Market Analysis with Dairy Economist Bill Brooks

Cheese prices continued to slip Monday, further discouraging farmers whose milk check hinge on those prices. Downes-O’Neill dairy economist, Bill Brooks, said in Tuesday’s DairyLine that, while it’s not much comfort, the market always does turn around eventually, but there’s been a lot of pain felt by producers.

Cheese is like a lot of other commodities, he said. “We’re chasing a declining demand base and we just haven’t reduced our supplies enough to match up with that.” Cheese is purchased when the buyers see good value, according to Brooks, and “That value is in the upper teens to the low $1.20s.”

Thankfully, prices haven’t plunged to the $1.04 bottom seen in January, Brooks said, and we’ve seen the market move up 10, 15, or 20 cents, but then we hit a “tipping point” and “That value that folks were looking for goes away and now unfortunately we’re seasonally outside of a good demand period, in between Easter and the unofficial start of summer on Memorial Day, and a lot of product has probably already been put away for that.”

He assures us the market will rebound but there’s likely more pain before that happens and trading will likely take place in a range of $1.15-$1.35 per pound until we get into the summer months, demand picks up seasonally, and supplies slow down.

Friday’s March Milk Production report will attract attention, according to Brooks, especially the cow numbers to see if they dropped like they did in January. He’s not sure that will happen, given the slowdown in slaughter that we have seen, but people will be looking for more visible signs of a slowdown in milk production. Some hope it will be below a year and he admits that’s possible, but more than likely it will still be slightly above last year’s level.