Food Prices Should Get Better (Except For Beef)


Good news: Bacon prices will fall next year. The bad news? That steak will cost even more come 2015.

Modest corn prices are expected to normalize markets for poultry and pork as well as dairy products, said DeWayne Dove, vice president of strategic planning for Denver-based food purchasing co-op SpenDifference. That should drive down prices for cheese and chicken breast and, indeed, bacon, often by as much as double digits.

The problem is still beef. The cost for burgers and steak and roasts has been elevated for years now, as drought and corn price spikes caused ranchers to reduce herd sizes and thus supply. While feed prices have come down, it takes a while for ranchers to get herd sizes back up to increase supply and bring beef prices back down. After all, it takes a couple of years for a cow to go from birth to slaughter, far longer than it takes either a pig or a chicken.

Food cost experts had hoped beef costs would start coming back down to earth in early 2016, but Dove said that relief isn't likely now until the end of 2016 at the earliest. SpenDifference believes beef costs will be up a couple percent above this year's prices, "with no recovery in sight—short-term, anyway," Dove said. "There's a glimmer of hope in the beef industry. As long as these costs stay down, that should let those guys ramp up."

Corn prices are now trading at $3.50 a bushel. That's half the level of the corn price spike in 2012. That spike led to higher costs for proteins, because corn is primarily used in feed. Thus, restaurants paid more for chicken, beef, dairy and pork. Now that corn has come back down, lower feed costs are leading to higher supplies of proteins and dairy. That's pushing costs down.

That includes bacon. While pork prices were initially thought to be on their way down this year, that didn't happen thanks largely to the PED virus, which affects young hogs and decimated the pig population. Those concerns are easing, and pork prices are expected to normalize next year. Hog production is expected to be up 2 percent.

"We're getting back to 2012 levels," Dove said. "2012 is the norm, if you will."

Dove expects bacon prices to fall 15 to 17 percent next year. Cheese prices, meanwhile, should fall by a similar amount. And the price for chicken breasts is expected to fall 4-5 percent, Dove said.

"Key categories like dairy, poultry and pork should offset the increases you're seeing in beef," Dove said. Most of his clients will have flat commodity costs. Some might even decline.

Except for heavy steak users. The suggestion: Start emphasizing chicken and pork products on the menu, and not beef.

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