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WASHINGTON, D.C. -- High cheese and butter inventories listed in the USDA's January Cold Storage report released on Feb. 20, sent prices for 40-pound blocks of cheddar plummeting on the Chicago Mercantile Exchange on Feb. 21.
Block prices hit $1.02 per pound, the lowest since November of 2000.
According to the Cold Storage report, stocks of American cheese were 4 percent higher than in December and 11 percent higher than a year ago. Total cheese in storage was up 3 percent over December and 9 percent higher than a year ago.
Stocks of butter, another key dairy market influencer, was up 104 percent over last year.
According to Dave Deal, a procurement and distribution consultant with the Food Source in Detroit, this week's price declines on the block market were expected. The gap between the cost of 40-pound blocks and 500-pound barrels, he said, had been too wide for too long.
"There should only be about five cents' difference between the two," said Deal. "It's been 10 cents and more several times lately, and that had to change."
With spring just around the corner, milk production will only increase, which may keep cheese prices low for several more months.
However, Deal said dairy farmers, whose profit margins were crushed by low milk prices in 2002, are culling their herds in an attempt to reduce inventory and strengthen prices.
"We've seen increases in that area already," Deal said. "An adjustment (in the dairy herd size) needed to be made sometime. So I think we'll see some prices changes in the next few months."
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