Widespread drought affects crop prices

July 16, 2012 | by Alicia Kelso

The commodities markets are in the spotlight as the U.S. faces its largest drought since the 1950s. According to the National Climatic Data Center, about 55 percent of the country experienced at least moderate short-term drought in June for the first time since December 1956, when 58 percent of the country was in a moderate to extreme drought.

July has hardly provided any relief thus far, with yet another heat wave moving across the country this week. The extreme weather conditions have left farmers scrambling to save some of their harvests, but the effects will likely lead to higher food costs sooner than later. Of particular concern is the corn harvest, which has been dramatically reduced by the drought. This will spike the cost of animal feed, which will spike the cost of meat.

Richard Volpe, an economist with the USDA's Economic Research Service, told CNN that beef, pork, poultry and dairy prices will experience the greatest impact from these weather conditions.

Wheat prices finished a second week in a row above $9, averaging nearly 20 cents higher than the previous week. A rise in crude oil prices has reversed the months-long dropping gas price trend, and hot temperatures across the country are also to blame for higher natural gas prices.


Average block cheese prices rose a penny to $1.65 last week on the Chicago Mercantile Exchange, from $1.64 the week prior.

Cheese prices closed at $1.64 Monday, Tuesday and Wednesday, $1.66 Thursday and $1.68 Friday.


The drought settling in across the country has affected wheat prices, which jumped again last week on the Minneapolis Grain Exchange, averaging $9.21. The week prior, prices were $9.02. Wheat averaged $7.49 in early June.

Wheat closed at $9.14 Monday, Tuesday and Wednesday, $9.32 Thursday and $9.35 Friday.

Gasoline and diesel fuel

Today's nationwide average for regular unleaded fuel is $3.39, up a penny from $3.38 the previous week, according to AAA and the Oil Price Information Service.

Prices a month ago were higher at $3.51. Last year at this time, consumers were paying nearly 30 cents more, $3.67, at the pump.

Today's mid-range unleaded is $3.54, from $3.53 the week prior, while today's premium unleaded price is $3.68, from $3.67.

Diesel fuel prices are averaging $3.68, from $3.67 last week. The price of diesel fuel is down from $3.78 a month ago, and from $3.94 a year ago.

Natural gas

Natural gas price movements at spot markets have been mixed since July 3. Over the past week, the Henry Hub price has posted a net loss of 6 cents per MMBtu, falling from $2.78 per MMBtu on July 3 to $2.72 per MMBtu July 10. High temperatures in much of the United States pushed prices up temporarily earlier this week.

The August 2012 NYMEX futures price fell from $2.899 per MMBtu July 3 to $2.853 per MMBtu July 10. Futures prices for the near month have remained below $3 per MMBtu.

Pizza company stocks

Pizza Hut parent Yum! Brands Inc. closed last week at $64.72, a slight drop from $64.75 the week prior. The company hit its 52-week high in May at $74.44. Its 52-week low is $47.15 from a year ago. Yum! Brands will report its latest earnings Wednesday.

Domino's closed last Friday at $31.81, up from $30.83 a week ago. DPZ's 52-week high was $42.21 in April. Shares remain higher over this time last year when the company traded at $22.84.

Papa John's closed last week at $49.44, a jump from $48.43 the week prior. PZZA hit its 52-week high in May at $50.45 after a positive earnings report. The company hit its 52-week low of $26.95 a year ago.

CEC Entertainment Inc., parent company of Chuck E. Cheese restaurants, closed out last week at $36.06, down a bit from $36.62 the week prior. The company hit its 52-week high of $41.92 in July 2011. Its 52-week low was $25.83 in September.

Pizza Inn closed Friday at $2.47, from $2.58 the previous week. PZZI hit its 52-week high of $7.07 in December and traded as low as $2.18 a year ago.

Read more about equipment and supplies

Topics: Cheese , Chuck E. Cheese's Pizza , Domino's Pizza , Equipment & Supplies , Operations Management , Papa John's , Pizza Hut , Pizza Inn

Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with FastCasual.com, QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.
View Alicia Kelso's profile on LinkedIn

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