Just like the 1897 report of Mark Twain’s death, stories of a bacon shortage in the year ahead are an exaggeration. What isn’t, however, is that consumers will likely pay more for pork next year because of projected lower hog supplies, a condition driven by this year’s severe drought and U.S. energy policy.
According to USDA’s latest hogs and pigs report, the U.S. sow herd dropped by 74,000 head from June 1 to Sept. 1, resulting in projected lower hog supplies for the last quarter of 2012 and the first three of 2013.
There also are reports that producers are sending hogs to market at lower weights and that some have gone, or will go, out of business. Both factors are likely to lead to a decrease in pork production.
All of that means, if pork demand holds to current levels, consumers will face higher prices for bacon in grocery stores by this time next year.
But what has prompted those production cuts?
It’s clear that the rising price of feed, which comprises up to 70 percent of the cost of raising a hog to market weight, has had a negative effect on U.S. pork producers. In fact — as of this writing — pork production costs for the year are nearly $91 per hundredweight (carcass), which is up from 2011’s level of $86.70. That had the average pork producer losing more than $27 a head in September, according to Paragon Economics of Adel, Iowa.
Everyone, including the soccer mom who could be staring at a much more expensive pound of bacon and higher prices for other foods next year, knows that the worst drought in more than 50 years severely affected this year’s corn crop. Indeed, USDA’s Oct. 11 crop report estimated just 10.7 billion bushels of corn will be harvested, down from the spring forecast of 14.8 billion bushels. (In 2011, 14.3 billion bushels were harvested.)
While the soybean crop, estimated at 2.86 billion bushels on Oct. 11, gained a few bushels from September’s projection, it is well short of 2011’s 3.06 billion bushel crop. Meanwhile, the global soybean supply is tight and the appetite is robust.
This year’s smaller harvest has pushed corn prices from the mid-$6-per-bushel range in 2011 to the mid-$7 range this year, with predictions of even higher prices next year.
There’s not much producers — or anyone else — can do about the drought, but something can be done about a federal law that has been putting steady upward pressure on corn prices for the past five years and raising pork producers’ costs of production.