Will Milk Prices Increase or Stay Rangebound? Analyzing the Divergence in Cheese Prices and Market Trends

However, there is growing concern that stronger milk prices may not hold through the end of the year. Historically, milk prices have shown a strong correlation with corn prices, which have declined substantially, potentially leading to further declines as the corn harvest approaches. The June Agricultural Prices report highlighted a significant drop in corn prices to $4.48 per bushel from $6.49 in June 2023. Despite this, the income over feed price in June was $11.66, the highest since June 2022, indicating improved profitability for dairy farmers.

Cheese buyers have maintained a cautious approach, purchasing on price breaks without aggressively increasing their inventory, leaving the market in a sideways pattern. Although cheese inventory is lower than a year ago, the market remains balanced as sellers are willing to move cheese at the upper end of the price range, and buyers show interest as prices decline.

As the year progresses, the tighter supply of fresh cheese, combined with increasing demand for various varieties such as Italian-type and Hispanic cheeses, could support higher cheese prices. This potential shift in supply and demand dynamics will be crucial in determining whether milk prices will increase or remain rangebound.