A 10-person barbecue with typical ingredients will cost nearly $100 this year as inflation has run hot—up 31% since 2018. But despite inflation, America’s grillers are poised to splurge on quality meats and drinks this Fourth of July as they prioritize paying for experiences over durable goods.
That was the take-away from a recent media event hosted by RaboBank, a BBQ Index in which commodity experts explained what is happening to the prices of all the major ingredients of a July Fourth barbecue—beef, buns, cheese, lettuce, tomatoes, pickles, potatoes and beer.
The 2023 Rabobank BBQ Index shows that it will cost $97 to host a cookout on Independence Day this year, up from $73 in 2018, marking the largest four-year spike since the late-1970s oil crisis. Myriad macro forces—the Russia-Ukraine war, severe drought, higher wages and rising costs of farm inputs, transportation and energy—have combined to fuel broad-based inflation throughout the supply chain.
Nevertheless, since the COVID-19 lockdowns, consumers have invested in more grilling and cooking equipment and have been willing to spend more for quality food experiences even as they have cut back in some consumer areas, like durable goods and technology.
Here’s the beef
That trend was visible in beef prices, according to Lance Zimmerman, senior beef and cattle market research analyst for Rabo AgriFinance. The extreme droughts of the past few years shrunk the cow-calf herd by about 2.8 million head, or 9%, from 2019 to 2023.
Some categories of premium beef are doing well nevertheless, he said, because as a response to both COVID and inflation, consumers “traded down” from dinners out to home-cooked meals with premium ingredients like good cuts of beef.
“You can still find good deals in the beef case,” he said. “Consumers’ willingness to buy beef in 2023 remains strong.”
Baked goods volumes dropping, but premium category does well
J.P. Frossard, an analyst focusing on bread and baked goods, said fresh bread has seen double-digit price increases last year and this, averaging about 1% to 1.5% each month. But consumer prices have lagged behind the rise in commodity wheat prices and have dropped more recently. Overall volumes are 3.5% below last year’s, year-over-year. Again, as with beef, “Some premium bakery items are doing better, thanks to consumer trading down from eating out,” spending the money instead on premium items at the store.
Milk prices peaked in the fourth quarter of 2022, as milk production costs jumped, according to senior dairy analyst Lucas Fuess. Milk prices paid to producers are relatively low right now, about $14 per hundredweight, which should lead to price relief for consumers later but not for at least a few months.
The good news, said Fuess, is that cheese production is quite healthy. “Americans still cannot get enough cheese,” and consumption of natural cheese per person, which stand at about 40 pounds a year now, continues to rise. Consumption of processed cheese, at about 8 pounds per person per year, is going up too.
Beer breaks pattern
Beer is the single most expensive item at the typical July Fourth barbecue, and its prices have seen “lots of push and pull,” said Jim Watson, senior analyst of beverages. Last year, due to rising brewing costs, beermakers added a second price increase at the end of the year, he said, an unusual move. Beer prices overall have been trending upward in relation to spirit prices since 2008, when InBev bought Anheuser-Busch.
With beer, he said, the “trading up” effect plays out differently. That’s because for many consumers, trading up from beer means leaving the beer market altogether and switching to spirits. Also, many Gen Z and millennial consumers were not big beer drinkers to begin with. There is also increased competition from “fourth category” drinks, like hard seltzers.
In a question-and-answer period, Zimmerman put recent price increases into perspective. “U.S. food is still incredibly cheap compared to the rest of the world,” he said. “Consumers have plenty of choices. If white-tablecloth restaurants get too expensive, consumers can order out, saving on bar and tip costs. If income tightens further, they can eat at fast-casual places, or order out from those, too. Even in inflationary times, there is lot of price resiliency.”
However, he said the winding down of supplemental payments to the lowest-income consumers from the United States Department of Agriculture’s Supplemental Nutrition Assistance Program could eventually affect beef prices. Christine McCracken, pork and poultry analyst at Rabobank, agreed that the end of the extra SNAP payments during COVID could push lower-income consumers away from beef and toward more pork and poultry.
David Murray can be reached at [email protected].
