The rollercoaster of US cheddar prices

Thursday, 6 August 2020

By Patty Clayton

The disruption to normal demand patterns from coronavirus has seen US wholesale cheddar prices hit both the highest and the lowest levels in over 10 years in the past few months. The structure of its cheese markets, government support programmes, and high reliance on the foodservice sector, means there has been much higher volatility in cheddar pricing than seen elsewhere.

About half of dairy consumption in the US, including cheese, takes place out of the home – a much higher proportion than in Europe, where it is estimated to be closer to one-third.  The closure of foodservice meant cheese inventories saw a huge jump in April. Cheese stocks typically increase through the spring peak, with April seeing stocks build by around 27k tonnes. This year, that increase was 73k tonnes, which combined with the approaching seasonal peak in milk production, led to a sharp drop in wholesale prices.

However, market developments elsewhere meant prices recovered strongly through June and July.

  • Competitive global prices led to an uptick in export orders for May.
  • Strong increase in retail demand for cheese as consumption moved in-home.
  • Government Foodbox purchases (emergency food aid)
  • Active milk production reduction in May

Combined these have added significant support to US cheese prices, seeing them almost double between May and July. The July average of $5,704/tonne is the highest monthly average since January 2001.

However, there are signs that cheese availability will improve and prices will begin to soften. Foodservice orders are reported to have slowed in many US states as infection rates rise and restrictions are increased.  In addition, changes to procurement for government backed food boxes mean a lower volume of cheese will be demanded. The latest spot market prices for cheese reflect these changes, with both block and barrel cheese prices falling in recent weeks.

Patty Clayton

Lead Analyst - Dairy

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