WCMA Notes: The New Landscape for Barrels

In June 2025, barrel cheddar cheese lost its role in determining the value of fresh farm milk.  This change set off a flurry of new barrel pricing contracts across the nation, and began speculation on the usefulness of maintaining a cash market at the Chicago Mercantile Exchange to buy and sell barrels. 

Barrel cheese is a low moisture, natural cheddar-style product, about 35 percent moisture, formed in tall cylindrical barrels that weigh 500 pounds. Prior to June, the value of barrel cheddar, alongside the value of 40-pound block cheddar, was used to set the price of protein in the U.S. Department of Agriculture’s Class 3 cheesemilk price. 

The two-year process to reform classified milk pricing formulas finally took effect in June, and industry players who argued that barrel cheese prices tended to drag down the price of milk used in cheesemaking won the argument. Since June 1, only the price of block cheddar is used to determine the value of milk protein. 

Interestingly, the volatile rollercoasters of block and barrel prices suddenly settled down since June. Looking at the cash markets at the Chicago Mercantile Exchange (CME) in the five years 2019 to 2024, those two price series varied by an average of 10.3 cents. Since June 2025, block and barrel  prices varied just 0.3 cents. The industry’s incentive to discover a unique price for barrel cheddar appears to have diminished. Why? 

Because in 2025, and in contracts now being discussed for 2026, buyers and sellers of cheddar barrels have made the seismic shift to pricing barrels based on the cheddar block price announced daily at the CME, rather than the cheddar barrel price. 

The industry couldn’t discuss pricing changes, but the uniform movement to the block price signal was inevitable: now cheddar block prices alone help set the milk price, so all cheddar, even barrels, needs to reflect that block value. 

Another advantage of using the block price, sellers report, is the simplified ability to hedge barrel sales using the block cheese futures product at CME. That is, barrels are sold using the block price, and pasteurized process cheese made from barrels are also sold using the block price. 

The block value, however, is just the beginning value for contract negotiations. Barrels are a different beast, with more solids that “regular” cheddar, different cost to produce and different costs to ship. Buyers and sellers negotiate an overage – a few cents over or under the average announced block price – to settle on their barrel buy. 

In addition to the unique features of barrels noted above, the volume of product a buyer promises to take, the unique specs they seek, the length of the contract term, shipping location, and other factors figure into overages.  

What doesn’t figure in today is the cash barrel price at the CME. One seller told WCMA that the barrel price will continue to be watched to see if spots sales discover a rapidly rising or falling barrel price, but others in the barrel market noted that the block price is likely to be permanently used as the base price for negotiations. The future need for a cash barrel market at the CME is in question, based on the swing to block pricing. 

So what’s the future for barrel cheese? Barrel cheddar is used in making pasteurized process cheese – slices, loaves, sauces. Retail sales of pasteurized process cheese – a lessor segment of overall sales – saw an 18 percent increase in 2020 up to 178 million pounds nationwide, but that has retreated since 2022.  Dollar sales of pasteurized process cheese at grocery stores fell 1.7 percent in 2024, compared to 2023. 

The larger markets – foodservice customers and food manufacturers – remain healthy, according to pasteurized process cheese makers. As sales increase, the pasteurized process cheese industry has not aggressively added capacity, and market participants describe these cheese supplies as perennially tight.  

Same store sales at McDonald’s and Burger King – two huge users of melty pasteurized process cheese – rose 2.5 percent and1 percent, respectively, in their most recent quarters, after weaker previous quarters. Pasteurized process cheese is the “cheeseburger cheese” for these and other major quick serve restaurant chains. 

One maker noted another plus for barrels: this low-moisture cheddar-style cheese is  not colored, making it a perennial favorite for whey protein processing.  

In the U.S. market, just ten manufacturers continue to produce barrels, including: