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  April 19, 2010

All through 2009, the downtrodden economy "flattened" demand for dairy products at a time when milk production and product inventories had "ramped up" for the 2008 export boom. Cheese continues to ride the CME rollercoaster this year with a generally bearish undertone. And Thursday's Cold Storage report didn't help.

According to USDA's Cold Storage report, total cheese inventory topped the one billion pound mark in March, which is the highest since 1984 (the year before the infamous government dairy herd buyout). American style cheddar stocks are up 10% over year ago, the report said. However, the past few months of production reports show that production of this cheese is below year ago while mozzarella and other varieties are cranking the press.

On the retail side, consider this... some dairy sectors increased their sales volumes last year, not the least of which was the shredded and grated cheese products where 6.6% more unit volume was sold in 2009 compared with 2008 according to a report last month in the "Progressive Grocer."

Cheese is a big question mark right now, and with the blend price for farm milk based on class utilization, the movements of this market will have a big effect on the final price received by dairy farmers in May. Thankfully butter prices bolstered the Class I base, which will help. Butter is being exported and demand exceeds supply... we'll see how the utilization plays out.

Cheese is also a big question-mark for retailers. The April CME rollercoaster for cheddar has retailers wondering what to do in terms of in-store promotions. This week, the CME settled fractionally lower with 59 loads of blocks selling and 23 loads of barrels. Block cheddar on the CME today (Apr 23) was $1.3675/lb. For barrels, the price was $1.3475/lb.

Meanwhile, there's yogurt and frozen dairy to think about. According to the Nielson supermarket scanner data reported in Progressive Grocer, yogurt sales on a unit volume basis, rose 3.1% in 2009. Frozen dessert sales were up 8.3%. And, while regular fluid beverage milk sales were flat, flavored milk sales volume was up 8.2%. Read more analysis of food retailing trends at Progressive Grocer.

 
     
 
 
 

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