Cost of Beef Expected to Drop by Double Digits

Nov 16, 2016 Industry News
Industry News

The trend of favorable costs for the commodities restaurants buy is expected to extend into 2017, with beef prices forecast to decline for a second year in a row and costs of many others to remain near current levels, according to the annual purchasing forecast by supply chain management firm SpenDifference.

Beef, pork, and poultry costs are projected to stay at “great levels” next year, while corn, which drives all other commodity prices, is forecast to remain below $4 a bushel, says DeWayne Dove, vice president of Supply Chain. However, soy oil, and cheese costs are expected to rise.

“With restaurants facing higher labor and healthcare costs in 2017—and expectations for continued slow traffic—now is the time to take full advantage of low commodity costs,” Dove says. “Analyze your needs and secure short- or long-term positions accordingly.”

Declining food prices will benefit both operators and diners, he adds. “These lower costs will allow restaurants to improve their margins, if they use smart sourcing strategies,” he says. “Meanwhile, guests are likely to see more beef and other protein items on menus at competitive prices.”

Although all signs point to continued favorable food costs for restaurants, Dove noted that unpredictable global events, such as storms and livestock disease outbreaks can quickly alter commodity markets.
Forecast highlights:

Beef: Overall costs are expected to drop by double digits in 2017, with ingredients for ground beef forecast to decline between 7 and 8 percent in 2017. Some cuts are forecast to drop 10 to 15 percent.

Pork: Average cost could drop modestly. Pork bellies are forecast to decrease slightly, but pork used for sausages is expected to see a modest increase. Pork production is forecast to rise 2.4 percent next year. Domestic supplies could fall, however, if producers increase exports.

Chicken: Boneless breast, coming off a nearly 6 percent drop in price for 2016, could decrease another 1 percent next year. Dark-meat leg quarters are forecast to rise 7 percent in cost due to an increase in exports.

Turkey: Flocks have recovered from the avian flu outbreak in 2015. Production has increased, and overall costs are forecast to drop 20 percent.

Wheat: The cost per bushel is projected to rise 5 to 7 percent, but it’s coming off record low prices the last two years.

Soy oil: Costs are forecast to increase 20 percent, based on demand and lack of supply.

Dairy: Butter is projected to drop in cost by 6 percent as a result of increased production, while cheese costs are forecast to rise 8 percent.

SpenDifference offers restaurant chains customized solutions that provide leverage, expertise and transparency to ensure their supply chains deliver maximum value. SpenDifference manages costs and risks, delivering actionable intelligence that supports brand growth.

News and information presented in this release has not been corroborated by FSR, Food News Media, or Journalistic, Inc.