What tripped the cheese price bubble?


What tripped the cheese price bubble?

A dairy economist says the collapse in the cheese market has been perplexing, but he has a theory on why markets have had drastic swings in recent weeks.

Nate Donnay with StoneX says no one wants to build inventories of 2-dollar cheese as milk production is building faster than expected.

“Instead of allowing inventory to build, they’re bringing the cheese to the spot market and dumping it there.”

Donnay expects inventories could start to build if the trade settles around $1.70 to $1.80.  Looking at the June disappearance when not accounting for government purchases, he says cheese demand was flat.

“If you have milk production growing and you have commercial demand that is flat against a year ago, you’ve got some problems, you certainly shouldn’t have record cheese prices at record high levels.”

He also doesn’t expect record exports to continue as the supply side improves and government purchases slow but says he believes trade has come to more of a fair market value for cheese.

Donnay made his comments during his latest market outlook report.

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