Assuming the big food companies are rational about purchasing cheese… Prices are not set week to week. They would be locking in at least 50% of the buy with futures to reduce the range of price swings.
As recently as May when the big guys would have been setting the incoming volume, the price available to them was in the low $1.70s for delivery now… which means if your vendor is doing this, they are marking up product above the current CME but making a margin that is 40 cents a pound better than that.
When you click on the link, you then need to choose the month you want to look at and click the chart icon. Then choose cheese electronic from the drop down menu of futures contracts and the month and year (current or future) you want to look at. If you look at weekly or monthly you will see pricing farther in the past… in other words, if your supplier locked in pricing several months ago, they are still paying less than $1.50 a pound.
This is where lots of cheese is traded… i.e. NOT on the daily spot market most of us are looking at and using for price comparison.
I don’t know of a single distributor that buys cheese futures. They are not in the speculation business, they are in the distribution business. Large chains are far more likely to contract out or buy futures so they will know their food cost for the next quarter or two. If a distributor guessed wrong with futures they could easily erase all profits for a month or even a quarter. That being said, I do know of distributors who raise the price as soon as the market goes up but when the market drops, they wait until their high priced inventory is sold off before they lower the price.
The last transaction is always a bid at yesterday’s price. Despite cars trading for less earlier in the day and the market clearly wanting to correct downwards, the price has been “stuck” at 2.155 all week.
Despite not knowing distributors who buy futures, I can assure you they do. You are correct, they do not “speculate” by buying them a year out, but they do benefit from pricing by placing orders in advance and they do not buy on the daily spot market which is what is generally reported by the CME and is the price the link here at PMQ gives us. The buyers for the distributors are forcasting case volume several weeks out and placing orders to keep the pipeline full. If you look at the futures reports I linked to, you can see how far out they have to go to save serious money. They may not be buying these through the CME, but the pricing direct from the producer is going to look a lot more like these futures prices than like the spot prices.
Think about it: Sysco alone buys more cheese than is traded on this spot market. The pricing we are looking at and the story we are told are BS. Have a look at the volumes reported two weeks ago when the price dropped to the $2 range… suddenly there is business! Now, back at $2.15 it is a load here and there.
PC, that $1.65 price was a while ago… sometime in April. I bought enough to carry well into June. Then we bought another batch at a higher price… but we are still buying under $2.30.
There are a lot of good cheese products out there. If yours is too high… get some samples and do blind taste tests with “customers”. When we do taste tests, we try to approximate the experience our customer has… i.e. we are a delco so we serve the pizza about 10 minutes after it comes out of the oven. We go to several businesses in our center and let them know we are tasting and generally we get 15-20 people to come in for free pizza and we get good feedback about what they like. We have also posted “free pizza for testers” on FB and gotten as many as 40. We only test one thing at a time. i.e. if we are testing cheese, we will make otherwise identical pizzas.
If I find a large majority likes something better, we are going to use it almost regardless of price. By large majority, I mean if 2/3rds or more prefer one choice. If opinion is split 55-45 we are probably going with the less expensive option. If someone says they do not taste a difference we count that as a vote for each. (It can be very interesting to do a test without telling them what you are testing)
If we are testing 4-5 choices, we will run one test and eliminate 1 or 2 of them and then test again.
We did this with sauce and with cheese. when we did it with sauce recently, we ended up switching product to Stani products. With cheese… well, we did not end up with the most expensive one.
Remember to compare apples to apples. The $1.65 is likely block price at large volume. Shredded would be closer to $2 or $2.10 . . . . . still a big difference, though.
Bodeghwy… was just curious. Do you buy when the market seems low like that normally? Do you negotiate your prices with your vendor? Definitely wish I was sitting on a good amount of $1.65 right now. If you negotiate, does buying in your large quantities give you leverage.
We are not buying at 1.65 now. That was in the Spring. Now we are paying 2.28.
We are not a particularly large volume buyer with a single location delco.
I do shop the price between our suppliers and they know it.
Our walkin is pretty good sized, so it is not a problem for us to take 1000 - 2000 lbs at once.
In our high season that would be a few weeks worth. In our off season it is enough for a couple of months. When I try to get a jump on cheese prices, I shoot for 4 weeks.
I watch the posted prices for cheese on the CME. Pricing from our vendors tends to lag about 2-3 weeks. If I see it moving up by 10-15 cents a week like it did this Spring, I will buy a months worth from whichever vendor has the best price. I have done this with flour too. (As much as 150 bags) Over the years I have done this maybe a dozen times. A couple of those times, I did not save any money as the prices came back down and I would have paid about the same price anyway. This last time, I guess I saved about $500 or a little more.
This last time around when prices started climbing I bought a 1000 pounds at $1.59. That was right after the holidays. A week later when the CME was still climbing and we got another 1000 pounds not much higher than that. That carried us into early Spring. Prices dropped again briefly and we did it again at $1.65 and $1.80 something which took us to the end of June.
I tried to buy cheese from my supplier ahead of the price increase. In my situation I am stuck with a limited amount of space in my cooler. I can only store 1300 lbs and I use between 900 and 1000 per week. I asked if they would store it for me if I prepaid but they would not. It was worth a try though.
How much money would you save in a particular purchase? Enough to buy a lightly used Double-door reach in cooler? I mean, you can get a new True 49 cu ft for like $3000 . . . a used one in the $800 - $1000 range. If it means you can save anywhere near $400 in one buy, then game on . . . pays for itself in 2 or 3 buys. I am guessing that you could get maybe 20 cases (1000#) of cheese in the 49 cu ft. if you stack it really well. Out of the cases, it should be easy.
We have room to get a bigger cooler and it is a great way to save money by stocking up when you know the cheese price is going up. The cooler would pay for itself pretty quick.
I guess that is the next thing on my purchase list.
Any idea what the shelf life of cheese is? How long can it be held in cold storage before you have to worry about the effects on performance, taste, etc.?
I think most of the mfg’s will give you 4-5 weeks of shelf life for soft cheese and maybe a little longer if they are still in block form. Harder cheeses will go 2-3 times that long especially if still in block form. These are just average numbers as I am sure each mfg will have a slightly different times listed. Best to check with your supplier for the exact product you use.