NATIONAL REPORT The unlikely combination of Mother Nature and OPEC are triggering changes at the farm level that could cut deeply into restaurant profits near-term and for some time into the future.
Restaurants dependent on produce or from California, scene of a freakish deep freeze last week, are already seeing food costs spike because of the drop in supply. Jamba Juice is raising the price of drinks that incorporate orange juice to offset the squeeze in margins. The up-charge for a glass of orange juice is 35 cents, while blended drinks that include the juice carry an increase of 25 cents.
Meanwhile, places that depend on organic or “natural” produce, priced at a premium even before the cold snap because of limited availability, say they are struggling to find sufficient supplies or to afford the quantities they manage to line up. One distributor pegged the increase for broccoli and oranges at 40 percent to 70 percent.
Growers of items like avocados say it will be weeks before the weather's longer-range damage to farms will be determined. They note that the number of trees destroyed by the freeze could limit production and elevate prices for some time to come.
But not all of the pressure on costs is traced to the weather. After President Bush called Tuesday for a nearly five-fold increase in the production of renewable fuels over the next 10 years, the National Chicken Council warned that consumer may see dinner and lunch prices rise as a result. Because corn remains the usual source of ethanol, the trade group warns, and the grain is the also most commonly used feed for chicken and other sources of protein, prices could climb as farmers sell their crops to fuel producers. Farmers will have to pay far more if they want to secure an adequate supply of corn feed, and that will channel down to increased prices at restaurants and supermarkets.
The Council noted that the cost of corn has already doubled because of stepped-up production of ethanol following the sharp increase in gas prices last year. President Bush said Tuesday in his State of the Union address that the increase in alternative types of energy is necessary to offset the United States’ dependence on foreign oil sources, like the OPEC cartel.
Meanwhile, with consumers paying more to tank up the car or heat their homes, some restaurant chains are rethinking their pricing to maintain traffic. The Joe’s Crab Shack chain announced yesterday that it “improved the affordability” and changed the presentation of its signature crab dishes. The adjustments are part of a larger effort to make the chain “the place families, couples and large groups come for great food."