Food prices are expected to continue to rise this year
The war in Ukraine is expected to hit wheat prices hard this year./Photo: Shutterstock.
Commodity prices are expected to continue to put pressure on restaurants, catering companies and retailers this year, putting further pressure on prices, the U.S. Department of Agriculture said this week.
The USDA said in its outlook for food prices that it expects menu prices in restaurants and catering businesses, or out-of-home food, to rise 5.5% to 6, 5% this year, which would be a higher rate of inflation than in 2020 or 2021 and would be above historical averages.
Prices for groceries, or take-home food, are expected to rise 3-4%.
Most of these increases are due to continued pressure on raw materials. Inflation for everything from fruits and vegetables to beef and cooking oil is expected to continue this year, putting further pressure on profit margins and driving up prices for restaurant businesses.
Beef and chicken prices in particular are expected to continue to rise this year. Wholesale beef prices are expected to rise 4% to 7% this year. This is due to rising livestock prices, which the USDA expects to increase by up to 15.5% this year.
Poultry prices, meanwhile, are expected to rise 12% this year. They have increased by 26.5% over the past year.
Russia’s invasion of Ukraine is expected to weigh heavily on wheat prices, sending flour prices skyrocketing. Wholesale wheat flour prices could increase by up to 15% this year. The invasion put considerable pressure on international wheat prices, as Ukraine is a major producer of the crop.
Soaring commodity prices
The USDA expects the prices of many commodities to rise significantly this year, continuing a historic period of food cost inflation. Here is an overview of some of them and the expected inflation range.
Source: United States Department of Agriculture
Cooking oil is also becoming expensive, largely due to rising soybean prices, which are expected to rise by up to 11.5% this year. Wholesale cooking oil prices have taken off – they are expected to rise 30% this year.
Other commodity costs are also expected to rise, including dairy, fruits and vegetables. The combination is expected to put considerable pressure on operators’ margins at a time when labor costs are also rising. Few of the carriers we spoke with expect the problem to subside soon.
Commodities rose due to the impacts of the pandemic on the supply chain, as higher labor costs, plant closures and labor shortages increased the costs of production and transportation. The war in Ukraine has further increased costs, especially for certain basic products. Rising gasoline prices could also prolong inflation in the future.
Keith Anderkin, director of supply chain at fast-casual chicken chain Zaxby’s, recently told the Restaurant Business A Deeper Dive podcast that he doesn’t expect supply chain challenges to happen. mitigate before next year.
He also alluded to operators’ frustration with the series of challenges they have faced over the past two years.
“We’re hard-wired to solve problems,” Anderkin said. “But usually we like to see the light at the end of the tunnel, so to speak, and then we’ll figure it out.
“When there is no light at the end of the tunnel, it can exhaust people. But that’s the world we live in. We have come out of the pandemic and we have a war going on.
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