Record U.S. bacon prices poised to drop on fat pigs

With bacon gracing everything from muffins to milkshakes, U.S. prices are poised to retreat from an all-time high as the fad wanes and pork supply rebounds after last year’s historic drought.

Retail bacon jumped 23% to $5.708 a pound this year, the highest since at least 1980, government data show. Pork bellies, cured and sliced to make bacon, account for a record share of the value of a hog as demand growth outpaced other cuts, according to the National Pork Board. Production shrank this year after last season’s drought, the worst since the 1930s, increased costs for corn, the main feed grain.

That’s reversing as this year’s 38% plunge in corn prices returns pig farmers to profit, sends hog weights to an all-time high and pork output to a record in 2014. Pork-belly prices plunged 23% since the end of September, and hog futures (CME:LHG14) will fall 14% next year to the lowest since October 2012, according to the median of seven analyst estimates compiled by Bloomberg. That may help ease prices for bacon, which is appearing on more menus even as chefs say the trend is fading.

“There’s been this explosion of bacon in all kinds of different uses, ice cream and all kinds of things, and that certainly has helped demand,” said Steve Meyer, the president of Paragon Economics Inc. in Adel, Iowa. “The price is going to moderate some because we will raise more pigs.”

Bacon Cheeseburger

Lean-hog futures rose 2.7% to 88.075 cents a pound this year on the Chicago Mercantile Exchange, heading for a sixth consecutive annual gain, the longest rally since at least 1986. Prices may fall to 76 cents a pound in 2014, according to the median forecast in the Bloomberg survey.

Hogs are the sixth-biggest gainer in the Standard & Poor’s GSCI gauge of 24 commodities, which fell 2.9% this year. The MSCI All-Country Index of equities rose 16%, while the Bloomberg Dollar Index, a gauge against 10 major trading partners, climbed 3%. The Bloomberg Treasury Bond Index lost 2.7%.

A&W Restaurants Inc. says it was the first chain to serve a bacon cheeseburger in 1963. In the past two decades, fast-food restaurants started adding more items with bacon in their menus and frozen, pre-cooked bacon made it easier to eat at home. Forty-four percent of Americans eat bacon in a two-week period, compared with 38% 13 years ago, according to NPD Group, an industry consultant.

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