Rising food prices challenge restaurant industry

by Meat&Poultry Staff
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FAIRFIELD, NJ – Restaurant owners will continue to experience some challenges as a result of high food costs, especially protein, in 2012, according to John Barone, commodities analyst from Fairfield, NJ-based Market Vision Inc. Protein prices are spiraling upward because of decreased supply, increased global demand and higher feed costs, reported the National Restaurant Association.

Barone says the impact on restaurants will depend greatly on which segment you're in.

"Chicken was kind of our go-to protein for the last two years, but those prices are going higher," he notes. "Beef is going to be very difficult for people this year. And if restaurateurs have already got their menu prices set, they'll be ok on pork items. It's going to be another challenging year for food cost in a consumer environment that's been very slow to rebound."

In his March report, the commodities analyst states that beef supplies will tighten even more this year because of smaller cattle numbers, weak imports and strong exports. The USDA reports that production is expected to decline 4.4 percent in 2012, to 25.1 billion lbs. As a result, beef prices will push higher this year than last year, and, he notes, the price of value cuts, such as ground beef, have never been higher than they are today.

Poultry producers will also be challenged in 2012. Year-to-date broiler output is forecast to be down 2.4 percent for the year, to 36.3 billion lbs., and as excess supplies continue to decline, prices will rise. On March 6, the USDA reported the price on broilers/fryers was up 14.5 percent from a year ago. Whole chicken wing prices, which currently average $1.76 per lb., are expected to decrease into the $1.20s by summer. Egg production is down, too, and is projected to decline 10.7 percent this year.

On the other hand, pork production is expected to increase 2 percent this year. Ham prices currently are running a few cents below last year's prices, at approximately 70 cents per lb. and pork bellies are priced at $1.05 per lb., down from $1.30 in February. Loin pork ribs, however, have steadily gained since the start of the year and are priced at about $$2.95 per lb. That figure, Barone says, is expected to rise another 20 cents to 25 cents before peaking in May.

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