Market Talk with Bill Brooks

The barrel cheese price rolled downhill another 5 3/4-cents, to $1.4025 per pound, in Monday’s trading at the Chicago Mercantile Exchange on one uncovered offer but the blocks held at $1.5075, with no activity. That left a 10 1/2-cent spread.

Chalk it up to “normal seasonal movements,” according to Downes-O’Neill dairy economist Bill Brooks in Tuesday analysis. He reminded us that last year at this time there was a 24 cent spread, with blocks at $1.70 and barrels at $1.46, but the block price was well above the current level.

Demand for barrel cheese which mainly goes into processed product is down, Brook’s said “As we approach the end of the year and the holiday season when there’s stronger demand for block cheese for the chunks of cheese, shreds, and things like that we’d be using a little bit more of whenever we’re watching football games and attending holiday parties.”

Switching to butter; prices fell low enough to spur some additional demand, according to Brooks, and “We see some featuring going into the end of the year that we might not typically see and maybe make up for what we didn’t see at Thanksgiving but, like cheese, the price got down to the level that buyers felt that there was value and a good time to step in and buy and own.”

He said we could see additional gains in butter but cautioned that we are entering the time when inventories start to build and that will limit price gains.

When asked about world market conditions, Brooks pointing out that the world market is driving conditions domestically a little bit on butter and to a smaller degree on cheese because U.S. prices are below world levels. He believes interest is growing in sourcing U.S. product but that always takes a bit of time to develop but that might lend some support as we get into the New Year and gain a little more on prices than what we might have if we just relied on the domestic market.