After Six Months Of Declines, Wholesale Food Prices Jumped 1.4% In May; Menu Prices Up Again

The six months through April brought operators a welcome respite from rising food costs, but the California drought and avian bird flu finally caught up with the supply chain. Wholesale food prices dropped 5.4% from November 2014 to April, but jumped 1.4% in May according Bureau of Labor Statistics Producer Price data and the National Restaurant Association. Big surges in prices for eggs (35.4% April to May), fresh vegetables (9.1%), and other fruits and vegetables were the primary culprits.

The half-year decline in wholesale food prices has helped operators’ cash-flow and margins so far this year. Even with the May jump, the NRA reports overall wholesale food prices are running 1.9% lower than a year ago, though prices of some key commodities, especially beef, eggs and fresh vegetables are running very high in historical terms. But these gains have been offset by big price drops in other products, such as pork and dairy products. The outlook for the rest of the year is also mixed. The California drought and water crisis remain key worries, but beef prices are finally beginning to moderate.

Meanwhile, other data from the BLS Consumer Price Index for May showed operators continued to raise menu prices throughout the six-month food price lull. Menu prices were up 0.2% for the third consecutive month in May, month on month. Menu prices have risen 0.2% to 0.4% every month since November. Meanwhile grocery- store food prices have fallen four of the past five months, reflecting the drop in wholesale food prices. For the 12 months ended May, menu prices are 3% higher while grocery-store prices have risen only 0.6%.

That differential has sometimes led consumers to swing toward food at home rather than eating away from home. But in this case, consumer’s pent-up demand for foodservice appears to be overcoming any effect from the differential, as operator sales continue to grow. Eating and drinking place sales ticked up 0.1% in real terms in May, and have risen 15 of the past 16 months according to the BLS and NRA.