Try not to panic, but bacon is about to get more expensive.
Wholesale pork belly prices are approaching record highs and rose over 100% year-to-date from 131.59 cents per pound in January, to 270.89 cents at the end of July, according to FactSet data cited by CNBC.
That's a jump of 106% and just shy of the all-time high of 279.97 cents per pound recorded back in August 2021.
Experts say consumers are about to see even higher prices on bacon, which is primarily cut from pork bellies.
So, what's driving the price hike? A new California law is partially to blame. Proposition 12, which went into effect July 1, requires farms to provide more space for breeding pigs. The new confinement standards also apply to out-of-state producers who sell their pork products in California.
The "other white meat" is especially popular in the Golden State, which consumes roughly 15% of all pork produced in the country. According to Rabobank, a global food and agriculture financial services company, California's restaurants and grocers use about 255 million pounds of pork a month, but its farms produce only 45 million pounds -- so most of the supply comes from out of state.
The problem, according to the National Pork Producers Council, is that new construction of compliant housing is estimated to cost $3,400 to $4,000
per sow – about 25% more expensive than conventional group housing and 40% more than a gestation stall barn for the same number of hogs.
"Many small and medium-sized farms will be unable to bear the significant capital investment," the Council said. "Any costs incurred because of Proposition 12 will also fall on consumers, with higher retail pork prices."
Since pig farmers want to keep their profit margins up, the spike in pork belly wholesale prices is going to translate to higher retail and food services prices, industry analyst Brian Earnest told CNBC.
According to the U.S. Department of Agriculture, the average nationwide price of a pound of sliced bacon for the week ending Aug. 18 was $6.20 -- that's 6.7% higher than a year ago.
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