The cash cheese market answered a question Monday regarding the huge price spread between block and barrel cheese, according to Dr. Brian Gould, Associate Professor at the University of Wisconsin. Everyone was wondering if the blocks would come down or would the barrel come up, as it’s been a concern for the number of trading days it was so large. The blocks fell 4 3/4-cents, to $1.52 per pound, and the barrels lost three quarters, and slipped to $1.4325.
Speaking in Tuesday’s DairyLine, Gould pointed to the latest American cheese stock numbers, which increased in November for the first time in five years, and said Monday’s downward price movement was not a surprise.
He suggested that listeners log on to the University’s website, “Understanding Dairy Markets,” at http://future.aae.wisc.edu/, where the values of Cheddar cheese are imputed, based on the current daily Class III, butter, and dry whey futures prices. Friday’s imputed value was $1.58 per pound, according to Gould, so Monday’s drop to $1.52, may trigger declines this week in the Class III milk.
When asked if cheese demand is down or pizza sales lagging; Gould admitted that he did not have current commercial disappearance numbers, due to the lag in reporting, but production data from January through November of this year showed Cheddar output was up 2.4 percent from a year ago. He said that’s a very large number relative to what he believes we’ll see in commercial disappearance down the road, considering what’s going on with our economy.
“It’s a real supply issue,” he concluded. “Our production was up in almost every month this year, relative to last year, and we know our commercial disappearance is under duress.”