The Weird World of Pork Economics

Price Puzzle

Bringing home the bacon costs more than it used to. Bacon prices are up 6.9% from last year, according to the May consumer price inflation report from the Bureau of Labor Statistics. But that hasn’t been the case for all pork products. The price of ham actually fell 5.4% annually in May.

Are people eating more breakfast and fewer sandwiches? We look at what’s going on.

Porkonomics

The short answer is very simple: demand. Economics teaches us that supply and demand — how much there is of something and how much people want it — determines the price of something. And demand has gone up.

In recent years, demand for ham has exploded in popularity in Mexico, as reported by CNN , so much so, that it drove ham prices up significantly, data from the Federal Reserve Bank of St. Louis showed. So how can it be that ham prices have dropped?

That’s the tricky thing about tracking prices, looking at a specific period of time can mask the bigger picture. In other words, a price drop from one year to another can still mean that prices are historically high, and that’s the case with ham. They have simply fallen from the peak.

As for the price of bacon, customers are simply more willing to stomach higher prices for more popular products, and the high demand translates to higher prices in the supermarket.

Breaking the Piggy Bank

Inflation has been hitting Americans from all sides over the past years. And even though peak inflation appears to be in the rearview mirror, prices continue to march high, albeit at a slower pace.

Climate events including droughts, disease, and storms, as well as geopolitical conflict can particularly weigh on food inflation, pushing up costs in restaurants and at home. The May inflation report showed that while grocery prices rose 1% year-over-year, restaurant and fast-food prices have increased 3.5% and 4.5%, respectively, over that period.

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