America's cheese stockpile at record high of 4.3 pounds per person

By Aimee Picchi

/ MoneyWatch

Impact of tariffs on Wisc. cheese industry

America wants to move its cheese, but market forces aren't complying. Cheesemakers have stockpiled 1.4 billion pounds of the stuff, the biggest cheese hoard since the government started keeping records a century ago. Held by cheese makers in warehouses designed to store cheese, the stockpile works out to 4.3 pounds of cheese for every adult and child in the U.S.

The problems facing American producers include curdling tastes for certain types of cheese. Millennials are turning up their noses at processed cheese products like Kraft Singles and Velveeta. More recently, President Donald Trump's trade war has taken a slice out of the cheese trade due to China's, Canada's and Mexico's retaliatory tariffs on American cheeses, which have cut U.S. exports.

"Our sales to Mexico have dropped off about 30 percent since the tariffs were put into place," said Nate Donnay, director of Dairy Market Insight at INTL FCStone Financial. "The problem with cheese is that it ages, and that changes the flavor profile. Your mild cheddar will become a sharp cheddar the longer it sits in inventory."

Cheese aficionados shouldn't worry that the cheese could spoil, because cheese makers rotate out older cheeses when they stockpile new batches, he noted. "They'll put in cheese that's one day old and take out a 30-day cheese," he said. "It won't get thrown away. It will get used."

Spilled milk

The cheese stockpile adds to the dairy industry's woes, which has been hit with low milk prices, making it tougher for dairy farms to stay in business.

A surge in farm bankruptcies includes dairy farmers filing for protection from creditors, according to a Federal Reserve analysis of Chapter 12 filings from farmers. Wisconsin, for instance, saw a number of recent dairy farm bankruptcies, likely because its smaller dairies are less able to weather downturns and challenges, the Fed said in its analysis.

Tough tariffs

Those tariffs imposed by China, Canada and Mexico in retaliation for Mr. Trump's trade policies have cost dairy farmers about $1 billion, according to the National Milk Producers Federation.

The administration's plan to compensate farmers for lost trade won't make dairy producers whole because it provides only $127 million in aid, the group said.

Millennial tastes

Millennials and other Americans are shifting away from processed cheese, which could be contributing to the stockpile. Even though processed cheese like Velveeta isn't considered cheese under FDA regulations, its manufacturers start with cheese and add ingredients to create the finished product. If they're buying less real cheese to make their processed version, that could lead to higher stockpiles.

Cheese prices may be slumping because of the growing stockpile, The Wall Street Journal reports. Prices for 500-pound barrels of cheese that are used for making processed cheese have declined 28 percent from 2014, it noted. Sales of processed cheese are on track to fall for a fourth straight year.

First published on December 18, 2018

© 2018 CBS Interactive Inc.. All Rights Reserved.

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