Executive Briefings

Dig In: Restaurants to See Cost of Beef Decrease as Much as 17 Percent

Reversing years of steadily increasing prices, the cost of beef is expected to decrease between 10 percent and 17 percent across all primal cuts in 2016 in what amounts to "the biggest story of the year" for chain restaurant operators, said DeWayne Dove, vice president of risk management for supply chain management firm SpenDifference.

Dig In: Restaurants to See Cost of Beef Decrease as Much as 17 Percent

The outlook for beef and other commodity costs is contained in the company’s annual purchasing forecast, which tracks the prices restaurant chains pay for food products.

“The drop in beef prices is clearly the best news operators have had in many years,” Dove said. “With cheaper beef and lower prices of other commodities, restaurants are starting to consider lowering menu prices to increase customer counts and boost their profit margins at the same time.” Dove added that winter storms hitting key cattle and grain regions are not expected to affect production or prices.

Higher cattle weight and a 4 percent rise in production led to the forecasted price decline for beef, he said.

The cost of corn, which drives prices of the other commodities, is forecasted to be below $4 a bushel to $3.96 for 2016, according to the purchasing forecast.

Boneless chicken breast meat will decrease in cost by 3 percent to 4 percent in 2016 because of an increase in supply. Last year’s avian flu led to a drop in exports and a “tremendous amount of supply” domestically, Dove said.

Turkey flocks were especially hard hit by the flu, with 7 million birds destroyed. That resulted in a 28 percent cost increase for turkey breast in 2015. The price is forecast to remain at $4.50 a pound or slightly higher in 2016, Dove said.

“Overall, restaurant operators are in a good spot for 2016 as long as they have risk management strategies in place to blunt unexpected volatility in commodity costs,” Dove said.

Source: SpenDifference

The outlook for beef and other commodity costs is contained in the company’s annual purchasing forecast, which tracks the prices restaurant chains pay for food products.

“The drop in beef prices is clearly the best news operators have had in many years,” Dove said. “With cheaper beef and lower prices of other commodities, restaurants are starting to consider lowering menu prices to increase customer counts and boost their profit margins at the same time.” Dove added that winter storms hitting key cattle and grain regions are not expected to affect production or prices.

Higher cattle weight and a 4 percent rise in production led to the forecasted price decline for beef, he said.

The cost of corn, which drives prices of the other commodities, is forecasted to be below $4 a bushel to $3.96 for 2016, according to the purchasing forecast.

Boneless chicken breast meat will decrease in cost by 3 percent to 4 percent in 2016 because of an increase in supply. Last year’s avian flu led to a drop in exports and a “tremendous amount of supply” domestically, Dove said.

Turkey flocks were especially hard hit by the flu, with 7 million birds destroyed. That resulted in a 28 percent cost increase for turkey breast in 2015. The price is forecast to remain at $4.50 a pound or slightly higher in 2016, Dove said.

“Overall, restaurant operators are in a good spot for 2016 as long as they have risk management strategies in place to blunt unexpected volatility in commodity costs,” Dove said.

Source: SpenDifference

Dig In: Restaurants to See Cost of Beef Decrease as Much as 17 Percent