Consumer Inflation and Food Prices at Stu Leonard's (with Carol Masser, Tim Stenovec)

Asks about sales and customer sentiment at the start of summer.

Tim Stenovec

Stu Leonard Jr.

Sales are brisk, but customers are complaining about food prices and overall expenses. Our prices are up about 3% compared to last Memorial Day, mostly due to meat. I'm stuck in the middle between farmers raising costs and customers who can't afford more.

A tomato farmer called me saying a freeze in Florida raised his costs and shipping is $2,000 more per truck. A customer just told me filling up their Suburban cost $50 more, and energy and insurance costs are up.

Asks about the expensive cut of meat and consumer behavior.

Tim Stenovec

Stu Leonard Jr.

People are switching their protein to save money—from ribeye to hamburger, chicken ($4-5/lb), or pork chops ($10/lb less than steak). The US herd is at a 50-year low because it cost ranchers a lot to feed cattle due to drought, so beef prices are high.

It takes two years to grow a calf to harvest weight, so rebuilding the herd takes time.

Asks if the herd situation is getting better.

Carol Masser

Stu Leonard Jr.

It is getting better now, but it takes time. I'm optimistic beef prices will come down in the future, and fuel prices will come down once things are straightened out in the Middle East. I think we'll see some softening on food inflation.

You have to break up disinflation, supply and demand, and actual cost. Labor is not going down—it's nearly $25/hour for us to have someone cut watermelons, and that's never going down. That's inflationary.

Asks about the difference between supply/demand and actual cost inflation.

Carol Masser

Stew Leonard Jr.

Supply and demand shocks (avian flu, fires, cold snaps) affect food prices, but labor costs are a permanent inflationary factor.

Example: a whole watermelon is $6-7, but pre-cut costs more due to labor.

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