August tomato crop helps put the B in BLT

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The August harvest of field tomatoes is giving the lowly pork belly a lift.

As North Americans tuck into their popular bacon, lettuce and tomato sandwiches, the price of pork bellies, sliced to make bacon, has skyrocketed.

The rise is welcome news for pork farmers, who have endured two years of soaring feed costs, and a swine flu outbreak that reduced sales and lowered prices.

Now, the B in BLT is getting a lift from the T.

On the Chicago Mercantile Exchange, frozen pork bellies now trade around $1.14 (U.S.) a pound, a 42-per-cent increase since last August. Whole hog prices have gone up by 7.5 per cent in the past month.

Canadian producers benefit from this surging U.S. pork market because most of Canada's hogs are exported and priced in Chicago.

Of course, a love of sandwiches made with fresh tomatoes and bacon isn't the only reason pork prices have risen. A tight supply is the biggest culprit. As far back as two winters ago, producers starting cutting their herds amid low prices.

At the time, it cost about $120 (Canadian) to feed 100 kilograms, but the animal sold for only $82, said Larry Martin an agricultural economist with the George Morris Centre in Guelph, Ont. A few months later, swine flu hit and most Asian companies stopped importing North American pork.

"It was just absolutely devastating. A lot of people went out of business, especially in Canada," Mr. Martin said.

Big Sky Farms Inc., where Mr. Martin was chairman of the board, survived, but the company cut its own supply by about 20 per cent, the average hit taken by Canadian pork producers.

The environment today is much healthier. "Now you've got lower supplies, export markets have opened up again to some extent, and people aren't scared about pork any more," Mr. Martin said.

And then there's bacon demand, propped up by both ripe American Midwest tomatoes ready for BLT sandwiches and a fast food industry that has added bacon slices to many new offerings, particularly breakfast sandwiches, said Altin Kalo, commodity analyst with Steiner Consulting Group in New Hampshire.

He also noted that a year ago pork belly prices were much cheaper, so producers added to their hog inventory very slowly. Moreover, because it takes, on average, 3 months, 3 weeks, and 3 days, to breed new pigs, "we're probably looking at another 9 months of tight supply," Mr. Martin said. "You can't just go out and push a button and increase supply."

Sustained higher prices would certainly help Canadian pork producers, he added, but that doesn't mean there aren't problems on the horizon.

First, because futures are priced in U.S. dollars, producers north of the border are hurt by a rising Canadian dollar. Second, a growing global demand for food and poor weather has bumped feed prices (wheat, corn, and soybeans), and producers will feel the pain if demand falls.

These costs are the big issue right now because margins aren't enormous, Mr. Martin said. "Hog producers aren't making huge amounts of money right now."