Russia’s invasion of Ukraine on Wednesday led to spikes in the price of key commodities on Thursday, sent stock prices down—at least for a time—and added yet more concern about inflation for the nation’s restaurants.
Operators, however, don’t yet seem worried about the impact the invasion could have on their own supplies. “We don’t see any operational disruption on the horizon,” Papa Johns CEO Rob Lynch told investors on Thursday. “I would not expect our company or our stock to really be impacted outside the macro impact to the market in general. This really won’t have a big impact on our situation or commensurately our financials.”
Still, there were plenty of signs that the invasion could provide further problems for commodities down the road.
The price of oil soared to levels not seen in nearly eight years. The price for a barrel of crude oil rose 6% at one point on Thursday to levels not seen since 2014. Oil prices pulled back as the day wore on and finished the day up 1%.
Corn prices also soared to more than $7 a bushel on Thursday. Corn prices had been trending downward more recently.
Both commodities are vital for the nation’s food basket. High corn prices mean higher prices for feed, which leads to higher prices for proteins like beef, pork and chicken. Oil prices also contribute by making it more expensive for suppliers and distributors that provide food to restaurants. And they have the dual impact of increasing prices on the consumer and hurting their discretionary income.
The price for a gallon of regular gas topped $3.54 a gallon on Thursday, according to AAA. That’s up 6% over the past month. It’s also up more than 30% over the past year.
Russia launched an attack on Ukraine in the early morning hours Thursday after months of military buildup and several days of negotiations and ominous predictions from Washington that such a move was imminent. News reports Thursday suggested bombing taking place across the country.
Back home, the higher prices added to concerns about the state of inflation, which has been a problem for restaurants and their consumers for several months.
Investors hit stocks hard early on Thursday. The S&P 500 stock index was down 2% at points on Thursday. Stocks recovered after President Biden in a speech announced sanctions on Russia in response to the attack. The S&P 500 finished the day up 1.5%, a substantial swing for the index.
Restaurant stocks had a similar roller-coaster day. Early Thursday, every restaurant stock was down. By market close, most of them were up. When Lynch made his above comments, in fact, his company’s stock had been down more than 9% in pre-market trading, at least in part on fears of the impact the invasion could have on his company’s commodity costs. By the end of his comments, the stock was down just 3%.
At the same time, prices have been inflated for some time and consumers have kept spending. Many operators have raised prices and watched consumers continue to order pizzas or burgers or steak.
Perhaps no chain is as sensitive to gas prices as Cracker Barrel, the chain of highway-side family-dining restaurants. The company is keeping its eye on gas prices, noting that they’re contributing to an inflationary environment that is eating into consumers’ discretionary income despite rising income levels.
“To some degree, we believe folks have gotten more used to generally higher inflation right now,” CFO Craig Pommells said, according to a transcript on the financial services site Sentieo. “We think that will mitigate what we would normally see at least at the gas price levels. Now, if gas prices go up significantly from here, that could change the outlook.”
UPDATE: This story has been updated to reflect stock price changes.
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