Food & Beverage

Lofty gas prices flatten out, still gobble up pizzeria profits

With gas prices a hefty 10 cents more a gallon than just a month ago, pizza operators may be feeling a slight sense of relief in hearing those still-stratospheric prices are at least flattening out.

Oil prices are continuing to play havoc with pizza operators business costs. (iStock)

June 7, 2021 by S.A. Whitehead — Food Editor, Net World Media Group

Gas prices have been, and remain to be, a wallop in the pocket for pizza operators, but there is some slightly good news this week in that fuel prices appear to be stabilizing again following the Memorial Day weekend that traditionally kicks off the summer driving season. Still, at a national average price of $3.05 for a gallon of regular today, the costs of getting commodities to pizzerias and then getting pizzas back out again to customers is hefty, to say the least.

Fortunately, at least two of the publicly-traded brands Pizza Marketplace monitors weekly also experienced a price increase of sorts, when the trading prices for both Domino's and Papa John's last week showed nice gains. Domino's, for instance, closed Friday at $431.14, up from $426.87 the previous Friday's close. Meanwhile, as Papa John's launched its cheddar-y streetwear line, its stock price smiled approvingly when that Louisville, Kentucky-based brand managed to add 80 cents to its stock value over the shorter trading week.

At Pie Five and Pizza Inn parent, Rave Restaurant Group, the stock price mimicked gas prices in standing still from the company's trading value a week earlier at $1.49, while Pizza Hut parent, Yum Brands lost $1.20 in its stock value over the four trading days last week to land at $118.77 at the closing bell Friday.

Auto fuel

Now, getting back to those auto fuel prices, the American Automobile Association said that over the last week, the price average, nationally, for a gallon of regular remained steady at $3.04, although the price is up to $3.05 today. In its latest weekly report, the U.S. Energy Information Administration released gas demand data that shows demand dropped from 9.48 million barrels per day (b/d), to 9.15 million b/d, while total domestic gas stocks increased by 1.5 million barrels in the last week of May. The AAA said the demand decrease and supply increase has helped to stabilize pump prices and will likely help prices remain stable into summer, which officially starts June 20.

Since last Thursday, the largest weekly gas price increases in the U.S. occurred in Kentucky (up 4 cents), followed by California and Nevada, which were each up 3 cents. That previously mentioned national average today of $3.05 for a gallon of regular today, was up a hefty 10 cents from last month, an increase that grew even steeper for higher grades, like mid-grade ($3.39) and premium ($3.67) which were each up 12 cents from a month earlier.

Diesel was up 10 cents from a month earlier, while at $2.56, E85 gained just 6 cents over the month in average price nationwide.

Cheese

Cheese prices lost some value over the last trading week, with the weekly average for barrels falling a penny to $1.59, while blocks lost nearly 4 cents to average nearly $1.51 for the week. Closing prices came in at $1.62 for barrels, while 40-pound blocks were $1.50, according to the U.S. Department of Agriculture, which relayed that cheese market tones overall remain strained.

The U.S.D.A. said that a month earlier, the prices paid for barrels and blocks were both more than $1.80, but now those prices have dropped to the $1.50-range. That reality has only heightened U.S.D.A. contacts concerns over an "inverted" price situation since historically block prices have maintained anywhere from a few cents to a dime over barrel prices. That situation could portend that barrel prices will fall to regain that more typical price arrangement.

Cheese production is busy with the current availability of milk and spot prices for the commodity at $6 to $5 under Class in the Midwest. Cheese production and cheese supplies are ahead of demand, according to U.S.D.A. contacts.

Wheat

Wheat gained in price last week, with spring wheat at the head of the pack. September Kansas City hard red winter futures rose 9 cents to nearly $6.41, while September soft red winter futures gained 9 cents to hit $6.89. Preliminary volume estimates were under the final count of 112,896 at 110,452 Chicago Board of Trade contracts.

Natural gas

Natural gas spot price movements were mixed for the latest seven-day report that ended on June 2. The Henry Hub spot price rose from $2.88 per million British thermal units (MMBtu) to $3.05/MMBtu over that period.The The July 2021 contract price increased to $3.08/MMBtu, up 5 cents/MMBtu over the period. The price of the 12-month strip, averaging July 2021 through June 2022 futures contracts, climbed 5 cents/MMBtu to $3.05/MMBtu.

The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 38 cents/MMBtu, averaging $7.95/MMBtu for the period. The weekly average price of ethane increased 3%, in line with rising ethylene prices, which also rose 3% week over week. The price of propane rose 7%, as continuing strong exports and high domestic consumption (reported as product supplied) keep inventory builds below seasonal averages for this time of year, according to the U.S. Energy Information Administration. The prices of normal butane, isobutane, and natural gasoline rose by 4%, 5%, and 4%, respectively, in line with rising Brent crude oil prices, which rose by 4% 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.