Published on: 13:34PM Apr 09, 2009
The chart of the week is US CME block cheese and International Cheddar markets. The principal reason cheese and butter prices were so inflated for the better parts of 2007 and 2008 was tight world supplies. This factor and the deflated dollar opened up literally a world of export business for US butter and cheese. Roughly 14% of US butter production was exported in 2008 compared to 6% in 2007 and 1.7% in 2006. Roughly 2.8% of US cheese production was exported in 2008 compared to 2.3% in 2007 and 1.6% in 2006. But the crash in the world cheese and butter markets and the reversal of the value of the US dollar have been extremely bearish for US cheese and butter prices. As of this writing, US butter was trading at a $.30 premium to New Zealand butter. New Zealand is the largest butter exporter in the world accounting for roughly 40% of all trade. EU cheddar is currently trading at a $.10 discount to US cheddar. The European Union is the largest cheese exporter in the world accounting for roughly 45% of trade. Unless world butter and cheese prices rally, slowed US exports could be bearish on the domestic cheese and butter markets. And this is a factor that shouldn’t be ignored when looking at the existing notable premiums in milk futures.
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