Daily Market Editorial

 

Commodity Reports are like the weather. Blink twice and they change. 

LocalFoodService.com brings you a very robust look at commodities, but they alone are meaningless until  you know how to use them in your food purchasing planning and menu adjustment process.

 

 

Most operators have a core list of commodities that they purchase from their suppliers on a daily or weekly basis.  Do you know your list?

That's the first step.  We recommend going out to approximately twenty items.

Once you have your list, take one commodity and run a hypothetical analysis.

In our example we chose 189a Select Beef Tenderloin.  According to our February 13th, 2009 report, Select Beef Tenderloin traded at $5.83 per pound as opposed to $8.07 per pound during the same time in 2008.

Take your baseline trading price = $5.83

Add packaging costs of approximately of .20 - .25 per pound

Add freight to the Distributor (not  you) - .15  - .20 per pound on average

Add Markup from the Distributor - now here is the tricky part. 

What is your agreement with your Distributor? 

Do you have an agreement with your Distributor?  In this instance, we assume a 15% mark up, but always plan on a few percentage points over your agreement. If you do have a mark up agreement, you need to review our Market Reports to be sure they are being honored.

Do the numbers: 5.83 + .23 +.18 + .94 = $7.18 per pound your cost. That's a theoretical difference of  -.89 from last year's commodity price!

Market Report Fundamentals

Trading price + packaging costs+freight to DC + markup to operator = final cost to back door.  

Granted, it isn't always this easy.  But the devil is in the details and it helps first to identify your core commodities and start from there.