Cheese Price Rally Expected

(May 1, 2012) The June Class III milk contract was able to “snap back” last week after nearly going below $14.00, according to Matt Mattke, Stewart-Peterson market 360 advisor. 

While cash cheese hasn’t been able to garner a lot of upward momentum, Mattke said it looks to be stabilizing in the $1.48 price area. 

“The opportunity going into May seems to be to the higher side, and worst case we are going to trade steady to sideways for a bit,” he said. 

Another 16 cents could be tacked on to the block and barrel average, if history repeats itself. 

“I think that’s pretty realistic as far as fundamentals go,” Mattke said. “The supply side remains the issue as demand for cheese is still doing well.” 

There could be a couple of indicators that could be a recipe for an up side. “We are still seeing a lot of products moving and that combined with high feed prices and protein prices that keep making new multi-year highs,” he said. 

He admits there are a lot of people worried about the direction of prices, and there is a risk that they can keep moving lower in the long term. 

”But in the short term we don’t see the situation being extremely dire like in 2009 when we had a huge supply and totally lost the demand side of the equation. This year we are dealing with supply issues, but still have demand,” he said. 

One thing to keep in mind during the summer months, things can change so quickly. 

“The second half of the year can definitely be a different animal than the first half of the year months and don’t rule out having a $1.50 or $1.75 tacked on to prices in no time at some point going forward. It may not last if milk production stays high, but there could be an opportunity,” Mattke concluded.

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