February 24, 2017 / 1:34 AM / 5 months ago

Bacon shortage unlikely despite record-low U.S. pork belly stocks - analysts

3 Min Read

CHICAGO, Feb 23 (Reuters) - A second straight month of record low U.S. pork belly inventories in January will likely intensify speculation about a potential national bacon shortage, but analysts said more supply will soon be available.

In early February, the Ohio Pork Council stoked alarm by publicizing that belly stocks were at their lowest in half a century, and it registered a website at www.baconshortage.com. While the group added that there was not an actual bacon shortage, several media outlets published reports.

The U.S. Department of Agriculture data for January on pork bellies, from which bacon is made, put total stocks at 14 million pounds. It was a record-low for the month and down 4 million pounds from the December record. The five-year average is a 6.6 million-pound gain.

Industry analysts attributed low belly stocks to prolonged demand for bacon as well as a decline in physical storage by speculators after the demise of Chicago Mercantile Exchange belly trading pit which they used to hedge product.

Fresh bellies, which are from recently butchered hogs and not frozen like those held in inventories, are readily available, at times amid record-high hog production. And lofty wholesale belly prices may have deterred processors from storing them in U.S. warehouses for later use.

Dan Vaught, a Doane Advisory Services economist, said pork and bacon demand surged late last year. Some consumers, he said, might have bought bacon and stored it in their own freezers driven by shortage worries that may not materialize.

"Certainly the USDA isn't forecasting any shortage. So, it is extremely unlikely that we'll have a shortage of bacon," said Vaught.

He pointed to a most recent U.S. government hog report that implied hog slaughter totals up 4 percent through the spring. Furthermore, USDA data on Thursday forecast 2017 commercial pork production up nearly 5 percent from 2016.

U.S. monthly retail data showed January bacon priced at $5.18 per pound, an 8-cent rise from December but down 47 cents from a year ago.

Robert Brown, an independent market analyst, said bacon prices were difficult to predict and could be pushed upward by demand and interest by processors in buying pork bellies to replenish stocks if wholesale prices come down. (Reporting By Theopolis Waters; Editing by Cynthia Osterman)

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