(Nation’s Restaurant News)
Restaurant operators are braced for dry, stiff headwinds in commodity costs as America’s food-producing regions continue to face the most persistent drought in a half century.
The U.S. Department of Agriculture’s Aug. 21 update said: “Serious agricultural drought effects persist east of the Rockies, despite cooler weather and recent showers.” For the week ended Aug. 19, the USDA reported that 51 percent of U.S. corn and 37 percent of soybeans were rated in very poor to poor condition. Jeff Powell, president and chief executive of the 15-unit Razzoo’s Cajun Café, said he expects his Addison, Texas-based chain “will be negatively impacted by the drought and other pressures on grain supply.”
“Corn particularly is a baseline driver of economics in the supply chain,” Powell said. “A shortage of corn caused by drought or other dilution of supply by other uses (ethanol, etc.) obviously negatively impacts the dynamic. Corn is a necessary feed and source of oil, and when in shortage the impact on beef, pork and poultry prices is immediate.” John T. Barone, president and commodities analyst for Market Vision Inc., wrote earlier this month that higher wheat prices for bread, pizza crust, pasta, flour tortillas and bakery products “are obvious.”
“The ‘sneaky’ price increase will come from the big bump in corn and soymeal prices,” Barone said. “That’s because they are the primary feed inputs for poultry, dairy cows, pork – and this year, cattle, because grazing pastures have also been toasted by the drought,”
Popeye’s Chicken & Biscuits recently pointed to the drought and high prices for corn, which is the main feed source for chicken, as the main cause of its higher costs. The company said commodities prices rose 1.5 percent for the second quarter, and company executives expect a 3-percent increase in food costs for the remainder of the year.