U.S. cheddar-cheese prices plunged the most since December 2008 as grocers slowed purchases after stockpiling most of what they will need for the year-end holidays.
The 40-pound blocks of cheddar traded on the Chicago Mercantile Exchange plunged 7.7 percent to $1.8325 a pound after touching a three-month high of $2 on Nov. 15. Prices still are up 27 percent from a year ago. Retail costs rose to a record $5.707 a pound in September, up 21 percent from a year earlier, Bureau of Labor Statistics data show.
“Buyers purchased all the product they needed ahead of the upcoming holiday season and will wait for lower prices,” Bill Brooks, a dairy economist for INTL FCStone Inc. in Kansas City, said in a telephone interview. “Demand dried up with $2 cheese prices.”
U.S. milk production climbed to 16.23 billion pounds (7.362 billion kilograms) in October, up 2.1 percent from a year earlier, the U.S. Department of Agriculture said today in a report. The dairy herd rose 1.1 percent to 9.219 million cows, while the average cow produced 1,760 pounds of milk, up 1 percent, the USDA said.
“Milk production is increasing, and cheese inventories are starting to build,” said Brooks, who had expected production to rise 1.8 percent last month.
Class III milk futures on the CME reached a four-year high of $21.75 per 100 pounds on Aug. 11 as U.S. dairy-product demand rose and exports of butter, cheese and powdered milk increased. Milk for December delivery rose 0.2 percent to close at $18.27 at 1 p.m. in Chicago. The commodity has climbed 38 percent this year.
“We could see milk prices fall below $15 in April,” Brooks said.