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Relax, the Great Bacon Shortage of 2012 Is a Myth

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High feed prices mean more pork, not less.

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"It's a 'problem' that isn't a problem," he says. "The reason they're trying to get people to 'save' their bacon is because there's not enough demand."


In fact, weak demand has been responsible for losses on both sides of the Atlantic. Earlier this month, Smithfield Foods (NYSE:SFD) failed to meet analyst expectations due to "weak retail demand" in its fresh pork business. Tyson Foods (NYSE:TSN), which enjoyed decent results within its chicken segment, reported "very difficult market conditions" in pork.

Further exacerbating the situation is the fact that low demand coupled with high feed prices will only serve to increase the supply of pork on the market, while simultaneously lowering prices even further.

"If all the money you put into raising your pigs is a loss, you cut your losses and slaughter them and sell them for meat," Hackett explains.

Indeed, the statistics confirm that a large culling is already underway.

From BPEX, an outfit representing the British pork industry:

"So far this year, 175,000 adult pigs have been slaughtered, seven per cent more than during the same period last year."

It's also occurring in the US. From Ron Plain of The Pig Site:

"Last week's hog slaughter was the third largest ever. This week's kill is the fifth largest ever. Hog slaughter this week totaled 2.406 million head, down 0.9 per cent from the week before, but up 5.0 per cent compared to the same week last year. Over the last six weeks hog slaughter has been 5.5 per cent above year-ago and 4.2 per cent above the level implied by the June hog inventory survey. Look for some big upward revisions next Friday in past inventory numbers when the September Hogs and Pigs Report comes out."

As Hackett explained, this means more meat, not less -- for now.
No positions in stocks mentioned.

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