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National Restaurant Association - Supply surplus leads to lower food costs

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Supply surplus leads to lower food costs

Food costs are lower this summer, thanks to a surplus of pork, chicken and beef, industry experts say. Coffee is a good buy, too.

“There’s plenty of pork to be had,” commodities analyst John Barone says. “It should continue flowing.”

The USDA projects pork production will increase 1.9 percent in 2016 over last year, after increasing 7.2 percent in 2015 over 2014. That should lead to lower prices through 2017. Chicken stock should rise about 2.6 percent over last year. Beef is looking meaty after a mild winter and spring. Its production should grow 4.8 percent following last year’s 2.3 percent decline.

According to Hudson Riehle, the National Restaurant Association’s head of research, wholesale food prices, overall, were down 2.9 percent through April on a year-to-date basis.

“Restaurant operators can expect to see an overall general decline in wholesale food prices this year, especially in commodities like beef, pork and eggs, as herds and flocks are recovering from recent challenges,” he says.

Only 6 percent of restaurant operators now rate food costs as their top challenge, down from 14 percent at this time last year, the NRA’s monthly Tracking Survey found.

Corner Bakery says it loves the price of pork shoulder right now. It uses it to make slow-roasted pork sandwiches. Food and supply chain chief Ric Scicchitano says it and chicken breasts are inexpensive. The price on roast beef also is favorable.

Coffee is good news, too. “It’s a great market,” he says. “Coffee is low and not showing signs of rising. It’s a friend of ours right now.”

What is he concerned about? Produce. “It’s the wild card for the industry. It can fluctuate with the weather and brings the biggest food-safety threats. It’s one of the hardest things for us to get our hands around. I buy as much produce as I do total protein so it’s a market I’m always watching.”

Riehle says fresh vegetables are trending up at double-digits, reflecting the sustained drought conditions in places like California. “Operators of salad-focused concepts could feel more of a pinch as the year progresses.”

Visit the NRA’s Restaurant TrendMapper for information on wholesale prices and other trends that affect your business. Subscribe to the Research Rewind newsletter for news and analysis from NRA experts.

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