I know this has been beaten like a dead horse more than some of the driver topics, but there has got to be a better way to price cheese than the CME. Since May 18th, one trade has occurred, but yet the price has increased by over 20cents per pound. Nearly every bit of cheese bought and sold is priced in some connection to the CME price and some analysts even believe the price of cheese on the CME pushes the price of milk up or down. Yet we allow all of these prices to be manipulated by a market that has had one 40,000 pound transaction in a week and a half. A market that has had known manipulation in recent years. There’s got to be a better way.
Trader 1: “Will you sell me a carload for $1.80?”
Trader 2: “No.”
CME: “Okay then, $1.80 is the new price for cheese!”
You’re trying to tell me that isn’t the most entertaining method of price discovery ever? How can that possibly be abused or manipulated? I mean, it’s not like Trader 2 can just sit on that carload and make money off market where 90% of cheese gets bought and sol… oh, wait… Ohhh!
It went up .10 cents today… $2.05! I’d “lol” if it weren’t so crushingly depressing.
The block market closed on May 17th at 1.655. 12 Trading sessions later and we are at 2.05, up .29 in less than three weeks. Only two carloads of cheese traded during these 12 sessions. What a bunch of bull@*&t!
Up another $.06 today.
I’m so glad I’ve got the ball rolling on a set of price increases before next school year begins.
I have been in business for over 20 years… Correct me if I am wrong but I don’t think I have ever seen the block price at $2.11!!! One year ago today it closed at $1.39 WOW!
I just looked it up, May 2008 blocks hit 2.285. Yuck
Only thing keeping me sane is that wings are at a long-time low of $41 for 40# case. We were up around $65 this time last year! Not a total balance for the cheese, but it eases my pain a bit to be making 30% savings on the wings side.
Below is a note from Jodi Fowler of Dairy Farmers of America
explaining the suddenly (crazy) market pricing basically
the cheese costs have skyrocketed due to Cheddar that is being held (for further inspection) out of the Market this has created a Cheddar shortage both in Natural Blocks and for further processing (Barrels/American Cheese) Once/if this cheese is released, we could see the Market drop as quickly as it has gone up.
That’s the answer I got from my cheese people.
held "for further inspection by? . . . . . probably a government agency. Yeah government!
First of all, Dairy Farmers of America has already been found to be manipulating the market in 2008 so anything they are saying about it should hold no weight whatsoever. I would tend to think that they are likely manipulating the market again knowing that even if they are fined another $12 million, it’s small compared to their benefit to running up the market this time. I have no doubt that there is cheese being “held out of the market”. What I doubt is the “for further inspection” reason. The fact is, there are so few traders in the CME cheese market, if DFA decides to hold their cheese out of the market, PLUS throw a few bids to purchase cheese, we could suddenly see huge run ups in the market prices like we are experiencing now. Meanwhile they are selling all of the cheese they manufacture at the new market prices but in private sales off of the market, just like 99% of the cheese sold in the country. It’s a screwed up system that really needs to be reworked.