Could Cheese Buyout Put a Dent in Inventory and Prices?

October 13, 2016 03:28 PM

USDA is announcing it will buy another round of cheese inventories to help with the glut of product and lower dairy prices.

USDA says it’s buying another $20 million of cheese in storage to help decrease surpluses and help depressed prices. It’s the department’s second $20 million purchase since August. The plan falls short of a request by the National Milk Producers Federation earlier this year for USDA to purchase $150 million in cheese products.

NMPF says in in a press release it is appreciative of USDA’s efforts.

“Today's announcement by USDA offering to purchase up to $20 million of cheese will provide assistance to America's dairy farmers through increased demand for milk, while also serving the needs of Americans who patronize food banks and other charitable assistance organizations,” the statement read, in part.

However, others in the industry say the transaction won’t make a dent.

“I think we have to look at the world market and try to continue to market our cheese through private means and not depend on the Government to buy up our stocks. The private buyers of cheese and the marketers know the government holds cheese, and that plays into their equation when they bid on cheese products,” says Wisconsin producer, Tom Crave.

Editor of Dairy Herd Management, Jim Dickrell, says this purchase only represents a fraction of total cheese in storage.

“It won’t make any dent because we have over a billion pounds of cheese in inventory," he says. "Then when USDA put out its bid for offers, it didn’t even get all of the bids filled."

“The reality is they buy cheese every year because they have food programs. They are always in the market at some point," according to Commodity Risk Management Group senior advisor Mike North. "[The first purchase] was more of a political feel-good type of movement and it was very late in the game. If we would have seen something happen then when cheese was $1.26 and the 20 million dollars got applied to that cheese price, it would have taken more out of the equation months ago."

USDA is buying cheddar, which will be distributed to federal nutrition programs and F\food banks. USDA Secretary Tom Vilsack says while the attempt is to provide relief, the dairy industry still must rely on trade.

USDA Buys Cheese for a Second Time

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