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Falling gas prices this fall could be boon to pizza brands' balance sheets

Okay, so the majority of publicly traded pizza brands took a bit of a bath on the stock market last week, but not all is lost. Falling gas prices -- with more on the way -- could be just the bottom line boost some brands need.

August 26, 2019 by S.A. Whitehead — Food Editor, Net World Media Group

It was a forgettable week for all but one major publicly traded pizza brand in trading last week, with the No. 1 and No. 2 brands by sales both watching their share prices drop over the five days of trading. But there was some relief for operators last week in less costly pizza commodity prices, including the cost of gas, which is still falling. In fact, the American Automobile Association said that prices below $2 are not out of the question in some parts of the nation.  

Cheese 

On the Chicago Mercantile Exchange, the price for barrels closed at $1.67, while 40-pound blocks ended up at $1.88, according to the U.S.D.A. The weekly average for barrels was down 5 cents to $1.69, while blocks averaged 2 cents more over the week at $1.90. 

The U.S.D.A. said nationwide, cheese demand is stable to positive, with cheese inventories reported to be plentiful. The association qualified cheese market tones across the nation as "wobbly" though, with a growing price gap between the cost of blocks and barrels, which typically are not more than 10 cents apart. 

Wheat

Compared to last week, cash bids for wheat were mixed, ranging from 5 cents lower to 15 3/4 cents higher. Kansas City U.S. No. 1 Hard Red Winter, ordinary protein rail bid was 1 1/2 cents lower, from $4.78 1/4-$4.88 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 2 cents lower to 5 cents higher, at $4.69 per bushel. Minneapolis and Duluth U.S. No. 1 Dark Northern Spring, 14.0 to 14.5 percent protein rail, was 15 3/4 cents higher at $5.98 1/2 per bushel. Portland U.S. Soft White wheat rail was steady to 5 cents lower, from $5.55-$5.75 per bushel.

Vehicle fuel

With gas prices already down 15 cents from just five weeks ago, AAA is reporting that consumers — including pizza restaurateurs — can anticipate those prices to fall still further as we move into fall, with a total drop of roughly 25-cents/gallon, compared to this summer. This perk is attributed to cheaper crude oil, less demand and a move to winter-blend gasoline, the association said. Nationally, AAA forecasts the national average price per gallon to drop to $2.40 or lower this fall.

A destructive hurricane season could change that forecast, however, and the National Oceanic and Atmospheric Administration predicted that 2019's Atlantic hurricane season will be "above normal," with 10 to 17 named storms, including five to nine hurricanes. If, however, Mother Nature's wrath is largely avoided, AAA said this fall, pump prices could even drop under $2/gallon by year-end, in the south and southeastern U.S. 

This morning, the average price of a gallon of regular nationally was down about 3 cents over just last week to $2.59, with mid-grade ($2.93) and premium ($3.19) following the same downward trend. Diesel ($2.94) was down just a penny, on average, while E85 ($2.31) was actually up a cent from last week, though still priced 9 cents below last month's level. 

Natural gas

Natural gas spot prices rose at most locations for the latest report week, that ended Aug. 21, according to the U.S. Energy Information Administration. Henry Hub spot prices rose from $2.15 per million British thermal units (MMBtu) to $2.25/MMBtu over the same period.

At the New York Mercantile Exchange, the price of the September 2019 contract increased 3 cents, from $2.14/MMBtu to $2.17/MMBtu. The price of the 12-month strip, averaging September 2019 through August 2020, futures contracts climbed 1 cent/MMBtu to $2.329/MMBtu.

Net injections to working gas totaled 59 billion cubic feet (Bcf) for the week ending Aug. 16. Working natural gas stocks are 2,797 Bcf, which is 15% more than the year-ago level and 4% lower than the five-year (2014-18) average for this week.

The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 23 cents/MMBtu, averaging $4.10/MMBtu for the seven days, ending Aug. 21. The price of ethane, propane, butane, and isobutane fell by 2%, 5%, 11%, and 19%, respectively. The price of natural gasoline rose by 2%.

According to Baker Hughes, for the week ending Tuesday, Aug. 13, the natural gas rig count decreased by four to 165. The number of oil-directed rigs rose by six to 770. The total rig count increased by one, and it now stands at 935.

Pizza company stocks

Two of the three publicly traded pizza brands watched here weekly, trended downward last week. Domino's lost the most value, as the brand watched its share value dive from $234.95 at the close the previous week, to $226.15 last Friday. Pizza Hut parent, Yum Brands followed suit by falling 31 cents in value over the course of the trading week, to end Friday at $115.31. 

The week's winner was Papa John's, which managed to hop up in value about 27 cents in all for the week, to close on Friday at $43.06. 

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.