After a spring that had a lot of members double-checking their price sheets against records, the wholesale market has quietly given some of it back. Milk pricing eased through July into August, block cheddar has drifted down from its spring peak, and the whey market has come off hard. None of that is catastrophic on its own. What matters is what it does to a margin that was built on the assumption prices would keep climbing.
Why the pullback, and why now
The short version: milk production ticked up slightly at the same time a slowing economy and stubborn inflation started denting restaurant traffic and grocery basket size. Foodservice cheese demand, in particular, is the first thing to soften when households eat out less. Add a summer of heat and drought stress across major dairy regions and you get a market pulling in two directions at once — tighter supply pressure from the weather, softer demand pressure from the wallet. This month, softer demand is winning.
If your pricing formula is tied to a component index with a lag, you may already be feeling this as a squeeze rather than a break — costs that rose earlier in the year haven't come back down at the same pace the wholesale number has. One member on our Awards & Competition Committee put it to us plainly at a recent tasting: "We repriced up in May because we had to. Nobody wants to reprice down in August and then eat it again in October if this bounces back." That's not a complaint, it's a planning problem, and it's worth treating it like one rather than reacting to the last invoice you got.
The export side is a different story, and here's what to do with it
Here's the part that's easy to miss if you only watch the domestic case: U.S. cheese exports have kept growing even as domestic wholesale prices soften, with July shipments to Mexico climbing again and year-to-date export volume still running well ahead of last year. That divergence — a cooling domestic wholesale market next to a still-expanding export market — is exactly the kind of signal that should show up in how you think about volume commitments for the rest of the year, especially if any part of your business touches a distributor with an export book.
A few things worth doing in the next couple of weeks, regardless of your size:
- Re-pull your cost basis, not just your sale price. If your feed, packaging, or freight costs rose faster than your wholesale reference has now fallen, your margin compression is worse than the headline number suggests.
- Ask your buyer or distributor what they're seeing on their book, especially if any of your volume moves through an export-facing channel. A pullback in the domestic spot market doesn't always mean a pullback in every channel you sell into.
- Hold off on reflexive discounting. A softer wholesale number is not the same thing as softer demand for your specific product, particularly in the specialty and artisan tier, which has held up better than commodity cheese through prior slowdowns.
If you want a second set of eyes on your pricing formula before the fall wholesale season, the Membership & Outreach Committee can point you to a member in a comparable category who's willing to compare notes. Reach out through the member portal and we'll make the introduction.
The International Cheese Federation (ICF) and More Cheese are entirely fictional. This post is demonstration content created for MemberJunction. All people, organizations, events, courses, certifications, figures, and quotations in it are invented, and nothing here represents a real association, a real business, a real person, or real professional advice.