DELCO FOODS
OCTOBER 2021 VOL. 26, NO. 10
BUYING VERSUS PURCHASING By Peter Thor, BFC The best way to minimize food cost is to shop every item from several distributors each week. If you think this statement is true, you are a buyer. Is there a better way?
EXPECTATIONS FOR 2022 By Peter Thor, BFC It’s tempting to say “here we go again” with the return to pandemic related consumer behavior. DON’T! Most recent consumer sentiment polls show a sharp drop in optimism, a reduction in spending, and renewed health and safety concerns. We’re betting that this time will be different, however, if only for the vaccine and preventative knowledge gained. Plus, people are tired of the restrictions. It’s doubtful, for example, that there will be fall shutdowns. Schools will stay open, and sporting events will be held with fans in attendance. Restaurants will remain open perhaps with restrictions, and demand for takeaway will continue as well. Pizza will continue to prosper as convenience, portability, and affordability all contribute to pizza being America’s favorite food. Demand will stay strong but so will higher costs. Inflation is a key trend, much different than prior years. Costs of most food ingredients, energy, and of course labor will be here through 2022. Costs will remain higher than 2019/20, with food costs trending down from current levels into early next year. Not so for labor, freight, energy, and other costs. Compared to last year in September, CME block cheese is $.50/lb. lower, but there are spot supply shortages. Cheese production is expected to remain flat with average costs near current levels. Other major cost items are at historic highs, with costs coming down but only partially to pre-pandemic levels. Red meat levels remaining high, especially beef. Pork production in early September was still 10% below last year, and the lowest since 2018. After recent price reductions, pork remains 30% higher than a year ago. Surprisingly, poultry has not been able to meet supply requirements and production remains constrained by Covid related labor shortages, high feed-grain and freight costs. Breasts, wings, and tenders are all running at record-high prices. We’re not confident that we’ll see chicken prices come down until 1st or 2nd quarter 2022. The fact that producers and marketers are actively developing different cuts as alternatives for wings tells us the supply-demand imbalance isn’t going away. Key trends for 2022 will recognize the harm caused by the Covid crisis, both local within family, community, and the broader society and environment. (continued on page 2) A PROUD DISTRIBUTOR OF BELLISSIMO
Managing food cost is extremely important; it just is not the only important factor. One of the reasons why pizzeria owners do not maximize their profitability is that they have too much focus on the buying process. Prime cost, which is food cost plus labor cost is far more important. When an operator spends hours and hours each week shopping distributor’s prices, they are not spending those same hours creating, driving revenue, training (continued on page 3)
MARKET UPDATE Dairy Cheese Blocks
PRICE
LAST MONTH
DIFFERENCE
$1.692 $1.500 $0.192
The CME cheese markets finished higher with blocks, the costliest in 17 weeks. The USDA lowered its Q4 2021 milk production forecast by .3 percent but expect 1.4 percent larger (y/y).
Beef
PRICE
50% Trimmings $1.386
LAST MONTH
DIFFERENCE
$1.181 $0.205
Analysts continue to view the downside across the beef markets carrying into mid- to late month. The Q2 forecast for 2022 has Q2 beef production below Q1. Concerns about both late 2021 and 2022 beef production continues.
Poultry
PRICE
Wings (Jumbo) $3.124
LAST MONTH
DIFFERENCE
$3.129 ($0.005)
Boneless, skinless thigh meat, tenders, wings, and breast meat prices are all running at record-high prices while the bulk leg quarter market is actually a bit more modest by longer-term historical standards. As of 9/17/21
1