Avendra recently published our 2024 Cost Outlook – a guide produced annually to assist our clients with budgeting for the remainder of 2023 and into early next year. It highlights several macro trends impacting the hospitality industry including inflation, employment, fuel, and food demand.
When looking at the food segment, we’re seeing a trend toward lower inflation relative to recent peaks. Here are five foods to watch:
Meats: Red meat and poultry production are down for the first time in a decade. Declines in beef cattle herd size coupled with higher feed costs mean that the beef supply will be tight, leading to higher prices.
Poultry and pork will likely follow suit later this year into early next year as consumer demand shifts away from more expensive beef to these less expensive proteins.
Potatoes: Demand for frozen potatoes domestically and internationally remains highs even as potato costs surge due to production declines and adverse weather conditions in the Pacific Northwest. The potato supply will remain tight despite and increase in U.S. potato plantings.
Sweeteners: A widening global sugar deficit has driven sugar prices to an 11-year high. Supply concerns are fueled by declining output in Asia and a reduction in sugar beet production in Europe.
The USDA has projected year-on-year declines in sugar beet acres and sugar imports, keeping inventories stretched tight for the remainder of 2023 into 2024.
Tomato products: We are currently in the lowest processing tomato production we’ve seen since 2017, driving market prices to multi-year highs. The decline is due to fewer acres planted, expansion of drought conditions, and worsening water shortages.
According to USDA reports, prices for key raw materials used in sauces, ketchup, and juices have risen 50% from a year ago.
Drought relief in California and some expansion in planting areas are positive signs for tomato production but the market likely will not be impacted until after the harvest later this year.
Fruit and fruit juices: Florida’s seasonal orange production is expected to be the smallest since 1937 based on current USDA projections. This has led to orange juice futures surging as historically 95% of Florida’s orange output is used in juice production.
Apple production in the top-producing state of Washington is expecting a 16-year low this season due to unfavorable growing conditions.