A Denver-based supply chain management firm has predicted a double-digit drop in beef price in 2016. If this forecast along with others related to some protein items turns out to be true, it will be a boon for most restaurants that are struggling to meet their food cost goals.
Citing elevated cattle weights as well as four percent increase in production, SpenDifference vice-president DeWayne Dove opined that beef prices may witness a decrease of anything between 10% and 17%.
According to him, the project decrease in beef prices is certainly one of the best news for restaurant operators in the last few years. With beef becoming cheaper and decline in prices of some other commodities, restaurants will now mull over lowering their menu prices with a view to attract more customers as well as boosting their profit margins, Restaurant Hospitality quoted Dove as saying.
Aside from beef, SpenDifference has also predicted price drop for several other proteins that are common of menus of most restaurants. The firm predicts that price of boneless chicken will drop by 4% to 5% during 2016, while prices of turkey breasts that soared following avian flu outbreak in 2015 will remain steady. Even pork prices are likely to remain constant, with a possibility of about 3% decrease.
According to SpenDifference, even corn, a major aspect of several animal protein prices, is likely to cost just a little under $4 a bushel, compared to the target price of $3.96. Even wheat prices, which plummeted to a record low in 2015, are expected to remain steady during 2016. All these will be favorable for restaurant operators during 2016, Dove added.
On the other hand, the "Food Price Outlook, 2016" report released by the Economic Research Service of the U.S. Department in January differs to some extent on beef prices for the current year. The report pointed out that farm cattle as well as wholesale beef prices were high during 2014, while the size of the cattle remained a record low. With the inflation pressures easing somewhat, the prices of these commodities began to deflate from 2015 second half and cattle prices are 27.7% less now compared to the corresponding period in 2015.
Even wholesale beef prices witnessed a 22% drop compared to last year largely on account of better inventories of heavy cattle. Unfortunately, the inventories have started declining again, resulting in a price rise. According to ERS, prices of farm cattle are likely to drop between 5% and 4%, while the wholesale beef prices may increase by 1%.
The difference in the predictions by the two organizations, both have hinted that the food costs, especially beef prices, will be favorable for restaurant operators in 2016.
