Big Take: What a Bacon, Egg and Cheese Teaches Us About the Economy
20:12 Share

KPMG makes the difference by creating value, like developing strategic insights that help drive M&A success or embedding AI solutions into your business to sustain competitive advantage. KPMG, make the difference. Learn more at www.kpmg.us slash insights.

How can you grow your business from idea to industry leader? Bring your vision to life with smart business buying tools and technology from Amazon Business. From fast, free shipping to in-depth buying insights and automated purchase approvals, they deliver everything you need to achieve your goals. It's not easy to stand out from the crowd. Simplify how you stock up to get ahead. Go to AmazonBusiness.com for support.

Bloomberg Audio Studios. Podcasts. Radio. News. Hi, good morning. Hello, how are you?

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 an egg and cheese sandwich, extra ketchup, salt and pepper, please? Egg and cheese is $5. $5? $5. It used to be $3.50. For the eggs, it's $3.50. The sandwich will go up.

It must have been a while since I stopped by the cart, because Karen Hidalgo and her co-worker Francisco told me two months ago they had to raise prices. Their egg and cheese sandwich on a roll went from $3.50 to $5. And their bacon egg and cheese has reached $6. Add in the cost of a cup of coffee and a tip, and my once reliably cheap breakfast just ran me $7.

It's not just my beloved breakfast cart. Bloomberg actually tracks the price of the key ingredients in a bacon, egg and cheese, plus a cup of coffee, on a special Bacon, Egg and Cheese Index. It's updated every month using data from the Bureau of Labor Statistics, or the BLS. And this year, the index has reached record highs.

Our breakfast foods are very consistent consumer staples, and so they sort of become outsized indicators of inflation. Eileen Peng 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 cost this much today and my coffee used to cost that much five years ago.

In March 2019, the commodities that make up an average BEC plus a coffee cost almost $1.90. If you adjusted for inflation, that means the meal should cost nearly $2.40 today. But as of March 2025, it topped $3. $3.23 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, "Oh, the price of coffee, 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 market." 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 whims 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 wheat farmer to a VP at an egg brokerage to a coffee roaster in lower Manhattan.

And along the way, Bloomberg's expert commodities reporters helped us make sense of how this sandwich got so expensive and what it says about the American economy, tariffs, inflation and more. This is The Big Take from Bloomberg News. I'm Sarah Holder. If you had to pick one ingredient to blame for the rising costs of a breakfast sandwich, it'd probably be eggs.

Eggs have a weird pulse on the economy. Brian Moscajori 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 $6.20 a dozen, double what eggs cost a year ago. Most people know — or think they know — what's behind that high price: bird flu. Since late last year, a new wave of avian influenza has been tearing through American egg farms, killing off tons of egg-laying hens.

50 million of 312 million, you know, since the start of October. It's just an unprecedented supply loss, and 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 shortage 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 2019. And to make bread, you need wheat. If you're flying around the country in the winter and you see something beautiful and green,

amidst all the brown and gray, that's a wheat 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. U.S. wheat prices are heavily influenced by two dominant global suppliers, Russia and Ukraine.

When those countries are cranking out wheat, the prices U.S. farmers get are lower. When Russia and Ukraine's supply is strained, growers here can make more.

So back in 2022, 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 2022, wheat was trading at about $7.50 a bushel. In March, after Russia's invasion, it spiked, surpassing $13 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 U.S., has driven down the prices wheat farmers are getting for their product. A bushel of wheat is now trading at around $5.40. In the meantime, our input costs have risen by, oh, I'd say 25 to 50 percent, 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 Herzer covers commodities for Bloomberg. Prices could change pretty dramatically, depending on how all these tariff negotiations go. Almost half of U.S. 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 U.S. 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 markets, someone is waiting to take our place. Perhaps some South American country will ship into Mexico.

Perhaps it'll be Russia. Perhaps, you know, it could 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 $4.50, the farmer's share of that is 14 cents. So our part isn't moving the needle. So we've covered eggs and bread.

What about cheese? For that, we had to call one of our experts. We typically watch Class III milk futures. That's like the class of milk that typically goes into cheese. That's Bloomberg's Ilena Pang 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 like the broader U.S. 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 brie, but if you are, watch out. The European Union is subject to the U.S.'s 10% tariff on imports.

A more traditional pick might be American cheese, produced right here in the U.S. But the U.S. also exports a lot of cheese products. More than half of U.S. dairy exports go to Mexico, Canada, and China. Canada has already put retaliatory tariffs of 25% on American cheese, butter, and dairy spreads, while China's levied 125% duties on all U.S. imports, which would include dairy products.

What if Mexico were to follow? 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 U.S. cheese, then that would take away a market for U.S. farmers. Overall, though, Ailina 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. KPMG makes the difference by creating value, like developing strategic insights that help drive M&A success and embedding AI solutions into your business to sustain competitive advantage or deploying tech enabled audits to deliver more accurate and transparent insights.

Learn more at www.kpmg.us slash insights.

Thrivent can help you plan your finances for the people, causes, and community you love. What makes Thrivent different? A combination of financial services and generosity programs. Thrivent offers advice, investments, insurance, banking, and generosity, as well as resources to fund service projects or direct dollars to causes you care about. With more than 120 years serving clients, you can plan your finances with confidence. Visit Thrivent.com to learn more. Thrivent.

where money means more. 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 U.S. and how those prices could fluctuate further under Trump's trade war. We've covered the bun, the E and the C. Now let's bring home the bacon. Bloomberg Commodities reporter Michael Herzer told me that understanding bacon prices actually starts with beef.

The U.S. beef cattle herd is the lowest since the 1950s, so beef is in pretty tight supply. And one of bacon's keys to popularity has been it's always been something of an 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 sort of a finite amount of it. Each pig only has, you know, one belly. And because it's so popular, bacon has a sort of built-in demand base. So U.S. consumers have spent decades driving up the cost of bacon by buying more. Today, it costs almost $7 a pound.

But Trump's policies could change that. A lot of the folks working inside the meat plants are immigrants and immigrants

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 U.S. pork, and them not having a tariff will allow U.S. pork to continue to go to Mexico.

If that changes, theoretically, pork could become cheaper in the U.S. 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 barista's choice. Thank you. Coffee.

These increases over the last six months have been monumental, and they've been fast. That's Peter Longo, the owner of Puerto Rico Importing Company, a coffee shop and roaster in New York's Greenwich Village. The store has been around since 1907, and Peter took it over from his parents in the 70s. And how much was a cup of coffee at that time? Oh man, a cup of coffee was a dime maybe. Yeah.

Coffee hasn't cost a dime in decades. But in the past year, coffee prices have truly been on a tear. Today, a pound of beans cost Peter about $4. That's nearly double what he was paying last year. Things that are causing price increases: 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 Eileen Peng, the agriculture reporter we heard from earlier. She told me there are two groups of people who get involved in coffee markets. There are commercial traders. People who have a stake 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 sell them for more than they bought. The thing is that right now, the roasters, the coffee houses, the people who do want to actually buy coffee and actually take delivery of it, they've been cautious, trying to buy just what they absolutely need and nothing more, hoping prices will come down.

The traders aren't willing to keep a bunch of coffee on hand unless they know they have a roaster to sell it to. And companies like Starbucks and big roasters who would normally buy a lot in advance are kind of reluctant to do that. 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 U.S. hit the world's second-biggest grower, Vietnam, with levies of 46%. This week, Trump announced he was pausing that tariff, at least for 90 days. But his universal 10% tariff still applies—

Importers are already trying to get clauses into their contracts so that those costs get passed on to coffee roasters. 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 $16.99, up a whole dollar since September. There's only a finite point to which you can raise your prices before it affects 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 and eggs prices are up a lot. Those two ingredients have been driving a lot of the increases in Bloomberg's bacon, egg and cheese index. And even though market and wholesale prices were expected to decline for those commodities, the relief hasn't hit consumers. And now tariffs have created a whole new level of uncertainty about where these prices are headed next.

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 U.S. 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 Herzer says that's because if commodity prices can be highly reactive,

The prices consumers pay are not. From the store 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 gotta, 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 Munchie, and Isis Almeida. It was fact-checked by Adriana Tapia and mixed and sound designed by Alex Sugiura. Our senior producer is Naomi Chavin. Our senior editor is Elizabeth Ponso. Our deputy executive producer is Julia Weaver. Our executive producer is Nicole Beamsterbord. Sage Bauman is Bloomberg's head of podcasts.

If you liked this episode, make sure to subscribe and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back next week.

KPMG makes the difference by creating value, like developing strategic insights that help drive M&A success or embedding AI solutions into your business to sustain competitive advantage. KPMG, make the difference. Learn more at www.kpmg.us slash insights. Big news. Verizon Small Business Days are here.

From April 21st through 27th, book your appointment today to make our experts your experts. Get a free tech check, special deals, and personalized advice. Call 1-800-483-4428 or visit verizon.com slash smallbusiness. We got you covered. Verizon Business.