No bacon?! Panic! Actually, it’s not what you think.

A few of our followers sent in the news that we are facing a bacon shortage. Well, here’s something to chew on. Be skeptical.

There Will Be No Bacon Shortage
How a British trade association press release sent the Internet into a senseless panic.

It all began, strangely enough, with a press release from an obscure foreign trade association. The National Pig Association of the United Kingdom, you see, wants British customers to feel OK about the idea of paying a higher retail price for pork products.

But the issue is CORN.

That’s because corn, for better or for worse, is one of the key commodity inputs of the modern economy. The corn you eat on the cob or in the occasional tortilla or slice of corn bread is just the tip of the corn iceberg. Corn is (unwisely) used to fuel vehicles, and it’s an element in a large share of the food we eat in the form of corn syrup and corn-based oils. What’s more, the meat that we eat is substantially made of corn—a key ingredient in the recipe for modern industrial-scale animal feed. So when drought hits and corn dies, it gets more expensive to feed animals.

This affects the price of meat in different ways, depending on timing. The feedlot operators who supply the vast majority of American beef buy year-old cattle and then fatten them for the slaughter. As fattening gets more expensive, the price they’re willing to pay for the yearlings declines, so the price of cattle in the futures market goes down, reducing breeders’ profits. In the short-term, drought and expensive feed lead to pre-emptive slaughter and an abundance of cheap meat. In the medium-term, however, this process leaves you with fewer animals to bring to the table.

Hence, the “bacon shortage”—actually a global increase in meat prices as a slightly delayed downstream consequence of the increase in corn prices.

So, for this year, the price of meat will go up (You can see it already at the supermarket!) but that doesn’t mean a shortage. It means higher prices. Just as with the hype about the shortage of helium, we are talking about other market forces at play, not that the stuff just isn’t there. And, don’t worry, bacon will be back. This is your chance to eat less meat. Be choosy.

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  4 comments for “No bacon?! Panic! Actually, it’s not what you think.

  1. GaryM
    September 27, 2012 at 2:26 PM

    Not to make light of this but Mike Luckovich’s political comment today is highly relevant: http://www.arcamax.com/politics/mikeluckovich/s-1209297

  2. oldebabe
    September 27, 2012 at 2:56 PM

    If everything is going up in price, why not bacon, too? But, it seems to me that pigs don’t need a corn diet…

  3. September 27, 2012 at 3:52 PM

    It makes sense that the corn shortage would have a knock-on effect on the price of meat.

  4. G
    September 28, 2012 at 3:52 PM

    The price of livestock feed has been rising out of proportion to everything else since gas prices went up. One of the interesting things livestock owners have seen is that farms who used to grow other livestock feeds (for example, hay) were converting to corn; it was more profitable. The demand kept going up for corn to make ethanol to put in the gas, so corn prices kept going up, so farmers grew corn and not other livestock feed, and the demand for corn *kept* going up, so the price kept going up… and so on.

    Earlier this year the US determined that subsidizing corn growers to help produce ethanol is not having any net effect on gas prices, so they allowed ethanol corn subsidies to lapse. So now corn is more expensive (and there may be less than 10% ethanol in the gas at those pumps that say “May be up to 10% ethanol”–maybe they’re buying actual gasoline instead).

    Hopefully the end result of this, at least for livestock farmers, will be that livestock feeds will settle somewhat back where they used to be: crop growers will produce more varied livestock feed crops, and more of the harvest will make it to the livestock feed market, and prices may go back down a little.

    For right now, though, all the farmers who were committed to corn this year already had their corn in AND they no longer have their ethanol subsidies, so they have to charge more to make any money on the corn. And some farms may have abandoned corn while they had a chance, and so it’s possible there’s less corn being grown this year than last year, so supply/demand is, basically, seriously wonky.

    That’s not to even mention the weather and its effect on the size of harvests. Oh, the weather. So demand for what’s available is outstripping supply.

    Since I’m talking about US corn, of course, I’m not really sure how this affects the UK livestock market, unless the price of corn in the US has an effect on the price in the UK.

    (By the way, did you see this story? http://www.reuters.com/article/2012/09/23/us-usa-cattle-candy-idUSBRE88M05N20120923
    It’s not like it’s a new thing to feed scraps to livestock–anyone remember Wilbur in /Charlotte’s Web/ eating “slops”? But on this scale with this type of scraps, maybe.)

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