The Steakhouse Index Options

[dauss]

What Steakhouses Reveal about the Weakness of the US Economy

If you want to understand how high energy prices are impacting the economy, you could spend your days reading the Wall Street Journal or consulting with economists. Or you could go have a really expensive New York strip steak at the Palm or Morton's.

High-end steakhouses have expanded rapidly in recent years thanks to an economic expansion, the popularity of cholesterol-reducing statins such as Lipitor, and the low-carb/high-protein Atkins/South Beach diet crazes. You'll now find outposts of Morton's, Ruth's Chris, and several competitors in all the best suburban strip malls, edge-city shopping districts, and gentrified downtowns.

The financial results of these testosterone-filled cow palaces reveal much about several trends affecting the U.S. economy. First, they are a neat case study in the unexpected collateral effects of high energy prices. The high price of oil has spurred demand for ethanol, which in turn has boosted the price of corn. Corn is a primary "input"—or as we say in English, "food"—for beef cattle. The combination of higher grain and energy prices has led to burgeoning inflation in food. In the first quarter of 2007, food prices rose at an annualized rate of 7.1 percent, according to the Bureau of Labor Statistics. Like many businesses, steakhouses face the classic choice of swallowing the higher costs—and accepting lower margins—or raising prices.

Some beef boîtes are boosting prices. The New York Times recently reported that "The Palm steakhouse chain has raised the price of its steaks by $2, and side dishes have gone up 50 cents to help compensate for the price of the beef." The company's chief operating officer told the paper: "I don't think our customers have noticed." (Note: If customers haven't noticed a sly price increase, you might want to refrain from broadcasting it to the New York Times' readers.) At Peter Luger, the Brooklyn landmark whose very name causes this writer to salivate, the price of the iconic porterhouse for two has risen from $79.90 to $81.

But most of the big meat chains seem to be eating the costs, as shown by their falling margins. At Morton's margins fell from 9.8 percent to 9 percent in the first quarter, thanks in part to rising costs. Ruth's Chris reported that first quarter 2007 operating income fell from 13.8 percent of revenues to 10.1 percent of revenues. Rare Hospitality, which owns 280 Longhorn Steakhouse outlets, saw first quarter 2007 operating income fall to 8.6 percent of revenues, down from 9.8 percent in the first quarter of 2006.

To aggravate matters, the rising cost of beef appears to be accompanied by slowing demand. At Morton's steakhouses, same-restaurant sales rose by a meager 0.5 percent in the first quarter of 2007. For the year, Morton's expects same-restaurant revenue growth of between 1.5 percent and 3 percent. When Ruth's Chris reported first-quarter sales in April, it reduced expectations of same-store sales growth substantially. At Rare Hospitality, same-store sales actually fell 1 percent in the most recent quarter. For the remaining three quarters of fiscal 2007, the company sees same-store revenue growth of between 0 percent and 2 percent for its Longhorn Steakhouse outlets. In each instance, same-store growth is rising at a rate slower than inflation.

Not surprisingly, given the shrinking margins and slowing revenue growth, the stocks of the major public steakhouse companies have done poorly in recent months. Here's a three-month chart of Morton's, Ruth's Chris, and Rare Hospitality compared with the S&P 500.

A look at the six-month chart of the same stock and the S&P 500 shows how the steakhouses could function as economic indicators. Note the outperformance in the first quarter and the underperformance in the second quarter. Steakhouses thrive on expense accounts. Their sales are tied to the exuberance of (mostly) men in the corporate world, and their business is largely discretionary. (It's easy to lose sight of just how expensive steakhouses are. At the Michael Jordan steakhouse in New York, for example, a dinner of shrimp cocktail [$16.50], New York Strip [$38.50], hash browns [$7.50], and creamed spinach [$8.50], plus dessert, wine, tax, and tip easily tops $100 per person.) Their outsized sales and stock performance in the early part of the year are lagging indicators, as bonuses are paid out and entertainment budgets are set based on the prior year's performance.

But as the year unfolds, steak stocks become more like leading indicators. If profits are humming, M&E budgets are in rude health, and prospects look good, you'd expect businesspeople to use steakhouses for meetings, deal-closing dinners, and recruitment lunches. When business slows down a lot—as it has in many sectors of the economy—it becomes much harder to justify a $250 lunch for three. Wall Streeters and hedge-fund guys may still be splurging for Kobe, but think about all those real estate and mortgage brokers, car dealers and consumer products salesmen, retailers and contractors who may be nibbling on takeout burritos because of slowing demand.

Right now, the steakhouse damage seems confined to the chains. The next trouble spot, however, could be the highest quality, most—um—rarefied steak joints. For decades, Peter Luger has been the epitome of high-end, high-quality, consumer-unfriendly steak: no credit cards, brusque waiters, and a remote location. So long as the economics of the steak business were friendly, the restaurant could afford to be standoffish. If the portly waiters in Williamsburg start wishing you a nice day and loudly tout the fact that Luger's proudly accepts the American Express card, start praying.

Chains will only eat the cost for so much longer, then the prices will start to rise fast.

[GOB]

that's pretty interesting... i had figured that the profit margin at a steak place would be higher than that of a normal restaurant chain (on the level of chilis and on the border), but maybe not. when i waited tables at california pizza kitchen, we were told that an average individual meal costs the chain $1, which includes all ingredients, transportation, and preparation.

considering the average meal price was probably $9, that's a pretty nice profit.

[impala454]

that's kind of a stretch there... look at just last year, oil was as much as it is now or cheaper, and yet steak has sure as hell gone up. I recall a 14oz ribeye at tx roadhouse being ~$15 last year, and now it's about $18.

here's a oil price chart from '78-'07
http://tonto.eia.doe.gov/dnav/pet/hist/wtotusaw.htm

[dauss]

So what, you think businesses will decrease the price because of lower costs after they've taken a hike? I remember when Starbucks increased their prices a couple years ago citing increased fuel costs. Now that gasoline is cheaper(hardly), you think they'll revert it back to the old price?

You think that TX Roadhouse is going to lower their Ribeye back to $15 if there was a huge surplus of beef and the wholesale price plummets? Of course they're not, because they're not stupid.

Look at gasoline. Gas companies never thought that we would increase our gas consumption even at over $3/gallon. It's still high(compared to a couple years ago) and the gas companies are posting the largest profits ever in the history of businesses.

that's pretty interesting... i had figured that the profit margin at a steak place would be higher than that of a normal restaurant chain (on the level of chilis and on the border), but maybe not. when i waited tables at california pizza kitchen, we were told that an average individual meal costs the chain $1, which includes all ingredients, transportation, and preparation.

considering the average meal price was probably $9, that's a pretty nice profit.

It depends on the chain. CPK sells....pizza. Water and flour are the main ingredients of the dough, and they are very cheap. A place like Carino's will run about 22% - 24%(only used this as an example because I knew what the actual numbers were at one in Austin about a year ago) food cost, because pasta is very cheap. It seems like a nice profit, but then slap on utilities, equipment depreciation, labor costs, etc.

[impala454]

bud you're proving my point that the article doesn't make sense. the guy is correlating oil prices to food prices, which is stupid. oil -> increased ethanol demand -> decrease in corn supply -> increase in beef cattle feed cost -> increase in beef cost to consumers is just a little too far of a stretch here. ethanol is a tiny fraction of our worries in energy production. the price of cattle feed is not going to skyrocket because of ethanol any time soon (or probably ever for us here in the US, considering the vast amount of farm land we have).

it's obvious to you, and me, that steak prices at texas roadhouse won't go back down because of oil prices going down, so why would they go up because of oil? they go up because of inflation and demand (i.e. the long ass lines at suppa time).

[JRockTTU]

it's obvious to you, and me, that steak prices at texas roadhouse won't go back down because of oil prices going down, so why would they go up because of oil? they go up because of inflation and demand (i.e. the long ass lines at suppa time).

Once upon a time, someone invented these things called "Trucks" that transport everything we consume. They run on this magical fairy dust called "gasoline." When "gasoline" costs rise, the companies must pay more to put fairy dust in their "trucks" to transport food to fine eating establishments. The companies have to pay more to transport, so they pass the extra cost along to the consumer. I don't see how a rise in oil, and therefore gasoline, prices wouldn't cause an increase in food prices.

[Hartmann]

Here's my problem.

I think we are shooting ourselves in the foot and will eventually kill off this country.

I would much rather pay $3-4 a gallon for gasoline because driving is necessary but at times it's a choice. It's not a choice for me to eat. This will not just affect steak prices but milk, eggs, poultry, etc. Talk about hurting the lower classes, they want to up the price of food rather than pay a few bucks more at the pump. It seems asinine to me.

Also, everything I've been reading lately is saying that ethanol is not any better for the environment and may prove to be worse. Yeah, it's sustainable fuel, but at what cost to the people?

[impala454]

Once upon a time, someone invented these things called "Trucks" that transport everything we consume. They run on this magical fairy dust called "gasoline." When "gasoline" costs rise, the companies must pay more to put fairy dust in their "trucks" to transport food to fine eating establishments. The companies have to pay more to transport, so they pass the extra cost along to the consumer. I don't see how a rise in oil, and therefore gasoline, prices wouldn't cause an increase in food prices.

there's no way in hell a rise in gasoline is going to make a $3 difference in the price of your meal because of delivery costs. lets say a delivery truck that normally has to spend $200 on fuel has to now spend $250. how much do you think that boils down to per steak (assuming the shipping company even raised their prices at all)? practically zilch.

[James]

there's no way in hell a rise in gasoline is going to make a $3 difference in the price of your meal because of delivery costs. lets say a delivery truck that normally has to spend $200 on fuel has to now spend $250. how much do you think that boils down to per steak (assuming the shipping company even raised their prices at all)? practically zilch.

Delivery of food for cattle to ranch + delivery of cattle to slaughterhouse + delivery of processed cattle to restaurant warehouse + delivery from warehouse to restaurant = it adds up.

[impala454]

yeah but the price of the goods being delivered far exceeds the cost of delivering them.

lets say they buy their steaks for $5/lb, and a truck can deliver 10,000 lbs. that's a $50,000 cost of items within the truck. now say the price of gas doubled (insane case). Lets say the gas cost of the delivery truck was $200, and increased to $400. Now we're talking about $200 difference vs a $50,000 order. and that's if gas prices doubled. Continue all the way down the line if you want, multiply that $200 x the other 3 other deliveries you discussed, now we're at $800 vs $50,000, a whopping 1.6% increase in the total cost (that is IF the shipping companies all shifted the entire cost of gas onto the customer). 1.6% increase in the total cost, if gas prices DOUBLED.

[JRockTTU]

yeah but the price of the goods being delivered far exceeds the cost of delivering them.

lets say they buy their steaks for $5/lb, and a truck can deliver 10,000 lbs. that's a $50,000 cost of items within the truck. now say the price of gas doubled (insane case). Lets say the gas cost of the delivery truck was $200, and increased to $400. Now we're talking about $200 difference vs a $50,000 order. and that's if gas prices doubled. Continue all the way down the line if you want, multiply that $200 x the other 3 other deliveries you discussed, now we're at $800 vs $50,000, a whopping 1.6% increase in the total cost (that is IF the shipping companies all shifted the entire cost of gas onto the customer). 1.6% increase in the total cost, if gas prices DOUBLED.

The gas price increasing affects every single step in the supply chain, they also have corporate people who take business trips on airlines (affected by gas) and who have rental cars (affected by gas) and have mileage paid for by the corporation (affected by gas). It raises the price of almost all operations. The only way to make more money to compensate is by raising the price of your steak. If you don't think an increase in oil prices affects everything around you then you're more ignorant than I thought.

[blaarg]

yeah but the price of the goods being delivered far exceeds the cost of delivering them.

lets say they buy their steaks for $5/lb, and a truck can deliver 10,000 lbs. that's a $50,000 cost of items within the truck. now say the price of gas doubled (insane case). Lets say the gas cost of the delivery truck was $200, and increased to $400. Now we're talking about $200 difference vs a $50,000 order. and that's if gas prices doubled. Continue all the way down the line if you want, multiply that $200 x the other 3 other deliveries you discussed, now we're at $800 vs $50,000, a whopping 1.6% increase in the total cost (that is IF the shipping companies all shifted the entire cost of gas onto the customer). 1.6% increase in the total cost, if gas prices DOUBLED.

Where are you getting these numbers from?
$200.00 for gas, where are they travelling to/from...

I have no idea how much gas would cost for inner state transportation of beef yet alone cross state (for example most of the seafood we get in LBK comes from Albuquerque, NM via the west coast).
$200.00 seems a tad bit load, but idk...

However, I agree with you that a $3.00 increase per steak because of gas prices is ridiculous. tens of cents seems a bit more realistic...

[dauss]

yeah but the price of the goods being delivered far exceeds the cost of delivering them.

lets say they buy their steaks for $5/lb, and a truck can deliver 10,000 lbs. that's a $50,000 cost of items within the truck. now say the price of gas doubled (insane case). Lets say the gas cost of the delivery truck was $200, and increased to $400. Now we're talking about $200 difference vs a $50,000 order. and that's if gas prices doubled. Continue all the way down the line if you want, multiply that $200 x the other 3 other deliveries you discussed, now we're at $800 vs $50,000, a whopping 1.6% increase in the total cost (that is IF the shipping companies all shifted the entire cost of gas onto the customer). 1.6% increase in the total cost, if gas prices DOUBLED.

I'll try to follow your failed logic and provide an example of what you've posted.
There are 1051 wal-mart stores in the US(as of April 30th, 2007). Let's just pretend that they only get 1 truck delivery/day, 365 days a year. Now lets go back to 1999. Gas was $1.50/gallon(and cheaper). Fast forward to last year when gas prices did double, to over $3/gallon. Lets say the gas cost of the delivery was $200 back in 1999, and in 2006 it costs $400.
1051 stores, x 365 days, x $200 increase = $76,723,000 a year in extra fuel costs. Obviously there weren't 1051 stores back in 1999, and obviously there isn't just 1 truck delivery/day.

Unlucky charms — General Mills raising prices

Cereal makers, like other food companies, have been pushing through price increases over the past year or so to cope with rising costs on commodities that have run the gamut from oil to cocoa.

Most recently, manufacturers have been faced with higher prices for corn as soaring gasoline prices have increased demand for that crop's use in ethanol, a crop-based alternative fuel. Prices for wheat have also soared due to global weather issues, including a drought in eastern Europe.

Food price rises hard on consumers, Fed
13 June 2007 @ 03:48 pm EST

Given growing demand for corn for use in ethanol production, shrinking stockpiles of grains, and rising demand for food fueled by economic growth in the developing world, the trend of rising food prices is likely to continue.

Food makes up about 15 percent of the U.S. consumer's spending.

The U.S. Agriculture Department's latest supply and demand estimates showed that world stockpiles of grains are expected to drop to levels not seen since the 1970s.

"The problem is not just falling supply, as unusual and uncomfortable as that may be. Demand for corn for ethanol production is taking down inventories at a faster pace than anticipated, and some wheat fields are being turned into cornfields to take advantage of this," said Carl Weinberg, chief economist at High Frequency Economics in Vahalla, NY.

Grain prices are particularly important in the food chain because they are used for feedstocks for animals and therefore higher prices will ultimately work their way up the food chain.

[impala454]

I'll try to follow your failed logic and provide an example of what you've posted.
There are 1051 wal-mart stores in the US(as of April 30th, 2007). Let's just pretend that they only get 1 truck delivery/day, 365 days a year. Now lets go back to 1999. Gas was $1.50/gallon(and cheaper). Fast forward to last year when gas prices did double, to over $3/gallon. Lets say the gas cost of the delivery was $200 back in 1999, and in 2006 it costs $400.
1051 stores, x 365 days, x $200 increase = $76,723,000 a year in extra fuel costs. Obviously there weren't 1051 stores back in 1999, and obviously there isn't just 1 truck delivery/day.

your "obvious" claims aren't so obvious. wal mart gets 1-2 trucks a week. it doesn't matter though, lets assume your number is correct. you didn't follow the logic I presented of cost of product vs cost of delivery. 76 million a year sounds like a lot, until you look at the fact that wal mart brings in 315 BILLION in revenues per year. again, assuming that the shipping companies pass on ALL increases in gas prices to their customers, even a 76 million dollar increase in one year (which is a huge exaggeration), we have an increase in cost compared to revenues of 0.024% (yes percent). it's a drop in the bucket. even all these numbers aside, have you noticed the prices of everything at wal mart increase dramatically since 1999? I sure as hell haven't.

Unlucky charms — General Mills raising prices

yeah, "less than a dime" increase, and only partially because of corn, also because of wheat, cocoa, and other commodities which have nothing to do with oil prices.

Food price rises hard on consumers, Fed

sorry man I just don't buy it. go here: www.e85refuleing.com and tell me how many stations you find on there. when I click texas, I see 37 stations which have e85. when I click california, I see 5 stations. New York, 8. It says there's 1,227 locations total across the entire country. Are you really going to believe that corn production for this tiny amount of stations is affecting cereal prices!??! I've told you already it's not even the same type of corn. If we had ethanol stations on every corner, it'd maybe be plausible, but there's a pathetically small amount of them. I have had a flexfuel vehicle for over a year now, and have yet to find a damn E85 station remotely near anywhere I drive.

and the $200 fuel cost I estimated is for a trip around 300 miles. I've been around the trucking industry a decent amount and they can get about 5mpg or so with a large load.

[dauss]

your "obvious" claims aren't so obvious. wal mart gets 1-2 trucks a week. it doesn't matter though, lets assume your number is correct. you didn't follow the logic I presented of cost of product vs cost of delivery. 76 million a year sounds like a lot, until you look at the fact that wal mart brings in 315 BILLION in revenues per year. again, assuming that the shipping companies pass on ALL increases in gas prices to their customers, even a 76 million dollar increase in one year (which is a huge exaggeration), we have an increase in cost compared to revenues of 0.024% (yes percent). it's a drop in the bucket. even all these numbers aside, have you noticed the prices of everything at wal mart increase dramatically since 1999? I sure as hell haven't.

and the $200 fuel cost I estimated is for a trip around 300 miles. I've been around the trucking industry a decent amount and they can get about 5mpg or so with a large load.

Took a while, but I found some numbers here.

In 2005 Wal-Mart operated 3,300 trucks that in 2005 drove 455 million miles to make 900,000 deliveries to its 6,500 stores. Fuel was $2.47/gallon. If we totally neglect the increased # of stores and keep the mileage the same, with gas at $2.81/gallon in 2006, it's costing Wal-mart an extra $152.6 million in extra fuel costs.

Nice comparison using revenue. I'm thinking of a company, in 2006, posted $160.1 billion in revenues....but didn't make a fucking cent. Actually they lost $12.7 billion. Any guesses? Who cares if a company makes a trillion billion dollars in revenue if they can't turn a profit?

In 2006, Walmart made a profit of $11,231 million. $152.6/$11,231 = a 1.4% hit to their profits.

sorry man I just don't buy it. go here: www.e85refuleing.com and tell me how many stations you find on there. when I click texas, I see 37 stations which have e85. when I click california, I see 5 stations. New York, 8. It says there's 1,227 locations total across the entire country. Are you really going to believe that corn production for this tiny amount of stations is affecting cereal prices!??! I've told you already it's not even the same type of corn. If we had ethanol stations on every corner, it'd maybe be plausible, but there's a pathetically small amount of them. I have had a flexfuel vehicle for over a year now, and have yet to find a damn E85 station remotely near anywhere I drive.

When was the last time you filled up your vehicle with 100% gasoline? You see that sign at the gas station that says "This product may contain up to 10% Ethanol"? You know, E10, Gasohol?

Half of the gasoline in the US contains ethanol. 140 billion gallons of gas was used in the US in 2004. If consumption remained the same in 06(which it didn't), and half had ethanol, and lets pretend that it was only E5(the lowest blend of ethanol to gasoline mixture sold), at the bare minimum 3.5 billion gallons of ethanol is in the gasoline. Factor in E7 and E10, and the 4.8 billions of gallons of ethanol produced in 2006, there's not much left for E85.

Ethanol boom may fuel shortage of tequila

Mexican farmers are setting ablaze fields of blue agave, the cactus-like plant used to make the fiery spirit tequila, and resowing the land with corn as soaring U.S. ethanol demand pushes up prices.

The switch to corn will contribute to an expected scarcity of agave in coming years, with officials predicting that farmers will plant between 25 percent and 35 percent less agave this year to turn the land over to corn.

How Ethanol Is Eating Our Lunch

On June 4, corn (No. 2 yellow, central Illinois) sold for $3.77 a bushel. A year ago, the price was just $2.25 a bushel. That's a 68% jump in price in a year. (The futures markets say prices will stay here, too, with corn for December delivery selling at $3.83 a bushel on June 4.)

Soaring demand for corn from ethanol producers isn't the only reason for the price increase, of course. There's rising demand from export markets for corn to use as animal feed and for human consumption. And there's increasing demand for corn sweeteners from the food industry.

But there's no getting around the corn-ethanol price connection. Corn prices are up despite projections of a record 12.5 billion-bushel corn harvest in the U.S. this year -- because ethanol producers will eat up 27% of the U.S. corn crop this year, according to the U.S. Department of Agriculture. Corn consumption by ethanol producers is projected to climb to 3.4 billion bushels in 2007, up from 2.2 billion bushels in 2006, when ethanol producers consumed 20% of the corn crop.

Supplies would be even tighter if high corn prices hadn't deterred some buyers. Corn exports, the U.S. Department of Agriculture says, are expected to drop by 10% in 2007. And corn purchases for animal feed will drop 3%.

The high price of corn has had a ripple effect on the price of other farm commodities too. With corn so profitable to plant, farmers have shifted acreage from soybeans, for example, to corn. In 2007, the acreage planted in corn will grow by 16% from 2006, while the acreage planted in soybeans will fall by 11%.

So it's not especially surprising that the price of a bushel of soybeans was up 36% as of June 4 from a year earlier. (Corn isn't just displacing food crops, either. In the southern U.S., the acreage planted in cotton is down 20% in 2007 as farmers switch to planting corn.)

And the ripples haven't stopped with the grain markets. The U.S. food industry is largely built on corn. It feeds the chickens, pigs and cows that wind up on our dinner tables. It's the source of the sweeteners in everything from soda to cookies to bread. And it's processed into starch for use in candies, soups, cake mixes, baked goods and, in the general economy, into plastic, paper, adhesives and textiles.

So if the price of corn is up, you'd expect the price of everything to be up. And so it is. If you grilled steak on this past Memorial Day, it cost 5.5% more than a year ago, according to the U.S. Labor Department. Think you can escape by barbecuing chicken? Forget it. Whole chickens cost 7.7% more than they did in May 2006.

Milk and cheese are up, too, since corn makes up the bulk of a dairy cow's diet. Milk prices are up about 3% from a year ago, or about 10 cents a gallon, according to the U.S. Department of Agriculture. But higher costs could push up the price of a gallon of milk by an additional 40 cents in the next few months to a national average of $3.78 a gallon.

Just because you don't see it doesn't mean it's not happening.

[impala454]

you're still not understanding, and just grasping for any number you can find that sounds ok to you. let me explain one more time and make it simpler:

let's say I drive a big semi truck on a 500 mile route to a wal mart to drop off goods for them to sell. it costs me $x amount of gas to make the trip. the worth of those goods in the truck (what wal mart eventually sells them for i.e. revenue) is $y. in every case, $x will be insignificant compared to $y. profit makes no sense to compare to in this case, because it's including every cost of the company, not just gas.

and just because I don't see it doesn't mean it's not happening? how am I supposed to get all up in arms over this issue if I'm still paying $0.50 for the same can of corn I paid $0.50 for ten years ago? Why would I get all gung ho about gas prices when, according to inflation, they're in the same place they've been the past couple years. I have a hard time taking the doomsday view of it when I don't even see the effects.

which leads to my final point. when you see the prices of consumer goods (and services) all rise simultaneously by small amounts over the period of a couple years, what is the more likely explanation:
1. inflation
2. an extremely nested web of goods depending on other goods depending on other goods all leading back to oil and omg /cry /cry it must be bush and global warming and war

yeah oil is important. yeah it sucks when it gets expensive during the summer, but we go through this every year. prices go way up at the beginning of the summer, people go insane and think it's the end of life as we know it, then when it goes back down in the fall people shuttup about it. so I suppose this thread is just business as usual.

[The Fanatic]

let's say I drive a big semi truck on a 500 mile route to a wal mart to drop off goods for them to sell. it costs me $x amount of gas to make the trip. the worth of those goods in the truck (what wal mart eventually sells them for i.e. revenue) is $y. in every case, $x will be insignificant compared to $y. profit makes no sense to compare to in this case, because it's including every cost of the company, not just gas.

Irregardless, it is still a good excuse to raise prices. In other news, the locally owned hamburger joint that I work at just raised their prices because suppliers raised their prices.

[The Fanatic]

http://p239.news.mud.yahoo.com/s/csm/20070613/ts_csm/amilk

[dauss]

Why would I get all gung ho about gas prices

No clue, but maybe it's because you're not reading the article. The article posted was talking about the ethanol demand, increased consumption of corn for the production of ethanol, reduction in supply for animal feeds, increased costs in animal feed, reduction in the farm land for other crops, and increased food prices from the above factors.

Why you would rant on about how much it costs a truck to deliver food and post prices of gasoline doesn't make any sense to me.

For these steak houses, $2 increase on top of what they're probably charging for a steak, >$35, it doesn't seem that much. These are prime steaks, and prime cuts of meat have more fat, which means the cows were fattened up longer and ate more. So it's a slightly higher percentage increase, but what else do you expect for a premium product?

$0.09 increase for a $2 box of cereal, 4.5%.
$2 increase for a $35 steak, 5.7%.

[impala454]

Why you would rant on about how much it costs a truck to deliver food and post prices of gasoline doesn't make any sense to me.

because you were talking about how gas prices would drive up delivery costs which would drive up food costs, which makes no sense because the delivery prices are minscule in comparison to the cost of the food being delivered.

For these steak houses, $2 increase on top of what they're probably charging for a steak, >$35

no, it's $3 increase from a $15 steak. that's a 20% increase. they increase the prices because they can. not because oil and corn prices are up. their stock prices have been skyrocketing as much as oil has.

I know what you're saying, you think food prices will increase because corn prices increase because corn demand increases because of ethanol demand because of gas prices, well that last, immensly important link doesn't exist. gas prices are high because of the lack of refining capacity, not because of a lack of oil, or lack of ethanol. this means the demand for ethanol doesn't change until the refining capacity changes. you think there's an enormous demand for corn and ethanol so it can sit in a bunch of tanks and not get refined and blended with gasoline that doesn't exist??

Irregardless, it is still a good excuse to raise prices.

Perhaps, but I'd say the fact that you can't get into the joints without an hour wait at dinner time would probably have much more impact on them raising prices. I'll tell you what will really raise prices at restaurants will be these minimum wage increases coming.

In other news, the locally owned hamburger joint that I work at just raised their prices because suppliers raised their prices.

how much was the increase?

[pysex]

i think we're going to get screwed in the near future....

people are sitting on their asses and watching the cost of living skyrocket in America

we're going to see people not making enough money to meet that narrow margin and we're going to have a job crisis

inflation is permanent




i blame magic millionaires

the more they have in their pocket the more price hikes are justified and the working class is going to get screwed in the ass

This was a major factor of the French Revolution...taxes were raised, food prices were raised, but no one was earning enough to meet that demand...all of their money was spent on trying to buy food and the economy collapsed because the people couldn't spend money anywhere else

[FORSAKENR320]

i think we're going to get screwed in the near future....

people are sitting on their asses and watching the cost of living skyrocket in America

we're going to see people not making enough money to meet that narrow margin and we're going to have a job crisis

inflation is permanent
i blame magic millionaires

the more they have in their pocket the more price hikes are justified and the working class is going to get screwed in the ass

This was a major factor of the French Revolution...taxes were raised, food prices were raised, but no one was earning enough to meet that demand...all of their money was spent on trying to buy food and the economy collapsed because the people couldn't spend money anywhere else

thats why i'm investing in canned food and shotguns. THE APOCALYPSE IS NIGH!

[impala454]

the thought of stockpiling mass amounts of guns and ammo always seemed sensible to me....

[FORSAKENR320]

the thought of stockpiling mass amounts of guns and ammo always seemed sensible to me....

agreed. better to have them and never need them, than to need them and not have them

[dauss]

because you were talking about how gas prices would drive up delivery costs which would drive up food costs, which makes no sense because the delivery prices are minscule in comparison to the cost of the food being delivered.

no, it's $3 increase from a $15 steak. that's a 20% increase. they increase the prices because they can. not because oil and corn prices are up. their stock prices have been skyrocketing as much as oil has.

I was referring to the Palms, mentioned in the article, not what you said.

I know what you're saying, you think food prices will increase because corn prices increase because corn demand increases because of ethanol demand because of gas prices, well that last, immensly important link doesn't exist. gas prices are high because of the lack of refining capacity, not because of a lack of oil, or lack of ethanol. this means the demand for ethanol doesn't change until the refining capacity changes. you think there's an enormous demand for corn and ethanol so it can sit in a bunch of tanks and not get refined and blended with gasoline that doesn't exist??

Besides the demand for corn, more farm land dedicated to corn means less of other crops, like soybeans, wheat, and barley, which is also used in animal feed.

So why the huge push for ethanol? The house passed Energy Policy Act in 05 which requires 7.5 billion gallons of ethanol to be blended with gasoline by 2012. In his State of the Union address, president Bush called for increasing that mandate to 35 billion gallons by 2017. Then there are millions of dollars in incentives to build new ethanol plans and even more for subsidized corn.

Lets say with current technology, 35 billion gallons of ethanol would require about 100% of the corn crop. Obviously there will be technological improvements, but it would still take a majority of the corn crop.

how much was the increase?

I've got a couple examples. Wendy's no longer have their $0.99 value menu.
Jr. Bacon Cheeseburger, $0.99 -> $1.29, 30% increase.
Everything else, $0.99 - > $1.19, 20% increase.

Arby's(depending on location)
5 for $5 -> 4 for $5, 25% increase
5 for $5 -> 5 for $6, 20% increase

Those also happened long before the new minimum wage increase.