September 13, 2019

How Long Will $2 Cheese Futures Last?

 |  By: Mike Opperman

Recently the spot cheese market on the Chicago Mercantile Exchange went above $2 per pound for Cheddar blocks. For perspective, the block cheese price hasn’t been above that mark since late 2014. 

So how long can it last, and how high can it go?

Part of the answer to those questions resides in what is currently in inventory. Total cheese stocks were nearly 50 million pounds below year ago levels in July 2019, says Nate Donnay, director of dairy market insight with INTL FCStone. He says inventories may recover in September thanks to slower exports and domestic mozzarella sales. 

“However, if stocks are still 50 million pounds below a year ago in September it would justify an average price of $2.10 per pound,” Donnay says. How high the price can go also depends on what happens to cheese inventories.

“If I don’t assume any slowdown on the demand side and a continuation of recent production trends it would put September stocks down 60 to 65 million pounds from last year,” Donnay says. “That would support an average price of $2.14.”

We could see the price hold into October, Donnay says, but his models don’t show it lasting much longer than that. 

“When the market has moved outside of the forecast range in the past it has dropped back pretty quick,” Donnay says. “The models are pointing toward prices back in the $1.70s by December. So it’s possible we can see $2.00-plus continue into October, but not much longer than that unless the milk supply turns out to be very weak.”

For market information, see these articles:

Cheddar Continues Upward Charge

$2 Cheese!

Is There A Normal Block and Barrel Spread?