Foodservice

Wells Fargo Report: At-Home Hamburgers 3x Cheaper Than Dining out

Mon, 01 Jul 2024 23:08:31 GMT

The annual Wells Fargo Fourth of July Food Report revealed for this year’s holiday home-cooked burgers would be three times cheaper than dining out.

The Agri-Food Institute team at Wells Fargo collected data showing the current cost of ingredients to prepare a quarter pound hamburger at home is $2.16 per burger (which includes cheese, tomato, and lettuce) whereas, the average of five popular quick service restaurants has a price of $6.95 for the same quarter-pound hamburger.

The team at Wells Fargo highlights the mid-June 2024 Consumer Price Index (CPI) for Food at Home rose by 1% compared to mid-June 2023 when this same index was rising at 5.9%.

Courtney Schmidt, Wells Fargo Agri-Food Institute Sector Manager says food inflation has mostly moderated, but the increased labor, transportation and capital costs are weighing on the dining out industry.

“When you go to dine out, of the total cost that you’re paying, only 30% of that is food,” she says.

For food away from home, the mid-June 2024 CPI rose by 4%

The analysts at Wells Fargo say that the longer the mismatch in inflation for food at home vs. dining out continues, the more consumers will be economically incentivized to eat at home.

“You’re still paying more for your food when you go into the grocery store than a few years ago, but you’re seeing a slow down in that food inflation. This time last year, we were at nearly 6%. Food inflation is not going negative, and we’re still paying more, but you’re seeing a slowdown considerably in that food inflation,” Schmidt says.

The Wells Fargo Fourth of July Food Report highlights two categories that did see declines in prices at the grocery store compared to last year: potatoes (for potato salad) and avocadoes (for guacamole).

“Both of those markets have just seen more production out there. So you’ve seen more potato production; you’ve seen better avocado production. That’s just been helping those wholesale prices that have just transferred into the retail side,” Schmidt says.

Courtney Schmidt

(Wells Fargo)

Regarding elevated beef prices through the summer grilling season, Schmidt says we could see many months to a few years of elevated prices for beef.

“You’re seeing those elevated beef prices because we had that drought back in 2022 where we saw the cattle herd dropped to very low numbers. We really need to start seeing that herd rebuilding before we’re going to start seeing improvement in those prices,” Schmidt says.

She does offer that with lower corn prices leading to lower feed prices, for the animals processed beef production is up because producers are putting more weight on cattle.

“That’s added to the beef production, and we’ve also seen more imports of beef. So while we are seeing lower supplies of beef compared to where we were at last year, it’s not as bad as it could have been based on the size of the cattle herd,” Schmidt says.

She adds, “I think we’re still a couple years out before we’re going to start seeing some of that significant herd rebuilding.”

Freight Rates Skyrocket

Tue, 15 Nov 2022 07:27:49 GMT

Transportation woes continue to haunt Northeast shippers as trucks remain hard to come by and freight rates skyrocket because of rising fuel costs and a scarcity of drivers.

“Trucks are at a premium right now,” said Tracie Levin, controller at M. Levin and Co. , in Philadelphia.

“It’s a major hindrance for our industry and anyone else that uses trucking, which is basically every industry out there,” she said.

Shippers can’t even buy trucks.

“We’ve been on wait lists to get more trucks, trailer and tractors,” she said. “You just cannot get those things these days.”

But Levin is optimistic that things will turn around. She said some relief is already in evidence.

“We’re slowly able to get things again in a semi timely manner,” she said.

East Coast shippers have been dealing with transportation issues, but there are trucks available, said Tom Beaver, director of sales and marketing for Sunny Valley International Inc. , in Glassboro, N.J.

“Obviously, the cost of brokering a truck, especially for our (less-than-load) business, has increased considerably, but the same is true for all of our competitors,” he said. “We’re adjusting to this ‘new normal,’ but the important thing is that we can get fruit loaded and out to our customers on time and in full.”

Transportation challenges are more prevalent during the winter than they are during the spring and summer for Vineland, N.J.-based The Freshwave Fruit & Produce and its growing operation, Consalo Family Farms , said Chelsea Consalo, executive vice president.

That’s because the company has more local deals during the warmer months.

During the winter, the firm must bring in products from outside growing areas, such as Mexico, and transport fruits and vegetables imported from offshore growing regions, such as Chile, from U.S. ports.

“We have more trucks on the road (in winter),” she said.

Transportation costs are a major concern.

“We’re managing to get the trucks,” Consalo said. “It is just more expensive.”

The Freshwave has added Nick Crisafulli, who recently completed an internship at Americold Logistics LLC, to its logistics staff to help arrange transportation.

Vineland-based Flaim Farms Inc . has its own fleet of trucks for local deliveries, said president Ryan Flaim.

But trying to find trucks for destinations that are farther out is challenging.

The company has good relationships with trucking firms, but rates are much higher than they have been in the past, Flaim said.

Finding transportation isn’t a problem, as long as you’re willing to pay exorbitant fees, said Joel Fierman, president of New York-based Joseph Fierman and Sons Inc .

“It’s really a pity when your cost for transportation pretty much is as high as your cost for goods,” he said.

He blamed the price spike on high fuel costs and a scarcity of drivers.

“It’s a terrible, terrible thing that this country is experiencing right now,” he said.

An added problem during the Christmas season was that many trucks were sidetracked delivering Christmas trees.

“It’s fast, easy money,” he said.

Filindo Colace, vice president of operations for Philadelphia-based Ryeco LLC , attributes the skyrocketing inflation rate the industry has experienced to high freight costs.

“Freight has been a premium for quite some time,” he said.

While seed prices and other costs have also gone up, he said high freight rates are 90% of the cause of inflation.

“Nothing in the industry has gone up at the same rate as freight has,” Colace said.

But he remains optimistic.

“We think the country is moving on,” he said. “We’re going to be as back-to-business as usual as possible in the first quarter of next year.”

He expected buying patterns to return to where they were in 2019.

“We hope the workforce returns to those levels, as well,” he said.

“If that’s the case, it will be our expectation that freight rates will start to lower because there are more truck drivers coming back into the workforce.”

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‘Perfect Storm’ Makes Restaurant Recovery A Long Haul

Tue, 13 Jul 2021 20:36:11 GMT

It’s calculated due to the influence of the COVID-19 pandemic, 90,000 restaurants have closed either permanently or long-term. That according to Mike Whatley, vice president of state affairs and grassroots advocacy for the National Restaurant Association.

Whatley joined AgriTalk host Chip Flory to talk about the ongoing challenges facing the restaurant industry.
At the root of many of the woes of hospitality is labor, which Whatley says we are experiencing, “the perfect storm in terms of labor challenges we’re seeing is really all across the country.”

“We’re excited that there’s a lot of pent up customer demand for a restaurant and being in person again because of the vaccine roll out,” he says. “One of the challenges that we’re now facing is not having enough staff to actually meet demand.”

He cites some workers having safety concerns for working in a hands-on industry such as food service, and the association is advocating for increased vaccinations. Also the availability of childcare is limiting for some workers.

Whatley says many restaurants aren’t able to find enough workers to fill the seating capacities and all of their shifts. So many businesses are adjusting their hours based on their available workforce.

Dr. Michael Swanson, economist with Wells Fargo, says labor is the largest challenge facing restaurants.

“It’s always about people,” he says. “We’re still about 4 million people down from people who were working just a year ago.”

The labor woes are compounding for businesses who have experienced 15 months of extreme hardship and rely on a summer surge of business, says Whatley.

“The Small business administration announced that the Restaurant Revitalization Fund or RRF which was a federal grants program to help restaurants cover those losses is officially out of money,” he says. “We had $28.6 billion that was there, and $75 billion was applied for. So you have restaurateurs who applied for money and planning that they would have hopefully get it, who are now being told, the money is gone. We need Congress to add more money to help restauranteurs who applied; this is critical.”

Another factor is the rising cost of food for restaurants, which the association says wholesale food prices are on track to post their largest annual increase since 2014.

Is Food Inflation Real?

Tue, 13 Jul 2021 20:35:30 GMT

Food prices for consumers are higher. Wholesale costs for restaurants are higher. Is inflation a real or transitory issue for agriculture and food?

Wells Fargo chief agricultural economist, Dr. Michael Swanson, joined Chip Flory on AgriTalk to discuss the issue and how it’s developing.

Swanson says two forces got us to the current situation:

In 2019, grain stocks were run lower and the market did not ration through price. “Back in 2019 the market would have been a lot better off moving to $4 plus corn to send a signal earlier in the market about how to use it and how to grow it,” Swanson says. He forecasts work to be done until 2023 to restore grain stocks to levels that are more in balance.
Labor is a key driver in the food system of the U.S. “We’re still trying to sort out with labor issues about who should be working, where they should be working, and for what wage rate,” Swanson says.

The National Restaurant Association says wholesale food prices remain on track to post their largest annual increase since 2014.

Increased food costs, higher labor costs and changing consumer behaviors are still revealing post-pandemic effects.

“People are deciding: you’re going to go out to eat, or you’re going to eat at home,” Swanson says. “We all see those signs, you know, 15 plus dollar an hour for working at the cash register. That makes food expensive. It only gets more expensive as you go up the chain. So people might want to get away from home, but it’s going to be really expensive due to the labor issue.”

While there have been other “shocks” in the economy, Swanson sees labor as the longest running and most challenging issue.

“When you get an unusual thing like shutting down Texas refineries and the short of plastics for a while, that is a shock, that’s not a structural change. And so what I think the Fed is really asking is, were there really structural changes that just make it more expensive to produce these products on a go forward basis,” Swanson says. “As you dig into each of those issues, whether it’s timber, plastic, or steel, it’s a much more complicated question. People are the are the biggest driver of anybody’s costs.”

So is this inflation? The Fed points to the factors being of transitory nature. Swanson says keep an eye on the labor side of the equation.

“It’s always about people,” he says. “We’re still about 4 million people down from people who are working just a year ago. And the question is, is that transitory, what would it take to get them back in the market and what that means to inflation. I think the Fed wants to have it both ways, like all of us. They want to keep the market from getting too excited about inflation, while they wait to see a better recovery.”