Cheese has been the most volatile market so far this year and shifted quickly from record high prices in July to the sharpest decline in history in the weeks that followed. Over a two-week timeframe, block and barrel cheddar averages lost more than 70 cents per pound through the first two weeks of August. Milk production has increased due to farmers operating under normal conditions and a better profitability outlook, high prices finally put a damper on demand and COVID-19 dining restrictions are reverting back toward stricter guidelines. Now the calendar has entered another month and cheese price gains are making yet another appearance.
Cheese prices lifted last week as government-induced demand brought bids to the spot session where they were met with limited offers. After a slight block market decline on Monday, prices raced higher to eclipse the $2 per pound mark on Thursday and settle up 29.75 cents on Friday (Friday’s settlement of $2.1250 was the highest since July 31) versus the prior week. Barrels finished the week 27 cents higher versus the prior Friday. There were minimal trades into the back half of the week when most of the price increases happened, with sellers unwilling to let cheese go to buyers with voracious appetites to purchase product. The extra $1 billion in government funding to the Farmers to Families Food Box program has pushed prices higher as contractors compete to procure product. In addition, end users are ensuring they have ample supply to meet upcoming Q4 demand, with some buyers still short after delaying summer purchases due to record high values. It is not likely that cheese prices will race sharply higher, but values should be supported overall in the near term. Bearish factors include weaker foodservice demand and the residual impacts of closed schools, minimal travel, and reduced fans at sporting events. Raw milk is ample for cheese vats as farmers increase production well above prior year levels and Class I demand remains slower due to closed schools.
The wheat complex was weaker overnight, following an upward trend on Dec Spring Wheat for three weeks leading into today’s sell-off. Spring wheat harvest is slightly delayed at 69% week ending August 30, versus the five-year average of 77% complete. North Dakota and Washington are dragging down the average but further delays are not anticipated as weather threats have subsided. The North Dakota Wheat Commission in its weekly crop progress summary issued Sept. 2 stated that there appears to be a wide variance in yield outcome depending on planting date and moisture received during the growing season (later seeded fields were faring better).