While many unknowns remain regarding 2021 milk prices, there are a few factors with major impacts that we do know details about. One of them is the expected expansion in cheese production in the coming year.

Analysts interviewed during the December 9 Hoard’s Dairyman DairyLivestream estimated that the U.S. will add 4 billion pounds of cheese processing capacity in 2021, including a $470 million cheese and whey plant in Michigan. That plant installed by Glanbia Nutritionals is expected to be at full capacity in the spring, processing 8 million pounds of milk per day.

“The 4 billion pounds is roughly equivalent to a rather robust growth rate of one year’s milk production out of the U.S.” detailed Matt Gould, who is president of Dairy and Food Market Analyst. “So, we’re taking all of next year’s growth and putting it into cheese is kind of the way that I’m thinking about it.”

Impact on Class III
The introduction of more cheese to the U.S. market next year is expected to weigh on cheese prices. That reality sparked a quick question from the webcast audience.

Can we expect additional cheese to bring Class III and Class IV prices closer together?

The short answer is yes.

“It does have the potential to bring those two back in line and put some pressure on the Class III side of things in comparison to Class IV,” shared Agri-Mark’s Catherine de Ronde.

The University of Wisconsin-Madison’s Mark Stephenson expanded on her comments by first asking a rhetorical question. “If there is a lot more product on the domestic market, are we going to consume it at a higher price or do those prices now have to clear the market at something more like the world price levels?

“If so, that is definitely going to bring cheese prices down. I don’t think there’s any question about that.”

An ongoing series of events
The next broadcast will be on Wednesday, January 6. Each episode is designed for panelists to answer over 30 minutes of audience questions. If you haven’t joined a DairyLivestream broadcast yet, register here. Registering once registers you for all future events.

To comment, email your remarks to intel@hoards.com.
(c) Hoard's Dairyman Intel 2020
December 17, 2020
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