So You Think Commodities Are An Issue...

Implications: Food costs will continue to rise.  Demand for grains and protien will mirror demand for energy and other raw materials.  Restaurants feel the pain.  

Analysis: Restaurant chains worried about the slow US economy are expanding overseas, but growing economies in China, India and elsewhere while presenting opportunity to US companies are creating a strain on the global food supply.  Unrest in the developing world over food shortages exposes this issue. 

Consider that the rise in the cost of food in the US was just north of 4% over the last year, while globally staples have nearly doubled in cost.  Worldwide demand for grains and protein will drive costs higher, and margins will continue to shrink.  For restaurants things are gonna get tougher.  

It’s expected that small restaurants with no mechanism for controlling price through bulk contracts or the futures markets will close at an increasing rate.  This will create opportunity for well managed chains, but until the balance between the cost of commodities and what consumers are willing to pay returns we won’t see a growing restaurant industry.