Wells Fargo Report: At-Home Hamburgers 3x Cheaper Than Dining out

Mon, 01 Jul 2024 23:08:31 GMT

The annual Wells Fargo Fourth of July Food Report revealed for this year’s holiday home-cooked burgers would be three times cheaper than dining out.

The Agri-Food Institute team at Wells Fargo collected data showing the current cost of ingredients to prepare a quarter pound hamburger at home is $2.16 per burger (which includes cheese, tomato, and lettuce) whereas, the average of five popular quick service restaurants has a price of $6.95 for the same quarter-pound hamburger.

The team at Wells Fargo highlights the mid-June 2024 Consumer Price Index (CPI) for Food at Home rose by 1% compared to mid-June 2023 when this same index was rising at 5.9%.

Courtney Schmidt, Wells Fargo Agri-Food Institute Sector Manager says food inflation has mostly moderated, but the increased labor, transportation and capital costs are weighing on the dining out industry.

“When you go to dine out, of the total cost that you’re paying, only 30% of that is food,” she says.

For food away from home, the mid-June 2024 CPI rose by 4%

The analysts at Wells Fargo say that the longer the mismatch in inflation for food at home vs. dining out continues, the more consumers will be economically incentivized to eat at home.

“You’re still paying more for your food when you go into the grocery store than a few years ago, but you’re seeing a slow down in that food inflation. This time last year, we were at nearly 6%. Food inflation is not going negative, and we’re still paying more, but you’re seeing a slowdown considerably in that food inflation,” Schmidt says.

The Wells Fargo Fourth of July Food Report highlights two categories that did see declines in prices at the grocery store compared to last year: potatoes (for potato salad) and avocadoes (for guacamole).

“Both of those markets have just seen more production out there. So you’ve seen more potato production; you’ve seen better avocado production. That’s just been helping those wholesale prices that have just transferred into the retail side,” Schmidt says.

Courtney Schmidt

(Wells Fargo)

Regarding elevated beef prices through the summer grilling season, Schmidt says we could see many months to a few years of elevated prices for beef.

“You’re seeing those elevated beef prices because we had that drought back in 2022 where we saw the cattle herd dropped to very low numbers. We really need to start seeing that herd rebuilding before we’re going to start seeing improvement in those prices,” Schmidt says.

She does offer that with lower corn prices leading to lower feed prices, for the animals processed beef production is up because producers are putting more weight on cattle.

“That’s added to the beef production, and we’ve also seen more imports of beef. So while we are seeing lower supplies of beef compared to where we were at last year, it’s not as bad as it could have been based on the size of the cattle herd,” Schmidt says.

She adds, “I think we’re still a couple years out before we’re going to start seeing some of that significant herd rebuilding.”

Is Food Inflation Real?

Tue, 13 Jul 2021 20:35:30 GMT

Food prices for consumers are higher. Wholesale costs for restaurants are higher. Is inflation a real or transitory issue for agriculture and food?

Wells Fargo chief agricultural economist, Dr. Michael Swanson, joined Chip Flory on AgriTalk to discuss the issue and how it’s developing.

Swanson says two forces got us to the current situation:

In 2019, grain stocks were run lower and the market did not ration through price. “Back in 2019 the market would have been a lot better off moving to $4 plus corn to send a signal earlier in the market about how to use it and how to grow it,” Swanson says. He forecasts work to be done until 2023 to restore grain stocks to levels that are more in balance.
Labor is a key driver in the food system of the U.S. “We’re still trying to sort out with labor issues about who should be working, where they should be working, and for what wage rate,” Swanson says.

The National Restaurant Association says wholesale food prices remain on track to post their largest annual increase since 2014.

Increased food costs, higher labor costs and changing consumer behaviors are still revealing post-pandemic effects.

“People are deciding: you’re going to go out to eat, or you’re going to eat at home,” Swanson says. “We all see those signs, you know, 15 plus dollar an hour for working at the cash register. That makes food expensive. It only gets more expensive as you go up the chain. So people might want to get away from home, but it’s going to be really expensive due to the labor issue.”

While there have been other “shocks” in the economy, Swanson sees labor as the longest running and most challenging issue.

“When you get an unusual thing like shutting down Texas refineries and the short of plastics for a while, that is a shock, that’s not a structural change. And so what I think the Fed is really asking is, were there really structural changes that just make it more expensive to produce these products on a go forward basis,” Swanson says. “As you dig into each of those issues, whether it’s timber, plastic, or steel, it’s a much more complicated question. People are the are the biggest driver of anybody’s costs.”

So is this inflation? The Fed points to the factors being of transitory nature. Swanson says keep an eye on the labor side of the equation.

“It’s always about people,” he says. “We’re still about 4 million people down from people who are working just a year ago. And the question is, is that transitory, what would it take to get them back in the market and what that means to inflation. I think the Fed wants to have it both ways, like all of us. They want to keep the market from getting too excited about inflation, while they wait to see a better recovery.”

Foodservice

Wells Fargo Report: At-Home Hamburgers 3x Cheaper Than Dining out

Is Food Inflation Real?