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    Firm: Relief in Sight for Commodity Costs

  • Industry News February 24, 2015

    Recent severe weather has many operators nervous about the potential effects on commodity prices. But Dewayne Dove, vice president of risk management for SpenDifference, a chain restaurant purchasing cooperative, says there might be some relief ahead for operators.

    Despite the exceptionally frigid temperatures that have recently plagued the country, Dove says, conditions continue to look favorable for the corn market as the year progresses. Corn is the main driver for price changes; three staple proteins—beef, chicken, and pork—all rely on the grain as a primary feed ingredient. Corn prices were down 27 percent in 2014 over the previous year. Dove says this change will have a particularly big impact on restaurants that are heavy users of chicken and pork.

    “With pork and poultry, because of the shorter cycle from farm to plate, we’re going to realize price relief this year,” Dove says.

    Beef prices, however, remain high because of the lengthier turnover rate. Dove predicts that it will take around two years to rebuild cattle herds and see any drop in prices. In the meantime, the price of beef will continue to increase.

    “Our message is, where you can identify the categories that you utilize in your restaurant, if you have the opportunity to change your menu mix and introduce more poultry or pork versus a new steak item, that is going to help you lower your price of goods,” Dove says.

    Staying savvy to changes in commodity markets allows operators to be prepared to change as the markets change, he adds, and today’s markets are fluctuating at a quicker rate than ever before.

    “Where the industry has changed over the past five to 10 years is that you used to be able to establish your strategy for the coming year, execute toward that strategy, and you wouldn’t have to monitor your strategy going forward,” Dove says. “In today’s environment, you have to establish that strategy and you have to watch it on a daily basis—specifically the key commodity drivers around that strategy.”

    By Emily Byrd