Last month, Americans wandering through supermarkets may have noticed something strange: bacon prices are sizzling hot, while ham is not as expensive.
According to inflation data from the US Bureau of Labor Statistics, bacon is more expensive compared to a year ago, with prices rising by 6.9% from May 2023 to May of this year. Pork chops also saw a 4.6% increase. However, ham prices are lower, with an overall decrease of 5.4%, and excluding canned items, the decline in ham prices reaches 6.3%.
So, what’s going on here? Generally, prices are determined by the law of supply and demand. However, in recent years, there has been a growing demand for pork outside the United States. With demand rising and supply remaining the same or decreasing, prices should go up, not down.
Then, why the rise in bacon prices and the fall in ham prices? To answer this question, we need to look at the long-term retail pricing strategies and food price trends.
CNN reported that Glynn Tonsor, a professor of agricultural economics at Kansas State University, stated that looking at a longer timeframe, pork prices have indeed been rising across the board.
According to government data shared by the Federal Reserve Bank of St. Louis, from May 2019 to May 2024, the prices of ham, pork chops, and bacon all went up.
However, the increase in ham prices in recent years has been higher than that of bacon and pork chops. This is because the export of ham from the US has been thriving, particularly to Mexico.
Professor Tonsor mentioned, “Over this five-year period, Mexico’s demand for ham has been increasing, and the US market is competing with Mexico for the same ham, so prices domestically in the US will be higher.”
Therefore, the recent drop in ham prices seen in grocery stores is, in fact, just a beginning of the price drop after it had already increased significantly before.
The hike in bacon prices is due to another reason: despite the high prices, there is still a strong demand for bacon. Even though bacon, pork chops, and (long-term) ham prices are getting more pricey, they still remain cheaper sources of protein compared to beef.
“People are willing to pay more for bacon rather than some other pork products,” said Christine McCracken, senior animal protein analyst at RaboBank.
Retailers set prices strategically. Supermarket pricing is not only related to costs but also heavily influenced by consumers’ shopping psychology. If retailers know that customers are willing to spend more money on bacon, they won’t lower the price.
For example, if eggs or pancake mix are on sale today, you might go to the store to buy these items. Once in, you might likely pick up a more expensive pack of bacon – because you’re going to make breakfast at home, bacon is essential, and since you’ve already bought other ingredients on sale, a slightly more expensive bacon doesn’t seem like an issue.
In some cases, due to discounts, bacon prices may not appear as high. “Stores have a pricing strategy to keep bacon at a higher price on regular days, then heavily discount it during super sales,” McCracken explained.
While grocery prices tend to remain stable, menu prices at restaurants continue to rise – causing customers to feel frustrated, reducing the frequency of dining out and overall spending.
According to data from the US Bureau of Labor Statistics, grocery prices rose by 1% for the 12 months ending in May. During the same period, menu prices at restaurants increased by 3.5% and fast food restaurant prices went up by 4.5%.
From Burger King, McDonald’s, KFC to Starbucks, chain restaurants have started offering promotional meal deals to attract customers back.
Nevertheless, buying slightly expensive bacon from the supermarket and making sandwiches at home is still much cheaper than buying bacon and cheeseburgers for takeout.