News

Cheese price meltdown? Analysts unsure whether market will hold

June 22, 2004

LOUISVILLE, Ky.—How long will the cheddar block market price of $1.80 hold firm?

That's the $64,000 question dairy analysts and users can't seem to answer.

To the surprise of some, that price has remained firm for 21 trading sessions (about four-and-a-half calendar weeks), and current cheese (cheese less than 30 days old) has traded at the Chicago Mercantile Exchange at record levels in recent weeks. Historically, vigorous trading sends prices tumbling, but the nation's largest dairy cooperative, Dairy Farmers of America, has bought nearly all the cheese traded in the last several sessions.

According to multiple reports, DFA is on its buying spree because it foresees some fall product shortages and is helping its members stock up in advance.

A June 22 report on Dairyline.com cited Mary Ledman's (co-editor of the CME's Daily Dairy Report and principal of Keough Ledman Associates Inc.) saying current decline in Class III milk futures prices may signal a cheese price drop. The reason, Ledman said, is that futures buyers are concerned DFA alone cannot support the cheese market much longer.

For the rest of the year Ledman sees milk production gaining strength, and she predicts that could push cheese prices below the $1.50 mark by late in the fourth quarter.

A somewhat conflicting report published on CheeseReporter.com expects continuing tight dairy supplies will keep prices about where they are. The article said some market volatility can be expected as the dairy product pipeline fills over the summer, but that continuing solid demand will eliminate any excess.