Some manufacturers are diverting some milk from barrel manufacturing into nonfat dry milk this week, responding to NDM demand. CME cheese prices reached yearly highs last week then declined this week while retail advertised cheese prices over the last two weeks have generally declined from prior levels.
After reaching record high 2012 price levels last week, blocks and barrels through this Wednesday retreated to price levels from the week before last. The 2012 record $1.9000 close for blocks last Thursday was last exceeded November 17, 2011. Barrels hit the 2012 record, $1.8550 last Thursday, which was last exceeded November 21, 2011. By this Wednesday blocks had retreated $.0625 from last week’s high to $1.8375 and barrels had retreated $.0500 to $1.8050. Cheese retail advertising weighted average advertised prices declined slightly for all but one of the five package sizes reported by the National Dairy Retail Report.
Ad volume reported has also declined, as has been the situation during four of the last five bi-weekly periods. Current cheese ad numbers are 3.2% below two weeks ago, in contrast with the 20.2% increase during the last period. The largest number of cheese category ads run during the current survey period, 38% of total cheese ads, are for 8 ounce shredded cheese, down 4.3% from the last period. The next highest at 31%, is 8 ounce block, 33.7% above the level two weeks ago, which was 34.3% below the numbers four weeks ago. The remaining cheese category ads in descending volume are 1 pound block, 11%, down 58.0%; 1 pound shredded, 10%, down 21.1%; and 2 pound block, 10%, down 410.6%. The weighted average advertised price of 8 ounce shredded decreased 6.8% to $2.19; 8 ounce blocks decreased 5.2% to $2.20; 1 pound blocks decreased 12.9% to $3.45; 2 pound blocks increased 11.1% to $5.03; and 1 pound shreds declined 3.0%, to $3.28.
Retailers report that retail cheese sales are «strong». While retail ad pricing over time relates to wholesale pricing trends, margins above wholesale prices offer some flexibility to retailers and retail advertisers have the initial strategy of «getting the shopper into the store». Retail cheese ad pricing is an effort toward that goal.
Thus, slightly declining retail advertised prices concurrent with generally increasing wholesale prices can be reconciled. In fact, if slightly lower retail prices generate retail sales increases, that can lead to more price pressure on wholesale prices as sold inventory must be restocked.