Cheese Production is growing fast! Where? How Much?

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This post will review how cheese and milk for cheese is growing.  Milk for cheese is the largest usage of U.S. milk.  In the prior post, the decline of Class I milk for drinking was covered.  In 2021, 40 billion pounds of drinking milk were produced in the U.S.  By comparison, somewhere around 100 billion pounds of milk was used to make cheese.  So, what drives the demand for milk?  CHEESE.

Cheese production in the U.S, is growing at close to three percent annually.  In 2020, the growth of cheese fell to less than one percent vs. the prior year.  This was caused by the COVID "stay at home" policies that changed consumer dining habits.  Cheese made for food service (think restaurants) is packaged differently from retail (grocery stores) and the overnight change made cheese scarce in grocery stores.  By 2021, production of cheese returned to a more normal rate and in the first half of 2022 production has been robust.

Chart I - The total USA is seeing a very consistent growth
 in Cheeses Production averaging 2.8 percent annually.

Table I below shows the major cheese producing states for the first half of 2022.  Wisconsin is the largest with California in second place.  Both have very large volumes of cheese production and together make up 43 percent of the U.S cheese production.  The six states listed in Table I make up 68 percent of cheese production.

Table I - Six largest Cheese Producers in the First Half of 2022

The USDA which tracks production of products like cheese has a disclaimer for their data.  It reads "States not shown when fewer than 3 plants reported or individual plant operations could be disclosed."  Recently South Dakota, which was growing with new and expanded cheese plants was recently eliminated from the USDA list as well as Oregon.  Texas which has some significant cheese production is also not in their list and therefore is included in "all other."

Tables II and III show the three-year and current year comparisons for the first half of the year.  Table II expresses the change in million pounds of cheese and Table III expresses it in percent.  They both tell the same story.  The growth in cheese production is not coming from the six largest cheese producing states.  From 2019 to 2022, 82 percent of the growth came from states other than the six largest cheese producing states.  Comparing 2021 to 2022, 70 percent of the growth came from states other than the six largest cheese producing states.

A partial listing of new and expanding cheese plants include Zumbrota, Minnesota, Menomonie, Wisconsin, Nampa, Idaho, Amarillo, Texas, Hiram, Ohio, Franklinville, N.Y, and Willows, California.

Table II - Three Year and One Year Growth in Million Pounds
for the first Half of 2022

Table III - Three Year and One Year Growth in Percent
for the first Half of 2022

There are only two of the six largest cheese producing states that have any major changes.  California had major losses in 2019 and 2020 but started making a comeback in 2021 and 2022 (Chart II).

Chart II - California Cheese Production

Minnesota has seen some very nice growth in the last three years and especially in the first half of 2022 with a 4.6 percent annual increase over 2021 (Chart III).  The growth has come from many new and expanded facilities. 

Chart III - Minnesota Cheese Production

Overall, the U.S. cheese business is in very good health.  As shown in Chart I above, production is growing consistently and significantly.  The Agricultural Marketing Service (AMS) price of cheese used for pricing Federal Order milk has grown steadily as shown in Chart IV.  There was volatility in 2020 when COVID "stay at home" policies upset normal eating habits.  The current price of $1.98 per pound is not a record price, but it is a price that reflects a good dairy sector properly responding to increasing consumer demand.  The AMS price of cheese is the most important parameter in Class III milk pricing and milk protein pricing.

Class III Milk = 9.6 x Cheese Price +5.9 x Dry Whey Price + 0.4 x Butter Price - $3.20

Milk Protein = 3.2 x Cheese Price - 1.3 x Butter Price - $4.43

Chart IV - Federal Milk Marking Order Cheese Prices

The Federal Order prices for cheese are based on the wholesale price of Cheddar cheese.  As shown in Chart V below, production of Cheddar cheese has increased at about two percent annually filling the needs for Cheddar cheese inventories.

Chart V - Production of Cheddar Cheese

Cheddar cheese inventories are not available publicly, but Cheddar makes up about 70 percent of American cheese.  Chart VI shows the inventory levels of American cheese which are growing at about three percent annually providing adequate inventories.

Chart VI - American Cheese Inventories

Overall, the U.S. cheese business is in great shape.  This is creating a need for milk.  Can the U.S. milk producers meet these needs?  Milk for cheese requires high component levels of protein and butterfat and low Somatic Cell Counts. This is the largest usage of milk in the U.S. and producers supporting cheese production need to produce milk that meets the characteristics needed for cheese making, high components and low Somatic Cell Counts.

The next post to this blog will cover the production of butter in the U.S.  Butter and butterfat prices are at record highs!