See California Law Threatens to Help Drive Up Bacon Prices: Wholesale pork-belly prices nearly triple as the state’s animal-welfare measure takes effect by Kirk Maltais of The WSJ.
It looks like a new regulation is the initial cause of this price increase. Regulations increase the cost of production, which reduces supply (a leftward shift). That would raise prices. Since buyers expected the price to increase once the regulations went into effect demand increased first which then increased price anyway. But this is one of the shift factors we talk about in principles, expectation of future price.
Excerpts:
"Helping drive the price surge is an animal-welfare law in California requiring pigs to be given at least 24 square feet of pen space for their meat to be sold in the state, which accounts for roughly 15% of U.S. pork consumption. After facing years of legal challenges, Proposition 12 was upheld by the U.S. Supreme Court in May and went into effect July 1.
Pork producers initially held off on buying new products after the Supreme Court ruling because they were unsure about how the law would be implemented. “You had processors that didn’t want to buy products for their freezers if it wasn’t Prop 12 compliant,” said Adam Samuelson, an agribusiness analyst with Goldman Sachs.
Then in June, California struck a deal with pork producers allowing them to sell their pre-existing inventory for the remainder of the year. Prices subsequently charged higher as buyers rushed to load up on supplies before the law came into full effect."
"How bacon prices change in coming months as a result of Prop 12 is still to be determined. Most of the pork produced in the U.S. isn’t currently compliant with the law, and some suppliers might opt to stop selling in California rather than change their practices. That could drive up retail prices in the state, while pushing them down in the rest of the country where supply would increase, analysts say."
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