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Multiple dairy market factors are signaling an imminent drop in the price of block cheese traded on the Chicago Mercantile Exchange.
Key among them is the wide price gap between 40-pound blocks and 500-pound barrels. Typically the spread is about a nickel, but currently it's 17 cents. (At the close of trading on May 18, blocks sold at $2 per pound, while barrels sold at $1.83.) According to a report on Dairyline.com, University of Wisconsin Emeritus Professor Dr. Robert Cropp said he expects block prices will fall to narrow the gap.
"With block at $2 a pound, we can fall quite a ways," Cropp told Dairyline. That slide, he added, could push blocks to $1.60 by September and below $1.30 by December.
Secondly, block trading on the CME has been busy this week, with 26 loads changing hands in just two days. So much activity in a market that didn't see such trading throughout March and April signals increasing supplies, and that could depress prices.
Thirdly, data in the recently released April Milk Production report pushed June milk futures down slightly. Though Class III milk prices were well above year-ago levels, the downward trend could indicate decreasing cheese prices in the coming months.
See related articles in our Cheese Market Research Center by clicking here.
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