CME spot cheese prices have returned to earth after a significant rally that began in mid-March and ended in Mid-May. Cheese prices appear to have corrected and will probably remain supported through summer before seasonally rising again this fall, according to Betty Berning, analyst with the Daily Dairy Report.
“The recent run-up in prices can be attributed to strong export demand,” Berning said. “In the first part of 2024, when U.S. cheese prices were at a significant discount to those in Oceania and Europe, international buyers seized the opportunity and made meaningful purchases of U.S. cheese.”
U.S. cheese exports hit an all-time high of 121.3 million pounds in March, up significantly from the previous year. Increased exports of fresh and grated cheese, especially mozzarella, were particularly robust, Berning noted.
After bottoming in mid-March at $1.3925/lb., CME block cheese prices climbed nearly 60 cents per pound to their May 17 high of $1.98/lb. Barrel prices also began to rocket higher in late March, climbing more than 80¢ to $2.125/lb. by mid-May, their highest price level since October 2022.
Through March, cheese makers produced less cheese amid tighter milk supplies than in the first four months of last year. Year to date, a total of 3.53 billion pounds of cheese were produced, or 1% less than in the same period in 2023. The drop in cheese production is notable, said Berning. From 2020 through 2023, she said manufacturers increased first-quarter cheese production by an average of 2.4%. This decline in production has also prevented inventories from rising substantially, she added.
Cheese prices have cooled since mid-May. On May 31, barrel cheese prices had dropped 18.5 cents from their recent high to $1.94/lb., and blocks fell 17 cents to close at $1.81/lb.
As cheese prices rallied, export demand likely dried up somewhat, Berning said. According to CLAL data, Oceania and EU cheese prices are now close to U.S. cheese prices excluding freight costs. When shipping costs are factored in, though, Berning noted that U.S. product becomes less competitive to some destinations, and that will lead to fewer exports.
Looking at the rest of 2024 becomes a bit murkier, she said. “Limited milk supplies due to contracting U.S. milk cow numbers and fewer heifer replacements land on the bullish side of the cheese price ledger. Manufacturers have also shown that they will push milk into the products with the greatest return, which mean milk could flow to churns if butter prices remain lofty,” Berning said. “On the bearish side is the looming new cheese capacity, which could quickly ratchet up production and stocks, changing the supply side of the equation to push prices lower. In addition, the steep discount between U.S. prices and those in the rest of the world has eroded, and the massive export business of early 2024 will likely not persist.”
