Restaurants can Expect Beef Prices to Continue to Rise

According to the U.S. Department of Agriculture, beef prices have hit an all-time high – topping the record set in 2003 at more than $2.11 per pound for choice grade beef. While this is a record in dollar value, when adjusted for inflation the number isn’t quite so startling. These prices represent a long-term sustained inflation on beef and veal prices that won’t end any time soon.

Factors Influencing Rising Beef Costs

There are a number of factors that have been contributing to the rising cost of beef over the last several years. The most obvious is the unusual weather patterns that have affected the ability of farmers and ranchers to be able to provide enough feed for their herds. Sustained drought last year made the production of corn difficult. It also caused many ranchers to sell their cattle because they couldn’t come up with enough grass or water on their land to sustain the herd.

This year the opposite problem is occurring in many parts of the Corn Belt, wherein they are getting too much rain to get the crop planted. The fact that many ranchers have been forced to significantly reduce their herd numbers, or worse, sell out completely, has also contributed to the rising cost of beef, as quite simply, there is no longer as much beef on the market as there used to be.

Given that it takes about two years for a cow to be old enough to go to market, it will take ranchers some time to be able to build their numbers up again, assuming weather and economic conditions permit the ability to do so. As a result, the cost of beef is projected to continue its rise well through 2016.

What Rising Beef Costs Means for Restaurants

A major issue for restaurants is the fact that their menu prices aren’t rising in-step with the increasing cost of beef. As a result, profit margins are much thinner than they once were. This puts restaurant owners in a tough position, given the fact that increasing your establishment’s menu prices typically doesn’t go over well with your consumer base. As a result, restaurateurs are having to get creative to make up the difference in other ways.

How Restaurants are Managing Rising Beef Costs

One obvious way to deal with the rising cost of beef is to simply rely more heavily on alternative protein sources such as chicken or pork, which are typically much cheaper than beef and veal. Aggressively promoting these menu options allows a restaurant to keep menu prices fixed while still receiving a decent profit margin.

Choosing less expensive cuts of beef is another option some restaurants are resorting to in order to close margins without increasing menu prices. Working with beef suppliers to ensure that the measurement specs for a cut of beef are as accurate as possible and looking for other ways to reduce cost such as eliminating packaging are methods that are also helping restaurants address the inflating cost of beef.

One positive in all of this is that the higher cost of beef is tempering its demand, which ultimately will help bring things back into balance. Until the time at which beef prices level out again, however, restaurants are going to have to keep looking for creative strategies to manage the rising cost of America’s favorite meat.

Tags: , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s


%d bloggers like this: