Menu price inflation outpacing grocery

The soft markets like orange juice, sugar and coffee have been making noise like Delta Tau Chi during the last week due to various supply concerns. Although I don't typically cover orange juice, the news is disheartening for the industry as production is expected to fall drastically this year. This long time Florida transplant can tell you that there are numerous groves that have been abandoned over the last few decades. Really sad for the industry. Beef 50 prices are making people cry as well with the weighted average market for fresh product just over $1.60 (not a typo) per pound last week.

To put this move for beef 50's in perspective, the weekly average of the market has only been above that level three times in the last decade with all three of those occurring during the spring of 2020 (think Covid panic). This is driving the cost to produce hamburger sharply higher as noted in the chart below. For those keeping score, and I'd bet the Hamburglar is, the cost to produce an 82 percent lean hamburger has risen almost 19 percent since the beginning of the year. By the way, the Hamburglar scared the you-know-what out of me as a kid. I can't be the only one.

Obviously, the rise in hamburger costs are shared by foodservice and grocery. The most recent inflation data continued to show that grocery price inflation is tempering while restaurant menu price inflation is remaining fairly strong. This is being perceived as negative for foodservice sales, and rightfully so. But as the chart shows, grocery inflation is typically much more volatile than restaurant inflation. And its not abnormal for menu price inflation to track above grocery inflation.

Datum FS has forecasts for over 50 commodities comprising various beef, dairy, grains, pork and chicken markets. If you would like to learn more about a complimentary trial to the forecasts and commentary or about Datum FS services direct message me. Thanks for reading.