Article

Papa John's only winner in last week's pizza trading wars

Trading in the runup to National Pizza Week was anything but a celebration for most publicly traded brands, with all but Papa John's posting losses.

Logo: Papa John's file

January 13, 2020 by S.A. Whitehead — Food Editor, Net World Media Group

It was a lackluster week for most publicly traded pizza brands, with only Papa John's recording a slight gain in value, while Domino's joined the parent companies of Pizza Hut, as well as Pie Five and Pizza Inn to post losses over the week's trading.

As the highest value stock, Domino's was also the biggest loser last week, dropping $5.58 in value over the course of the trading week to end up Friday at the close at $289.09. The bleeding continued at Pizza Hut parent, Yum Brands, which posted a loss of 16 cents in value over the week to close at $101.69. Pie Five and Pizza Inn parent, Rave Restaurant Group, followed suit with a loss of 6 cents in value when the closing bell rang Friday and it ended at $1.68.

But the folks at Papa John's had something to smile about when its stock ended up $1.60 Friday to close out the week at $64.83. Granted, that's well below the $88.36 the brand had climbed to in its days before its debacle with its founder three years ago, but lately the stock has generally trended upward.

Cheese

Cheese prices should have given pizza operators something to smile about last week, particularly on the Chicago Mercantile Exchange where the U.S. Department of Agriculture reported that prices were generally down. Barrels averaged 7 cents lower at $1.58, while blocks averaged 3 cents lower at $1.86. The closing price Friday on barrels was even lower at $1.52, while 40-pound blocks were slightly higher than the week's average at $1.87 Friday.

The U.S.D.A. said that a bountiful supply of milk has gotten cheese production back apace following the holiday weeks. In fact, since plants are generally running full schedules, milk purchasing picked up the pace, as well, with spot milk prices ranging from $1 to $3.50 under Class. Retail cheese outlets are continuing their push for cheese sales, as football playoff season gets underway. As a result, cheese stocks are expected to be higher and customer orders fairly healthy, according to the U.S.D.A.

But the price gap between blocks and barrels on the Chicago Mercantile Exchange is unusually large, so some market instability is expected in the near-term. On the foreign cheese market, the European Union's presence grew to an estimated new record of 870,000 tons, with the U.S. and Japan the No. 1 and No. 2 buyers respectively. But, of particular note to pizza operators, is the fact that since the start of October 2019, the U.S. has implemented higher tariffs on EU cheese.

Wheat

Cash bids for wheat last week ranged from 16 1/4 cents lower to 8 3/4 cents higher. Kansas City U.S. No.1 Hard Red Winter, ordinary protein rail bid was 1 cent lower, from $5.80 ¼- $5.90 1/4 per bushel, though 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 5 cents higher at $6.30 per bushel. Minneapolis and Duluth U.S. No. 1 Dark Northern Spring, 14 to 14.5 percent protein rail, was 16 1/4 cents lower to 8 3/4 cents higher, from $6.72-$7.02 per bushel. Portland U.S. Soft White wheat rail was 5 cents lower to 5 cents higher, from $6.10-$6.20 per bushel.

Vehicle fuel

Once again, tension in the Middle East is producing tension at the U.S. gas pumps, where reactive spikes in crude oil prices are pushing the national average cost of gas up. In fact, last week the American Automobile Association reported that crude oil prices spiked and dropped twice in six days, first following the U.S. drone strike in Baghdad, then also when Iran launched missiles at bases in Iraq that house American soldiers.

Domestic crude prices saw immediate gains with the announcement of both events, AAA said. That kind of fluctuation is expected to continue, though the impact on the national average gas price has been relatively minimal. According to AAA, that is partly because although Middle East tension exists, there is no immediate threat to crude supply that could support a sustained increase to crude oil prices or domestic wholesale gasoline prices.

Additionally, the U.S. Energy Information Administration released new gasoline data that showed demand declined last week to 8.13 million b/d from 8.96 million b/d during the previous week, while total domestic gasoline stocks grew substantially. Typically, low demand amid rising gasoline stocks would put downward pressure on pump prices, but given the current tension between the U.S. and Iran, gas prices are seeing fluctuation, though minimal.

Today's national average for a gallon of regular was up just a cent from last month to $2.58, as well as premium, diesel and E85, which averaged $3.18, $3.01 and $2.33 respectively.

Natural gas

Natural gas spot prices rose at most locations over the latest report week from the U.S. Energy Information Administration, which ended Jan. 8. The Henry Hub spot price rose from $2.05 per million British thermal units (MMBtu) last Wednesday to $2.08/MMBtu over that period.

At the New York Mercantile Exchange, the price of the February 2020 contract increased 2 cents, from $2.12/MMBtu last Thursday to $2.14/MMBtu, while the price of the 12-month strip — averaging February 2020 through January 2021 futures contracts — climbed 3 cents/MMBtu to $2.32/MMBtu. The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 18 cents/MMBtu, averaging $5.07/MMBtu for the week.

The prices of ethane and propane fell by 15% and 3%, respectively. The prices of butane and isobutane rose by 3% and 2%, respectively. The price of natural gasoline 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.