Tuesday, October 30, 2012

Who is eating the higher food prices?

Sunday I went grocery shopping and paid less than $2 for a gallon of milk.  Most other prices were similarly reasonable and close to what I have paid for the last few years.  My point is that the high grain prices caused by last summer's drought are NOT showing up at the retail level.  At least not yet.  It's not for lack of trying.  If anyone raises their prices, all you have to do is wait a couple of weeks and they will have gone back down.  Yes, there is some successful stealth price rises such as reduced package sizes with the old prices, but the overwhelming reality is that nobody in the food industry has pricing power these days.

I don't see higher prices showing up at the local eateries either.  So the lesson seems to be that while someone is eating the higher food prices, it is the food processors, wholesalers, retailers and eateries who are suffering the major margin reductions.  Dairy farmers are obviously losing money.  And I have NO idea how most small restaurants are surviving these days.

Bulk Food Supplier Reveals How Much More Restaurants Are Paying For Food

Rob Wile | Oct. 24, 2012

The full toll this summer's epic drought took on the economy is still being reckoned.

But Bruce Reinstein, V.P. of strategic development & sourcing for Consolidated Concepts, a group buying and services company for mid-size restaurant chains, told us via e-mail that prices for at least a dozen foods are already rising or are about to spike.

Here's the full list, with Bruce's comments:
  • Chicken Wings — "Buffalo wings will keep rising into next year until they are almost 100% higher than 2011."
  • Bacon — "Over 5% higher."
  • Apples & Apple Cider — "Prices will be up 20-30% this holiday season instead of being 10% lower if there had not been a drought."
  • Turkey — "A 7% jump in prices."
  • Whole Chickens — "They have been 6% higher since April."
  • Chicken Breasts — "They have been 5% higher since April."
  • Eggs — "Prices of eggs will probably be much higher in 2013 because of the limited supply of chickens."
  • Cooking Oil — "5% higher now, going into next year to a 10% increase over 2011."
  • Milk, Butter & Other Dairy Products — "Butter prices usually drop 20% in the fall, but that has not happened. Instead, dairy prices will be 5-10% higher than 2011."
Reinstein says smaller chains are going to see their profits or even their survival under attack. more


  1. Prices have been climbing for some time now. While rice prices didn't go up much after the ballyhooed shortage, they have now gone up about 25% over the last 2-3 years and by a third in the last five years. Produce prices are swinging wildly, and staples like bell peppers have gone up a lot at the wholesale level.

  2. Thanks Mark. If anyone knows these thing, it would be you. I just think that a lot of small producers are eating the losses because nobody can raise prices at the retail level. I mean, I know your prices are up for supplying that Thai restaurant but have you raised your menu prices? Can you?

  3. Another reason why small producers and retailers eat the increases, is because they see the consumers face to face. It is easy for a German banker to raise prices on a Greek pensioner, but much harder for a Greek banker to raise prices on his neighborhood.

    That is yet another reason why multi-national corporations are evil, and why the most 'efficient' market is not necessarily the most effective for society.

  4. Menu prices were raised this summer for the first time in over five years. Customers barely noticed because other restaurants have raised their prices higher.

    Most customers haven't been phased by the economy, but for quite a few of them it's obvious that every night out is a special occasion. Tolerance for bad service is at an all time low.