There Is Plenty to Go Around

Published on: 12:18PM Mar 08, 2010

By Robin Schmahl, AgDairy


The trend for cheese prices has not changed over the past weeks. Cheese prices have not found a bottom where buyers will step up to the plate and buy aggressively. Sellers feel the need to continue moving cheese to the market as soon as possible and not hold for a potential price increase later this year. Spot trading activity has been brisk as price continues to weaken. 


Block cheese price fell last week 4.5¢ to $1.29.75 with 10 loads traded. Barrel price dropped 4¢ to fall to $1.25 with 34 loads traded.


Seasonally, it would make sense that cheese prices should increase as the year progresses, but manufacturers are unwilling to pay storage costs only to discover that cheese prices may not increase enough to cover these costs. This does give the impression that manufacturers feel that there is little upside potential for cheese prices for the foreseeable future.


Obviously, this is a concern for farmers. Milk prices did get back to breakeven or perhaps some profitability over the past few months, but current futures contracts suggest a return to lower prices.


February class prices were announced, showing Class II increasing 43¢ to $15.65. Class III fell to $14.28, a decrease of 22¢, and Class IV dropped to $12.90, a decrease of 95¢.   


The impact of falling cheese prices during February is going to hit hard when the March prices are announced. March Class III futures are below $13.00 with the close at the end of the first week in March indicating the expectation of $12.89. The April contract closed at the same price as traders anticipated that plenty of cheese will be available for spring. Milk production is increasing seasonally and spring flush is drawing near.


This is a recipe for lower prices, especially with lower demand.


Like it or not, we will be facing lower prices over the next few months. I know we do not like to hear this, but the reality of this is staring us in the face.


Current stocks, supply and demand are in a position that will limit upside price potential. Regional nonfat dry milk and dry whey prices are weakening as a result of heavier cheese production and nonfat dry milk production. Extra milk has been moving to dryers, satisfying demand and then some.


International prices are mixed with Fonterra’s latest auction, showing a slight improvement for the whole milk powder price after declining the previous two months. Price increased to $1.49, an increase of 0.8%. Anhydrous milkfat price fell to $1.80, a decline of 12.8%. Skim milk powder was added to the auction this month with a weighted average price of $1.33 per pound.


Commercial disappearance of dairy products fell 1.2% to 190.4 billion pounds in 2009. American cheese disappearance rose 2.6%, other cheese was up 1.7%, while fluid milk products increased 1.1%. Butter disappearance was down 8.1% while nonfat dry milk was down 5.9%.


USDA anticipates commercial disappearance to increase this year, but we will need some help from the economy. Disposable income is tight and will limit demand growth.  


Upcoming reports to watch for:


The World Agricultural Supply and Demand report - March 10

The Crop Production report - March 10

The Monthly Milk Production report - March 18



Robin Schmahl is a commodity broker and owner of AgDairy LLC, a full-service commodity brokerage firm located in Elkhart Lake, Wisconsin. He can be reached at 877-256-3253 or through


The thoughts expressed and the data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed are subject to change without notice. There is risk of loss in trading and my not be suitable for everyone. Those acting on this information are responsible for their own actions


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