What’s Your Beef? | How to Combat the Rising Fallout Cost of Drought

Higher food prices are now predicted from a perfect storm of conditions due to this year’s drought. Recent accounts report there hasn’t been a drought as strong since the 1950’s. Now is the time to reflect upon your purchase strategy.

Trickle Down Affects

The corn and soy bean crops suffered severely from the drought driving up their prices. Higher feed prices mean higher costs to feed livestock forcing feed lots to push through animals faster. At the same time new cattle on feed is 19% lower than last year which means there will be less beef supply down the road.

The reduced corn and soy harvest will also affect the dairy, pork and poultry markets which also rely on these crops for feed. The USDA predicts food prices to rise by as much as 4% by the end of the year.

The Laws of Supply and Demand will also contribute to the situation. If demand remains steady [most likely, it will] or increases, higher food prices will result.

Go On the Offense

What can you do to combat higher prices when it comes to beef and pork? Here are some of our prime suggestions:

  • Lock-in current prices with your supplier. Commit your weekly volume to your supplier now and lock-in a price or, “not to exceed” price.

If your supplier knows your volume and has your commitment to purchase they can plan ahead for your needs. Having a predictable committed customer is a value to your supplier that helps them with their planning. For the operator, having a locked-in food cost allows you to lock-in your margins and menu prices.

  • If you can use frozen product, purchase a percentage of your forecasted volume now and freeze it. Today’s prices are hedge against higher future prices. Your frozen hedge can dollar cost average down your overall spend.
  • Take advantage of value cuts which you can offer on your menu at a lower price, yet deliver the same or higher margins for your operation. An example of these would be hanger steaks, bistro steaks and double bone pork chops.
  • Consider purchasing All Natural products such as Niman Ranch or Tallgrass Beef, which ride their own market for pricing and tend to be more price stable than the commodity market.

…and one more savings tip from our resident Chef, Russ Kramer:

One way to save and still keep product quality intact can be to do some portion size adjustments as a means of saving center of the plate cost. For example, by reducing the portion by 1 ounce from an item that costs $25.00 per lb, it will save them $1.56 in the plate cost. Slight specification adjustments can help save money as well.

Plan now. The best defense really is a good offense – even with meat!

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From the desk of  John Cecala  Twitter @Buedel Fine Meats  Facebook  Buedel Fan Page

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