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Markets poised for trader action after Papa John's investment announcement

Pizza stocks will be among those to watch in the week ahead after Papa John's announced its $200 million cash infusion from turnaround company, Starboard Value LP.

February 4, 2019 by S.A. Whitehead — Food Editor, Net World Media Group

Pizza stocks will be among those to watch in the week ahead after Papa John's announced its $200 million cash infusion from turnaround company, Starboard Value LP. Though the brand closed lower than it has in the last 4 1/2 years last Friday, it may be in for an ascension today, depending on traders' sentiments about the move. 

Cheese

Cheese barrels closed at $1.30 Friday, while 40-pound blocks ended at $1.50 last week. The weekly average for barrels was up almost 11 cents to $1.28 and blocks rose almost 8 cents to $1.46 as an average on the week. 

Those upturns last week provided some relief to cheesemakers in all regions, according to the U.S.D.A. Agricultural Marketing Service, which added that though the Chicago Mercantile Exchange block-to-barrel cheese spread remains large and concerning, both block and barrel prices did make marked gains. 

U.S.D.A. Western contacts have acknowledged heavy inventories, reporting that they are preparing to accept the current conditions as the new norm. Weather has created some minor hiccups, but cheese plant managers relayed only minor issues as contingencies were in place in most cases. 

Production has been steady and pizza-style cheese orders have been strong since early in 2019, as is seasonally expected.

Wheat

Compared to last week, cash bids for wheat were mostly lower, with Kansas City U.S. No. 1 Hard Red Winter, ordinary protein rail bid was 12 1/2 cents lower, from $6.09-$6.24 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 6 cents lower, from $5.46-$5.47 per bushel. Minneapolis and Duluth U.S. No. 1 Dark Northern Spring, 14.0 to 14.5 percent protein rail, was 6 1/4 to 16 1/4 cents lower, from $6.90-$7.00 per bushel.  Portland U.S. Soft White wheat rail was 5 to 20 cents higher, from $6.35-$6.50 per bushel.

Vehicle fuel

The American Automobile Association reports that gas demand has skyrocketed recently to the levels of the travel-heavy summer driving season. At this point though, most fuel prices have not been substantially affected, with the average price this morning of a gallon of regular at $2.26, the same as last week and a cent higher than last month.

That same trend held true for mid-grade ($2.58) and premium gas ($2.84), which also remained relatively flat over the last month. Diesel fuel prices actually dropped over that period, with today's price averaging $2.92, about 6 cents less than last month. But E85 was up about 4 cents from last month, with an average price today of $2.02. 

Natural gas

Natural gas spot prices rose at most locations for the report week that ended Jan. 30, according to the U.S. Energy Information Administration. However, Henry Hub spot prices fell from $3.10/MMBtu to $2.96/MMBtu over that same period.

At the NY Mercantile Exchange (Nymex), the February 2019 contract expired Jan. 29 at $2.950/MMBtu, down 3 cents/MMBtu from the previous week. The March 2019 contract decreased to $2.854/MMBtu, down 7 cents/MMBtu over that  report week. The price of the 12-month strip averaging March 2019 through February 2020 futures contracts climbed 2 cents/MMBtu to $2.946/MMBtu.

Net withdrawals from working gas totaled 173 Bcf for the week ending Jan. 25. Working natural gas stocks are 2,197 Bcf, which is 1 percent lower than the year-ago level and 13 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 16 cents/MMBtu, averaging $6.67/MMBtu for the week ending Jan. 30. The price of propane fell by 2 percent. The price of natural gasoline, ethane, butane, and isobutane rose by 1, 8, 4 and 5 percent, respectively.

According to Baker Hughes, for the seven days ending Tuesday, Jan. 22, the natural gas rig count decreased by one to 197. The number of oil-directed rigs rose by 10 to 862. The total rig count increased by nine, and it now stands at 1,059.

Pizza company stocks

The pizza stock market may be interesting to watch in the week ahead, with the infusion of cash that the beleaguered Papa John's brand announced from StarboardValue LP before markets opened today. Last Friday though, the markets closed with a mixed-bag message for brands, which all did a little something different over last trading week. 

Domino's, for instance, after a two-week jump in price, was delivered back down to reality last week when the brand closed down $5.77 over the week to end Friday at $278.39. Over at Yum Brands', the company's Pizza Hut brand had a nice rise over the week, from $92.71 Jan. 25 to $94.13 on Friday. 

Papa John's closed last Friday down into the $30-range for the first time in about 4 1/2 years, ending at $38.51 or down $3.67 on the week. Finally, take-and-bake brand, Papa Murphy's stayed completely flat for the week at $4.70. 

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.