Foodservice operators should expect higher beef prices this year as inflation takes hold and supplies tighten.
“The 50,000-foot view is that all meat will be more expensive when calculated through 2021,” says Kevin Good, VP of industry relations for CattleFax, an independent research, information and analysis service for the beef industry. “Grain prices are higher, exports are stronger and there’s a tighter supply of all proteins.”
At around this time last year, foodservice meat supplies were diverted to grocery stores as restaurants and other eateries closed. Restaurants are the main purchasers of beef, especially higher-end cuts and steaks, but the full-service market virtually disappeared overnight. Then the coronavirus spread among workers in meatpacking plants, and facilities were forced to shut down or drastically decrease production.
That combination of events wreaked havoc on beef prices in 2020.
“You can’t look at price comparisons year over year because of the wild gyrations of last year,” Good says. “We couldn’t steadily harvest beef and pork, and prices went record high, especially in May and June.”
Although production slowed down considerably in the late spring of 2020, beef supplies are now up 2% to 2.5%, and operators can expect plenty of beef short term, Good says. But supplies may tighten in Q3 and Q4, he says.
Will Sawyer, the lead economist in animal protein at CoBank in Atlanta, agrees. When the foodservice market dried up last year, U.S. ranchers cut back on cattle production. Although herds are back to 2019 levels, the back half of 2021 will see a contraction in the cattle production cycle—a natural cutback that happens every few years, he says.
"There will be less beef in the second half of 2021, which means higher prices," Sawyer says. "Plus it looks like feed prices will be up 25 to 30% and inflation is higher."
Maximizing the beef buy
Recent USDA figures put choice ribeye—a popular cut in casual dining—about $1 a pound higher than a year ago, and strip about 80 cents higher, but there are cuts that offer more bang for the buck. Top sirloin, for example, is “dead even” in price with a year ago [excluding May and June] and offers good value and better margins than strip or ribeye, Good says. Briskets are still pretty attractive, too, he says.
Sara Scott, VP of foodservice for Certified Angus Beef, agrees. “Sirloin offers more consistently priced products. It can easily be cut into fillets and welcomes additional aging to tenderize it.” The baseball steak, cut from the center of the top sirloin, is lean, thick and flavorful, similar to filet mignon but at a gentler price.
Other cuts that may be more cost-effective are chuck rolls, often used in Asian dishes, sirloin flap and skirt steak, Scott says.
The advantage of cutting meat in-house is that the trim can be used in other applications, such as salads, soups and appetizers. But with the current challenge of staffing up kitchens after restaurants laid off employees last year, it may pay to invest in zero-waste trimmed beef.
Justin Marx, CEO of North American Meats, a foodservice distributor, sources grass-fed beef from New Zealand that is chef-ready and portion-controlled. “Watch for yields,” he advises restaurateurs. “Meat that is ready to use right out of the bag can be a smarter buy … a better way to manage labor and reduce waste.”
Marx believes that customers will be craving steaks, chops and medallions after a year of cooking braised dishes, stews and ground beef at home. Cuts such as skirt steak, flank steak and flat iron are lower in cost and can be menued creatively.
Restaurants are still estimating demand, Marx says, so until meat buys become more predictable, foodservice operations should make sure to keep communication open with their supplier. “Distributors are stocking up and I’m not expecting any supply problems,” he says.
Good recommends booking products up front with a distributor to guard against future price increases. And operators shouldn’t be too hesitant about raising menu prices for quality beef dishes. Pent-up demand for dining out means that consumers may be less resistant to price increases.
After all, “retailers had their way with margins last year,” Good says.