Latest / Inflation Explained with Fexingo: CPI, Prices, and the Cost of Living for Everyday People / How Pork Prices Reveal Inflation’s Hidden Drivers
Transcript
- Lucas: Let’s talk about bacon. The price of pork is up more than 15 percent year-over-year, and that’s not just a grocery aisle curiosity—it’s telling us something about how inflation is behaving under the surface. Luna: Fifteen percent is huge when headline CPI is running around three and change. What’s driving that? Lucas: A few things. First, there’s an African swine fever outbreak in parts of Europe and Asia that’s reduced global hog herds. That’s tightening supply for imported pork and pushing up prices here. But beyond that, it’s really a story about concentration in meat processing. Luna: Right, the big four—Tyson, JBS, Cargill, Smithfield—control something like 80 percent of the market. When they have supply issues, prices don’t just adjust—they jump. Lucas: Exactly. And we’re also seeing higher feed costs because of corn and soybean prices staying elevated. That hits hog farmers directly. Then add in labor shortages at processing plants, which have been chronic since the pandemic. All of that gets passed to the consumer. Luna: And it’s not just pork. The latest CPI print for April showed food at home up 4.2 percent year-over-year. That’s still running above overall inflation. Lucas: Right. And the New York Fed’s latest survey—the one that came out this week—showed household financial worries hit the highest level since July 2022. People feel it at the register. Pork is just a visible symbol of a broader trend. Luna: It’s interesting because we’ve talked about services inflation, rent, insurance—but food has been this persistent sticky element. Why do you think the Fed hasn’t focused on it more? Lucas: Partly because food is volatile. Central banks tend to look at core inflation, which strips out food and energy. But when food prices stay elevated for this long, it bleeds into inflation expectations. People start expecting prices to keep going up, and that can become self-fulfilling. Luna: So pork might seem like a small thing, but it’s a canary. And if the jobs report on Friday shows continued wage growth, the Fed might have to stay cautious. Lucas: Exactly. The ADP numbers were stronger than expected—122,000 private payrolls in May. If Friday’s official number confirms that trend, wage pressure could keep food inflation sticky. Meatpacking workers have been organizing for higher wages, too. Luna: That’s a whole other layer. Labor costs in processing plants are a big part of the final price. If wages go up, prices go up—unless margins get squeezed. Lucas: And margins at the big processors have actually been pretty healthy. But the key point is that pork prices are a lens into how supply chain concentration, global disease outbreaks, and labor markets all intersect. It’s not just about demand. Luna: So when we hear that headline CPI is cooling, we should probably still look at what’s happening in specific categories. Because the average person isn’t buying a basket of all goods—they’re buying bacon. Lucas: Exactly. And if walking through the economy with us has made something click—like why your grocery bill is still high—that’s exactly the kind of conversation we want to keep having. Luna: Absolutely. And the way these stay ad-free is listener support. If today was useful, you can find us at buy me a coffee dot com slash fexingo. Lucas: Yeah, it’s a simple way to keep this going without sponsors. So back to pork—one thing I want to highlight is that the concentration in meatpacking isn’t new. The USDA has been tracking it for decades. Luna: Right. And there have been antitrust efforts, but nothing that’s really changed the structure. So when a shock hits—like African swine fever—prices spike more than they would in a competitive market. Lucas: Yeah, the fed funds rate is at 3.63 percent, and the Fed’s been on hold. If food inflation stays sticky, that could delay any rate cuts. The May CPI report comes out next week, and food will be a key component to watch. Luna: And the 10-year breakeven inflation rate is around 2.36 percent, which suggests the market expects inflation to moderate. But if pork is any guide, the path might be bumpy. Lucas: Exactly. So keep an eye on that bacon price. It’s not just breakfast—it’s an economic indicator.