Cheese, Milk Prices Skyrocket

August 18, 1999

Cheese prices have been setting new records with the basic formula price for milk following right along. One analyst sees the trends continuing perhaps beyond Labor Day, but then prices will moderate.

Driving the higher prices is demand. "Cheese demand has been great this year," says Alan Levitt, vice president, The Jerry Dryer Group, a Chicago consulting firm. But cheese making capacity has not kept up with that demand, he adds.

The old record high cheese price of $1.90 per pound was broken last week, and Levitt says he would not be surprised now to see that move to $2.10 and beyond. "This is the time of year when prices go up; there's not a lot of downward pressure," he says.

Basic formula prices for fluid milk also have been high, reaching almost $18 per cwt on the futures exchange. Fluid milk prices also will continue to find strength as the nation's schools gear up to open for the 1999-2000 school year.

USDA's milk production report, released Monday, showed a 2% increase in total production from July 1998 and a 1.2% decline in production for this July compared with June. June revised production, at 11.7 billion pounds, increased 2.8% over June 1998. The July total production was 11.6 billion pounds.

Production in Idaho increased 11.6% in July compared with July 1198; Arizona and California each increased 8.4%. Milk production declined 10.6% in Missouri, 5.8% in Kentucky and 4.8% in Illinois. Generally states in the Midwest registered declines or small increases as did states in the Northeast and Mid-Atlantic. However, Vermont's milk production increased 2.2%.

With cooler weather across the Midwest in recent days, milk production should begin to increase throughout the region, and as temperatures moderate elsewhere in late summer into fall, production should return to higher levels. Demand, too, will moderate into fall.

Levitt says he expects that once a downward trend begins, cheese prices will move quickly back to $1.20-1.30 per pound.