Operations

Food prices expected to keep climbing this year

The U.S. Department of Agriculture expects commodity costs to continue increasing in 2022, sending menu prices skyward.
The war in Ukraine is expected to hit wheat costs hard this year./Photograph: Shutterstock

Commodity costs are expected to continue pressuring dining concepts, foodservice companies and retailers this year, further impacting prices, the U.S. Department of Agriculture (USDA) said last week.

The USDA said in its food price outlook that it expects menu prices at restaurants and foodservice companies, or food away from home, to rise 5.5% to 6.5% this year, which would be a higher rate of inflation than in either 2020 or 2021 and would be higher than historical averages.

Grocery prices, or food at home, are expected to rise 3% to 4%.

Driving much of these increases is continued pressure on commodities. Inflation for everything from fruits and vegetables to beef and cooking oil is expected to continue this year, putting more pressure on profit margins and driving foodservice companies’ prices even higher.

Beef and chicken prices in particular are expected to keep rising this year. Wholesale beef prices are expected to increase 4% to 7% this year. That’s being driven by higher cattle prices, which the USDA expects to rise as much as 15.5% this year.

Poultry prices, meanwhile, are expected to rise as much as 12% this year. They’ve risen 26.5% over the past year.

Russia’s invasion of Ukraine is expected to take a massive toll on wheat prices, sending the cost of flour soaring. Wholesale wheat flour prices could rise as much as 15% this year. The invasion has put considerable pressure on international wheat prices, given that Ukraine is a major producer of the crop.

Soaring commodity costs

The USDA expects prices for many commodities to increase considerably this year, continuing a historic period of food cost inflation Here’s a look at some of them and the range of expected inflation.

Source: U.S. Department of Agriculture

Cooking oil is also getting expensive, due largely to rising soybean prices—which are expected to increase as much as 11.5% this year. Wholesale prices on cooking oils have taken off—they’re expected to rise as much as 30% this year.

Other commodity costs are expected to increase, too, including dairy, fruit and vegetables. The combination is expected to put considerable pressure on operator margins at a time when labor costs are also increasing. Few operators we’ve spoken with expect the problem to ease anytime soon.

Commodities have been increasing because of the pandemic impacts on the supply chain, as higher labor costs, plant shutdowns and worker shortages have increased the costs of production and transportation. The war in Ukraine has driven up costs further, particularly for certain commodities. Rising gas prices could also extend inflation well into the future.

Keith Anderkin, chief supply chain officer for the fast-casual chicken chain Zaxby’s, recently told A Deeper Dive, a podcast from FoodService Director sister publication Restaurant Business, that he doesn’t expect supply chain challenges to ease until next year.

He also hinted at the frustration operators have had with the series of challenges they’ve encountered the past two years.

“We’re wired to solve problems,” Anderkin said. “But usually we like to see the light at the end of the tunnel, so to speak, and then we go solve it.

“When there’s no light at the end of the tunnel, it can wear people down. But that’s the world we’re living in. We came out of the pandemic and we have a war going on.”

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