Record Hog Production Puts Plenty of Pork on Menu

July 28, 2015 10:00 AM
Record Hog Production Puts Plenty of Pork on Menu

More than half the meat budget at Gabe Garza’s barbecue restaurant in Chicago normally goes to pork. This year, he’s buying even more.

With pork production in the U.S. heading for an all-time high, wholesale prices have fallen about 40 percent since last July. As a result, Garza’s Chicago Q restaurant will buy 113,550 pounds (51.5 metric tons) in 2015, 14 percent more than last year. A half-dozen new items are also on the menu, including pork-belly corn dogs and pulled-pork macaroni and cheese.

“Before, we would use bacon sparingly,” said Garza, 43, who owns two other eateries and a cigar bar in the city. “Now, we’re playing bacon with different seasonings and toppings. We absolutely started experimenting and playing, and the chefs really had fun.”

A jump in the hog herd and slower export growth are boosting supplies in the U.S., the largest producer after China. The government expects pork prices to drop more than any other food group this year. Wholesale pork fell to 84.66 cents a pound on July 24, compared with a record $1.3756 in July 2014, government data show.

At the same time, the price of beef has surged as a decline in the U.S. cattle herd pushes consumers to increasingly seek that meat from places like Australia. Retail beef prices will jump 5.5 percent to 6.5 percent this year, the most of any food group, the USDA said.

Wendy’s Baconator

Wendy’s Co., which gave the world the Baconator burger in 2007 -- with six slices of bacon -- added bacon fries this year. Potbelly Corp. started selling a barbecue pulled-pork sandwich in June, and Papa John’s International Inc. put bacon on its Double Cheeseburger Pizza.

“We’re certainly overwhelming the market with meat,” said Altin Kalo, an analyst at the Manchester, New Hampshire-based Steiner Consulting Group, an economic consulting firm to the food industry.

That’s a big change from last year, when a virus outbreak killed millions of piglets and sent prices surging.

Since then, the herd has recovered as lower feed costs encouraged expansion. As of June 1, there were 8.7 percent more pigs than were being grown a year earlier, U.S. Department of Agriculture data show. Pork output will jump 7.6 percent to an all-time high this year, the USDA forecast on July 10.

“Anytime you talk about that kind of increase, you’re certainly going to talk about lower prices ahead,” said Scott Brown, a livestock economist at University of Missouri in Columbia.

Supermarket Chops

Pork chops at supermarkets fetched $3.824 a pound in June, down from a record $4.174 in October, and bacon plunged 17 percent from a record a year earlier, according to the Bureau of Labor Statistics. The USDA estimates retail pork prices will drop 3 percent to 4 percent this year.

Hog futures fell for four straight quarters, the longest slump in price data through mid-1986, and are headed for a fifth. Prices touched a five-year low of 59.45 cents a pound on July 13 and are down 22 percent this year.

Only coffee, sugar and nickel fell more among 22 items tracked by the Bloomberg Commodity Index.

The most-active contract may touch a low of 56 cents before the end of the year, according to the average estimate of 11 analysts surveyed by Bloomberg. October futures closed Monday at 63.55 cents.

Demand Rising

With so much cheap pork around, demand is growing, potentially preventing prices from dropping much further, said John Nalivka, president of Sterling Marketing Inc. in Vale, Oregon. Per-person consumption will jump 7.1 percent, the biggest gain since 1998, to a six-year high of 49.7 pounds, according to the USDA.

There are signs the herd expansion is slowing. Pork output will rise just 0.5 percent next year, and hogs have been getting lighter in recent months, which may limit the supply increase, said Dan Vaught, an economist with Doane Advisory Services in St. Louis. Hogs weighed 209.11 pounds on average at slaughter on July 14, the lightest since October.

The USDA still expects prices to drop as supplies increase. On average, hogs will fetch 46 cents to 49 cents a pound next year, down from 50 cents to 51 cents this year, the government said July 10.

U.S. exports in the five months through May were 2.086 billion pounds, down 5.7 percent from 2014, USDA data show. A stronger dollar and a surge in lower-priced European pork has hurt demand for American meat, the U.S. Meat Export Federation said July 8.

That just means more pork-filled goodies on the menu.

“We’ve been able take advantage of the market price, and we benefit tremendously now,” said Garza, the owner of Chicago Q.

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