Sluggish demand encourages buyers to limit inventory

By CAROL RYAN DUMAS

Capital Press

While there is a steady amount of trade in cheese markets, it hasn't been overly aggressive for this time of year, analysts say.

Prices are just trading around in a range, not trending one way or another, said Alan Leavitt, publisher of CME's Daily Dairy Report.

"Prices are up for a few days then down for a few days trying to find the right level," he said.

Blocks and barrels have mostly been trading up and down between $1.68 a pound and $1.79 a pound for two months. The market seems fairly comfortable with that level, he said. Demand is not great, he said.

"There's not a sense of panic. Traders aren't tripping over each other to get the bid," he said.

The economy is creating uncertainty. Demand is sluggish and buyers don't want to hold too much product, he said.

"We see that reflected in the futures market. The price is jumping all around," he said.

But this is the time of year when people have to buy cheese to have it shipped in time for the holidays, he said. But that doesn't necessarily mean prices will increase.

"It's going to depend on where the international market goes; that's kind of soft. It seems like it would be difficult for our prices to go higher," he said.

International prices for the last five years have been 20 cents to 30 cents higher than the U.S. price reported by National Agricultural Statistics Service, he said. The Oceania cheddar price last week averaged $1.90 a pound.

Sizable price drops in blocks and barrels last week appear to have gone a long way in resolving concerns about imbalances in the market, said John Kaczor of California Milk Producers Council. Many buyers accepted offers last week, he said.

"It looks like cheese has found its comfortable (price) level for now," he added.

Buyers are not in a big rush, said Jerry Dryer in his Dairy & Food Market Analyst weekly newsletter.

"Buyers will drag their feet, and too many retailers seem loath to do major holiday promotions," he said.

He expects cheese prices to keep "zigging and zagging" and doesn't think prices have hit its fourth quarter low yet, he said.

The big issue hanging over the market is production in the Southern Hemisphere, Kaczor said.

New Zealand's production was up 13 percent in the first six or seven months of the year, and the country is hitting its flush season. Pastures and cows there are in great shape, the weather is ideal and dairymen there added cows last year, he said.

Other things to keep an eye on are the world economy, global weather, China's dairy imports and the U.S. milk supply, Leavitt said.