With more cheese competing for buyers around the world, could the global market be headed for a price war?

U.S. cheese plants are running full, whey protein demand is supporting production and exports have been strong. But at home, cheese demand remains soft.

That puts more pressure on exports to keep product moving.

In episode 106 of The Milk Check, host Ted Jacoby III sits down with the T.C. Jacoby & Co. cheese team to discuss what happens when growing U.S. production meets intensifying competition overseas.

In this episode, we cover:

• Why international buyers are asking for more cheese varieties, and where that could create opportunities for U.S. suppliers


• How freight costs and the strength of the U.S. dollar could make American cheese less competitive overseas


• What happens when stronger milk production in New Zealand and continued competition from Europe could puts pressure on global cheese prices

Listen to The Milk Check episode 106, “We Have a Cheese Problem,” for the T.C. Jacoby & Co. team’s take on what could be ahead for the global cheese market.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

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Transcript:

[Intro commercial text not included]

Ted Jacoby III: Coming up on The Milk Check.

Are you saying if we produce 2% more cheese and it all has to go into the export market, it’s gonna be a price war?

Brianne Breed: Yes.

Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby & Co., your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in.

Ted Jacoby III: Hello, everybody, and welcome to The Milk Check.

Today is September 21st. Today we’re gonna talk cheese.

I’ve got my cheese team here today. We’ve got Brianne Breed, Jeff Daanen, Miguel Aragón, Jennifer Kuo, and Michael Brown joining us. We even have Diego Carvallo to help us talk a little bit about international. But we’ve talked a lot about cheese, we’ve talked a lot about how much cheese we’re producing and how whey protein seems to be driving cheese production right now.

But I thought we’d get some really great insights from our cheese team in terms of what they’re seeing out there. Bree, I’ll start with you. If you had to explain the U.S. cheese market right now without even looking at CME prices, how would you describe it?

Brianne Breed: There’s a lot of cheese out there right now, especially a lot of cheddar.

The large plants that have expanded over the last few years are running very full, and a lot of that is because of what you mentioned: with whey being in high demand. We’re finding a lot of cheese out in the market. Exports have been very strong. I think that there’s been a really big push over the last few years to get more and more cheese exported from the United States, and we’ve been very successful. Mozzarella seems to be growing every year. But at the same time, domestic demand has definitely slowed down.

Restaurants lost maybe 1% to 2% foot traffic this year. Retail demand is also down to flat. We’re in this weird spot right now where we have a lot of cheese being made and we’re exporting a lot, but domestically, we’re not consuming as much as we have in the past.

Ted Jacoby III: What’s going on in the domestic market? Are we seeing any growth anywhere?

Brianne Breed: We are seeing growth in a few of the pizza chains that have been making some good pushes using mozzarella and some good deals just because, you go to out to a restaurant right now and it’s very expensive to feed a family of four, where you can just order a couple of pizzas and have your fixed cost.

You know what you’re paying. And so pizza’s been doing better than it was the last couple of years, which I guess you could say is great because it was struggling for a couple of years there. But as far as anything positive domestically, it’s been a struggle, I think, on the cheese side.

The positives are really more on the powder side and on the UF side. The protein demand for Americans right now is just crazy. I’ve never seen it like this, and we’re seeing cheese being made just so we can get the whey stream, and we’re seeing some cheese manufacturers lose some of their farmers because those farmers are actually taking their milk to other plants that maybe are making UF milk to go into protein beverages.

Ted Jacoby III: Mike, I’m gonna ask you this question. One thing that seems really odd to me is that we’ve been talking about protein a lot. The whole nation seems to wanna be talking about protein, but it doesn’t seem to me that domestic cheese demand is participating in the big increase in demand for protein, yet for years we’ve always talked about cheese as a protein, comparing it to meat, in terms of where it fits on the pyramid.

Mike Brown As far as cheese and protein, people just don’t affiliate it as a protein source like they do, for example, all the nutrition beverages that we’re seeing now and some other products. It tends to be fairly high calorie, although we know it’s very nutrition-dense. And so, when consumers are looking for that avenue to increase proteins, particularly quality dairy proteins in their diet, it’s pretty evident they’re moving toward the beverages and the bars, even though cheese is a good source.

It’s been a bit of a surprise, particularly with butter being so strong, that cheese retail sales haven’t had a little more lift than they’ve had. They’ve been pretty flat. I think a lot of it is just how we’ve promoted those protein beverages and the focus, and frankly the shelf space they’re now getting in a lot of your stores, particularly your big box stores and your big club stores.

Ted Jacoby III: Okay, thanks Mike. Jeff, what are you seeing out there? Where are the places where you see demand being decent domestically for cheese?

Jeff Daanen: Pizza sales seem to be extremely strong, and mozzarella is tight. There seems to be plenty of colored cheddar out there.

Retail is down, food service is down. I don’t see where we’re gonna see any relief real soon. White processing solids are still in high demand for processing plants. We heard that there’s a big expansion going on down your way and there’s a big expansion for making processed cheese in Minnesota as well, too.

So, I think that will stay strong. The one thing that there is a lot of is colored processing solids that really are hard to get placed.

Ted Jacoby III: What about the export market? Jen, what are you seeing out there?

Jennifer Kuo: Export demand is really good this year.

I think the biggest barrier are a lot of the things we cannot control. Obviously, freight has been really bad both domestically and internationally this year. It’s hurting everybody’s budgets. The demand is there. What we’re learning is that there’s more opportunity for new and innovative ways to get cheese into the international market.

They don’t necessarily have all the conversion capabilities that we do in the U.S., so we’re moving more finished retail-ready goods internationally than we do domestically. But those are all, avenues we’re pursuing, and the demand is there. We are surprised, I think, month over month that freight keeps going up and the customers keep placing orders, so don’t know where that kind of ceiling will start making an impact.

But as of right now, we are able to move even a good amount of colored cheddar overseas, more than we have in the past. That’s the metric we use domestically to measure how much colored cheddar volume are we moving. That’s what the market is based on. Overseas, it’s more a combination of many other different kinds of cheese.

Not necessarily as colored cheddar-based, but it’s still, a good measuring point for many of our customers. They still understand that’s what we make day in and day out. But yeah, we h