Foodservice Equipment Reports

Food Prices Forecast To Stabilize In 2015, As Wholesale Prices Fell, Menu Prices Rose in December

Wholesale food prices fell for the second consecutive month in December, according to the Bureau of Labor Statistics and the National Restaurant Association, while menu and grocery-store prices continued to rise, pushed higher by earlier run-ups in wholesale prices. Meanwhile, the U.S. Department of Agriculture and others are predicting food prices should stabilize in the U.S. in 2015 if the ongoing droughts in California, Oklahoma and Texas don’t worsen.

NRA estimates average wholesale food prices fell 0.6% in December after falling 0.8% in November. But the group notes that for the 12 months ending in December wholesale prices were 5.5% higher, the biggest gain in three years and the fifth consecutive year of gains. Beef prices are up more than 24% since this time last year and poultry prices are 8.4% higher, in part because operators attempted to shift from beef and pork as prices soared last year.

These earlier wholesale price increases—vegetable, dairy and egg prices also jumped as the California drought intensified last year—are behind continuing run-ups in food prices at the consumer level. In December, menu prices rose another 0.3%, following a strong 0.4% increase in November. Grocery-store prices rose 0.3% in Dec. For the year ending December, grocery-store prices were up 3.7%, menu prices 3%. They are the strongest 12-month gains for both indexes in three years.

The good news is that food prices at the wholesale level are already beginning to moderate and the outlook for this year is for “normal to moderately lower” food-price increases, according to the USDA and other forecasters.

Hudson Riehle, NRA’s senior v.p. of research, said in an NRA press release last week that, “The intensity of the pressure related to higher wholesale food prices has been easing for some operators as prices on certain commodities seem to be moderating.” But he also noted that, “Because overall food costs have increased for several years, prices in general remain elevated. The impact on operators can vary depending on what’s on their menus. For example, beef prices are expected to advance, but pork costs are likely to drop. That will give operators something of a break for now.”

Cited in the same NRA release, foodservice commodities expert John Barone said that one factor in the improved outlook is the diminishing impact of the virus that decimated pork piglet populations last year, driving pork prices dramatically. New vaccines and sows becoming naturally immune to the virus are helping farmers rebuild pork herds.

Poultry populations are also increasing, as operators continue to try to switch from still expensive beef. But Barone says the increased demand may balance out the increased supply, leaving poultry prices at about the same level as 2014.

The continuing droughts in California and the Southwest are also a factor in keeping beef prices high. One good development in the food-price outlook going forward over the next 12 to 24 months: Corn and soybeans, the key animal feedstocks, posted record harvests in the U.S. in 2014.

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