Inflation-weary consumers have been cutting back on trips to burger joints and pizza shops for nearly two years, but the added economic stress caused by months of rising gas prices appears to have taken a steep toll on cheese prices in September, said Betty Berning, analyst with the Daily Dairy Report.
“While poor foodservice demand for cheeseburgers and other cheese-heavy items served by fast-food restaurants is a big part of the story, supplies are sizable, too,” Berning said, adding that rising fuel prices are also taking a toll on demand.
In the first seven months of 2026, U.S. quick-service restaurant traffic fell 1.3%, as consumers who paid more for everything from gas, water, and energy to healthcare and groceries, made more dinners at home.
Year-over-year American cheese inventories rose In August for the first time since January. At 815.5 million pounds, natural American cheese inventories were 0.5% larger than August 2025. While American cheese stocks rose in August, production of these cheeses fell 0.1% from the first eight months of 2025, highlighting weaker demand. Moreover, American cheese output set a record in 2025, which means that despite the drop, total volumes have still been significant.
In late September, CME block Cheddar prices sank below $1.30/lb. for the first time since May 2020, the heart of the Covid pandemic, and September’s average CME block price of just under $1.40/lb. was well below the five-year September average of about $1.90/lb. Still, low prices have so far failed to kickstart spot cheese demand.
“Few buyers have been bidding for product at the CME spot market due to rising freight costs, Berning said. “The CME offers a freight allowance of 4.93¢ per pound, but for product coming from the West Coast, the allowance covers only about one-third of total transport costs, leaving buyers responsible for about 10¢ for every pound at the current record-high diesel prices. The sizable differential has restrained bidding at the CME. Packaging costs are also increasing, which only adds to buyers’ total costs.”
U.S. consumers remain deeply pessimistic about the economy. The University of Michigan’s Consumer Sentiment Index of 48.1 points for September was the second lowest since the index was created in 1952, above only May 2026’s 44.8 points.
“Until production slows or demand meaningfully improves, Cheddar prices are poised to stay well below historical averages. While a drop in fuel prices could spur some buying, fuel prices are expected to remain high for the foreseeable future,” Berning said.
