Cheese prices likely to stay high, analyst says

 
May 10, 2004

LYNDEN, Wash.—Dairy & Food Market Analyst editor Jerry Dryer believes prices for cheese sold on the Chicago Mercantile Exchange are unlikely to fall much further.

According to a report on Dairyline.com, Dairy Farmers of America, the largest cooperative in the U.S., purchased nearly 2 million pounds of cheese on the CME last week in a move to support the current $2.15-per-pound price.

Yet despite such a large purchase, Dryer said in an interview with PizzaMarketplace.com that demand and supply remain soundly balanced, and that market prices will reflect that.

Dryer said DFA "markets more cheese than it makes," and that the cheese it bought "has a home." In other words, it won't be warehoused in order to support current prices artificially; it's headed into end-users' operations.

Cheese and milk sticker shock at the retail level has softened demand slightly, Dryer said, and milk production is up slightly due to the annual "spring flush," when dairy cattle milk output increases amid mild weather. However, any increase in supply likely will be small, Dryer said, and demand will pick up strongly again just a few months down the road.

"No one wants to be holding excess inventory at these prices," Dryer said. "Everyone at the retail level is cutting his orders so that doesn't happen," which also leads cheese manufacturers to reduce production accordingly.

"All indications are that prices will remain well above average for the next two years," Dryer said. "It may not be $2.15, but it certainly won't be a dollar."

Read related Cheese Market Analysis stories by clicking here.


Topics: Cheese


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