Why Did Retail Pork Prices Climb 27.3% in 2.5 Years?
From January 2020 to May 2022, retail pork prices increased 27.3%, according to Dr. Jayson Lusk and Dr. Glynn Tonsor’s recent report prepared for the National Pork Board.
Why?
With concerns of food affordability and security, following the volatile and rising pork prices post-pandemic, Lusk and Tonsor set out to determine the root causes of the increases in retail pork prices, the report says.
Drivers of Change in Pork Price Increase
The aggregate drivers of this 27.3% increase estimates, according to Lusk and Tonsor, include:
• General inflationary pressures due to increased money supply—outside of the pork industry—13.7%
• Marginal cost of producing and selling pork, inner-industry supply-related factors—8.4%
• Demand-side factors—strong domestic demand —5.2%
While relative price changes in beef and poultry did not likely lead consumers to purchase more pork, the increase in strong consumer food spending, encouraged by federal stimulus and COVID-19 relief payments, likely drove the increase in pork demand, the report says.
The graph below shows spikes in disposable income around times of stimulus payments, which resulted in an increase in beef, pork and broiler prices in the following months. This lends some support to believe that the government payments helped fuel demand for meat products, the report suggests.
Significantly higher feed costs, with corn prices up 79% and soybean meal prices up 42% during this time, as well as fuel and transportation costs and packing and retail wages, have fueled the marginal cost increase.
Many of these marginal costs translate into change in farm, wholesale and retail pork prices.
Feed, transportation and labor are a direct contributor to the increase in hog and wholesale prices, showing much greater volatility than retail pork prices.
In summary, Lusk and Tonsor believe this increase of 27.3% in pork prices can be attributed to:
The full report can be found on the Kansas State University website.