Posts Tagged ‘pork belly prices’

What Does the Price of Pork in China have to do with the American Restaurant Industry?

August 16, 2011

Prices of pork have been driven up to an all-time high. On August 3rd, the average price of a single hog reached $108.31—the highest reported prices since 1996. Compared to an average price of $75.01 in January, this was a hugely unanticipated jump in price for this commodity.

Why Such a Huge Rise in the Price of Pork this Summer?

Two factors are affecting this price. One has to do with the huge heat wave that has ravaged the Midwest. The average hog is reporting a decrease in weight of 2.3% or about 6 lbs from this time last year. In general, hogs don’t do well in extreme heat. So a major source of supply is down and even if the higher-than-normal temperatures break, the average weight of a hog going to slaughter still won’t bounce back for at least another couple of weeks.

The second factor revolves around demand. China’s pork supply is dwindling and causing a massive inflation in their economy. It’s rumored that China has been supplementing their pork supply with US stock and driving up the prices. An estimate of 250,000 metric tons in purchase for delivey to China from January-August (about 5% of the supply) is rumored to have driven up the price of pork in our nation.

What Does This Mean for American Restaurants?

One other factor, which isn’t as huge as these other two—but doesn’t help, is that the BLT sees a gain in popularity every year at this time as home grown tomatoes come to fruition and pork belly prices go on the rise.

With the future prediction of food inflation standing at 3-4%, restaurants are left with little choice but to tighten their budgets, outsource pricing consultants and raise prices – a task that is easier said than done with the restaurant bouncing along the bottom of a recession.