Pork prices, not industry profits, are rising. In a new report on retail pork prices, economists with Iowa State University, North Carolina State University and the National Pork Producers Council (NPPC) reveal that prices are rising due to increased transportation costs, supply bottlenecks and delays and increased labor costs throughout the pork chain.
Those factors, said Iowa State’s Dermot Hayes, NC State’s Barry Goodwin and NPPC’s Holly Cook, were either caused or exacerbated by the COVID-19 pandemic, NPPC said in a release on Tuesday.
In addition, other factors include a 2.5% loss in pork packing capacity resulting from a federal court order stopping faster harvesting line speeds, higher energy costs, rising feed costs and, most importantly, a shortage of workers, which has hindered productivity and caused wages to increase.
“This report shows there are numerous issues affecting pork prices, but increased profits, whether at the retail, wholesale, or farm level, are likely not a significant contributor to the rising prices,” NPPC President Jen Sorenson said in a release. “Pork producers, for their part, are continuing to produce hogs to meet the strong demand for pork the industry has seen despite the pandemic.”
Economists also shared that the farm-to-wholesale price spread – the difference between what producers receive for hogs from packers and what packers receive for pork from retailers – has remained relatively constant over the past two years aside from a spike in May 2020 when some packing plants shut down because of COVID-19 illnesses among their workforce. With fewer places to send their hogs, producers were paid less for them, NPPC shared in a release.
The wholesale-to-retail spread, however, has significantly widened over the past few months as the farm-to-wholesale price spread has declined, the report said. Higher costs for transporting pork to retail outlets, higher costs of labor in retail stores and distribution centers, and delays and bottlenecks in the supply chain are likely causes of this increase.
“Although there are significant food production, processing and distribution challenges,” Hayes said in a release, “there are likely no permanent, structural barriers in the way of getting back to cheaper food. It is unclear whether the same can be said about energy prices, wage inflation and other current challenges.”
Labor’s long-term outlook is a critical factor in easing supply chain challenges and high prices, the authors note, and is dependent on future immigration policy and agricultural labor reform. If this critical topic is not addressed, economists say it “will continue to be a limiting factor in food and pork production for the foreseeable future.”
NPPC continues to urge lawmakers to address the labor shortage in agriculture by expanding the existing H-2A visa, which allows temporary seasonal foreign farmers workers into the country, to year-round agricultural laborers.
Read the report on retail pork prices.
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