Input Costs Flat on Week, Down -3.1% y/y; Meats Down, Energy Up. Cocoa, Chicken Wings are Tailwind MVPs. Friday Cost Factor
Optimal Advisory Friday Cost Factor – Food & restaurant sector can broadly plan for calendar 2026 input cost tailwinds, while packaging & energy remain headwinds, especially for HPC, Beverages.
Cost Factor flat w/w, -3.1% y/y (vs. prior -4.0%). Some commodity headwinds this week include natural gas, soybean meal, and oats (> +5% w/w). Some relief on the way with tailwinds from potatoes, barley and cocoa(< -10% w/w).See Fig 1-7.
Cost headwinds: Energy/Freight (+2.8% w/w, +8.4% y/y), Oils/Oilseeds (+2.6% w/w, +5.6% y/y)
Cost tailwinds: LW (-6.5% w/w, 10.2% y/y), HSY (-2.9% w/w, -15.8% y/y), MDLZ (-0.4% w/w, -9.5% y/y)
Energy spikes on natural gas headwind y/y. Natural gas prices now at their highest level since December 2022 and higher w/w for 6 consecutive weeks (+5.3% w/w and up +47.8% m/m), Natural gas powers factories, ovens and provides electric power across the value chain, heating up the energy complex broadly (+2.8% w/w, +6.8% y/y).
Cost headwinds: HPC Average (+1.5% w/w, +23.0% from 12-mo low)
Egg prices continue to be a volatile driver for some brands. Following an avian flu outbreak earlier this year which hurt US supply triggering a price peak earlier this spring. Egg prices bounced +43.0% m/m while still down 50.4% y/y – with the 2-year stack still +24%.
Cost tailwinds: Meats/Proteins -20.0% y/y (vs. prior -21.1%)
Restaurant level input costs down -0.7% on week, down –1.3% y/y. Lower protein costs (-20.0% y/y), especially chicken wings (-43.2% y/y) are bringing relief to all 7 of our restaurant level indices. Potato prices down (-13.4% w/w and down -52% year-to-date); a significant cost driver for multiple food service companies, especially fast food. See Fig 8-9.In this weekly note, we identify spot input costs’ putative impact on the U.S. consumer value chain, most measurably impacting staples, staples retailers, restaurants & food service. Optimal’s proprietary cost factor weights ticker & sector specific cost trends using a proprietary formula based on 32 trackable spot cost inputs – 23 of which are updated as of last night, the other 9 latest available.
Figure 1: Weekly Cost Factor Summary
Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA
Figure 2: Weekly Cost Factor Margin Context
Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA
Figure 3: Weekly Input Commodity Performance by Group
Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA
Figure 4: Biggest Input Cost Movers y/y
Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA
Figure 5: Food Sector Cost Factor
Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA
Figure 6: Beverage Sector Cost Factor
Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA
Figure 7: HPC Sector Cost Factor
Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA
Figure 8: Restaurant Level Cost Factor
Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA
Figure 9: Restaurant Employment Cost Index
Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA
Figure 10: Staples Sector Theme Box
Figure 11: Market Sector Performance
Sources: Optimal Advisory Proprietary Analysis, Bloomberg