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Commodities: News of consumers staying home pushes dine-in brands off cliff

The cause-and-effect relationship of market data studies is rarely displayed as clearly as it was in pizza trading last week after the mid-week news of a new NPD Group study that found a growing number of consumers are eating at home these days.

February 27, 2017 by S.A. Whitehead — Food Editor, Net World Media Group

The cause-and-effect relationship of market data studies is rarely displayed as clearly as it was in pizza trading last week after the mid-week news of a new NPD Group study that found a growing number of consumers are eating at home these days.

At the close of the markets Tuesday, it was business as usual for the pizza stocks monitored here each week in NYSE and NASDAQ trading. But by the open of trading less than a day later, everything changed, with brands that do a substantial dine-in business, like Pizza Hut falling off a cliff in value, while delivery-centric Domino's fell grew slightly and the take-and-bake chain, Papa Murphy's, showing a nice bump overall in trading last week.

It was an almost mirror-like reflection of how and where NPD Group's data showed consumers have been eating since the start of this year — at home. And that was by far the biggest trading story last week, although it is worth noting that the price of other pizza commodities gave restaurauteurs some reason for celebration, since most of these essential operating ingredients dropped in value over the course of last week. 

Cheese
Cheese prices — which have been in freefall in recent weeks — flattened out in trading last week. Friday, the commodity was down about a half-cent from the previous week's trading average, dropping from $1.58 to $1.5750 at the close of markets on Friday. 

Wheat:
Compared to the previous week, wheat prices were mostly mixed over trading last week, running 9 cents lower to 17 cents higher. Wheat’s planting estimate made a record low at 46.0 ma with wheat price estimates averaging $4.30 a bushel. The price estimate appears optimistic this early in the season and will depend on a fifth consecutive year of good weather around the globe.

Weekly export sales for wheat were listed at 26.0 mb (707,800 mt) with 16.6 mb (451,300 mt) for the 2016-2017 marketing year. Kansas City U.S. No. 1 Hard Red Winter, ordinary protein rail bid, was 1/4 to 5 1/4 cents lower, from $4.72 3/4 to 45.47 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 9 cents lower from $4.33 to $4.43 per bushel.  

Minneapolis and Duluth U.S. No. 1 Dark Northern Spring, 14.0 to 14.5 percent protein rail, was 2 3/4 lower to 17 1/4 cents higher from $6.33 1/4 to $6.63 1/4 per bushel. Portland U.S. Soft White wheat rail was 9 3/4 lower to 2 cents higher from $4.73 to $4.87 per bushel.

Gasoline and diesel fuel
Although vehicle fuel prices are running 55 cents or more higher per gallon than this time last year across all grades, the price finally seems to be leveling off. The price of a gallon of regular this morning was $2.29, up less than a cent from last week and the same as last month. Nonetheless, this time last year, we paid just $1.74 a gallon on average for the same grade of fuel, showing that overall the price of this essential commodity stands steeply higher than last year. 

That same trend was echoed almost identically across all gradees, with mid-grade gas at $2.56, the same as last month and 56 cents higher than last year, and premium at $2.81, up a penny from last month, but 58 cents higher than the $2.23 paid last year. 
And finally, diesel followed the same trend, with an average price of $2.52 this morning, the same as a month ago, but 54 cents over last year's price. 

Natural gas
Natural gas spot prices fell at most locations this report week (Feb. 15 to 22). The Henry Hub spot price fell 39 cents from $2.92/MMBtu last Wednesday to $2.53/MMBtu yesterday, a 13 percent decrease.This is the lowest Henry Hub price since mid-November 2016, when the price dipped nearly to $2.00/MMBtu on mild weather and high storage stocks. At the New York Mercantile Exchange (Nymex), the March 2017 contract fell 33 cents, from $2.925/MMBtu last Wednesday to $2.592/MMBtu on Feb. 22. 

Weather was warmer virtually everywhere in the country by the end of the report period, with temperatures breaking records. Net withdrawals from working gas totaled 89 billion cubic feet (Bcf) for the week ending Feb. 17. Working natural gas stocks are 2,356 Bcf, which is 10 percent less than the year-ago level and 7 percent more than the five-year (2012–16) average for the week.

The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 20 cents, closing at $7.50/MMBtu for the week ending Feb. 17. The prices of propane, butane, and isobutane fell by 3, 5, and 7 percent, respectively. The price of natural gasoline rose by 1 percent. The price of ethane remained flat week over week.

According to Baker Hughes, for the week ending Friday, Feb. 17, the natural gas rig count increased by 4 to 153. The number of oil-directed rigs rose by 6 to 597. The total rig count increased by 10, and it now stands at 751.

Pizza company stocks
The trading week may have been shortened a day by President's Day last Monday, but the drama grew mid-week, upon news consumers have been staying at home this winter to save cash and take advantage of relatively lower grocery prices. 

Tuesday's trading went along at its usual clip, but after the report's release that afternoon, traders returned to drop bids on the big pizza brands substantially that Wednesday morning.

For the take-out and delivery brand Domino's the drop was largely momentary, with that brand actually ending up gaining slightly in value from Friday, Feb. 17 when it was $185.95, to last Friday at the close, when the stock went for $186.28. 

But for brands that are more dining-in focused, Wednesday morning was like falling off a cliff from Tuesday's trading at close. For Pizza Hut parent, Yum Brands, overall value dropped steeply last week, from $68.50 on Feb. 17 to $65.95 last Friday at the close of trading. 

Papa John's took an even deeper plunge from $86.10 on Friday, Feb. 17 to $78.70 at the close of trading last Friday. In fact, that brand's value dropped nearly $4 in less than 24 hours between Tuesday's close of trading when it was valued at $85.34, to shortly after Wednesday's opening of trading when it fetched just $81.38. 

But as mentioned, take-and-bake brand Papa Murphy's, took the opposite path, rising in value over the week from $4.15 on Friday, Feb. 17 to $4.34 last Friday at the close of trading.

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.