18.07.17 Cheesy Cheesiness

July 17, 2018
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It Ain’t Easy…
Being Cheesy

Whether its mac & cheese or mozzarella, cheese prices fall as America’s stock of the dairy delight hits a 100-year record-high.

Why?

Wait…Cheese Stockpiles?

  • America’s agriculture department keeps track of its cheese inventory. The gov’t has a record of cheese stockpiles since 1917!
  • Compared to last year at the same time we have 6% more cheese in America.
  • Why? Too much milk. Milk often made into cheese to preserve it. Also, summer months = less lunches packed. And tariffs.

Why It Matters

  • U.S. families: Cheese prices drop. We have plenty of cheese, but not enough demand for it.
  • U.S. dairy farmers: In addition to stockpiles, cheese exports hit by Mexico/Canada tariffs in retaliation for our tariffs on steel & aluminum. This adds more pressure on farmers who don’t make a ton of money off of cheese (margins tight).

Bigger Picture

  • Milk consumption has fallen despite theA “Got Milk?” ads first introduced in the mid-1990s by the dairy industry to try to encourage consumption.
  • Americans picking other non-dairy options like almond milk.
  • Insight from one industry exec: While yogurt producers have innovated (pouches, squeeze packs), milk producers haven’t.

The price of cheese impacts the price farmers receive for milk, so it impacts the entire dairy industry. Despite current pressures, one analyst is optimistic the industry will regulate. Read more on SmartHERNews.com

  • Cheese prices crumble — but the global trade dispute could halt their drop:
    https://www.marketwatch.com/story/cheese-prices-crumble-but-the-global-trade-dispute-could-halt-their-drop-2018-07-13
    Roger Orth, an independent market maker, points out that China and Mexico are two of the largest destinations for U.S. dairy products by a wide margin. They”ve both implemented tariffs on cheese, in retaliation to U.S. tariffs. U.S. dairy exports to Mexico totaled $1.3 billion in 2017, while China took in $577 million in dairy exports from the U.S., according to the U.S. Dairy Export Council.
    Being involved in a trade war with [two of the] largest importers of U.S. dairy products has the potential to really change the demand side of the equation for our products, says Orth. We are seeing the impact now. The question is just how long it lasts.
    In the long run, however, the tariffs may end up being good for the market. The tariffs are painful now, but it”s possible they are setting us up for a “perfect storm,” says Tim O”Leary, an independent dairy trader. With the declining dairy prices, we will have more farms closing up.
    __Should we get back to a “true” balance of trade, I have to wonder what new and increased demands on our dairy market will do to the current prices, he says.
  • America”s cheese stockpile just hit an all-time high:
    [https://www.washingtonpost.com/news/wonk/wp/2018/06/28/americas-cheese-stockpile-just-hit-an-all-time-high/?utmterm=.d6d9534b2c67](https://www.washingtonpost.com/news/wonk/wp/2018/06/28/americas-cheese-stockpile-just-hit-an-all-time-high/?utmterm=.d6d9534b2c67)
  • Take Our Cheese, Please: American Cheese Makers Suffer Under New Tariffs:A
    https://www.wsj.com/articles/take-our-cheese-please-american-cheese-makers-suffer-under-new-tariffs-1530783005
  • Why Are Americans Drinking Less Cow’s Milk? Its Appeal Has Curdled:Ahttps://www.npr.org/sections/thesalt/2017/05/16/528460207/why-are-americans-drinking-less-cows-milk-its-appeal-has-curdled

by Jenna Lee,

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