It could soon be time to lay off the latte and, for that matter, grilled cheese sandwiches, too. Why? Because milk prices are set to rally next year. In case you forgot, cheese is made from milk.
Recently plummeting U.S. milk prices mean it doesn’t pay for farmers to maintain the highest quality milk production of their dairy herds. As a result, herd size is set to drop and production with it. It’s a problem that could take years to work out. Still, there’s a chance for traders to profit.
November-dated futures prices for class III milk have been sliding for much of the year, trading Friday on the CME at $15.61 per hundred pounds, down from more than $17 in early June. Class III milk is primarily used in the manufacture of cheese, according to the U.S. Department of Agriculture. In 2014, prices were in excess of $20 per hundred pounds for the first 11 months of the year, says the USDA.