January 17, 2014 — We have seen cheese prices soar since the first of the year. Block cheese is up almost 23 cents since the first of the year and butter is up over 27 cents, what is going on?
“It’s called supply and demand,” said Jerry Dyer, editor of the Dairy and Food Market Analyst. “Demand is very strong with the cheese price. I was reasonably comfortable with the $2.20 price, but the spike late this week has hastened the day of a correction, because it probably won’t be the only spike over the next week or two, and that’s going to start putting a dinger in demand.”
Dryer reported that the market is also being supported in large part by strong exports, and those exports are by and large hedged and sold out well into the second quarter.
“So $2.25 or $2.30 cheese doesn’t make any difference to that buyer,” he said. “They bought it at $1.75 or $1.85. So there’s still some support for the market, but these higher prices will hasten a correction lower, although it still could be a month or two out.”
How soon will we see the downfall?
“That’s a question I don’t have a good answer for, but, my take-away is first quarter exporters are pretty much sold out, and second quarter, almost sold out on the cheese side,” he said.
There is good support and additional support comes from strong powder exports which are moving some milk away from cheese and strong Mozzarella exports, which are moving some milk away from Cheddar.
It’s not just China that is behind all this. Pacific Rim countries are big buyers of our powder. Mexico is a big buyer of milk powders and of cheese. The Middle East is buying butter.
“The Russians are buying butter and cheese from Europe, taking them out of play in some of the markets where we are exporting. The international demand is broad based,” Dryer concluded.