Last month Chinese officials announced they were lowing import tariffs on certain types of cheese. That’s great news for the dairy markets and will likely lead to an increase in cheese exports. However, while it will help, China’s demand for cheese is not likely going to be enough to compensate for the massive supply of milk and dairy products in the U.S.
”So [these lower tariffs are] a great news story,” Blohm explains. “Right now, the reality is that we have a surplus of cheese. Cheese prices as of late have been lower and that’s what’s been pulling that milk price down into the low $15 area with some of the deferred contracts already seeing $14.”
That said, the market is flooded in milk and dairy products she says. While every bit of extra demand will help the fundamental situation, she doesn’t see an increasing appetite for cheese in China as a silver bullet.
“I don’t know how much of an increase it’s going to do because of course a lot of that goes with currency fluctuations as well,” she says. “And we have competition from Oceana. I would say though, that it’s going to hopefully see a small increase in the exports. The exports in general need all the help they can get.”
According to Blohm milk prices could bounce another 50 cents in the near term but then they will do some sideways trading into the first quarter of 2018 because of strong milk production.