Food & Beverage

Cheese prices soar as restaurants seek more

As restaurant pandemic restrictions ease nationally and pizza restaurants continue to add business, cheese producers are getting significantly higher prices for their products to meet the current and anticipated demand from food service.

A sign of better days? Cheese prices are pushing up as restaurant demand increases. (Photo: iStock)

May 18, 2020 by S.A. Whitehead — Food Editor, Net World Media Group

Proof that the restaurant industry — particularly the cheese-reliant pizza sector — is gaining ground even in the midst of a pandemic, came last week as cheese prices soared amid ever-increasing food service demand, according to the U.S. Department of Agriculture. In fact, to say that cheese markets are bullish would be an understatement, as the average price paid for barrels shot up 27 cents to $1.52, while blocks stampeded ahead 32 cents in price to an average of $1.60. 
In fact, on the Chicago Mercantile Exchange Friday, barrels actually closed way up at $1.72, while 40-pound blocks sped ahead to close at $1.78. 

As a result, a majority of U.S.D.A. cheese producer contacts are now reporting higher cheese production due to a rebound in demand, namely from food service. Simultaneously, the milk needed to make that cheese has become less and less available daily, the department reported. 

In the Western U.S., contacts have suggested that competitive domestic prices have given international customers more incentive to order. Likewise, domestically, restaurants and other food service establishments are busier as they begin to reopen and continue to see increasing customer demand. 

Pizza brand stock values

On Wall Street, trading around major pizza stocks has generally echoed the sector's staying power, even amidst the many business restraints such restaurant brands have incurred as a result of the pandemic. But last week, only half of the four brands monitored here weekly made gains. 

On the positive end, Domino's Pizza Inc., was the big winner in last week's trading, ending Friday at $376.04, up $6.93 from the previous week's close. Papa John's Inc. joined Domino's in last week's winners' circle when that Louisville, Kentucky-based brand gained 70 cents on the week to close Friday at $81.90.

But the multi-brand pizza companies did not fare as well last week, beginning with Pizza Hut parent, Yum Brands Inc., which closed down $1.28 on the week at $84.90. Meantime, Dallas-based Pie Five and Pizza Inn parent, Rave Restaurant Group Inc., also lost value. The company closed down 10 cents Friday at 81 cents. 

Auto fuel

The break that pizza operators have been getting in the form of lower gas prices, appears to be disappearing, as the average cost of a gallon of gas last week alone increased 6 cents on average, according to the American Automobile Association. 

Late last week, the price had moved up to $1.84 on average for a gallon of regular, which is 6 cents higher than the previous week, but still cheaper on the month (3 cents less) and year ($1.02 less), respectively. Additionally, despite the national price increase, 40 states still have averages of $2 or less per gallon, AAA said.

"Pump prices are fluctuating throughout the country as demand increases and gasoline stocks decrease," said Jeanette Casselano, AAA spokesperson, on the organization's website. "The boost in demand continues to push pump prices up around the country, as more states re-open businesses. Motorists in the Great Lakes, Central, South and Southeast states are seeing the most volatility at the pump."

The U.S. Energy Information Administration's showed demand for gasoline grew by 800,000 barrels a day to 6.7 million b/d last week, which is 3.2 million b/d less than last year at this time. AAA believes gas demand will continue to grow, along with pump prices. 

This morning, the average price of a gallon of regular was $1.88, which is 3 cents higher than the previous week, with the average price of a gallon of mid-grade up ($2.24) and premium ($2.50) also up 3 cents in the past week, on average. Diesel, meanwhile, inched up just one cent to come in at $2.41) while E85 fuel was up 4 cents on the week at $1.77 on average. 

Natural gas

Conversely, natural gas spot prices fell at most locations for the most recent report week that ended on May 13. The Henry Hub spot price fell from $1.88 per million British thermal units (MMBtu) to $1.56/MMBtu over that period. At the New York Mercantile Exchange, the price of the June 2020 contract decreased 33 cents, from $1.94/MMBtu to $1.62/MMBtu. The price of the 12-month strip averaging June 2020 through May 2021 futures contracts declined 20 cents/MMBtu to $2.36/MMBtu.

The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 40 cents/MMBtu, averaging $3.75/MMBtu for the week that ended on May 13. The prices of ethane, propane, natural gasoline, and butane all rose, by 7%, 10%, 16%, and 18%, respectively. Rapid increase in demand for isobutane for alkylate production (a blendstock for premium gasoline) resulted in isobutane prices rising 29% week over week.

Wheat

And finally this week, a look at wheat prices last week, which ran the gamut, from 19 cents lower to 37 cents higher. Kansas City U.S. No. 1 hard red winter, ordinary protein rail bid was 13 cents lower, from $5.36 3/4-$5.46 3/4 per bushel. Kansas City U.S. No. 2 soft red winter rail bid was not quoted.  

St. Louis truck U.S. No. 2 soft red winter terminal bid was 19 cents lower at $5.25 per bushel. Minneapolis and Duluth U.S. No. 1 dark northern spring, 14 to 14.5 percent protein rail, was 37 cents higher, at $6.33 per bushel. Portland U.S. soft white wheat rail was steady to 7 cents higher, from $6-$6.15 per bushel.

About S.A. Whitehead

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Pizza Marketplace and QSRweb editor Shelly Whitehead is a former newspaper and TV reporter with an affinity for telling stories about the people and innovative thinking behind great brands.