WCMA Notes: The Coming Cheddapalooza

Posted By: John Umhoefer WCMA News ,

It's tricky to propose a future dairy disruption when one major cheesemaker describes today’s industry conditions as “wilder than the spring of 2020.”

Spurred by media inquiries, Wisconsin Cheese Makers Association reached out to cheese manufacturers to discuss softness in production of American type cheeses and cheddar cheese, particularly, in 2022. Current reduced production stands in sharp contrast to a coming tidal wave of new cheddar, Colby and jack capacity best described as Cheddapalooza.

But one disruptor at a time.  Today, cheddar volume is down 2.9 percent and all American styles together are down 0.6 percent through April 2022 compared to the previous year. That’s one reason 40-pound cheddar blocks have lingered in the $2.20-$2.39 range at the Chicago Mercantile Exchange for two months. At the same time, high prices for dry whey and butter have combined with expensive cheddar to drive milk prices to record highs.

The nation’s Class 3 milk price (for cheese milk) set an all-time record in May, reaching $25.21/cwt. The Class 3 price has topped $20 for five straight months. High prices for fresh milk are a positive for dairy farms, however most cheese manufacturers can’t afford milk prices lifted by strong dry whey prices. Most manufacturers don’t produce dry whey – they earn a fraction of its value selling their liquid whey unprocessed. Widespread depooling to avoid an unaffordable, government-set price are part of the “wild” times the Wisconsin cheesemaker was describing.

Meanwhile, April milk production was 0.1 percent lower than last April but 4 percent higher than April 2020 and 2019. A similar pattern held true in March.  Milk production in March 2022 was about equal (+0.2 percent) to last year, but 4 percent higher than the two previous years. In other words, monthly milk production is steady at a higher plateau set in 2021.

Manufacturers are counting on milk production growth in areas where a wave of new investment in cheddar and American styles production–Cheddapalooza—is on the horizon. Starting with the November 2020 commissioning of MWC, the massive joint venture between Glanbia Nutritionals, Dairy Farmers of America and Select Milk Producers in St. Johns, Michigan, a slate of nine greenfield plants and major additions are now in production, under construction or in design phase in six states.

The focus on growing cheddar and American styles production is a renaissance for a category that has played second fiddle to successful mozzarella growth in recent years.

Looking at springtime (January through April) production in the last five years, American type cheese production was up 3 percent in the first four months of 2018, but weakened in 2019, losing 1.0 percent. In 2020, through April, production gained back 1.5 percent. The full strength of pandemic-era growth was evident in 6.5 percent growth for American styles in the first four months of 2021. This year, production has slipped slightly from that strong growth, down a 0.6 percent through April 2022. Looking end to end at this five-year snapshot “through April,” the U.S. is producing 9.7 percent more American styles than 2017.

But cheddar and American styles are set for astonishing growth.  Add to MWC’s daily production the plan by Hilmar Cheese Company to complete a $460 million plant in 2024 in Dodge City, Kansas; the announcement by Great Lakes Cheese of a greenfield site in Franklin, New York for a $515 million cheese plant; and plans at Valley Queen Cheese in Milbank, SD, to spend $195 million on new cheese production.

And the list goes on: The 2021 commissioning of a new American-styles block cheese plant at First District Association in Litchfield, MN; the rising new production facility for Agropur in Little Chute, WI; the new cheese facility – KDI Cheese -- at Kansas Dairy Ingredients in Hugoton, KS; the complete renovation of Plant 1 at Mullins Cheese in Knowlton, WI, and a new production center at Agri-Mark’s plant in Chateaugay, NY.

By 2024, WCMA estimates that new cheddar and American styles production from these facilities will add about 500 million new pounds of volume – not including incremental growth among other cheese manufacturing sites across the nation.

In 2025, Cheddapalooza will be in full swing, with WCMA estimating cheddar and American style production exceeding 2021 production by more than one billion pounds. That would represent 19 percent growth in cheddar and American style production in four years. To put that growth in perspective, total U.S. cheese production managed one billion pounds of growth in four years (2017-2021).

It's ambitious expansion for American favorites cheddar, Colby and jack, growth that will rely on strong domestic sales and new inroads in world markets. Look for more wild times ahead.