Articles
March 20, 2025
Commodities corner: Higher prices require operator flexibility
As operators brace for continued price hikes, analyst Bill Lapp looks at the lay of the land.
Prices on eggs, beef, and coffee continue to skyrocket, the result of Avian Flu, economic dynamics, and drought, respectively.
The restaurant industry is facing several challenges right now, especially where food price fluctuations are concerned.
As global tariffs loom, restaurateurs must stay flexible about potential ingredient cost increases and menu changes if, and when, necessary, says Bill Lapp, president of Omaha, Neb.-based Advanced Economic Solutions.
The commodities analyst further notes that the pricing and shortage of eggs and beef, because of Avian Flu and economic dynamics, are also of concern, as is the skyrocketing cost of coffee, due to a supply shortage resulting from drought conditions in South and Central America.
“For operators, it could be a fairly tricky proposition to make a change like that,” he says. “Customers might not see or realize the switch immediately, but eventually they will and that could impact market share and/or brand appeal in the longer term.”
Lapp says restaurants specializing in breakfast items are likely being hit hardest by supply shortages and price increases.
“If one segment of the industry is struggling more at present, it’s breakfast-centric operations,” he says. “When you look at commodity prices, it appears that those restaurants—because of coffee and eggs—are perhaps the most challenged.”
In addition, prices on produce, such as avocados, tomatoes, and other fruits and vegetables, will remain volatile or increase, especially if the proposed tariffs on goods from Canada and Mexico are enacted in April.
On the brighter side, prices of milk, butter ($2.30/lb.), and block cheese ($1.63/lb.), are lower and should stay stable. Gas also costs less than it did last month, which could boost consumer travel and spending.
As global tariffs loom, restaurateurs must stay flexible about potential ingredient cost increases and menu changes if, and when, necessary, says Bill Lapp, president of Omaha, Neb.-based Advanced Economic Solutions.
The commodities analyst further notes that the pricing and shortage of eggs and beef, because of Avian Flu and economic dynamics, are also of concern, as is the skyrocketing cost of coffee, due to a supply shortage resulting from drought conditions in South and Central America.
Coffee prices, demand still robust
Lapp notes that weather conditions in Brazil could dominate the future of coffee bean supplies. Other countries, like Vietnam and Colombia, add to the overall total of the U.S. supply, but the challenge of the drought will continue because product demand remains high. Over the last two years, the price per pound jumped from $1.50 to $4, nearly triple the price. To counter the reduction in supply, consumers and restaurant operators might look at switching from Arabica to Robusta beans, which are less expensive, he says.“For operators, it could be a fairly tricky proposition to make a change like that,” he says. “Customers might not see or realize the switch immediately, but eventually they will and that could impact market share and/or brand appeal in the longer term.”
Egg prices continue to soar
Egg prices will remain unstable in the short term, according to Lapp, because of the reduction of egg-laying birds in the supply chain. To date, a total of 120 million birds, or 6%, have been culled from flocks. On the other hand, the supply of broiler chickens remains plentiful and pricing, while higher than last year at $3.30/lb., has not reached extreme levels, he adds.Lapp says restaurants specializing in breakfast items are likely being hit hardest by supply shortages and price increases.
“If one segment of the industry is struggling more at present, it’s breakfast-centric operations,” he says. “When you look at commodity prices, it appears that those restaurants—because of coffee and eggs—are perhaps the most challenged.”
Where’s the beef?
Beef prices will also continue to rise over the next couple of years because of smaller herds and lower production. The inventory of U.S. cattle at the start of 2025—the smallest herd since 1951—declined for the sixth consecutive year. As a result, beef trimmings, used in the production of hamburger, is $3.80/lb., an increase of about 30%.In addition, prices on produce, such as avocados, tomatoes, and other fruits and vegetables, will remain volatile or increase, especially if the proposed tariffs on goods from Canada and Mexico are enacted in April.
On the brighter side, prices of milk, butter ($2.30/lb.), and block cheese ($1.63/lb.), are lower and should stay stable. Gas also costs less than it did last month, which could boost consumer travel and spending.
Lock in contracts
“Take advantage of opportunities to establish long-term contracts to limit price increases and reduce the risk of shortages,” Lapp says. “Make sure to have good relationships with suppliers to ensure you lock in contracts that maintain supply at established prices. At the same time, stay open to re-engineering menus in case you encounter shortages or price hikes. It’s essential to be as flexible as possible.”Sign up for our Newsletter
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