In recent weeks there have been stories circulated about large U.S. inventories of bacon. Specifically it was noted that frozen inventories were at 40-year-record levels. That caught our attention because it seemed the United States was running out of bacon when inventories reached 50-year-record shortages just a few years ago. This week’s post is a closer look at the U.S. bacon and pork situation.
Bacon stocks volatile
Figure 1 shows U.S. frozen-pork-belly stocks – measure at the end of September – since 1957. At more than 40 million pounds, inventories at the end of September 2019 were at the greatest levels since 1971. Furthermore stocks are 34 percent more than levels a year ago, which were at 30.3 million pounds.
Figure 1 also captures an uptick in the variability of September stocks in recent years. September inventories before 2009 were typically between 10 million and 20 million pounds. But stocks in 2009 exceeded 38 million pounds – a noteworthy number at the time. That was followed by a sharp contraction in 2010 of 4.8 million pounds and in 2011 of 9.3 million pounds. The whiplash continued as stocks again swelled in 2014 at 34 million pounds before decreasing in 2015 by 10.9 million pounds.
While the large September 2019 stocks are significant, there are other significant insights from the data.
- Frozen stocks of pork bellies have been extremely volatile during the past 10-plus years.
- The large swings from big numbers to smaller numbers can occur in a short time period.
Bacon stocks vary by season
Digging into the data revealed the U.S. Department of Agriculture reports frozen-pork-belly stocks every month. The most recent headlines were generated using September data; the “running-out” story in early 2017 was based on December data.
Figure 2 shows the average monthly stock of frozen pork bellies since 2000. Those data give us an idea about the seasonality of frozen stocks. Frozen stocks vary significantly throughout the year. Inventories on average reach their least in September before trending bigger throughout the winter, peaking in April.
The range of the seasonality is also worth noting. During late-summer reductions pork-belly stocks decrease to 20 million pounds. By early spring seasonal inventories nearly triple to more than 60 million pounds between March and May.
When considering current levels, 40 million pounds of pork bellies in frozen storage in September is more than twice the average stocks in September. On the other hand 40 million pounds in April would be a completely different story.
Pork story bigger than bellies
The bacon and pork-belly situation captures only one component of the overall pork market. We need to consider what’s going on with pork more broadly. Figure 3 shows annual U.S. pork stocks measured as a ratio of ending stocks to use. That ratio is helpful because it provides context to an otherwise increasing trend in U.S. pork production.
The first observation is that total annual pork stocks are less than what we might typically expect in grains. Since 1970 annual ending stocks of pork have an average 2.2 percent of usage. But during the 2000s it wasn’t uncommon for pork stock to exceed 2.5 percent. The last increase occurred in 2012 at 2.6 percent and in 2013 at 2.6 percent. Most recently pork stocks were at 2 percent at the end of 2018. One would need to go back to the late-1990s to find stocks as depressed as they have been in the past three years of 2016-2018.
Wrapping it Up
On the surface frozen-pork-belly stocks reached September numbers not seen in many decades. But digging into the data provides valuable perspectives. Frozen-pork-belly stocks are generally least in September. While current levels of 40 million pounds are nearly double the September average, current levels are less than what is typically in storage headed into summer months. For context, historically frozen-pork-belly stocks have occasionally exceeded 100 million pounds.
Furthermore frozen-pork-belly stocks have been volatile in recent years. For example during the past decade stocks have reached historically large-number levels before sharply contracting toward historically small-number levels. Those swings can occur quickly – sometimes from one year to the next. That begins to explain how media articles about “running out” of bacon can quickly be replaced with stories of “burdensome supplies” in just a few years. Moving forward, don’t be surprised to see more of such stories in the future.
While frozen-pork-belly stocks appear to be at historically large numbers, overall pork stocks – when measured relative to usage – ended 2018 at less than the historical average. Stocks since 2016 have not only been less than the historical average but also less than levels observed since the late-1990s. When thinking about the U.S. pork situation as it pertains to a potential trade deal with China, the overall tight U.S. pork-stock situation will be important to keep in mind. Admittedly any increased trade with China will come down to specific pork cuts and products, but the overall situation has been toward less-than-normal U.S. stocks in recent years.
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