Article

Commodities: Gas prices drop, but so does Papa John's value

The final week of November brought some big wins and an equally substantial loss in pizza brand trading, but all brands will profit from the continued downslide in vehicle fuel prices.

December 3, 2018 by S.A. Whitehead — Food Editor, Net World Media Group

It was a week full of big ups and downs for pizza brands during the last days of November, as investors stepped on the gas pedal for brands like Pizza Hut and Domino's, while they stomped on the brakes for Papa John's upon news that a potential buyer for the brand backed out and sped away. 

Cheese

Barrels closed at $1.32, while 40-pound blocks finished the week at $1.36. The weekly average for barrels was $1.27, which was up less than a cent, while blocks dropped nearly one cent in price to finish the week at $1.36, according to the U.S.D.A. Agricultural Marketing Service. 

Nationally, cheese demand reports are somewhat bullish in the U.S. Cheese shredders in the Midwest were busier last week, while pizza cheese producers in the East report stronger sales. Lower U.S. cheese prices have piqued Mexican buying interest, as well, according to Western producers. 

Midwestern and Eastern cheese plant managers relay slower production overall. Some Midwestern producers report shifting away from barrel manufacturing due to lighter demand and weakening prices. 

Wheat

Compared to last week, cash bids for wheat were mixed, with a lot of producers focused on the G20 meetings that began over the weekend, according to the U.S.D.A. Department of Agriculture Market News. Last week's export sales and shipments of wheat totaled 13.9 million and 9.2 million bushels, respectively, putting wheat shipments down 18 percent from a year ago.

Kansas City U.S. No. 1 Hard Red Winter, ordinary protein rail bid was 5 1/2 cents lower to 3 1/2 cents higher, from $5.82 1/2-$5.97 1/2 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 steady to 1 cent lower, from $5.21-$5.23 per bushel. Minneapolis and Duluth U.S. No. 1 Dark Northern Spring, 14.0 to 14.5 percent protein rail, was 4 cents lower to 26 cents higher, at $7.13 per bushel. Portland U.S. Soft White wheat rail was steady to 5 cents lower, from $6.15-$6.30 per bushel.

Vehicle fuel

Crude inventories are still increasing according to AAA, which said this is now the tenth consecutive week the product inventories have risen. And the really good news is that the price of a gallon of regular has actually dropped below the price for that commodity exactly one year ago when we paid $2.48 a gallon. Today, the average price of a gallon of regular unleaded is just $2.46. That price is also a good 10 cents  below last week's cost and an impressive 30 cents below what we paid just a year ago. 

Mid-grade, premium, diesel and E85 did not see nearly as sharp a drop over the last month, with mid-grade ($2.80) and premium ($3.05) down 28 cents since last month, while diesel ($3.15) was just 12 cents lower and E85 ($2.16) about 21 cents lower than last month. Likewise, none of the higher grades or varieties fell lower than last year's prices. 

Natural gas

Natural gas spot prices fell at most locations for the seven days that ended Nov. 28. Henry Hub spot prices fell from $4.68/MMBtu to $4.44/MMBtu over that same period, according to the U.S. Energy Information Administration.

At the Nymex, the December 2018 contract rose during the report week, expiring at $4.72/MMBtu. The January 2019 contract price increased to $4.7/MMBtu, up 22 cents/MMBtu during the report period.

Net withdrawals from working gas totaled 59 billion cubic feet (Bcf) for the week ending Nov. 23. Working natural gas stocks are 3,054 Bcf, which is 17 percent lower than the year-ago level and 19 percent lower than the five-year (2013-17) average for this week

The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 63 cents/MMBtu, averaging $6.54/MMBtu for the week ending Nov. 28. The price of natural gasoline, ethane, propane, butane and isobutane all fell by 11, 9, 8, 12 and 7, respectively.

According to Baker Hughes, for the seven days ending Nov. 21, the natural gas rig count remained flat at 194. The number of oil-directed rigs fell by three to 885. The total rig count decreased by three, and it now stands at 1,079.

Pizza company stocks

It was a particularly good trading  week for Domino's and Pizza Hut, both which saw substantial increasing in stock market value. But news that Trian Fund Management was pulling out of a potential deal to acquire the faltering Papa John's brand, sent that stock down in flames. 

Domino's saw a nice kick up in value last week, closing Friday at 277.32, up $14.83 over the week's trading. Nearly as joyful likely were Pizza Hut leaders, where parent company, Yum Brands, last week saw its value ride up $5.03 in seven days' time, to close Friday at $92.22/

But as we said, Papa John's got beat up by investors over the same trading week, closing at $47.99 which  was down $9.30 from its previous week's close. But take-and-bake brand, Papa Murphy's got votes of confidence from investors, regaining much of the previous week's losses to close Friday at $5.22.

Photo: iStock

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.