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Pizza players see hefty hikes in cheese, wheat, gas prices

Last week was harder to swallow than most on the markets for pizza brands, with only moderate gains in some pizza brand values, but steeply higher wheat, cheese and gas prices.

September 23, 2019 by S.A. Whitehead — Food Editor, Net World Media Group

The markets were full of all kinds of surprises last week, though none particularly welcome for pizza operators. Cheese prices overall trended upward, but brands that include cheddar in their offerings got particularly unwelcome news when that variety officially became the highest-priced cheese in the world last week. Meanwhile, a huge spike of 73 to 83 cents in dark northern spring wheat prices only added fuel to the fire under all those blends of pizza dough. 

Cheese 

The cheese markets nationally are volatile, with strong pizza demand for mozzarella keeping those prices healthy, while pizza brands that favor cheddar cheese are facing particularly steep prices. In fact, last week the U.S.D.A. said cheddar officially became the singular highest-priced cheese on the planet for blocks, which hit a five year high. 

But overall, cheese market tones were fluctuating a bit after reaching recent-year highs in the past 10 days, the U.S.D.A. Agricultural Market News Service said. Strong seasonal pizza demand is also pushing up production of mozzarella. The wide price spread is encouraging block production. Some U.contacts are trying to "make sense of the lift in cheese prices on the CME, especially for the 40-pound block price." They see demand as adequate to keep cheese stock piles from ballooning, but export demand has been stifled by the higher prices compared to world market prices.

On the Chicago Mercantile Exchange, barrels closed at $1.66 and 40-pound blocks ended up at $2.05. The weekly average for barrels was off 6 cents at $1.79, while block were up 3 cents at $2.12. 

In the Western U.S., producers said customers were pushing back against higher prices. Cheddar blocks were also tighter in the West where U.S.D.A. contacts said blocks were tighter, prompting a late summer runup in market prices.

Wheat

Compared to last week, cash bids for wheat were higher with dark northern spring wheat sharply higher. The Minneapolis dark northern spring wheat market has quality concerns around the remaining crop in the fields due to a lot of recent rain, the U.S.D.A. As a result, dark northern spring, 14.0 to 14.5 percent protein rail, was 73 to 83 cents higher, from $6.60 1/4-$6.70 1/4 per bushel.  

Overall, wheat was 4 cents to 18 cents higher, with dark northern spring 73 to 83 cents higher. Wheat export sales showed an increase of 10.5 million bushels for 2019-20. Kansas City U.S. No. 1 hard red winter, ordinary protein rail bid was 6 cents higher, from $4.84 1/2-$4.94 1/2 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 4 cents higher, at $4.90 per bushel. Minneapolis and Duluth U.S. No. 1 Portland U.S. Soft White wheat rail was 15 to 18 cents higher, from $5.88-$5.95 per bushel.

Vehicle fuel

The U.S. Energy Information Administration's latest weekly report showed the typical fall drop-off in gas demand for this time of year, while total domestic stocks increased by 800,000 barrels, which would usually mean lower pump prices. However, due to the recent attack on oil facilities in Saudi Arabia pump prices ticked up last week about 10 cents from Monday through Friday, with the average current price for a gallon on unleaded regular at $2.67. That's also 7 cents under last month's price, but still about 18 cents lower than what we paid for the same gallon one year ago. 

Across the grades, mid-grade ($2.99) and premium ($3.25) stayed within the same trend monthly and yearly. In fact, even diesel ($3.01) followed the same basic price arc. For E-85 ($2.35), the fluctuation was not as steep over last month when we paid $2.30 for that fuel, but again the price of E-85 last year was higher at this time at $2.42. 

Natural gas

Henry Hub spot prices rose from $2.59 per million British thermal units (MMBtu) to $2.68/MMBtu for the seven days ending Wednesday, Sept. 18, to $2.68/MMBtu. Seasonal temperatures were moderate, averaging in the 70s (degrees Fahrenheit) across most of the U.S. At the Chicago Citygate, prices increased 2 cents, from $2.37/MMBtu to $2.39/MMBtu for that same period.

At the New York Mercantile Exchange (Nymex), the price of the October 2019 contract increased 9 cents, from $2.552/MMBtu to $2.637/MMBtu for the period. The price of the 12-month strip averaging October 2019 through September 2020 futures contracts increased by 3 cents/MMBtu to $2.587/MMBtu.

Net injections to working gas totaled 84 billion cubic feet (Bcf) for the week ending Sept. 13. Working natural gas stocks are 3,103 Bcf, which is 15% more than the year-ago level and 2% lower than the five-year (2014-18) average for this week.

The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 13 cents/MMBtu, averaging $4.99/MMBtu for the week ending Sept. 18. The price of ethane fell by 1%. The price of natural gasoline, propane, butane, and isobutane rose by 4%, 3%, 3%, and 6%, respectively.

According to Baker Hughes, for the week ending Tuesday, Sept. 10, the natural gas rig count decreased by seven to 153. The number of oil-directed rigs fell by five to 733. The total rig count decreased by 12, and it now stands at 886.

Pizza company stocks

In trading last week on the New York Stock Exchange and Nasdaq, mild gains were recorded for two of the three major pizza players globally. Pizza Hut parent, Yum Brands scored a 94-cent growth in stock price over the week's activity to settle in Friday at the close at $112.30. Meantime, powerhouse pizza brand, Domino's also picked up some value, rising from $245.05 to $247.62 over the week's buying and selling. 

Papa John's was the only of these three to suffer a small setback in last week's trading on the Nasdaq, closing Friday at $52.05, down 19 cents from the previous week's close. 

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.