ST. LOUIS — Tom Schmidt has already raised prices at his Salt + Smoke barbecue restaurants once, and he’s doing everything he can to avoid doing it again. Experts are betting against him.
Economists at the U.S. Department of Agriculture predicted late last month that the cost of eating out will jump as much as 6.5% this year, more than double the average rate for the past two decades.
Such is the reality in an industry getting squeezed from farm to table. Spikes in prices for feed and fertilizer are making food more expensive to grow, fuel costs are pumping up the cost of moving it around and a tight labor market means it costs more to get it processed, cooked and served. Complicating things further are ravenous consumers, flush with rising wages, crowding eateries as pandemic concerns fade.
“It’s this perfect storm,” said David Mitchell, an economist at Missouri State University.
Local restaurant owners have seen the tide rising since at least last spring, when coronavirus vaccines became widespread and customers stormed back practically overnight.
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Schmidt, of Salt + Smoke, said there was one week around that time where his pork supplier told him he didn’t have any ribs available. They had sold out — at nearly triple the price.
The price of ribs has come down some since, but with labor shortages at packing plants, it’s still near double the historical average.
David Sandusky, owner of the three Beast barbecue restaurants in the region, said he’s seen the same thing with brisket. A pound of it cost $20 a year ago. Now it’s $30.
“We’re paying more for everything,” said Maria Giamportone of Asador del Sur in Maplewood. “Vegetables, takeout containers, plastic.”
And limes. Giamportone’s South American surf-and-turf eatery used to get a case for $17. Now it’s $92.
The first time Giamportone got a bill with the new rate, she called her supplier thinking the company had accidently charged her for more cases. The supplier said it was actually the result of a unique supply chain issue: Mexican drug cartels have been fixing the price to finance their operations.
She can’t just eat those costs. Asador has raised prices on all its steaks — the bone-in ribeye jumped from $48 to $58 — and cut the Spanish prawns and broiled lobster off the menu.
“The prices they wanted were outrageous,” she said.
Sandusky, of Beast barbecue, said he raised the price of his brisket sandwich from $12 to $15 and reduced the portion size.
Something strange happened with the brisket sandwich, though: It’s gotten more popular. Sandusky isn’t quite sure why.
“Maybe people just think they’re going to get what they pay for,” he said.
People also aren’t complaining much about the prices at Asador del Sur, Giamportone said — perhaps because customers are seeing prices rise everywhere.
Or maybe they’re just excited to return to dining out.
Mark Paur, manager at Kenrick’s Meats and Catering, said he’s not seeing a slowdown at the restaurants he supplies, either.
“It’s amazing the amount of steaks they’re buying,” he said.
It’s not exactly clear how long customers will keep paying the premium, or how long they’ll have to.
With prices for essentials such as gasoline rising, households may start cutting back on luxuries like going out to eat, said Charles Gascon, an economist at the Federal Reserve Bank of St. Louis. That would be enough to start slowing things down.
USDA economists are also predicting that producers will see some of their costs stabilize after two years of bumper growth. Schmidt, of Salt + Smoke, said he’s heard forecasters say he could get some relief as soon as the third quarter.
But obstacles loom: War in Ukraine is disrupting grain and fertilizer production, soybean crops have tanked in southern Brazil, and a new avian flu is killing millions of chickens across the U.S.
The Federal Reserve is predicting that overall inflation will slow this year as it hikes interest rates, though prices could still be rising faster than they’d like.
Schmidt, of Salt + Smoke, said that’d be par for the course after the last year or so.
“We’ll adjust,” he said. “We’ll adjust and live in the new reality.”