The future of U.S. pork belly supplies isn’t so clear despite reports of an impending bacon shortage in 2020, according to a Texas A&M AgriLife Extension Service economist.

David Anderson, Ph.D., AgriLife Extension economist, College Station, said numerous recent reports regarding a bacon shortage in 2020 could be based more on expectations than current reality.

Anderson said Chinese demand for U.S. pork has increased significantly since an outbreak of African swine flu led to large scale culling of China’s swine herd. Growing exports of half-carcasses of U.S. pork to China is fueling concerns that U.S. supplies of pork bellies, the cuts that provide bacon, may not keep up with domestic demand.

“The long-term expectation is for big exports to China, but that is relative to the record amounts of pork we are producing today and have in storage,” he said. “Pork prices are extremely cheap here and are competitively priced in China even with the current tariff.”

Pork belly supply on ice

Anderson said cold storage stocks of pork bellies, the cuts that produce bacon, are the highest he has on record going back to 1973. The U.S. Department of Agriculture reported pork bellies in cold storage were up 34% from last year, reaching 40.7 million pounds compared to 30.4 million pounds in 2018.

“It’s also worth noting that bellies in storage is highly seasonal,” he said. “September storage is often very low.”

U.S. pork exports have increased significantly since African swine flu cut China’s herd in half over the last several months. Anderson said Chinese demand for pork hasn’t let up and led to prices so high that U.S. pork is competitive despite a 67% tariff.

Demand for pork bellies in U.S. markets has continued to grow as bacon has become a staple in many households, Anderson said.

“We’re producing more and more hogs here at home, and pork bellies are only one cut, but we have to remember America’s appetite for bacon,” he said. “Bacon is on everything these days.”

Rollercoaster market

Anderson said cold storage holdings could indicate bacon-producing companies and restaurants are building supplies in case there is a shortage and prices begin to rise. Expectations of a shortage and subsequent price speculation, rising exports to China, the ongoing trade dispute, how African swine flu continues to affect China’s swine herd, U.S. production and stockpile levels add to the commodity’s uncertain future and ultimately market volatility.

Pork belly prices have been a “rollercoaster for a while now,” Anderson said, well before Chinese supplies became a factor.

For now, Anderson expects U.S. pork exports to China will continue to grow as the Chinese continue to deal with swine flu.

“All these stories could be true in the future even though they appear to be at odds with what is going on with production,” he said. “We’ll just have to wait and see if export growth is larger than production growth to the point it cuts into domestic supplies and causes prices here to rise.”

Source: Texas AgriLife Extension