Food Prices Post Huge Gains In February

Food prices at the wholesale level leaped 4% in February, the largest monthly increase in 36 years, according to the National Restaurant Association. It was the eight consecutive month of rising wholesales food prices. So-called “finished foods,” a narrower measure, were 3.9% higher, per the latest Producer Price Index data released by the Bureau of Labor Statistics.

At the consumer level, supermarkets are responding to the wholesale food-price increases more aggressively than foodservice, which continues to move menu-prices only moderately higher. This is increasing the relative inflation gap between food-at-home and food-away-from-home prices, often a positive for foodservice.

The price increases at the wholesale level were driven by a huge 62.3% increase in the prices for fresh vegetables versus January prices, as severe winter weather in the Southeast, Southwest, California, and even Mexico growing regions decimated crops. But meat and dairy prices also jumped and egg prices rose 14.1% compared to January.

Overall, wholesales food prices are 8.9% higher than February last year, said NRA, the largest rise in four years. As foodservice operators major cost input besides labor, higher food prices suppress profit margins, and thus cut into money that might be used for capital improvements.

And this margin gap can be aggravated when operators don’t or can’t raise their own prices fast enough to cover the spread. The reported February increase of only 0.2% for food-away-from-home prices appears to indicate many operators are wary about raising prices just as traffic and sales are beginning to rebound. Supermarkets, which run on lower margins, are being more aggressive. February prices at grocery stores were 0.8% higher. During the past 12 months, food-at-home prices, unadjusted for seasonal variations, are running 2.8% higher, while menu-price increases are up only 1.6%.