October 22, 2013 — There’s been a bit of resistance from buyers in the CME block cheese price this week. FC Stone dairy economist Bill Brooks told us it’s probably because buyers are not
comfortable with the current price of $1.8575. The spread between blocks and barrel cheese narrowed to 6-1/2 cents today after the barrel price rose 3-1/4 cents to $1.7925.
“A wide spread at this time is not out of the ordinary,” Brooks said. This is because of a shift on the demand side as folks are looking to market block cheddar products for the upcoming holidays.
Last year at this time the spread between blocks and barrels was about the same. Traders battled that wider than normal spread throughout the holiday season where spreads were in the 8-11 cents range.
“Nothing out of the ordinary,” Brooks said. “But because of weakness in the barrel market it does lead you to believe that we might see some erosion in the block price as we go forward.”
He said we currently don’t have any negative indicators, like bad weather, that will hurt milk production. Plus, low feed prices could also push milk prices lower. That means we could see $15 milk next spring.
“Some guys in parts of the country are still paying a pretty high level for forages. But corn and beans continue to be much lower than just a month or two ago and drastically lower than last year with the drought,” he said.
It’s not going to be surprising when we see a fair number of cows on dairy farms in the next milk production report, scheduled to be released by USDA next week.
“That’s going to allow us to see pretty strong milk production levels as we go into next year as well,” Brooks commented. “Until we start getting into late first quarter, early second quarter when we start seeing some early heat waves come in an impact things.