Cheese prices are skyrocketing due to COVID-19. Why is the pandemic increasing costs?
The coronavirus pandemic already came for the meat industry, forcing processing plans to close as workers tested positive for COVID-19 and farmers to depopulate their livestock by sending millions of chickens and pigs to the chopping block.
It looks like cheese could be next.
A block of cheddar cheese on the Chicago Mercantile Exchange went from just a dollar a pound in mid April to $2.585 a pound on June 9, the New York Times reported. The price of cheese, just like oil and hogs, is set by traders in commodities markets, according to the Times.
By June 22, cheddar blocks closed at an all-time high of $2.7025 per pound, according to Dairy Herd Management.
“Prior to June 2020, the last time CME block prices set a record high was in 2014, when they hit $2.45/lb,” Dairy Herd, a magazine for commercial dairy producers, reported.
The price of cheese hit a 20-year low during what some saw as the peak of the pandemic in mid-April — meaning it made a 160% turnaround in June, Business Insider reported.
Here’s why cheese is so volatile
The cheese industry appears to have been hit by a perfect storm.
When the coronavirus pandemic forced restaurants, school cafeterias and college dining halls across the U.S. to shutter, overall demand for cheese fell, the New York Times reported.
Suppliers with excess stock then “offloaded their would-be cafeteria cheese onto export markets,” according to Business Insider. Given the low price, foreign buyers were eager to take it off their hands.
But “now that U.S. restaurants are reopening and back on the market for cheese, they’ve found much of their old supply tied up in export contracts,” Business Insider reported.
Meanwhile, millions of people relearning how to cook under stay-at-home orders are buying cheese from the grocery store like never before.
According to Capital Press, a weekly agricultural newspaper, retail demand for cheese went up between 20% and 30% during the pandemic. The same could be said for sales to fast-food restaurants and pizzerias that continued to operate, the newspaper reported.
Many of those limited-service restaurants “traditionally rely on cheese as one of the main ingredients for pizzas and burgers, as opposed to fewer cheesy items on menus of fine-dining restaurants that were shuttered,” Eat This reported.
Desperately seeking cheddar
The Wisconsin Cheesemakers Association says “everyone’s is looking for cheddar” right now.
“We’ve got restaurants looking for that sliced and shredded cheddar, you’ve got people at home wanting that shredded product, so this all bears down on that one product that sets the price of the entire industry,” John Umhoefer with the Wisconsin Cheesemakers Association told WXII.
The spike in prices could be bad news for exports, the Dairy Herd reported.
“U.S. cheese prices are now the most expensive in the world, and that could negatively impact export business,” Betty Berning, an analyst with the Daily Dairy Report, told the magazine. “If U.S. cheese prices remain at a premium to prices in Oceania and Europe, domestic demand will have to make up for lost export business to sustain current prices.”
Dairy market analyst Mark Gould told Capital Press the recent spike in prices typically makes the cheese supply chain as a whole “uncomfortable,” with many fearing such a drastic and sudden climb isn’t sustainable.
“Record-high prices don’t last forever,” he said. “And just like giants — the bigger they are, the harder they fall.”
