Correction: Rich Cosgrove is the owner of an independent Whole Hog Cafe restaurant in North Little Rock. What he owns was incorrectly described in this article.
As the price of a pound of pork and beef continues to rise, many Arkansas barbecue restaurant owners say they are eating the increase rather than passing it along to their customers.
Landon Curd, owner of Dink's Barbeque in Bentonville, said that the rising cost has directly affected his business.
"Brisket is our No. 1 seller and we have seen a 70 percent increase on price," Curd said. "It's been a drastic hit and we've been hit hard," he said.
Instead of raising the price of barbecue on his menu, Curd said he is absorbing the cost. If prices don't level off by the end of summer, he will consider an increase.
"I can only charge so much for a barbecue sandwich. I have to eat the loss and hope that I can weather the storm" he said. "There are always peaks and valleys and eventually it will level out."
"If I were to raise the prices I would definitely hear about it from my customers," Curd said. "I've raised prices once in four years and am hesitant to raise the price again."
The shortage is twofold.
The porcine epidemic diarrhea virus is fast-moving coronavirus that is deadly to piglets. It has killed an estimated 5 million pigs across 30 states, according to the U.S. Department of Agriculture.
And the U.S. cattle population is still recovering after a stretch of drought that began in 2011. The conditions forced ranchers to sell large portions of their herds to compensate for high grain and corn prices. Because it takes years, roughly 30 months, to get cattle ready for slaughter, the rebuilding has been slow, which has driven up the price of beef because supply is low.
Steve Meyer, president of Paragon Economics, an agriculture marketing and consulting firm in Iowa, said that he does not see beef and pork prices dropping anytime soon.
"This is not something that will just blow over and it won't pass in just a few months," Meyer said. "Prices will get better. Instead of being ridiculously high, they will just be high."
Meyer said smaller mom-and-pop barbecue businesses will be hit the hardest.
James Harold Jones, owner of Jones Bar-B-Q Diner in Marianna, said he can't shake the effects of high prices.
"My prices have done tripled, and that means that I am selling three and four times the barbecue, but I am not making any money," he said. "But I refuse to jack up the price again and I will just have to live with what I get."
Jones said in all the years he's been in the business he has never seen prices so high. His family has operated the restaurant for more than 100 years.
"It's not just the pork, beef is high. The drought has impacted me, too," Jones said.
Though times are tough, Jones remains optimistic. "People come from all over the U.S. to eat my barbecue. I will be all right because I don't have a high overhead."
"It's tough and it's gonna stay tough. I've heard it will be two years before prices really go down," he added. "All I can do is keep on keeping on."
Mike Long, a commodities buyer, has been purchasing meat for 35 years. He said the effects of the pig virus are not just hard on the the restaurant business, but on producers and packers, too.
"We don't have a handle on [the virus] and the drought has been a huge factor. This means that when ranchers sell their animals, they aren't buying as many to replace them, which in turn cuts down on the capacity that packers can run," Long said. "This creates a gap in the market and the pressure falls to other proteins. The low inventory for one raises prices for the products, the buyers, and then the consumer."
On March 1, the last time the U.S. hog herd inventory statistics were released, there were 62.9 million head, down 3 percent from the same time a year ago, and 5 percent from the last quarter, ended Dec. 31, according the Quarterly Hog and Pigs report.
Market hogs -- pigs that are sent for slaughter -- was at 57 million, down 4 percent from the same time last year and 5 percent from the last quarter.
In January, the last time the cattle count was totaled, the inventory was 87.7 million head, down 2 percent from the same time a year ago. In that count, beef cattle accounted for 29 million head.
Allen Brumett, owner of Sassy's Red House Bar and Grille in Fayetteville, said that his beef brisket is the cause of his stress.
"Brisket beef has gotten out of control, and it's the one that is having more of an impact," he said. "I tried to switch to whole brisket but it wasn't the same quality as a brisket so I went back."
"It's $5.25 now and it used to be below $3. That's the one that's killing me," he added.
He said he has been trying to adjust to the higher cost, but the only way to truly adjust would be to raise menu prices.
"You can only charge so much to the consumer so we have to grin and bear it," Brumett said. "I just hope it comes down in the next few months. For now, I've quit looking at the prices. It's disappointing"
When Brumett opened Sissy's Red House in 2009, bone-in pork was 90 cents a pound, but today it costs roughly $1.68 a pound. "It's a big difference considering how many pounds we go through," he said.
Rich Cosgrove, owner of the Whole Hog Cafe, a Little Rock-based chain, is betting on the prices declining in the coming months and isn't planning to make changes in his business model.
"Right now we are stuck with high prices, but it will be OK once the market comes down," he said. "We already did a price increase to address the shortage and if we have to raise prices again to make a profit, people would find it offensive."
He said the best way to combat the cost and to see his profit-and-loss margin is his constant upkeep of inventory.
"We monitor everything daily and take weekly inventory and compare what was sold. I can tell on a daily basis our yield for the average day," Cosgrove said.
"Right now we sell 3.5 tons of meat a week just out of the North Little Rock location," he said. "When I can see my food costs go up consistently I know the general price has risen."
He said Whole Hog's ability to remain profitable has eroded, but because he has locked in pricing on his meat cost for a year, he thinks he is better off than some in the industry.
"Because we buy so much we have negotiated the guaranteed delivery of meats at a set price, so that means we're probably paying less that anyone around," Cosgrove said. "We have locked in prices for the rest of the year, but there could be a huge spike by next year, and I will be locked in at that price."
"Our product and our sales are incredible, so we're not going to change anything anytime soon," Cosgrove said.
Sunday Business on 05/25/2014