Agreeing with rumblings within the dairy industry, USDA took the rare step of revising Idaho June cheese production volumes contained in its latest Dairy Products report, impacting the outlook and prices for American and cheddar cheese.
The changes, published Aug. 5, revise June 2014 production estimates previously reported on Aug. 1.
Idaho’s June total cheese production (excluding cottage cheese) was raised about 25.7 million lbs. from the previous report, from 57.8 million lbs. to 83.5 million lbs. The state’s June cheddar volume was revised about 17.8 million lbs. higher, up 22% vs. June 2013, and 7.7% higher than May 2014; and Idaho’s American cheese volume was revised 25.7 million lbs. higher, up 14.5% vs. June 2013 and 9.9% more than May 2014.
As a result, U.S. cheddar, American cheese and total cheese production data increased by similar amounts. Previously reported at 916.4 million lbs. for June, total cheese output for the month was raised to 942.1 million lbs. The revised total is down 2.6% from May 2014, but up 3.3% from June 2013.
USDA’s announcement came after Aug. 5 spot trading on the Chicago Mercantile Exchange (CME), which saw block cheddar climb 1¢ to $2.07/lb., and barrel cheddar jump 1.25¢, to $2.1025/lb. Since the close of trading on July 31, block prices are up 9.25¢/lb., while barrels have jumped 11.5¢/lb.
Following the revision, HighGround Dairy changed its cheese market outlook to bearish.
Nearby contracts bore the brunt of the futures price impact on the CME. Cash-settled cheese futures settled mostly lower, down 4.7¢ (September 2014) to down 1.0¢ (December 2014). CME Class III August–December 2014 milk futures settled on average 27¢/cwt. lower; the 2015 Class III average settled 8¢/cwt. lower, at $18.04/cwt. The bearish move was further enhanced by weaker prices on the Global Dairy Trade auction.