Effects of Record High Dairy Prices

As dairy prices continue to soar, favorite menu items at restaurants have become more costly to produce. According to The National Milk Producers Federation, average farmer’s milk prices rose to $2.16 per gallon in September; this is the highest level on record. Many dining chains have been feeling the effects of these high costs which have been high throughout the year. For example, Chipotle recorded a 20% increase in sales, however executives stated that the higher food costs for items such as cheese and sour cream affected the chain’s profit margins in the quarter.

The Cheesecake Factory, a chain which relies heavily on cream cheese for the cheesecakes stated that increased dairy prices cost them $4.3 million in the quarter. According to Mary Keough Ledman, an economist specializing in dairy markets, the prices have soared due to a global slow down in milk production. “The path to these record high prices was supply-driven..It was kind of the perfect storm — European output was lower, Oceania’s output was lower, and China’s was lower.”

Both restaurants as well as major suppliers such as Kraft Foods or Hershey are being affected by the higher dairy prices and will begin to implement price increases on their products to deal with the dairy cost spike. To read more about the struggles restaurants and suppliers are facing due to the price increases, click here

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