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Coronavirus, Saudi gas price-slashes rock markets at start of trading week

Markets opened this morning amidst a firestorm of changes caused by both the worsening problems related to the coronavirus and a move by Saudi Arabia to vastly slash oil prices and flood the market with supply. All this follows a comparatively modest week in trading for pizza brands.

Photo: iStock

March 9, 2020 by S.A. Whitehead — Food Editor, Net World Media Group

At the opening of markets this morning at the time of this writing, U.S. stock markets were in serial whiplash mode as a combination of increasing concerns around the business and health problems associated with the coronavirus, along with a move by Saudi Arabia to flood international markets with an open spigot of low-priced oil, weighed on traders minds and cash stores. The effects on pizza brands along with all other businesses traded both nationally and internationally remains to be seen, but all this follows some pretty significant changes for the world's largest pizza brand, Domino's, just in the last few weeks, when that brand catapulted up in value following positive earnings reports.

At the close of markets Friday, Domino's stock price did drop slightly, ending at $336.41, down $3.05 from the previous Friday's close of $339.46. Some of that drop in the stock's rise was even last week attributed to uncertainty over the effects of the coronavirus internationally. Last week, for instance, the Financial Times reported that the chain's U.K.-based stores were "stockpiling" some products as a precaution in the event of any supply chain stoppages in coming weeks or months due to the virus. The current values for Domino's stock are ranging in the upper $330-range, well above what they were less than a month ago when the stock was in the upper $290-range. 

But Domino's loss last week was its competitors' gains in the pizza restaurant environment, where Louisville, Kentucky-based brand Papa John's pulled off a 13-cent gain over the week's buying and selling to close Friday at $57.74. 

At nearby Louisville corporate headquarters for Pizza Hut parent, Yum Brands, a slight gain on the week was also being toasted, when that stock closed up 15 cents to end Friday at $89.40. 

In fact, even the recently struggling double-pizza brand company, Rave Restaurant Group, Inc., pulled off an improvement on the week, posting a 1-cent gain on Friday at the close of trading when the Pizza Inn and Pie Five parent ended up at $1.26. 

Despite the modest movements overall in pizza brand trading last week, operators could take some reassurance in the values of their other major commodities, which last week were all down, especially for anything involving petroleum, like vehicle fuel and natural gas. 

Vehicle fuel 

The price at the pump for all those pizza deliveries plummeted last week, dropping three cents in the first three days of the week in the price of unleaded gas, according to the American Automobile Association. The organization said that although domestic gas stocks have fallen, they still remain well above last year's levels at this time. 

As a result of that ample supply, along with increasing concerns over the effects of the coronavirus on crude prices, AAA said its analysts expect pump prices to continue their downward trend through the end of the winter driving season. In fact, some of the biggest savings in pump prices were in the Midwest, where prices in Ohio, Indiana and Michigan were down last week 12-13 cents. 

Today, the current average for a gallon of regular clocked in at $2.38, down 6 cents from the previous Monday and 30 days earlier. The same drop was also in effect for mid-grade $2.73 and diesel fuel ($2.81), while premium and E85 both fell 5 cents on the week to $2.99 for premium gas and $2.11 for E85. 

Wheat

Wheat prices were also mostly lower, ranging from 19 cents and under to 8 cents over the previous week's average prices, according to the U.S. Department of Agriculture. 

Kansas City U.S. No. 1 Hard Red Winter, ordinary protein rail bid was 5 ½ cents lower, from $5.19 1/4-$5.29 1/4 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 at $5.55 per bushel. Minneapolis and Duluth U.S. No. 1 Dark Northern Spring, 14 to 14.5 percent protein rail, however, was up 8 cents, ranging from $6.62-$6.72 per bushel. Portland U.S. Soft White wheat rail was 18 to 19 cents lower, from $5.93-$6 per bushel.

Cheese

On the Chicago Mercantile Exchange cash markets last Friday, barrels closed at $1.48, while 40-pound blocks ended at $1.75, according to the U.S.D.A. The weekly average for barrels was down 7 cents to $1.52, while blocks added 1 cent last week to average $1.76. 

Milk is in ample supply, according to the U.S.D.A., keeping cheese producers busy nationally. Cheese demand reports are across the spectrum from slow/steady in the Midwest to strong in the West. Eastern U.S.D.A. contacts reported that they expect an uptick in sales with the upcoming spring holidays.

But even as cheese stocks grow nationally, market tones are still being classified as "shaky," according to the U.S.D.A. with the price gap on the Chicago Mercantile Exchange managing to grow again to just under 30 cents last week. 

Natural gas

Natural gas spot prices fell at most locations for the report week that ended last Wednesday, March 4. The Henry Hub spot price fell from $1.92 per million British thermal units (MMBtu) to $1.80/MMBtu over the period.

At the New York Mercantile Exchange, the March 2020 contract expired at $1.82/MMBtu. The April 2020 contract price decreased to $1.83/MMBtu, down 1 cent/MMBtu over the same seven-day period. The price of the 12-month strip, averaging April 2020 through March 2021 futures contracts, declined 1 cent/MMBtu to $2.16/MMBtu.

Working natural gas stocks total 2,091 Bcf, which is 48% more than the year-ago level and 9% more than the five-year (2015–19) average for this week.

The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 33¢/MMBtu, averaging $4.30/MMBtu for the period. The prices of butane, natural gasoline, propane and isobutane fell by 17%, 12%, 5% and 4%, respectively. The price of ethane remained flat week over week.

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.