Dairy Report: Higher Cheese Prices, Rising Milk Prices

Dairy Report 091719
Stacks of cheese at Vermont Creamery. ( Vermont Creamery )

Lower cheese stocks could spell good news for producer’s milk checks as we prepare for the coming holiday season. The current block cheese price now stands just above the $2 mark, the highest it has been since 2014. Milk prices are also on the rise and continue to look brighter even into 2020. AgDay’s Clinton Griffiths explains more in this week’s Dairy Report. 

How Long Will $2 Cheese Futures Last?

Recently the spot cheese market on the Chicago Mercantile Exchange went above $2 per pound for Cheddar blocks. For perspective, the block cheese price hasn’t been above that mark since late 2014.

So how long can it last, and how high can it go?

Part of the answer to those questions resides in what is currently in inventory. Total cheese stocks were nearly 50 million pounds below year ago levels in July 2019, says Nate Donnay, director of dairy market insight with INTL FCStone. He says inventories may recover in September thanks to slower exports and domestic mozzarella sales. 

“However, if stocks are still 50 million pounds below a year ago in September it would justify an average price of $2.10 per pound,” Donnay says. How high the price can go also depends on what happens to cheese inventories.

“If I don’t assume any slowdown on the demand side and a continuation of recent production trends it would put September stocks down 60 to 65 million pounds from last year,” Donnay says. “That would support an average price of $2.14.”

We could see the price hold into October, Donnay says, but his models don’t show it lasting much longer than that. 

“When the market has moved outside of the forecast range in the past it has dropped back pretty quick,” Donnay says. “The models are pointing toward prices back in the $1.70s by December. So it’s possible we can see $2.00-plus continue into October, but not much longer than that unless the milk supply turns out to be very weak.”

September Milk Production and Prices

New September milk production numbers from the USDA are raising milk prices. The new forecast calling for growth in milk per cow, which, reports suggest, will offset lower cow numbers. 

Production for next year is reduced and that is based on a slower regrowth of the milk herd which will not be offset by higher production per cow. This year’s all milk price has been raised to $18.35 and $18.85 for 2020.

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