UPDATED FOR ALL FOUR WEEKS OF AUGUST NASS PRICING
Cheese pricing data for the second quarter of 2020 is now complete. Some data is available for July. The charts in this post give us a good picture of why there were huge swings in dairy prices in the second quarter. Data for the third quarter of 2020 is showing major changes from the second quarter. This post will focus on Cheddar cheese as it is the primary commodity used to calculate producer milk prices.
In late April and early May cheese prices took a huge drop as COVID 19 uncertainty prevailed and domestic disappearance fell. Many buyers took advantage of this "buy on the cheap." In June and July cheese prices escalated to record prices. August prices are now "falling like a rock."
Cheddar cheese prices are the main parameter for producer milk prices. As shown in Chart I, production of Cheddar in the second quarter of 2020 was relatively robust compared to average production of the last three years. Compared to the second quarter of 2019, production of Cheddar is up 2.6 percent. Cheddar is not a growth product, so the increase is above norms. The record high cheese prices in June and continuing in July cannot be blamed on low Cheddar production.
Chart I - Production of Cheddar Cheese |
Withdrawal from cold storage of American cheese for domestic use is shown in Chart III and net exports of American Cheese are shown in Chart IV. Both charts show a significant increase in June. Domestic disappearance of American cheese was up eight percent in June compared to the June level of the three prior years. Deliveries of American cheese for the Coronavirus Food Assistance Program (CFAP) contributed to the spike in June withdrawals from cold storage.
Chart II - Domestic Disappearance of Cheddar from Cold Storage |
Chart III - Net Exports of American Cheese |
Comparing Charts II and III, the changes in domestic disappearance are far greater than changes in net exports of American cheese.
Strong production and strong withdrawals from cold storage, netted to a reduction in inventories of American Cheese (primarily Cheddar) in the second quarter. However, inventories are still at or above averages in the second quarter. In total there was no shortage of available American Cheese (Chart II below). Chart II below includes data for July as well as June. June and July inventories took a plunge from May but are still not showing an inventory shortage from norms. The inventories may not be exactly what is needed with the change from food service to retail demand, but overall, inventories of American cheese are not low.
Chart IV - Inventory of American Cheese |
Chart VI- NASS Survey of Cheese Prices |
Chart VI - NASS Survey of Butter Prices |
Dry whey pricing, (Chart VII) which is used to price Other Solids, has also decreased. It has dropped from $.35 per pound to $.32 per pound, an eight percent drop.
Chart VII - NASS Survey of Dry Whey Prices |
Chart VIII - NASS Survey of NDM Prices |
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