What Happened?
A number of stocks fell in the afternoon session after a USDA forecast indicated that rising farm production costs could soon impact ingredient prices.
The U.S. Department of Agriculture's latest forecast projects that total production costs for major crops will continue to rise, potentially reaching record highs. This suggests that restaurant operators may not see relief from elevated expenses in the near future. Key drivers for this increase include significantly higher costs for fuel, lube, electricity, and fertilizer, with some fertilizer cost estimates revised up by as much as 13%. For pizza chains, which rely on agricultural products like wheat, tomatoes, and dairy, these rising input costs could translate directly into higher food expenses, putting pressure on their profit margins.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Traditional Fast Food company Wendy's (NASDAQ: WEN) fell 8.9%. Is now the time to buy Wendy's? Access our full analysis report here, it’s free.
- Traditional Fast Food company Jack in the Box (NASDAQ: JACK) fell 11.4%. Is now the time to buy Jack in the Box? Access our full analysis report here, it’s free.
Zooming In On Jack in the Box (JACK)
Jack in the Box’s shares are extremely volatile and have had 60 moves greater than 5% over the last year. But moves this big are rare even for Jack in the Box and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 12 days ago when the stock gained 4.3% on the news that the CPI data showed food away from home rose only 0.3% in May, well within manageable range for operators.
The broader inflation shock was concentrated in energy, not food costs or labor. That was a margin signal the sector needed. The second catalyst was more timing related: the World Cup kicked off later in the week across host cities in the U.S., Mexico, and Canada, running through July 19. Goldman Sachs and Deutsche Bank both flagged restaurant stocks near stadium venues as direct beneficiaries.
When the U.S. last hosted in 1994, restaurants in host cities saw 10% to 15% increases in food and beverage spending. Shake Shack, Cheesecake Factory, and Dave & Buster's cited the tournament as an incremental traffic catalyst, and McDonald's had World Cup-themed promotions active across U.S. and international markets.
Jack in the Box is down 38.4% since the beginning of the year, and at $11.53 per share, it is trading 53.7% below its 52-week high of $24.88 from July 2025. Investors who bought $1,000 worth of Jack in the Box’s shares 5 years ago would now be looking at only $94.86.
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