In the three-week period to 12th August 2020, Mintec US cheddar prices dropped by 11% to USD 3,940/MT, partly attributed to foodservice orders slowing. Many US states are now reporting a rise in COVID-19 infection rates, leading to an increase in lockdown restrictions.
US cheese demand is expected to remain subdued due to the slower-than expected recovery in foodservice trade with COVID-19, adding further pressure likely to extend mobility restrictions. The USDA’s government food box programme in May-June 2020 has meant USD 100 million per month is allocated for dairy products, to support farmers impacted by foodservice closures by purchasing dairy products. The USDA has since extended this initiative by purchasing a further USD 288 million until 31st August 2020.
Typically in mid to late August, milk supplies are diverted from summer cheese production into bottling for school orders. However, with many schools throughout the United States preparing for at-home learning, more milk remains in manufacturing, which has led to growing inventories.
Although retail demand has improved, foodservice orders are well below pre-COVID 19 levels, while milk supply is expected to expand faster year-on-year. The growing uncertainty regarding second COVID-19 waves provide further bearish potential. As a result, US cheddar prices are expected to weaken.