No Relief in Sight on Food Prices

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

The USDA said in its food price outlook that it expects prices for food at home (groceries) to rise 3% to 4% this year. Menu prices at restaurants and foodservice companies are expected to rise 5.5% to 6.5%, which would be a higher rate of inflation than in either 2020 or 2021 and higher than historical averages.

Driving much of these increases is continued pressure on commodities. Producer price 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, with wholesale beef prices expected to increase 4% to 7%. 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 (Ukraine is a major producer of the crop), sending the cost of flour soaring. Wholesale wheat flour prices could rise as much as 15% this year. 

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. 

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 commodities such as sunflower oil and wheat. 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 Winsight Grocery Business 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.

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

A version of this story originally appeared on FoodService Director.com.