Widening Gap Between Wholesale, Retail Beef

January 26, 2017 04:22 PM

Wholesale food prices are sharply lower across several categories, including wholesale beef prices, which are trading 18% lower than at this time last year.

Despite those lower prices, prices for beef – and other food items – have not declined accordingly at grocery retailers and foodservice outlets. The Bureau of Labor Statistics says that while grocery store food prices have declined for eight consecutive months, the price of food products sold by retailers is just 2.2% lower than a year ago, although retail beef prices are about 7% lower than last year.

Foodservice prices, however, have barely responded to lower wholesale food prices. Prices for food consumed away from home in December were 2.3% higher than a year earlier.

Industry analysts say foodservice prices tend to be less volatile and stickier than those at retail grocery stores. That’s due to a variety of reasons, including the fact that foodservice outlets have some processing and cooking steps, while retailers sell fresh products. Analysts also say foodservice outlets continue to struggle with rising labor costs, health care costs and distribution costs.

Whatever the reason for the widening gap between grocery store and foodservice costs, analysts believe the net effect is more traffic for grocery stores, and that should be a positive trend for beef as it has good exposure at retail outlets and still holds a favored position among consumers. 

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