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Commodities: Rising stock values, falling commodity prices help operators fight 2.8 percent cost-of-living increase

It's costing nearly 3 percent more to live in the U.S. this year than last, according to the Consumer Price Index cost-of-living adjustment for 2019, but the good news for pizza operators is that, at least for now, most commodity prices are lower and, this week, most brands won higher stock values, too.

January 21, 2019 by S.A. Whitehead — Food Editor, Net World Media Group

The U.S. Consumer Price Index is reporting that this year it's costing Americans nearly 3 percent more to live and breathe, on average, than it did last year, with the official annual cost-of-living adjustment or COLA this year set at 2.8 percent. That's the highest annual increase in eight years, but there is some good news for pizza restaurateurs. Last week, most of the brands monitored here saw some nice gains in stock value, while the price paid for pizza commodities fell for everything but natural gas. 

Cheese

On the cheese markets, barrels closed at $1.20 Friday, while 40-pound blocks finished at $1.40. The weekly average for barrels, according to the U.S.D.A. Agricultural Marketing Service was off 6 cents at $1.21, while blocks were up 2 cents at $1.41. 

In the coastal regions, cheese production continues actively, the service said, as the central region remains active, but many producers are reining in manufacturing levels following typically heavy post-holiday inventories. Post-holiday cheese demand is softer, with Western cheese contacts reporting that production is outpacing demand. 

Cheese markets in the U.S. are somewhat shaky, the U.S.D.A. said, with the large block-to-barrel CME price gulf adversely affecting most producers. U.S.D.A. cheese contacts have suggested that the possibility of block prices descending toward an expected proximity — $.05 or thereabouts — creates buyer hesitancy.

Wheat

Wheat bids were mixed last week, ranging from 22 cents lower to 5 1/4 cents higher.  Kansas City U.S. No. 1 Hard Red Winter, ordinary protein rail bid was 5 1/4 cents higher from $6.14-$6.29 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 3 to 4 cents higher, from $5.45-$5.52 per bushel. Minneapolis and Duluth U.S. No. 1 Dark Northern Spring, 14.0 to 14.5 percent protein rail, was 4 to 22 cents lower, from $6.65-$6.72 per bushel. Portland U.S. Soft White wheat rail was steady to 5 cents lower, from $6.10-$6.35 per bushel.

Vehicle fuel

The American Automobile Association reports that winter gas demand has reached a new low, even as fuel inventories continue to grow. The average price for regular has flattened out for the past week, remaining at $2.25 over the seven days. But overall, that's still down 10 cents from last month and 29 cents from last year, making it a nice counter-note to that aforementioned COLA.  

Across the unleaded fuel grades, the same trend followed suit, with mid-grade averaging $2.57 today and premium $2.83, all lower than one month and one year ago, though not as markedly as for regular unleaded. 

Diesel users also have noticed savings over the month and year, though nowhere near as much as gasoline users have. The average price of diesel today was $2.92, down 13 cents from last month, but just 2 cents from last year at this time. Similarly, E85 users paid $1.98 this morning, down 11 cents from last month and 10 cents from this time last year. 

Natural gas

Natural gas spot prices rose at most locations for the report week ending on Wednesday, Jan. 16. Henry Hub spot prices rose from $2.91 per million British thermal units (MMBtu) to $3.61/MMBtu during that time period. 

At the Nymex, the price of the February 2019 contract increased 40 cents, from $2.984/MMBtu to $3.384/MMBtu in that span. The price of the 12-month strip averaging February 2019 through January 2020 futures contracts climbed 12 cents/MMBtu to $2.965/MMBtu.

Net withdrawals from working gas totaled 81 billion cubic feet (Bcf) for the week ending Jan. 11. Working natural gas stocks are 2,533 Bcf, which is 3 percent lower than the year-ago level and 11 percent lower than the five-year (2014-18) average for this week.

The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 26 cents/MMBtu, averaging $6.46/MMBtu for the week ending Jan. 16. The price of natural gasoline, ethane, propane, butane, and isobutane all rose, by 5, 1, 7, 3 and 1 percent, respectively.

According to Baker Hughes, for the week ending Tuesday, Jan. 8, the natural gas rig count increased by four to 202. The number of oil-directed rigs fell by four to 873. The total rig count remains unchanged at 1,075.

Pizza company stocks

Three of the four publicly traded brands followed by Pizza Marketplace experienced nice upward trends last week on the stock market, beginning with the winner for the week, Domino's, which shot up $17.47 in value over the previous week to close Friday at $267.46. Meanwhile, Yum Brands-parented competitor, Pizza Hut, also had a nice uptick over the week from $90.94 on Jan. 11 to $92.36 last Friday. 

At Papa John's, the brand also pulled out about a 30-cent gain week over week to close Friday at $42.86. In fact, only the smaller Papa Murphy's brand experienced a loss last week, dropping 35 cents in value over the trading week to close Friday at $4.76. 

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.