Editor's note: This is the final story in a six-part Restaurant Business series on climate change and the restaurant industry.
The market for beef is hot right now. Beef prices are up 22% this year. And the U.S. consumer is apparently undeterred by those prices, snapping up steaks at Texas Roadhouse and prime rib at the grocery store.
All of which should provide considerable incentive for the nation’s ranchers to ramp up beef production. Farmers and ranchers traditionally increase production when prices are high, to take advantage of the market while they can.
The problem? Grass.
Drought conditions in Southern plains states such as Oklahoma mean there isn’t enough grass for cattle to graze upon. So even if they could ramp up production, they can’t because the grass just isn’t there. So, they’ve liquidated herds and now hope for better weather down the road.
All of which adds up to high prices that won’t likely abate anytime soon.
“This is a multi, multi-year problem,” said David Maloni, a supply chain consultant and restaurant owner in Florida. He estimates it will be 2030 before beef gets back up to the production level of 2022.
Climate change affects restaurants in numerous ways. But the most common, and subtle, is through the supply chain.
Weather events, droughts and fires, made worse in a warming planet, ravage cropland and drive up the cost of what’s available. A global economy means that even a weather event on one side of the world can increase costs on the other side.
A drought in Mexico is making it hard for Huy Fong Foods to source enough peppers for its Sriracha hot chili sauce. A wet year in France has spread a fungus that is endangering grapes used for wine. A pair of hurricanes in the Southeast U.S. has hammered the orange crop. Hot ocean temperatures are making it tougher to source seafood as fish search out cooler temperatures.
But over the long term, global temperature changes will make numerous crops less productive.
For every 1-degree Celsius increase in global average temperatures, for instance, production of wheat decreases 6%, rice 3.2% and corn 7.4% by 2027, according to a National Academy of Sciences study.
“You cannot find a crop or a species that is not impacted by climate change,” said Greys Sošić, a professor of data sciences and operations and the E. Morgan Stanley chair in business administration at the Marshall School of Business at the University of Southern California.
By 2027—just three years from now—at least one estimate suggests restaurant industry revenue could start declining as rising costs for food leads to restaurant closures, particularly among independents, according to a report from the James Beard Foundation and the Global Food Institute at George Washington University.
And yet while the supply chain and food costs are a casualty of global warming, they are also a cause of it, one that is generating a lot of action among restaurant chains and their suppliers.
Droughts can hammer the corn crop, which drives up prices for several proteins. | Photo: Shutterstock.
A fragile supply chain
To understand the potential impact of some of these issues on restaurant costs, just look at a pair of different events over the past decade.
In the winter of 2011-2012, below-normal snowfall left much of the country without the spring snowmelt, according to the National Weather Service. What snowmelt there was quickly evaporated in March with above-average temperatures, creating dry conditions that would worsen by the summer.
By July, much of the Midwest was entrenched in the worst drought since the 1950s.
The drought hammered the country’s corn crop. Farmers had their lowest crop yield in nearly two decades, and the lack of supply drove prices skyward. At one point, the price for a bushel of corn that year hit a record $8.31—well over double what it typically is.
The price of corn has a substantial impact on food prices, because it’s used as feed for animals, particularly cattle. Beef prices took off the next year, hurting profits for chains like Ruth’s Chris and other brands, and remained elevated for more than two years. But the drought affected many other crops, like wheat, and drove up those costs, too.
Drought is certainly not uncommon, hitting the U.S. at least once per decade. And much of the food industry has adapted to it. Yet climate change increases the chance for drought worldwide. Much of the U.S. is currently in a drought.
The global economy means the impact of these weather events is felt worldwide. A persistent drought in Spain has ravaged the olive crop, producing a shortage of olive oil and driving up prices worldwide. Olive Ventura, a retailer out of Ventura, California, recently raised prices for the olive oil it sells while explaining the prices to its customers on its website.
But the fragility of the supply chain was also demonstrated in an event that, in many respects, had nothing to do with climate change.
In 2020, a global pandemic shut down much of the worldwide economy as governments took steps to keep people home to stop the spread of COVID-19. As the economy reopened in late 2020 and 2021, production ramped up far more quickly than did people’s willingness to work.
The lack of labor made it difficult for many industries, including food production businesses, to meet demands for their goods. And it drove up global inflation to levels unseen since the oil shocks of the 1970s.
The impact of that inflationary period is still being felt, as voters angry over high prices changed the power structure in numerous countries around the world, including the U.S. with the recent election of Donald Trump as president.
“When COVID hit, it showed the vulnerability of the supply chain,” said RC Carter, a rancher in Wyoming.
There is at least some good news, however, for restaurant operators. It forced a few lessons. Namely, be careful with sourcing. And those lessons could be valuable in a future in which supplies are more fragile than ever.
“Restaurant chains realize, and even in my restaurant, you can’t be single sourced,” Maloni said. “Particularly for your main items, whether that’s a key sauce for a chicken wing chain or a French fry, you can’t be single sourced anymore. You have to be agile.”
Wildfire smoke can give wine a smoky or burnt taste, known as "wine taint." | Photo: Shutterstock.
Fires and hurricanes
January and February 2020 were unusually dry months in California. That was followed by an unusually hot summer which, on top of a lack of snowmelt coming down from the mountains, turned much of the state into a tinderbox by August.
So, when some thunderstorms moved into Northern California that month, the lightning strikes ignited several fires. Driven by strong Santa Ana winds, the resulting LNU Lightning Complex fires would last more than a month and burn 192,000 acres in the hills surrounding cities like Napa.
It also did hundreds of millions of dollars in damage to the region’s crops, particularly the vineyards used to produce grapes for chardonnay or cabernet sauvignon served in restaurants around the country.
But it’s not just the grapes that were destroyed. Smoke from wildfires can give grapes a smoky or burnt taste, known as “wine taint.”
“It changes the flavor,” said Shannon Douglass, president of the California Farm Bureau. “It’s one of those things, even if smoke isn’t right in their backyard, it can still cause damage.”
And it’s not just wine. Smoke from wildfires can lower crop yields of California’s almond orchards, according to a study published earlier this year by the University of California-Davis. That’s a big deal, because California produces 80% of the world’s almonds.
Major disasters, from wildfires to droughts to heavy rain, are disruptive to the global supply chain. And the number of disasters has increased markedly in recent years.
According to the James Beard/Global Food Institute report, there were 7,342 natural disasters from 2000 to 2019, up 74% compared with the previous two decades. And natural disasters have only increased in frequency since then, with the average number of storms up 19%, wildfires by 29% and floods by 23%.
These disasters can hit agricultural communities and drive up prices.
Unusually warm waters in the Gulf of Mexico over the summer fueled the creation of an unusual number of powerful hurricanes. Hurricane Helene formed over the Caribbean Sea and hit Florida as a Category 4 storm on Sept. 26.
Hurricane Milton formed just a couple of weeks later and would grow into the strongest tropical cyclone on record this year, with 180-mile-per-hour winds. It hit Florida on Oct. 9.
The dual hurricanes wiped out a Florida orange crop already in decline. Orange production in Florida will be down 16% this year because of the hurricanes, according to the U.S. Department of Agriculture.
And that’s on top of previous declines. Florida’s orange production has fallen 92% since 2003-2004, thanks to a combination of storms and disease. Climate change is also a contributor to crop disease, as warmer temperatures prove to be far more favorable for the growth of pathogens.
Farmers have in many ways learned how to adapt. In California, some ranchers have taken steps to protect their cattle from heat.
Douglass owns a farm in Northern California that raises beef cattle, walnuts, hay and seeds. She closely monitors the soil, test plants and will even have permanent sensors on some of her trees to determine moisture levels.
That can help the crops better withstand drought, or California’s tricky water supply issues.
“We want to make sure we’re utilizing our water at the most appropriate time,” Douglass said.
Droughts and disease in many coffee-producing regions are driving up the cost of coffee beans even as demand soars around the world. Coffee prices are up 42% over the past year, helping send prices for coffee drinks rising—which in and of itself could be contributing the weak sales this year at market leader Starbucks.
The Seattle-based coffee giant buys about 3% of the world’s coffee beans. The company’s hacienda Alsacia, its first coffee farm in Costa Rica, has been working on efforts to improve productivity and water use, potentially mitigating the impact of climate change. Starbucks recently said it is expanding that effort with two new farms in Costa Rica and Guatemala and plans more farms for Africa and Asia.
Starbucks is raising coffee that can withstand climate change in Costa Rica. | Photo courtesy of Starbucks.
A casualty and a cause
When Carter, the rancher, abandoned his plans to become a veterinarian so he could run his family’s Wyoming ranch, he had no idea he’d spend so much of his time thinking about worms.
“If you have 10 worms per square foot, you get 2.7 million worms per acre, and they will completely flip and build six inches of soil in three years’ time,” Carter said. “A good habitat for worms affects everything.”
Worm health is important, because it ensures a healthy underlying soil, encouraging growth of grasslands for his 2,700 head of cattle at the 40,000-acre Carter Ranch, which supplies Carter Country Meats.
So, while he didn’t expect to be so into worms, he is now, to maintain his regenerative ranch, improve the ecosystem on his land and ensure that the meats he produces are more nutrient-rich.
For Carter, the healthier worms mean the ecosystem on his ranch is more favorable for the cattle. But it also attracts more wildlife, which makes the land more enjoyable for him and his family.
“I’m a dirt guy,” he said. “I’m a soil guy. A nature guy. That is my church.”
The supply chain isn’t just a casualty of climate change but a cause. And raising livestock is a particular problem.
Livestock are responsible for 14.5% of greenhouse gas emissions, according to the Food and Agriculture Organization of the United Nations. Many grasslands have also been eliminated to make way for corn, which is typically used for feed for that livestock, rather than food—which in turn makes that crop vital to the demand-supply equation.
One solution in recent years has been to replace beef and chicken with plant-based substitutes. But that market isn’t there, certainly not in the way it is for those animal proteins. And it’s not entirely evident that plant-based meat substitutes would actually be better for the environment over the long-term.
That’s why many advocates believe regenerative agriculture is the answer, by focusing on soil health and restoring balance to the ecosystem. The plants and trees can then draw down some of the carbon dioxide in the atmosphere that is trapping the heat.
The ranchers themselves also practice good grazing habits, moving cattle around much in the same way that bison roamed the western plains before overhunting wiped them out. “You can use your animals to increase biodiversity,” said Farley Green, marketing manager for Audubon Conservation Ranching. The program encourages ranchers to use regenerative techniques to improve the ecology of grasslands.
Some restaurant companies such as Taco Bell owner Yum Brands have worked with Audubon on the effort, which is largely aimed at restoring the habitat of grassland birds, the population of which has declined 53% since the 1970s—thanks to grassland destruction.
But that also helps with the cattle and with climate change. And a growing number of chains are sourcing their beef and other products from farms and ranches that use regenerative methods.
Sweetgreen, for instance, recently debuted Caramelized Garlic Steak on its menu, the first time it has added beef to its vegetable-heavy set of offerings. The fast casual believes that sourcing more ingredients using regenerative agriculture will offset whatever carbon is emitted by the cattle.
The burger chain Hopdoddy, meanwhile, uses regeneratively raised, grass-fed beef for its burgers. Shake Shack, the New York-based burger chain, also uses regenerative beef. Chipotle has taken numerous steps to source its products from regenerative agriculture sources.
So has Taco Bell, which is working with Cargill and the National Fish and Wildlife Foundation to improve ranchers’ farming efforts out West. “It’s really anchored around environmental protection, species and habitat, some water remediation, some climate and it has an element of making sure rancher livelihood fits in there as well,” said Jon Hixson, chief sustainability officer for parent company Yum Brands.
For Yum, which is adding restaurants globally at a breakneck pace, taking steps to strengthen the supply chain is important. “For the planet, for the climate and for the resilience and the capacity of the business,” Hixon said, “it all has to fit together.”
There are legitimate reasons for these brands to take these steps that go beyond working to ensure they can source enough product going forward: Customers like it.
Each of those aforementioned chains has outperformed average sales results for the broader restaurant industry. Last year, they on average grew at double the rate of a typical restaurant chain on the Technomic Top 500 Chain Restaurant Report.
Still, fixing the supply chain remains a long-term issue. Many of the ranchers working the most-sustainable practices have a limited market, and most of the major chains are supplied by larger companies for whom taking those steps is expensive and complicated.
Carter Country Meats went to a direct-to-consumer model during the pandemic but next year plans to sell its meats to restaurants and other companies.
“The supply chain is not set up to suit them,” Green said of ranchers that Audubon works with, such as RC Carter.
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