Forget the S&P or CPI. Meet the Bacon Egg and Cheese Index

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Hi, good Herdon.

For the last few years, whenever I've needed a little extra morning sustenance, I visited a food cart outside the Bloomberg office. Could I have a egg and cheese sandwich, extra cutup, salt and pepper, please.

Egg and cheese ease a five dollar?

It used to be three fifty.

Or they actually says thanksy.

It must have been a while since I stopped by the cart, because Karen Hidalgo and her coworker Francisco told me two months ago they had to raise prices. Their egg and cheese sandwich on a roll went from three point fifty to five dollars, and their bacon, egg and cheese has reached six dollars. Add in the cost of a cup of coffee and a tip, and my once reliably cheap breakfast just ran me seven bucks. It's not

Our breakfast foods are very consistent consumer staples, and so they sort of become outsize indicators of inflation.

Aileena Pang covers agriculture and commodities for Bloomberg.

Even though economists really like to look at the rate of inflation, as a consumer, you tend to think, oh, my coffee costs this much today, and my coffee used to cost that much five years ago.

In March twenty nineteen, the commodities that make up an average BC plus a coffee cost almost a dollar ninety. If you adjusted for inflation, that means the meal should cost nearly two forty today, but as of March twenty twenty five, it three dollars three twenty three to be exact. So the story of why these foods have gotten so expensive isn't just about inflation. It's also about supply and demand.

When my customers complained to me recently at the price of gouging, you're gouging.

Global weather patterns and.

Disease, experienced veterans would tell me, like, young man, we've seen everything that could possibly happen in the egg marketing.

Land wars, and trade wars.

We're used to handling the natural barriers. The man made ones, we kind of struggle.

With them, you know, the winds of consumers and the complexities of financial markets. Now, as Trump's sweeping tariff orders send shockwaves through the global economy and put new pressures on domestic commodities markets, we wanted to look closer at one sandwich that helps explain it all. Today on the show, we talk to people up and down the bacon, egg and cheese supply chain, from a Kentucky week farmer to a VP at an egg brokerage, to a coffee roaster

Eggs have a weird pulse on the economy.

Brian Muskajeri has worked in the egg industry for over a decade. He's currently a vice president at an egg brokerage called Eggs Unlimited. It also helps farms distribute their eggs to retail customers.

When I got into the egg industry, my mom said, like, somehow you belonged in this industry. You just always loved eggs.

Right now is a rough time to be an egg lover, as anyone who's been to the grocery store recently knows, the price of eggs has been uncomfortably high. The most recent data we have shows that consumer prices in March hit a new record over six twenty a dozen, double what eggs cost a year ago. Most people know, or think they know, what's behind that high price, bird flu.

Fifty million of three hundred and twelve million, you know, since the start of October. It's just an unprecedented supply loss than those prices have been passed along to the consumer, But.

There may have been other dynamics pushing up the price of eggs. The Department of Justice has opened a probe to investigate potential price fixing by egg sellers and consumer reactions also had an impact.

It created panic buying and hoarding, and the consumers are maybe buying more eggs than they typically bought, which just kind of fed into the show rang a little bit more.

But consumers have hit their price ceiling since February, They've stopped buying as many eggs, and wholesale prices have started to fall. Consumers just haven't felt that yet. The second most important part of the bacon, egg and cheese, in my opinion, is the bread. Bread has also outpaced inflation since twenty nineteen. And to make bread, you need wheat.

If you're flying around the country in the winter and you say something beautiful and green amidst all the brown and gray, that's a wheak field.

That's Pat Clements, a second generation wheat grower and president of the National Association of Wheat Growers. When America's beautiful, green wheat fields are thriving, that doesn't always mean America's wheat farmers are making more money. Walk me through how you set prices.

The issue is we don't set them, we take them. Market prices for wheat can vary pretty widely over the course of a year, and.

From year to year, US wheat prices are heavily influenced by two dominant global suppliers, Russia and Ukraine. When those countries are cranking out wheat, the prices US farmers get are lower When Russia and Ukraine's supplies strained, growers here can make more so. Back in twenty twenty two, just after Russia's ground invasion of Ukraine, prices shot up.

That was one of the last big run ups in the price of wheat.

In January twenty twenty two, wheat was trading at about seven to fifty a bushel. In March, after Russia's invasion, it spiked, surpassing thirteen dollars a bushel, but it was a short lived jump. Russia and Ukraine found ways to keep supplies flowing, and that, combined with reduced demand in the US, has driven down the prices wheat farmers are getting for their product. A bushel of wheat is now trading at around five forty.

In the meantime, our input costs have risen back oh Watch day twenty five to fifty, depending on which particular item you're talking about.

Pat says the costs of pesticides, fertilizers labor and equipment. They're all up, and farmers fear that squeeze could get even worse depending on how Trump's trade war goes.

That's the sort of million dollar question.

Michael Hertzer covers commodities for Bloomberg.

Prices could change pretty dramatically depending on how all these tariff negotiations go.

Almost half of US wheat is exported. Mexico is our biggest wheat buyer, and right now the country has escaped the worst of Trump's tariffs. But if that changes, and if Mexico retaliates, that could hit US wheat producers hard.

To interrupt the supply to a dependable nearby neighbor, you just can't imagine anything worse for the industry.

From the ground in Kentucky, Pat says farmers are nervous that the trade wars could drive business away.

When you interrupt these small markets, someone is waiting to take our place, perhaps some South American country we'll ship into Mexico. Perhaps it'll be Russia, Perhaps you know, can come from anywhere in the world.

Tariffs could also drive up other costs of doing business, not just for wheat farmers, but all the way up the bread supply chain. That's on top of costs that have already been rising and driving up the cost of bread, labor costs, packaging, transportation, marketing.

A loaf of bread that costs four dollars and a half. The farmer's share of that it's fourteen cents. Our part isn't moving the need.

So we've covered eggs and bread. What about cheese? For that we had to call one of our experts.

We typically watch Class three milk futures. That's like the class of milk that typically goes into cheese.

That's Bloomberg's I lean up. Hang again. She follows the cheese market, and she says prices have been relatively stable in recent years. That's despite a cheese craze that started during the pandemic, and.

That trend has just sort of accelerated, and it's really been a boon to the broader US dairy industry, just because fluid milk is no longer as popular as it once was at its peak, and so now what the dairy industry likes to say is that people are eating their milk instead of drinking it.

Since the increased demand for cheese has been offset by increased production, the cost of this domestic dairy product has remained relatively low. But we also get some of our fanciest cheeses from the European Union.

They make a lot of the high grade specialty cheeses that everyone loves.

I'm not sure most of us order breakfast sandwiches with imported French bree, but if you are, watch out. The European Union is subject to the US as ten percent tariff on imports. A more traditional pick might be American cheese produced right here in the US, but the US also exports a lot of cheese products. More than half of US dairy exports go to Mexico, Canada, and China.

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, though, Aileena sees domestic cheese prices staying pretty calm amid broader tariff turbulence. So we've tackled eggs, bread, and cheese. But what's going on with the last two pieces of this breakfast puzzle bacon and coffee? That's coming up. We've been digging into why a classic American breakfast combo, the bacon, egg and cheese sandwich plus a cup of coffee, is getting more expensive in the US, and how those prices

The US beef cattle herd is the lowest since the nineteen fifties, so beef is in pretty tight supply, and one of bacon's keys to popularity has ben. It's always been something of alternative to beef.

In the past few decades, bacon has been heavily marketed by restaurants and food companies who wanted to sub in pork because beef was so pricey, and all that exposure has helped bacon evolve from strictly a breakfast side to something you see on salads, on burgers, any meal of the day. All this drives up demand, but.

Supply bacon is cut from the pork belly and there's a sort of a finite amount of it. Each pig only has one belly in Because it's so popular, bacon has a sort of built in demand base, so.

US consumers have spent decades driving up the cost of bacon by buying more. Today it costs almost seven dollars a pound, but Trump's policies could change that.

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 or the number of workers that are willing to show up if they're in fear of being taken away.

And once again, tariffs could upend everything.

Mexico is the top buyer of US pork, and them not having a tariff will allow US pork to continue to go to Mexico. If that changes, theoretically, pork could become cheaper in the US if Mexico is buying less.

In the short term. Pork prices could drop if the supply of pork exceeds the demand, but Michael thinks farmers would adapt raise fewer pigs, bringing the price back up in the medium term. So we're down to the last ingredient in our breakfast. Order something to wash it all down. I'll go Burista's Choice coffee.

These increases over the last six months have been monumental, and they've been fast.

That's Peter Longo, the owner of Porto Rico Importing Company, a coffee shop and roaster in New York's Greenwich Village. The store has been around since nineteen oh seven, and Peter took it over from his parents in the seventies. And how much was a cup of coffee at that time?

Oh man, a cup of coffee? What's a dime? Maybe?

Yeah, coffee hasn't cost a dime in deck gates. But in the past year coffee prices have truly been on a tear. Today a pound of beans costs Peter about four dollars. That's nearly double what he was paying last year.

Things that are causing price increase is scarcity, fears of weather changing, of the temperature. Global warming has affected farming a lot.

A drought in Brazil damaged bean supply in the world's top producing country.

But I think the speculative investment has boosted the price of coffee and made it more volatile.

Speculative investment, in other words, economic forces beyond supply and demand. To understand how markets influence coffee prices, we had to call back Eileena Pang, the agriculture reporter we heard from earlier. She told me there are two groups of people who get involve in coffee markets. There are commercial traders.

People who have a steak in the market, so like you're a coffee roaster, you're a coffee producer, you are a coffee trading house. And then there are speculative traders, like the hedge funds, and their goal is not to take delivery of beans. Instead, they want to play the coffee market kind of like the stock market, buying futures at a certain price, hoping that they'll be able to

And since there are fewer buyers in the market right now, any activity can make prices fluctuate wildly. Tariffs are making the coffee market even more volatile. Last week, the US hit the world's second biggest grower, Vietnam, with levies of forty six percent. This week, Trump announced who his pausing that tariff at least for ninety days, but his universal ten percent tariff still applies.

Importers are already trying to get clauses into their contracts so that those costs get passed on to coffee roasters, and eventually there is a sense that that would make it to the consumer level.

Traders are now expecting bean prices to get even higher, so high that consumers might eventually start buying less coffee, which could force prices down. All this weighs on coffee sellers like Peter, who's now selling a pound of beans for sixteen to ninety nine, up a whole dollar since September.

There's only a finite point to which you can raise your prices before to fix your sales.

After all these conversations about all these different commodities, you might be noticing some trends we did. Bacon, cheese, and bread prices are either stable or slightly elevated, but coffee

The bacon, egg, and cheese index we have is a little bit backwards looking.

Remember the index is based on data from the Bureau of Labor Statistics. It's not a snapshot of where prices are today or tomorrow, but where they were last month. That's the way US inflation data works too, and why it can sometimes feel like the fed's latest CPI figures don't perfectly reflect Americans' experiences of the economy, and inflation is sticky. That's something Jerome Powell, the Chair of the Federal Reserve, acknowledged at February's FED meeting.

The grocery bill is about past inflation.

Really, consumers are still hurting.

And they're not wrong to be unhappy that prices went up quite a bit and they're paying a lot for those things and commodities.

Reporter Michael Hertzer says that's because if commodity prices can be highly reactive, the prices consumers pay are.

Not from the star level. It's hard to raise prices, you know. If you get an opportunity when everyone is talking about inflation and you raise prices, you don't really want to give that back. So for the consumer, you just got to, I guess, clip the coupons and try to find savings.

Or you can get creative, like Peter Longo the coffee roaster.

My go to breakfast sandwich is the egg McMuffin. But I noticed it got very, very expensive, and I was just talking with the girl behind the counter and she said, you gotta buy the sausage McMuffin and throw the sausage away because they had one of those deals, so you could get two sausage mcmuffins for two bucks.

I guess there's always a deal to be found somewhere. This is The Big Take from Bloomberg News. I'm Sarah Holder. This episode was produced by Julia Press. It was edited by Tracy Samuelson, Millie Munci, and Isis al Naida. It was fact checked by Audre Natapia and mixed and sound designed by Alex Sugia. Our senior producer is Naomi Shadan. Our senior editor is Elizabeth Ponso. Our deputy executive producer is Julia Weaver. Our executive producer is Nicole Beamsterboorg Sage