REDFIELD, Iowa (DTN) -- Inflation is leading American consumers to look for ways to save money on meat and other ingredients that make up the traditional summer BBQ, yet they are still willing to pay for an experience that leads to good memories for their families, according to experts from Rabobank.
Inflation over a prolonged period has led to historically high food prices, said Tom Bailey, senior consumer foods analyst at Rabobank, during a presentation Wednesday on Rabobank's BBQ Index. The yearly index measures the cost of staple ingredients for a 10-person barbecue.
"The consumer is waving the white flag on food inflation," Bailey said. "With an added 2% in price hikes in 2024 coupled with the cost disparity between dining out and cooking at home at its widest margin in history, we're seeing heightened fatigue and frugality."
In the past five years, there has been an increase in prices due to agricultural industry effects from severe drought, higher restaurant overhead and wages, rising interest rates, geopolitical crises, and higher inflation throughout the supply chain. This has led to a food cost increase of 27% from 2019 to the end of 2023. Adding another 2.4% for 2024 leads to 32% inflation during the past five years.
During the past year, Bailey pointed out the only decrease in prices was chicken and lettuce when looking at the barbecue index. The overall cost of ingredients for a cookout for 10 people is under $100 for likely the last time, coming in at $99. "It's more affordable to eat at home right now," Bailey said. "Consumers are looking for value especially by going to discount grocery stores and warehouse clubs, and fewer people are eating out."
BEEF PRICES CONTINUE TO BE HIGH
Lance Zimmerman, senior beef analyst at Rabobank, said the second highest cost increase for the cookout is beef. When realizing the price increase, he said it's important to look at what's happening at the ranch level with production numbers. "If we look at the cow herd number highs in 2019, we have been in a downward shift and are down 3.5 million head in the past five years," he said. "This is due to a wide variety of factors, including drought, market price risk, demand volatility and high labor costs."
While he said consumers do like high-quality beef, they are buying cheaper cuts because of the high prices. Hamburger has been a hot commodity, and prices reflect it, but Zimmerman said ground beef prices aren't as high as they were in 2014 and 2015. "Retail beef prices are increasing due to higher demand, rather than smaller supplies," he said.
Beef continues to be a good value for consumers. Farm-to-consumer sales have softened a bit since the high in 2022 when 12,900 head were processed per week at non-federally inspected cattle slaughter facilities. This is currently down to 11,300 head per week so far in 2024, but not to the low of 9,200 head per week in 2019.
Zimmerman said this continues to provide a good market for producers but isn't as popular despite all the USDA announcements about spending more on local, state and regional infrastructure.
HIGHER BEEF PRICES AHEAD
A narrowing of the prime-choice spread has been affected by consumers choosing cheaper cuts or other meats such as ground chicken, ground turkey or ground beef.
"The quality of beef available to the consumer has never been better," Zimmerman said. "In the past 20 years, we've seen the availability of USDA prime and choice meat increase 60% as improved cattle management has created more marbling. Those fatty flecks pack a lot of tenderness and flavor while making it easier to grill. Even if you overcook quality meats a little, they won't turn into shoe leather."
With the tighter U.S. beef supplies, the market is expected to continue to move higher, hitting record highs throughout the summer grilling season. These higher prices have caused beef exports to shrink also.
"People want memories, not leftovers. This year will be memorable since it's the last time consumers will be paying under $100 for a barbecue," Bailey concluded.
The Rabobank Barbecue Index assumes an average American cookout will include 10 adults with each consuming one cheeseburger with lettuce and tomato, one chicken sandwich with lettuce, tomato and a slice of cheese, two handfuls of chips, two beers, a soda and a few scoops of ice cream.
Jennifer Carrico can be reached at jennifer.carrico@dtn.com
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