Pork Profit Maximizer – Retail Edition for April 30, 2018

Highlights

We have presented the chart below two weeks ago but thought it was appropriate to update and show again. It illustrates, in our opinion, part of what’s wrong with the market for pork bellies. Supplies are historically large for his time of year given the combination of +2.4 million slaughter hogs in the last four weeks and near-record hog carcass weights. Retail prices tend to be sticky, i.e. retailers do not adjust them as quickly as one would hope. There are real operational issues at play as well as problems with timing promotions/bacon sales during times when consumers are more likely to increase their bacon purchases.

The benchmark retail bacon prices are reported by ERS on a monthly basis but we have found the weekly USDA retail feature report to be a very useful gauge. The weekly price series also matches up well with the official monthly statistics. For the week ending April 27, the average retail feature price for a pound of bacon was $4.96/lb. This is a national price although the regional differences were not as large as we would have thought. The average price in the Midwest region was $4.87/lb. while the average price in the Southeast was $5.12/lb. The average national price of $4.96/lb. corresponds to a wholesale pork belly price six weeks ago of $101.79/cwt. The ratio of the retail price to the wholesale value six weeks ago is 4.87 (divide retail price by wholesale price).

While this is high, it is not unprecedented. Indeed, in early May 8, 2015 the ratio was as high as 7.09. Back then, the retail price was $4.53 per pound and corresponded to a wholesale price of 63.85 cents per pound. Low spring prices slowly started to filter through at the retail level, eventually spurring more sales in June and July. Retail bacon prices declined 13.5% between early May and early July in 2015. Wholesale prices, on the other hand, continued to rally all the way into August, gaining 152%.

Please click the download button below for the full, detailed price summary and forecasts PDF.