Ilya Marritz covers business for WNYC.
Rising Meat And Wheat Prices Squeeze Businesses
Rising Wheat and Meet Prices Squeeze Area Businesses
Thursday, September 23, 2010
On Friday, the U.S. Department of Agriculture released its monthly forecast of consumer food prices. The costs of several raw ingredients have risen sharply this year and the purveyors of foods from bread rolls to beef are warning higher prices are on the way.
Staubitz Market in Brooklyn is a family-run butcher shop with a neon sign in the window and a loyal clientele.
Lately, owner John McFadden has been thinking about whether to raise prices. A few weeks ago, his wholesale supplier hiked beef prices dramatically.
"Say prime ribs of beef were going in the $7 a pound range, untrimmed. And they jumped to $8.50, $8.75," McFadden says. "That's a big swing."
Usually, fluctuations are measured in dimes, not dollars. For a shop purchasing 500 to 600 pounds of beef a week, an increase this large has an immediate effect on the bottom line.
Across town, in Astoria, Tom Cat Bakery is dealing with a different commodity, but a similar problem: a spike in the price of flour, resulting from droughts earlier this year in Russia, a major wheat producer.
Reich expects to pay 15 to 20 percent more for flour for several months to come and some analysts say wheat will be expensive for longer than that.
"The Russians are out of the world wheat market for at least two years," says Dan Basse, President of AgResource in Chicago. "And that's gonna mean higher prices for wheat on a global basis, and here in the United States also."
But if Russia's drought is driving up wheat costs, what's the deal with beef? Dan Basse says there's a connection.
Around the world, beef cattle are major consumers of grain -- corn in the U.S, wheat in the rest of the world. In early 2008, both commodities spiked, then the recession hit and demand for steak dried up. And farmers trimmed their herds.
"There's been no real reason to breed cattle and put 'em in feedlots," Basse says.
Today, there are fewer cows in the pasture. And once again, their feed costs are rising. Just as consumer demand is creeping back.
The U.S. Department of Agriculture says it will take time for higher wholesale food costs to show up in the supermarket. First, every middleman along the way absorbs part of the damage: from farmer to miller to baker.
This month, for the first time in two and a half years, Tom Cat bakery raised the rates it charges hotels, restaurants and sandwich shops. For you and me, it could mean paying just a few cents more for that roast beef sandwich.