Pork retail value for the month of March was pegged at $3.78 per pound, 3.8 per cent higher than the previous month and 0.5 per cent higher than the previous year.

Bacon prices at retail have reset rather sharply and help explain what is now happening with belly prices at wholesale.

It was a scenario that we considered back in February when belly pries spiked (remember the belly shortage brouhaha).

What is unfortunate is that pork prices are above a year ago at a time when pork production is up +6 per cent and pork exports are about flat with last year (this is based on our forecast for April exports not exports in Jan/Feb).

The result is continued weakness in the pork cutout, most of it due to the sharp deflation in the wholesale value of bellies.

The chart below shows that bacon prices at retail generally move a bit higher even as wholesale prices start to decline, reflecting the lag in the price transmission through the supply chain.

In the past we also have seen belly prices continue to decline through April but eventually the low price becomes attractive enough to get retailers to start featuring bacon again for the summer months.

Right now futures are pricing a fairly bearish outlook for pork prices in June, July and August, with implied cutout values at around $80/cwt (hogs at 72.9 for July). This would indicate a belly value around $125, a very small premium to current market.