Lower food prices seen at the store, but eating out not cheaper

Shoppers are finding some real bargains in the food aisles these days thanks to abundant harvests and cheap energy.

Prices on many commodities, from poultry and beef to coffee and eggs, are down sharply, helping cut grocery bills.

But don’t expect to pay less for eating out. Falling food prices are doing little to lower restaurant expenses.

“We have not seen a price drop in our costs,” said Spokane’s Scott McCandless, who owns 45 restaurants, most of them Subway franchises.

For much of what he buys, including fruits and vegetables, prices are set annually. For example, he negotiates a price on tomatoes for the year and may end up paying more for them than the current market value.

“Your proteins stay pretty consistent, but what really fluctuates is produce,” McCandless said. “When lemons are a dollar each at the grocery store, it’s very expensive for a restaurant to use lemons. That’s the kind of thing we get caught up in.”

A lime shortage last year was particularly hard on many restaurants, he said. “Every Mexican restaurant was screaming bloody murder because they couldn’t get the limes.”

Even when restaurants see lower food prices, other costs keep the industry’s margins thin.

“Restaurant prices are primarily comprised of labor and rental costs with only a small portion going toward food,” said a recent report by the U.S. Department of Agriculture. “For this reason, decreasing farm-level and wholesale food prices have had less of an impact on restaurant menu prices.”

Menu prices are up 2.8 percent over last year, but food prices at supermarkets and grocery stores are down almost 2 percent over the same period, the Agriculture Department reports.

A recent survey by the American Farm Bureau shows the total cost of 16 food items used to prepare one or more meals has fallen 8 percent, to $49.70, from a year ago. Retail prices for 13 of those products fell. They include eggs, down 51 percent; chicken breast, down 16 percent; and sirloin tip roast, down 11 percent. Bagged salad, apples and potatoes each rose in price.

Average sales on orders are down for those who buy from Food Services of America, said Clifford Hoye, president of the regional distributor’s Spokane branch.

“Our customers are seeing lower costs of goods across the board,” Hoye said. “It’s primarily from the protein categories – chicken, pork, beef, cheese – predominantly the ones that are impacted more quickly by a cost reduction.”

Low oil prices are a big driver of the decline in food production costs. “That’s a huge part of the transportation piece, the feed piece, what it costs to get an animal to the feedlot and back to the market,” Hoye said.

Produce prices are more stable this year, largely due to favorable weather, he said.

“We haven’t seen those huge spikes or challenges in produce that we saw last year,” Hoye said. “That immediately affects costs.”

Prices on packaged and canned goods usually lag in the fluctuations of commodity prices, he added.

Food Services of America supplies restaurants, hotels, schools, hospitals, nursing homes, jails and other institutions in Eastern Washington, North Idaho, western Montana and part of Oregon.

Food costs in the region started to flatten out over a year ago and declined through last winter, Hoye said.

“It’s just continued through this year and accelerated,” he said. “Just for the month of October so far we’re seeing a 3.7 percent cost deflation just year over year.”

The savings is substantial for those who buy in bulk.

“You take 50 cents a pound off of a steak … it adds up,” Hoye said. “We sell 70-pound master cases.”