No commodity cost relief in sight for restaurants

Beef challenges operators

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But “beef represents the biggest challenge for foodservice operators for at least the next two years,” he said, particularly since restaurants tend to follow trends and all seek the same popular cuts. He said that would likely result in particular price pressure on USDA Choice cuts as well as ground beef, because of the “Better Burger” trend, and skirt steak as a result of the growing popularity of Mexican food. 

“You can look for people to get a little more creative,” he predicted, as restaurateurs sought lower-cost items.

Andy Harig, director of government relations for the Food Marketing Institute, which represents food retailers and wholesalers, said that even before the drought rising global popularity of the Western style diet, diversion of corn stocks to ethanol production and fluctuating fuel prices all had upward pressure on commodity prices.

However, he said, many factors go into pricing of food in supermarkets, including transportation, processing and packaging costs, so, for example, only about 10 percent of bread cost is affected by commodity prices. On the other hand, nearly 50 percent of fresh beef prices are related to commodity prices.

He said that, although he didn’t want to make light of the impact of the drought on farmers, in retail the impact wouldn’t be that great, particularly since many FMI members were already locking in pricing for their commodity purchases.

Providing perspective on the drought, Alexander said corn prices had been hitting record highs for the past three years.

She projected that the U.S. Farm Price of corn would hit $7.60 per bushel for the marketing year that started in September, up from $6.22 in the previous year, which was more than $1 higher than the record-setting prior year, at $5.18.

Assuming a normal corn harvest for next year — which some webinar attendees noted was a big assumption — she said Purdue expected the 2013-14 farm price to fall back to $5.50.

“We have to have a good crop next summer, and a large crop,” Alexander said.

This article has been revised to reflect the following correction:

Correction: December 3, 2012 An earlier version of this article misspelled the last name of Andy Harig.

Contact Bret Thorn: bret.thorn@penton.com
Follow him on Twitter: @foodwriterdiary