Dick Groves
Editor, Cheese Reporter

 

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A First Half For The Record Books

Records are made to be broken, as the old saying goes, and in the first half of 2014, a number of dairy industry records were either broken or downright shattered. With almost half of the year left, it’s safe to predict that 2014 will go down in history as a record-breaking year.

Obviously we’re not talking about production records here, since production statistics are currently available for less than half of 2014. We’re talking about prices.

For example, heading into 2014, the record high price for 40-pound Cheddar blocks on the Chicago Mercantile Exchange (and, for that matter, the CME’s predecessor, the National Cheese Exchange) was $2.2850 per pound, set back in May of 2008.

Less than a month into 2014, that record fell by the wayside. The block market hit a record $2.2950 per pound on January 23, reached $2.3100 a pound the next day, and eventually reached $2.3600 a pound in late January and early February before retreating.

But the block market wasn’t quite done setting records. After falling all the way down to $2.1050 per pound by mid-February, the block market started a slow climb, eventually setting a new record of $2.3625 per pound on March 14 and then continuing to rise until peaking at $2.4325 per pound on March 24.

To put that in perspective, the “old” block market record of $2.2850 per pound, set in May of 2008, had broken the previous record high of $2.2025 a pound, set in November of 2007. That record, in turn, broke the previous record of $2.2000 per pound, set in April of 2004.

Thus, from April of 2004 through early January of 2014, the block price record rose from $2.20 a pound to $2.2850 per pound. And then, in the course of just a couple of months, the block price set a new record of $2.3600 a pound and then another new record of $2.4325 a pound, or almost 15 cents higher than that 2008 record.

Records like this aren’t set very often. Indeed, the most recent time a cheese price record was shattered by such a wide margin was back in 2004, when the block market reached $2.2000, breaking the previous record of $1.9725, set in August of 1999.

The block market is now below $2.00 a pound, so it looks like the block price record of $2.4325 a pound is safe for a while. Or is it?

A year ago, the first half of 2013 ended with the block price at $1.6375 a pound. By the end of the year, the block price had risen to $2.0000 a pound, and it continued to rise in January, to a new record high.

Given that the block price ended the first half of 2014 at $2.0000 per pound, who knows what the rest of this year has in store for cheese prices? But recent history suggests that the record $2.4325 per pound price reached earlier this year won’t be broken anytime soon.

Meanwhile, thanks in part to record-high cheese prices, the federal order Class III price has been breaking records here in 2014. Previously, the record high for the Class III price in a single month was $21.67 per hundredweight, set in August of 2011. And the record high Class III price average for an entire year was $18.37 per hundred, set in 2011.

The Upper Midwest market administrator’s office publishes a very informative “History of the Federal Order Class III Price” table, with prices dating back to 1980, and that table illustrates the scope of the Class III price records that were set in the first half of 2014.

For example, the February Class III price of $23.35 per hundred marked not only the first time the Class III price topped $23.00, but also the first time it topped $22.00 per hundred. Keep in mind that, in 2013, the Class III price never even reached $19.00 per hundred.

But February’s record lasted all of two months. The April Class III price of $24.31 per hundred shattered the February record by almost a dollar.

For the first half of this year, the Class III price never fell below $21.15 per hundred, and averaged $22.68 per hundred, or more than $4.00 per hundred higher than the previous record-high average Class III price for an entire year.

Notably, this was the first year that the Class III price ever topped $20.00 per hundred in each of the first four months of the year. Previous record-high Class III prices were $19.32 per hundred in January (2008), $17.25 per hundred in February (2013), $19.40 per hundred in March (2011) and $19.66 per hundred in April (2004).

Going back to product prices, the dairy industry during the first half of 2014 also experienced something else that’s never been seen before: cheese, butter and nonfat dry milk prices all above $2.00 per pound at the same time. That happened back in late March (March 28, to be exact), when, at the CME, blocks settled at $2.3850 per pound, barrels settled at $2.2900 a pound, butter settled at an even $2.00 a pound and Grade A nonfat dry milk settled at $2.0300 a pound.

Thanks to these high dairy product prices, the federal order Class 1 base price reached a record high of $24.47 per hundred in May, and has now been above $22.00 per hundred for six straight months (February through July).

And thanks to all of these high dairy product and milk prices, the Consumer Price Index for dairy and related products has set records for four consecutive months (February, March, April and May).

Based on what’s happened with prices, the US dairy industry will be talking about 2014 for years to come.
And based on recent trends, they’ll mostly be talking about what happened during the first half of the year, except for retail dairy prices, which may keep rising. DG


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