Record pork belly prices coming
Ongoing increases in bacon use by fast-food and casual dining restaurants come as grocery stores expect a seasonal pickup in demand in the months ahead. Consumers tend to make more bacon, lettuce and tomato sandwiches during the summer months. The pork product also continues to remain a breakfast staple.
About 44% of U.S. consumers will eat bacon within a two-week period, which is a record high, according to consumer studies conducted by the NPD Group, a Port Washington, N.Y.-based market research firm.
Americans aren't necessarily just eating more strips of bacon. Instead, they are increasingly using the cured or smoked meat as an ingredient to enhance the taste of a dish, said Harry Balzer, vice president of NPD.
"We're getting more flavorful foods using something that we're very familiar with," he said.
Prices for pork bellies, from which bacon is made, are responding to strong demand, with analysts and traders predicting bellies will set new, all-time highs this summer of $1.70 to $2.00 a pound. Cash market prices reached a record of $1.60 a pound in September as belly supplies ran short.
Recent federal data put the price of 14- to 16-pound bellies at $1.50 a pound, well ahead of $1.10-a-pound price a year ago. Retail bacon prices climbed to $4.537 a pound for March, 23.7% above prices a year ago, but still below the record high of $4.773 a pound set in October, according to the U.S. Bureau of Labor Statistics. Pork belly futures also are above year-ago levels, but the contract is thinly traded.
Contributing to higher prices is a steep increase in hog prices. Yet the cost of bacon is outpacing other cuts of pork as restaurants add it to enhance the flavor of sandwiches and salads, increasing annual consumption.
"Every time bacon is put on a fast-food sandwich, it is incremental growth in sales," said Ron Plain, an agricultural economist at the University of Missouri.
A knock-on effect can follow. Most people find the taste of bacon on fast-food sandwiches to be appealing, and that may influence their purchasing decisions at the grocery stores, Plain said.
The number of restaurant menu items that include bacon has grown by approximately 60% during the past 10 years to around 3,000, according to the National Pork Board, a trade group to which producers contribute to promote pork.
One increased focus on bacon to attract diners is seen in an advertising campaign that Denny's Corp. (DENN) rolled out last month called Baconalia. The promotion at Denny's restaurants includes seven bacon-laden menu items including a maple bacon sundae.
Adding bacon to a sandwich raises the cost by a few cents, and some restaurants have bumped up their prices to recover the added expense, analysts said.
Despite the growth in food-service use, Balzer said most of the bacon is still prepared at home. Grocery store sales typically expand in mid-summer when bacon, lettuce and tomato sandwiches are most popular.
Yet the rise in pork belly and bacon prices could slow, particularly if cost trumps taste and demand begins to pull back. Any seasonal strength will require the U.S. economy to grow more rapidly than it has so far this year, said Jim Robb, economist at the Livestock Marketing Information Center in Denver.
Bacon processors stored some additional bellies late last year when prices declined, but few bellies have been put into cold storage in recent months as prices climbed. The U.S. Department of Agriculture reported frozen belly supplies at the end of February at just over 51 million pounds, nearly unchanged from the previous month and down about 4.3 million pounds from a year ago.
-By Curt Thacker, Dow Jones Newswires; 913-322-5178;
(END) Dow Jones Newswires
April 19, 2011 12:56 ET (16:56 GMT)
DJ Bacon Demand Sizzles Despite Record Price Outlook For Pork Bellies->copyright