Volatility road sign.
August 4, 2020

Class III Volatility Not All That Unusual

 |  By: Jim Dickrell

While the scope of recent run-ups in cheese prices and subsequently Class III prices (and even more recent price declines) have been somewhat unprecedented, Class III price volatility is not all that unusual.

In fact, volatility in cheese markets is more the rule than the exception, says Mark Linzmeier, president of MarginSmart Dairy Analyzer. In fact, the Class III prices you see today will most likely be different--sometimes way different--from what you will see 6 months from now.

Linzmeier has been tracking Class III prices and volatility since 2006. He compared Class III final prices to those same prices six months earlier. He found that the prices differed (up or down) more than $1/cwt about three quarters of the time, more than $2/cwt about half of the time, more then $3 about a third of the time and more than $5 about 15% of the time.  

On a percentage bases, the Class III final prices compared to six months earlier changed more than 10% nearly 60% of the time, more than 25% about a fourth of the time and more than 40% more then 5% of the time.

“Granted it, these changes may appear in bunches with major price moves, but this still represents some pretty extreme volatility,” Linzmeier says.

He also notes that recent experience not withstanding, the level of volatility over the past 4 years is actually down.