatically to balance the market.
COVID Impacts on Pork Industry
The pork supply chain faced unique challenges during COVID-19 that suppressed supply.
Meat processing plants became early hotspots for virus outbreaks. Plant shutdowns and slowdowns caused pork backlogs, even forcing farmers to euthanize pigs that couldn’t be processed.
Reduced processing capacity meant fewer hogs were making it to market. This crimped supply despite strong demand from consumers.
Additionally, some hog farmers culled breeding stock amidst the uncertainty. This further constrained pork production in 2021 as fewer pigs were born to meet demand.
Feed, Labor, and Transport Costs
Surging input costs have also driven up bacon prices for producers and processors.
The prices of critical inputs like corn, soy and wheat for hog feed have increased significantly. Transportation and shipping costs have also risen, squeezing processor margins.
Additionally, labor shortages in meat plants after COVID have forced wage increases to attract employees. These mounting input costs get passed on to consumers.
Impacts of African Swine Fever
The global outbreak of African Swine Fever has also impacted US bacon prices.
This pig disease emerged in China in 2018 and has since spread across Asia, forcing major pork cullings. This boosted US pork exports to meet Asian demand, tightening domestic supply.
With ASF now present in the Dominican Republic, there are heightened biosecurity fears of this contagious virus reaching the US. Such an outbreak would devastate domestic pork production.
Industry Consolidation Effects
Another contributor is the increasing consolidation and concentration in the pork industry. Just 4 companies now control over 60% of US pork processing, up from 25% in the 1970s.
This concentration gives large processors more pricing power. Critics argue the lack of competition enables disproportionate price hikes by dominant firms.
The Biden administration has outlined plans to boost competition and antitrust enforcement to combat price inflation, including in the meat industry.
Will Prices Stay High?
Looking ahead, analysts expect bacon prices to remain elevated for some time. Though input costs may be peaking, the market will be slow to adjust.
Processors anticipate continued strong demand and limited cold storage inventory to prop up pricing. Futures markets indicate prices likely won’t fall to pre-pandemic norms until mid-2022.
However, prices should moderate as 2021’s suppressed pork production starts to rebound. Wholesale pork prices have already dropped from their mid-summer highs.
Coping with High Bacon Costs
For consumers, high bacon prices mean adjusting shopping habits and being flexible. Here are some tips:
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Seek out sales, coupons, and bulk bacon packs.
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Switch to cheaper proteins like eggs as an alternative.
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Buy more frozen bacon when prices drop; freeze excess inventory.
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Try lower-cost bacon ends and pieces.
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Consider buying pork belly and making your own bacon.
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Add small bacon bits to dishes as a flavoring rather than main ingredient.
The Takeaway
Understanding the supply and input costs dynamics provides insights into why bacon prices are so high. COVID disruptions, strong demand, and market concentration have all contributed.
While prices are expected to remain elevated near-term, they should eventually moderate as supply recovers. In the meantime, consumers can find ways to cope with high costs for their bacon cravings.
One thing is clear: with all the factors at play, bacon prices have reached a sizzling level unlikely to cool down anytime soon. But a few adjustments can help manage the costs of this cherished staple.
Demand for groceries grows
Unlike discretionary items, consumers cant simply stop buying food when prices rise. They may, however, opt for less expensive options. Producers, grocers and restaurant operators have noted that consumers are indeed trading down — swapping out higher-priced items for more affordable ones.
Earlier this week, Tyson said demand for steak is falling while interest in chicken is rising. Wendys traffic has been hit because some customers are deciding to pack lunches or eat breakfast at home, CEO Todd Penegor said during a post-earnings analyst call Wednesday.
According to Penegor, about 28% of meals were eaten at home before the pandemic. However, that number has gone up three percentage points since then and has stayed there.
“People have been a little tighter on cash, so there are a few more meals being made at home,” Penegor said. “Inflation has been high, so net disposable income has been a little bit pinched. “.
Restaurants have also been raising prices, but not as quickly. From July to July of this year, menu prices went up 7. 6%, less than overall inflation.
Plus, food prices are largely unaffected by current government efforts to curtail spiraling costs.
Federal Reserve Chair Jerome Powell acknowledged as much during a Senate Banking Committee hearing in June, saying that raising interest rates to fight inflation wouldnt lower food prices.
According to Michael Gapen, head of US economics at Bank of America Global Research, the Fed thinks that “global commodity prices affect food and energy in a way that tells them, Hey, these things aren’t really under your control.”
The main idea is that the US can’t fully control food prices in the US because it can’t change things happening in other countries, like the war in Ukraine and higher shipping costs.
Whats more, the US government doesnt have a stockpile of food as it does of oil, noted Rob Fox, director of the knowledge exchange division at CoBank, which provides financial services to agribusinesses.
Fox said, “The government can’t let out extra stalks of wheat, corn, cheese, and other things.”
What got more expensive in June
Prices in the grocery store have been steadily going up because of this, with some items seeing bigger month-over-month price increases than others.
In July, adjusted for seasonal swings, egg prices popped 4. 3% compared to June. Coffee and peanut butter each got 3. 5% more expensive. Flour rose 3. 2% and bread prices went up 2. 8%. Cheese jumped 2%, while chicken got 1. 4% pricier.
There was some relief, however. Citrus fell 3. 2%, and whole milk dropped 1. 4%. Uncooked beef roasts fell 1. 3%, and uncooked steaks fell 1. 1%. Ham got 1% cheaper.
The biggest decline was in hot dog prices, which dropped 6.1%.
How to Make Your Own Bacon While Prices Are High
Why is Bacon so expensive?
The stock market set a new record. Here’s what that means for the economy Bacon is more expensive for Americans than it has been in the past 40 years. And yes, that is accounting for inflation. That hankering for pork chops is costing you about 7% more than 12 months ago.
Will bacon increase in price?
Consumers are seeing prices continue to increase all around the grocery store, with some of the highest hikes on the meat aisle; pork and beef have increased in price by 14% to 20% since 2021. As shoppers continue to edit their grocery lists the price increases on bacon may cause it to become one of the first items to go.
Are bacon prices adjusted for inflation?
Correction: This story has been updated to clarify that the price increases over the past 12 months are not adjusted for inflation. Bacon is more expensive for Americans than it has been in the past 40 years.
What happened to Bacon prices in July?
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.