- WHITE PAPERS
FOND DU LAC, Wis. -- The price of block cheese traded at the Chicago Mercantile Exchange hasn't moved from its $1.60 price since Aug. 4. And according to The Country Today, that has some industry observers expecting the price will go down, but not too far.
"History tells us that relatively high cheese prices don't last," said Robert Cropp, retired UW-Cooperative Extension milk marketing specialist. "But with production declining and no turnaround in production for a few weeks, the $1.60 cheese price is reasonable and could hold I think to mid-October." (See related story, CHEESE MARKET ANALYSIS: Weather, feed and culling to keep cheese prices high.)
"The price is as high as it'll probably get," said John Umhoefer, Madison, executive director of the Wisconsin Cheese Makers' Association. "It may lose a little ground but ... the market is firm enough to take us through the fall and holidays."
The combination of reduced milk production and increased cheese use typically keep wholesale cheese prices steady and high for extended periods
"This time of year prices tend to be higher than lower," said Elvin Hollon, Kansas City, Mo., director of fluid milk marketing and policy analyst with Dairy Farmers of America (DFA). "Is ($1.60) going to last forever? It may last a little while longer because demand seems to be pretty good."
DFA has been a spot buyer of cheese on the wholesale market recently. The cooperative, which includes 14,000 farms in the United States, purchased five carloads on Sept. 18 for the $1.60 a pound price.
Hollon said the last time any cheese traded on the CME until last Thursday was Aug. 26 -- 17 trading days on the open outcry CME market.
"Each day since Aug. 26 there were bids, but no one until Sept. 18 was willing to sell at $1.60," Hollon told The Country Today. "The fact that there was a standing bid and no takers for a period of time tends to say the market must be at some equilibrium or satisfied point."
In effect, he said, bidders weren't willing to pay more for the cheese and sellers weren't willing to sell for less.
"I would venture there's not a lot of upside left in the wholesale cheese price," Hollon said.
Cropp noted that milk production may improve as the weather cools in late October, but that "prices should stay in the $1.35 to $1.40 per pound range during the mid-October to December period and $1.30 per pound for the first quarter of 2004. Right now with milk production down, fresh cheese is fairly tight in supply."