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Why Are Cheese Inventories Not Increasing?


Volatility has increased in spot cheese trading with the month of March showing some strong price swings. Block cheese price from March 1st initially moved from $1.90 down to $1.78 by March 10th. It then rebounded to $2.10 by March 27thand fell back to $1.85 by March 31st. The movement was similar to the volatility we saw in mid-December through mid-January. Barrel cheese has not had quite the movement of blocks, but prices have retraced a good portion of what it had gained in early March. This keeps futures traders guessing and the markets volatile.


Once cheese prices move low enough, buyers step in to purchase supply to meet demand or increase ownership for aging programs and later demand. It seems that once prices begin to move higher, buyers become excited and attempt to outbid each other in order to obtain supply before price moves higher. The same holds true when the market shows weakness. Sellers become more aggressive propelling the market lower. Those type of movements are becoming more common over the past few years than they have been in the past.


There may be more volatility in cheese recently due to the inability of cheese inventory to increase so far this year as it generally does. Overall demand has remained strong and enough to keep inventory from increasing even with higher milk production than last year. What has been a hinderance to stronger cheese output is the lack of employees at manufacturing plants. Plants are running at full capacity relative to their workforce and not the capacity of the plants. This has been reiterated numerous times by various plants. This may be the reason spot milk continues to remain historically low from week to week and inventory from increasing. Plants would normally be glad to absorb spot milk at reduced prices but are having a difficult time keeping up with what they have from patrons or regular suppliers due to a lack of employees. This could become a greater bearish problem when spring flush is in full swing, and sellers find no one willing purchase extra milk. Milk production continues to run ahead of last year and is expected to continue to do so for the foreseeable future.


By ROBIN SCHMAHL

April 4, 2023

dairyherd.com


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