The price of things to come

The drought that affected the Midwest corn crop over the summer is going to have a major impact on cattle feed costs and beef prices, predicts DeWayne Dove, VP of Purchasing for SpenDifference. This Denver, Colorado company partners with smaller restaurant chains to boost their buying power through scale.

In 2011, beef producers saw corn spike to over $7 a bushel; the third and fourth quarters of 2012 will look similar, with 2013 prices flattening out or going down slightly. Dove believes. But beef prices rely on more than just corn. “Demand and shrinking herd size are also factors,” he points out. “It won’t be until 2014, when cattle production starts to grow again that we’ll see prices going down.”

So what’s an operator to do? SpenDifference recommends these strategies:

  • Work closely with your R&D team to spec product. By changing the lean point of a burger blend to 78 percent from 80 percent, you can save some money without a noticeable difference in flavor or quality
  • Consider all the factors that go into the cost of burger meat—shrinkage, waste, freight, etc.—and try to increase efficiencies
  • Don’t rely only on one or two suppliers and distributors to determine pricing. Research and compare multiple sources
  • Leverage volume. Suppliers become more flexible about pricing when they work on a larger scale

Download a PDF with additional data here.

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