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The biggest movers to the upside on my commodity screen (only those relevant to the restaurant industry) this week were corn (+10.5%), soybeans (+9.8%) and wheat (+5.6%). Although none of these upward moves signal a change from the overall trends we have been seeing, they all represented a reversal from the prior week's declines (corn -2.3%, soybeans -0.2% and wheat -0.2%). Keith McCullough pointed to that week's downward trade relative to the upward trend on his portal on May 21st (please refer to CRB Inflation Index: Straight Up! ).
  • CORNCorn actually moved up 5% yesterday alone, which is not surprising after seeing the USDA's weekly crop report released earlier in the week, which showed that only 74% of the corn crop had emerged relative to the 5-year average of 89%. These big moves in corn prices will impact just about all of the restaurant operators as these higher corn costs will eventually translate into higher protein prices. That being said, the biggest movers to the downside in the past week were cattle and pork (-1.5% and -5.6%, respectively). Judging from Tyson's investor presentation this week (on which I commented on June 5), I would not be surprised to see these prices move higher.
  • SOYBEANSRising soybean prices will impact most companies as well as it relates to cooking oil, but P.F. Chang's stands out in my mind as the company highlights wok oil as an important component of its cost of sales.
  • WHEATAlthough wheat was up for the week, year-to-date, it has actually declined 11% and is down nearly 39% from the highs seen back in March. Wheat's current price of $7.86 per bushel still represents a 23% premium over the average 2007 price and a 94% premium over 2006. The companies most impacted by these huge year-over-year increases will continue to be Panera Bread and California Pizza Kitchen. Panera is locked in for FY08 at $14 per bushel (versus an average of $5.80 per bushel in FY07). California Pizza Kitchen is only locked in for the next few months on its pizza dough needs (at a 12% YOY increase), but is contracted for the entire year for its pasta needs. Neither company has locked in FY09 prices, but Panera stated on its last conference call that it will make a decision whether or not to do so in the June/July timeframe.