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The cash cheese market is correcting after “being at a level that was too high for too long” according to Bill Brooks, dairy broker of the Downes O’Neil Dairy team. He said there’s still a decent amount of blocks out there, but barrels are a little tighter.  

The inverted spread is indicative of fewer supplies of barrels over the past decade. “Barrel capacity is shut down, but also more recently a shift in consumer buying patterns to more products with processed cheese on it that’s probably helping keep demand for barrels much stronger than maybe what we anticipate,” Brooks said.  

Meanwhile, there’s a potential for the butter price to rebound, especially with the spread between the retail price of butter and the wholesale price in Chicago . “We didn’t anticipate it occurring quite this quickly,” Brooks said. Inventories are relatively low compared to where we’ve been at the last few years, so there is room for commercial entities to hold on to butter and maybe keep that price from dropping any further.  

Brooks said there’s potential to see some additional gain, even though we’re not seeing a great deal of demand right now because of where the price is at the retail level. “But hopefully we’ll see some of the prices in stores come down to spur some addition to the demand so we can keep inventories from building a great deal.” He said.  “This is historically the time to see butter stocks start to increase and continue into the middle part of next year,” he concluded.

The cash cheese market inched higher Monday. Downes-O’Neill dairy broker, Bill Brooks, said in Tuesday’s DairyLine that we’ve been running a pattern of establishing lower highs throughout the year and he expects that to be the case. $1.89 was the most recent high in mid October, he said, but it’s likely the current market will reach $1.80 but it’s not out of the question as we are in the holiday period and there’s a lot of uncertainty where we will be.

The market is moving higher, sales are decent, and no one is in any hurry to try and stop the upward movement and as long as the market is being pushed higher, no one is in a tight situation as far as needing to move product so the price will continue to work its way higher but it’s unlikely it will reach $1.80.

Brooks made his comments prior to the release of the October Milk Production report. He expected gains similar to those in September. Weather has been good, he reasoned, and October’s weekly slaughter data slowed quite a bit so it’s possible that cow numbers have also grown relative to September as well and that could put pressure on the market.

When asked about the steady butter price, Brooks said “We’re not selling enough product to push the price higher but we’re not seeing enough being made to push the market down. Brooks reported that he hadn’t seen much retail featuring of butter of late but have actually seen features on margarine but he’s now seeing some sales on butter so hopefully that will move some product.

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