Odd Lots: Big Take – What a Bacon, Egg and Cheese Teaches Us About the Economy

Release Date: April 23, 2025
Host: Bloomberg’s Joe Weisenthal and Tracy Alloway
Episode Title: Big Take: What a Bacon, Egg and Cheese Teaches Us About the Economy

Introduction

In this insightful episode of Odd Lots, Bloomberg’s Sarah Holder delves into the economics behind the classic American breakfast staple: the bacon, egg, and cheese (BEC) sandwich. By dissecting each key ingredient—bacon, eggs, cheese, bread, and coffee—Holder and her guests explore how rising costs, supply chain disruptions, and trade policies are inflating the price of this beloved morning meal. The discussion not only highlights the complexities of the food supply chain but also serves as a microcosm for broader economic trends affecting consumers across the United States.

Rising Prices of a Classic Breakfast

Sarah Holder introduces the topic by recounting her personal experience with the escalating costs of her favorite breakfast. She notes the price hike from $3.50 to $5 for an egg and cheese sandwich and $6 for a bacon, egg, and cheese (BEC) sandwich alone, excluding coffee and tips, which brings the total to approximately $7.

Sarah Holder [01:02]: "Their egg and cheese sandwich on a roll went from $3.50 to $5, and their bacon, egg and cheese has reached $6."

Holder explains that Bloomberg tracks these changes through the Bacon, Egg, and Cheese Index, which has reached record highs this year, signaling significant inflationary pressures.

Eggs: A Pulse on the Economy

Eggs have emerged as a primary driver of the BEC price surge. Brian Moschagiri, Vice President at Eggs Unlimited, provides an in-depth analysis of the factors contributing to soaring egg prices.

Brian Moschagiri [04:28]: "Eggs have a weird pulse on the economy."

The surge is largely attributed to a devastating avian influenza outbreak that has decimated egg-laying hens, resulting in a supply loss of approximately 50 million hens since October. This supply shock has nearly doubled the price of eggs, with consumer prices hitting over $6.20 per dozen.

Brian Moschagiri [05:25]: "It's just an unprecedented supply loss. And those prices have been passed along to the consumer."

Additionally, a Department of Justice probe into potential price-fixing among egg sellers and resultant panic buying have exacerbated the shortage.

Brian Moschagiri [05:47]: "It created panic buying and hoarding... which just kind of fed into the shortage a little bit more."

Despite a recent stabilization in wholesale prices, consumers continue to bear the brunt, as indicated by Holder:

Sarah Holder [05:53]: "The second most important part of the bacon, egg and cheese, in my opinion, is the bread."

Bread: Navigating Supply and Demand

The bread component of the BEC sandwich has also seen prices outpacing inflation since 2019. Pat Clements, a second-generation wheat grower, discusses the volatility in wheat prices influenced by global suppliers like Russia and Ukraine.

Pat Clements [07:22]: "That was one of the last big run ups in the price of wheat."

Following the Russian invasion of Ukraine in 2022, wheat prices spiked but later stabilized as supply chains adapted. However, rising input costs—such as pesticides, fertilizers, and labor—have squeezed farmers' margins, despite a decrease in wheat prices to around $5.40 per bushel.

Pat Clements [07:58]: "Our input costs have risen by, oh, I'd say 25 to 50% depending on which particular item you're talking about."

Trade tensions, particularly under the Trump administration's tariffs, pose further threats to wheat farmers, potentially disrupting exports and inflating domestic prices.

Pat Clements [08:10]: "When you interrupt these markets, someone is waiting to take our place."

Clements emphasizes the minimal impact farmers receive from bread sales:

Pat Clements [09:20]: "A loaf of bread that costs $4 a half the farmer's share of that is 14 cents."

Cheese: Stability Amid Turbulence

Unlike eggs and bread, cheese prices have remained relatively stable. Eileena Peng, Bloomberg’s agriculture and commodities reporter, attributes this stability to increased cheese production offsetting rising demand.

Eileena Peng [09:38]: "We typically watch Class 3 milk futures. That's like the class of milk that typically goes into cheese."

Despite a cheese craze accelerated by the pandemic, domestic production has kept prices in check. However, potential tariffs on high-grade European cheeses and retaliatory duties from countries like Canada and China could introduce volatility.

Eileena Peng [11:14]: "Mexico is by far the biggest buyer of American dairy products. And so there is concern there that if Mexico were to retaliate by putting tariffs on US cheese, then that would take away a market for US Farmers."

Overall, Peng anticipates cheese prices to remain stable despite ongoing trade uncertainties.

Bacon: Supply Constraints and Demand Surge

Michael Hertzer, Bloomberg’s commodities reporter, connects bacon prices to the broader beef market. With the U.S. beef cattle herd at its lowest since the 1950s, bacon, derived from pork belly, faces supply constraints.

Michael Hertzer [14:04]: "The US beef cattle herd is the lowest since the 1950s, so beef is in pretty tight supply."

Bacon's versatility and heavy marketing have transformed it from a breakfast side to a staple in various meals, driving up demand. Limited by the finite supply per pig, bacon prices have surged to $7 per pound.

Michael Hertzer [14:17]: "Bacon has a sort of a finite amount of it. Each pig only has one belly."

Trade policies further complicate the bacon market. Potential deportation of immigrant workers can reduce labor availability, while tariffs on pork exports to key markets like Mexico could destabilize prices.

Michael Hertzer [15:01]: "A lot of the folks working inside the meat plants are immigrants. And any sort of deportation efforts could have a tangible impact on just the number of workers that are available."

Hertzer suggests that while tariffs might initially lower domestic pork prices by reducing exports, farmers may eventually reduce pig numbers to restore balance, stabilizing prices.

Coffee: Volatile Markets and Trade Uncertainties

The final component, coffee, exemplifies the volatility driven by both supply issues and speculative trading. Peter Longo, owner of Porto Rico Importing Company, highlights a near $4 per pound cost for coffee beans, nearly double from the previous year.

Peter Longo [16:28]: "Things that are causing price increases, scarcity, fear of weather, changing of the temperature. Global warming has affected farming a lot."

A drought in Brazil, the world’s top coffee producer, and increased speculative investment have heightened price volatility. Speculative traders, focused on futures contracts, amplify price swings, making it challenging for roasters to manage costs.

Eileena Peng [17:36]: "The traders aren't willing to keep a bunch of coffee on hand unless they know they have a roaster to sell it to."

Trade policies, including a 46% tariff on Vietnam’s coffee (later paused for 90 days) and existing universal tariffs, further destabilize the market. Importers are attempting to pass these costs onto roasters, which may trickle down to consumers.

Peter Longo [19:26]: "There's only a finite point to which you can raise your prices before it affects your sales."

Longo shares creative strategies to cope with rising costs, such as modifying orders to maximize value, reflecting the broader consumer struggle to adapt.

Broader Economic Implications

The BEC sandwich serves as a lens to understand wider economic phenomena:

1. Inflation: The BEC Index, based on Bureau of Labor Statistics data, mirrors persistent inflationary trends, though it may lag real-time consumer experiences.

   Jerome Powell [20:15]: "The grocery bill is about past inflation, really."

2. Trade Wars and Tariffs: Tariffs under the Trump administration have introduced uncertainty, affecting everything from wheat and pork exports to coffee imports. These policies have ripple effects across the supply chain, influencing prices and availability.

3. Supply Chain Disruptions: Avian influenza, weather anomalies, and labor shortages highlight the fragility of the food supply chain, making essential commodities more susceptible to price fluctuations.

4. Consumer Behavior: While wholesale prices for some commodities are stabilizing or decreasing, consumer prices remain high due to inflationary lags and price-setting behaviors at the store level.

   Michael Hertzer [21:06]: "From the store level. It's hard to raise prices."

Impact on Consumers

Consumers face the dual challenge of rising prices and lagging price adjustments. Despite some commodity prices stabilizing, the overall cost of a BEC sandwich remains steep, reflecting broader economic pressures.

Sarah Holder [21:24]: "Or you can get creative like Peter Longo, the coffee roaster."

Strategies to cope include seeking bargains, modifying purchases, or adjusting consumption habits, underscoring the tangible impact of macroeconomic trends on daily life.

Conclusion

The exploration of the bacon, egg, and cheese sandwich reveals the intricate interplay between supply and demand, global trade dynamics, and inflationary pressures. As tariffs and trade wars continue to influence commodity markets, the cost of everyday items like a BEC sandwich serves as a tangible indicator of broader economic health. While some components like cheese remain stable, others—particularly eggs and coffee—illustrate the volatility and uncertainty consumers face in the current economic landscape.

Jerome Powell [20:49]: "Consumers are still hurting and they're not wrong to be unhappy. That prices went up quite a bit."

As policymakers and industry stakeholders navigate these challenges, the BEC Index remains a useful, albeit backward-looking, tool to gauge inflation and economic sentiment among American consumers.

Notable Quotes:

• Brian Moschagiri [04:28]: "Eggs have a weird pulse on the economy."
• Pat Clements [08:10]: "When you interrupt these markets, someone is waiting to take our place."
• Jerome Powell [20:15]: "The grocery bill is about past inflation, really."
• Michael Hertzer [21:06]: "From the store level. It's hard to raise prices."
• Jerome Powell [20:49]: "Consumers are still hurting and they're not wrong to be unhappy. That prices went up quite a bit."

This summary encapsulates the key discussions and insights from the Bloomberg Odd Lots episode on how the economics of a bacon, egg, and cheese sandwich reflect broader market trends and consumer challenges.