Corn Production Estimates Down By 13%, And How This Impacts Your Restaurant
August 10, 2012 | By wthompson |
Frankly, the reality is simple: food prices are on the rise. Most importantly, corn prices are rising. So how does this impact your business? Again, simple: each item you sell, might need a small price adjustment! Here’s the skinny from the USDA, as reported on USA TODAY:
The government report said corn prices, which already have reached record levels above $8 per bushel in the last month, could go as high as $8.90 per bushel, well above $6.40 per bushel projected in July and $4.80 per bushel projected in April at planting time.
On the Chicago Board of Trade, corn futures sold for $8.43 a bushel shortly after the report was issued, as traders already had factored lower production into their numbers.
About 40% of the U.S. corn crop is used to make ethanol, under federal mandate. Another 40% is used as animal feed, both here and abroad. The remaining 20% is eaten in mostly processed foods in the United Statessuch as high-fructose corn syrup and items like corn flakes. The USDA has warned that the 2.5% to 3% increase in food prices this year will widen to as much as 5% next year.
Is this dire? You’re going to have to be the judge of that one… But what you do about it all depends on how well you plan and execute a strategy to secure your inventory. What to consider:
- Reporting: menu pricing is going to be key! Mostly, you’ll want to track your costs and profits per item. Use your product mix to analyze what is selling, and an inventory management system to uncover the highest profits per item.
- Invoice Management: know what you’re buying and the price increase. We had a customer, during a demo, say, “I’d rather my staff know exactly how much my costs are rising by looking at each and every invoice.”
- Physical Counts: pretty much a critical component of any inventory system is how well you account for product on-hand. Weekly counts will provide you a good estimate of what to buy, and if you should buy in the first place!
One of the big improvements can be institutional. Get your staff to start reading and learning more about proper inventory management (can I recommend a blog). Have them consider what it would mean if you raised your menu prices? Would customers like it? Probably not, so have them help you with creative marketing ways around the issues. My point, keep your staff aware of the challenges and circumstances surrounding your P&L.