Image via United States Department of Agriculture photographer Lance Cheung on Flickr.
Written by Edward Smith
At the surface, the 1%-2% food price increase Lorraine Salazar sees for restaurants might not seem significant. But for an industry that reinvests 95% of its income back into itself, paying more for food is yet another hurdle for an industry desperate to recover.
Salazar owns and operates Sal’s Mexican Restaurants in the Central Valley. Shortages in supply are affecting people and businesses down the line.
“If you don’t raise your prices, that comes off your bottom line,” Salazar said. Margins are so tight that there aren’t many places to cut from, she said.
Food prices are increasing nearly across the board.
At the consumer end, the United States Department of Agriculture forecast food price increases for food away from home to reach between 2.5%-3.5%, according to their Consumer Price Index last updated April 23. Year-over-year prices for food not purchased at a grocery increased 3.7%, up from an annual increase of 3.4% in 2020, 3.1% in 2019 and 2.6% in 2018.
All food is forecast to increase between 2%-3%.
Stephen Maxey, general manager of Certified Meat Products in Fresno, a food distributor focusing on meat, said the biggest reason for the rise has been a shortage in labor.
There is no shortage of cash floating around in the system, Maxey said, but he can’t find the labor to keep up. People are still hesitant to get back to work.
Freight costs have also gone up, Maxey said. With ports and canals struggling to find labor as well as shipping containers has made getting products unreliable. A piece of equipment the company purchased was pushed back months and they still haven’t received it.
Chuck Van Fleet, president of the Fresno Chapter of the California Restaurant Association says they’ve seen price increases especially in chicken wings, which are at an all-time high. Restaurants turn to chicken because it’s cheaper than beef.
Poultry prices at the wholesale level rose 4.4% in March, month-over-month, according to the USDA’s Producer Price Index. Poultry rose 12.7% year-over-year in March. Beef prices dropped .5% month-over-month in March, but they rose year-over-year 14.6%.
Pork rose 4.7% month-over-month and 13.7% year-over-year.
Van Fleet said cheese has risen from $1.50 a pound to over $2.50 a pound. For pizza places, a 66% price jump is “devastating.”
Ordering has also been tough. Without predictable supplies, chefs have had to limit their menus, said Dave Fansler, owner of Fansler Restaurant Group, which includes Pismo’s Coastal Grill, Westwoods BBQ and Yosemite Ranch.
And drought doesn’t help either. Fallowed land in Salinas might mean increases in costs for lettuce and strawberries, said Salazar.
A recent article in the Washington Post cited the dire straits restaurant are in regarding ketchup. Fast-food restaurants are facing shortages in single-used ketchup packages. In 2020, demand dropped, but then suddenly spiked and manufacturers couldn’t keep up.
Heinz said it would increase production by 25%, according to an NPR article. But on the supply side, most of the processed tomatoes that go toward ketchup come from the Central Valley.
Fresno County Farm Bureau President said that going into next year, many farmers are foregoing row crops for tomatoes out of concerns about water availability because they are having to prioritize watering permanent crops so many have invested in. This includes onions and garlic that farmers are now planning for to begin planting in the winter.
One farmer, Tony Acevedo of Stone Land Company in Fresno County, said he probably won’t do onions at all next winter season because of the lack of water.
His tomato and garlic acreage will be reduced as well.
And these price increases come at a time when restaurants are facing other costs as well.
In March, Gov. Gavin Newsom signed SB 95 into law, which requires businesses to supply a new cache of paid sick leave to employees. The California Restaurant Association pushed for a new state tax credit for costs associated with the new tax credit.
Having to pay more in wages goes beyond merely the extra hourly dollar or so to workers, said Salazar. The amount employers pay into worker’s compensation also increase as do tax contributions.
But they have to do what they can to meet the increased demand.
“If you can’t find people, then you have to figure out how to get the job done,” said Maxey.