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US food service shares high price grinding beef view

Jon Condon, 24/11/2011

Large US food service sector grinding meat end-users are now talking about 2012 as being the “Year of the Commodity Cost.”

Food service website BurgerBusiness.com claims that wholesale beef prices will have more influence on US hamburger restaurant menu innovation next year than will consumer tastes or desires.

“What that means is that burgers certainly won’t go away, but consumers will pay more for good ones. Watch for chains like McDonald’s to cross the US$5 threshold on premium-burger prices, driven by commodity cost,” BurgerBusiness.com said.

The food service view about price parallels supply and demand-side market signals discussed in today's main story "Hold on for the grinding beef juggernaut."

Another US forecast group, Technomic, cited commodity costs in its list of seven US food service trends for 2012, but concluded that the result would be more home-based cooking.

It also forecast a shift from beef to chicken and other cheaper proteins on burger restaurant menus.

"US burger chains are planning for 2012 now and the picture for beef isn’t pretty," one commentator said.

"High feed costs (corn is up 26pc over October 2010) and US domestic cattle shortage are expected to keep beef prices rising. Chicken-breast prices, in contrast, were down 14pc versus October 2010."

A spokesman for the large US Jack-in-the-Box burger chain said beef was the ‘biggest wild card’ in the volatile 2012 commodities market. He forecast a rise of 9-10pc in prices for grinding beef (representing 20pc of the company’s total commodity spend) in 2012.

Another factor likely to add to grinding meat costs to industry in 2012 is the USDA’s recent announcement that from March next year, it will declare the six non-STEC pathogen strains as adulterants in raw beef from fed and non-fed cattle.

Once the necessary additional testing starts, any product found to contain any of the six strains will be banned from sale to consumers and will have to be diverted for use in the cooked, manufactured products sector. Two large companies are already holding and testing ground beef for the strains and others are likely to do the same to reduce the risk of a product recall.

USDA estimates the cost of the additional testing will be about US$10m a year. But that cost might be tiny compared to the impact that diverting more product to cooking might have on trimmings prices, observers told Cattle Buyers Weekly recently.

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