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Ted Jacoby III: Coming up on The Milk Check.

Are you saying if we produce 2% more cheese and it all has to go into the export market, it’s gonna be a price war?

Brianne Breed: Yes.

Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby & Co., your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in.

Ted Jacoby III: Hello, everybody, and welcome to The Milk Check.

Today is September 21st. Today we’re gonna talk cheese.

I’ve got my cheese team here today. We’ve got Brianne Breed, Jeff Daanen, Miguel Aragón, Jennifer Kuo, and Michael Brown joining us. We even have Diego Carvallo to help us talk a little bit about international. But we’ve talked a lot about cheese, we’ve talked a lot about how much cheese we’re producing and how whey protein seems to be driving cheese production right now.

But I thought we’d get some really great insights from our cheese team in terms of what they’re seeing out there. Bree, I’ll start with you. If you had to explain the U.S. cheese market right now without even looking at CME prices, how would you describe it?

Brianne Breed: There’s a lot of cheese out there right now, especially a lot of cheddar.

The large plants that have expanded over the last few years are running very full, and a lot of that is because of what you mentioned: with whey being in high demand. We’re finding a lot of cheese out in the market. Exports have been very strong. I think that there’s been a really big push over the last few years to get more and more cheese exported from the United States, and we’ve been very successful. Mozzarella seems to be growing every year. But at the same time, domestic demand has definitely slowed down.

Restaurants lost maybe 1% to 2% foot traffic this year. Retail demand is also down to flat. We’re in this weird spot right now where we have a lot of cheese being made and we’re exporting a lot, but domestically, we’re not consuming as much as we have in the past.

Ted Jacoby III: What’s going on in the domestic market? Are we seeing any growth anywhere?

Brianne Breed: We are seeing growth in a few of the pizza chains that have been making some good pushes using mozzarella and some good deals just because, you go to out to a restaurant right now and it’s very expensive to feed a family of four, where you can just order a couple of pizzas and have your fixed cost.

You know what you’re paying. And so pizza’s been doing better than it was the last couple of years, which I guess you could say is great because it was struggling for a couple of years there. But as far as anything positive domestically, it’s been a struggle, I think, on the cheese side.

The positives are really more on the powder side and on the UF side. The protein demand for Americans right now is just crazy. I’ve never seen it like this, and we’re seeing cheese being made just so we can get the whey stream, and we’re seeing some cheese manufacturers lose some of their farmers because those farmers are actually taking their milk to other plants that maybe are making UF milk to go into protein beverages.

Ted Jacoby III: Mike, I’m gonna ask you this question. One thing that seems really odd to me is that we’ve been talking about protein a lot. The whole nation seems to wanna be talking about protein, but it doesn’t seem to me that domestic cheese demand is participating in the big increase in demand for protein, yet for years we’ve always talked about cheese as a protein, comparing it to meat, in terms of where it fits on the pyramid.

Mike Brown As far as cheese and protein, people just don’t affiliate it as a protein source like they do, for example, all the nutrition beverages that we’re seeing now and some other products. It tends to be fairly high calorie, although we know it’s very nutrition-dense. And so, when consumers are looking for that avenue to increase proteins, particularly quality dairy proteins in their diet, it’s pretty evident they’re moving toward the beverages and the bars, even though cheese is a good source.

It’s been a bit of a surprise, particularly with butter being so strong, that cheese retail sales haven’t had a little more lift than they’ve had. They’ve been pretty flat. I think a lot of it is just how we’ve promoted those protein beverages and the focus, and frankly the shelf space they’re now getting in a lot of your stores, particularly your big box stores and your big club stores.

Ted Jacoby III: Okay, thanks Mike. Jeff, what are you seeing out there? Where are the places where you see demand being decent domestically for cheese?

Jeff Daanen: Pizza sales seem to be extremely strong, and mozzarella is tight. There seems to be plenty of colored cheddar out there.

Retail is down, food service is down. I don’t see where we’re gonna see any relief real soon. White processing solids are still in high demand for processing plants. We heard that there’s a big expansion going on down your way and there’s a big expansion for making processed cheese in Minnesota as well, too.

So, I think that will stay strong. The one thing that there is a lot of is colored processing solids that really are hard to get placed.

Ted Jacoby III: What about the export market? Jen, what are you seeing out there?

Jennifer Kuo: Export demand is really good this year.

I think the biggest barrier are a lot of the things we cannot control. Obviously, freight has been really bad both domestically and internationally this year. It’s hurting everybody’s budgets. The demand is there. What we’re learning is that there’s more opportunity for new and innovative ways to get cheese into the international market.

They don’t necessarily have all the conversion capabilities that we do in the U.S., so we’re moving more finished retail-ready goods internationally than we do domestically. But those are all, avenues we’re pursuing, and the demand is there. We are surprised, I think, month over month that freight keeps going up and the customers keep placing orders, so don’t know where that kind of ceiling will start making an impact.

But as of right now, we are able to move even a good amount of colored cheddar overseas, more than we have in the past. That’s the metric we use domestically to measure how much colored cheddar volume are we moving. That’s what the market is based on. Overseas, it’s more a combination of many other different kinds of cheese.

Not necessarily as colored cheddar-based, but it’s still, a good measuring point for many of our customers. They still understand that’s what we make day in and day out. But yeah, we have seen good growth in Asia, the Middle East, and South Americas, and Australia. Oceania is still very strong.

We’ll see what happens if freight doesn’t start leveling off.

Ted Jacoby III: Miguel, how about you? What are you seeing as we look south?

Miguel Aragón: I have to echo what Jen just said. We are seeing still a lot of interest in Mexico and the rest of Latin America. But there are three things I’m really looking at right now.

I’m looking at what the CME is doing because that is helping, undoubtedly. But freight is hindering us. However, the exchange rate is favorable right now. If any of those three things change, if the CME starts going up or the exchange rate starts going up and the dollar starts getting stronger we may see some movement in regards to demand.

But right now, so far, whatever freight was gonna hurt us is being helped by the CME. The second thing is that the types of cheeses that are going into these markets like Mexico, Colombia, Peru, Chile Panama, are diversifying. We are no longer just shipping a cheddar.

Now, we have a lot of demand for Colby Jack, Pepper Jack, Gouda, Monterey Jack, feta, others that we never used to have before. The market is diversifying. And of course, we do have a lot of demand for mozzarella still.

Ted Jacoby III: When we talk about international cheese demand, is it more restaurant-driven, food service-driven, or is it more retail-driven?

Miguel Aragón: At least a lot of our clients are food service and retail.

Ted Jacoby III: So both?

Miguel Aragón: They’re both. They’re both. We have requests for for pound blocks that are going to converters that are either, cutting or shredding the product. But, also, we’re finding a lot of requests for five-pounders or retail packages ready to go.

So, we’re seeing it in both places.

Ted Jacoby III: We’ve seen some really excellent growth just in international cheese demand in general. One of the slides when we had Will Loux from the U.S. Dairy Export Council on that really stuck out to me was the fact that, the overall global cheese trade has gone up enough that all the major exporters have been exporting more cheese the last three years.

It’s not just the U.S. taking market share away from someone else, it’s everybody that’s been benefiting. Bree, I’m gonna throw this one out to you. Is that gonna continue? Are we hitting a wall in terms of global cheese demand, or is it we’re just gonna keep going?

Brianne Breed: I think we’re gonna keep going.

I think it could be slower, right? We really accelerated very quickly the last year or two. And I think that, with everything going on around the world right now I think it’s going to slow things down, but I think that the volume and the opportunities are going to keep growing year-over-year.

Ted Jacoby III: Who’s our biggest competitor right now in the world market? Who should we be afraid of? Europe, New Zealand?

Brianne Breed: I think that we need to keep our eyes on New Zealand. They’re entering spring right now, and their milk production is up.

I believe it’s up 2% in last month. And we haven’t even hit spring really. So, I think these next couple of months they’re gonna have plenty of milk to go towards cheese production and other dairy products. We definitely need to keep our eyes on New Zealand and on where they’re marketing. Like Jen mentioned, we have gained a lot of ground in Asia and Australia.

But when you throw in the elevated freight rates into those regions from the United States, like it’s gonna be a competition. And then, I do think Europe’s gonna enter the party here, also. We’re approaching a time when we’re all going to be maybe racing to the bottom to try and capture as much business as we can.

So, 2027 could be a very interesting year for other reasons. The first half of this year in 2026, we exported a lot of cheese out of the United States, and I think we’re gonna need to continue to do that. I just think our pricing’s going to be quite different than it was earlier this year.

Ted Jacoby III: Sounds like you’re bearish. Are you saying if we produce 2% more cheese and it all has to go into the export market, it’s gonna be a price war?

Brianne Breed: Yes.

Ted Jacoby III: Who do you think’s gonna lose between us, New Zealand, and Europe?

Brianne Breed: I think Europe’s gonna lose. I think that we, in the United States, we’re gonna make it happen, no matter what.

We have a lot of capacity to make just about anything that the international market needs. We can change things in order to adapt to the growing demand internationally, whereas a lot of the European manufacturers can’t adapt as quickly.

Ted Jacoby III: Really? That’s good to hear. It’s exciting to hear to me that the U.S. producer is starting to figure out how to be flexible and how to meet the needs of the international market.

Give me some examples. Miguel, Jen, Bree, give me some examples of how the U.S. has been adapting to the international market.

Jennifer Kuo: It’s almost that they adapted to us. I’ll say innovation in new foods and new trends seems to be moving faster overseas than in the U.S.

We have had a very robust domestic market for a very long time, but cheese is still very new in some of the international markets. Bree was introducing the slices to Australia. Just that American cheese slice on a burger is still pretty new for them. We’ve grown a lot of cream cheese, both in South America and Asia, just because of new innovations that the end user there has figured out with what we have in the U.S. that, in the U.S. we use cream cheese in bagels, in bakery, and sushi, but we haven’t concentrated as much on finding the next new innovation as much as they do overseas. And Pepper Jack and Colby Jack and some of these are still very new over there, but we’ve had them here for decades. So, I think it’s just the overall growth to the entire range of cheeses we offer.

It’s not just, oh, cheddar or American cheese or mozzarella anymore. Those all grow, but in addition to other things as well. And USDEC, a lot of the programs they run overseas are to help the end customer innovate and find new ideas and new foods that they introduce to the market.

I’m a little bit older now, but I can say when I was younger, I was the only person in my entire family that ate cheese. And I think many of my cousins and extended family in Asia still don’t have regular access. They can’t go to the grocery store and just buy cheese, whether it’s from Europe or the U.S. or Australia.

So, cheese is still very available to us here, which is not necessarily true to all the customers internationally, and that’s something that is growing much faster than it is here.

Ted Jacoby III: So, Jen your cousins in Asia.

When they consume cheese, where do they consume it?

Jennifer Kuo: Pizza was the first food that was introduced. Pizza Hut I feel like Pizza Hut’s not necessarily one of the brands you hear a lot about in the U.S. There are many other pizza brands that have expanded and grown beyond that.

But Pizza Hut is very big in Taiwan and China. They put a lot of effort into expanding in the late ’90s, early 2000s, and that was still their first introduction to cheese. It was something all of my cousins in Taiwan had not had up until then, and it wasn’t really available on any other foods.

‘Cause, Asian food doesn’t quite yet incorporate a lot of dairy like that. And then McDonald’s obviously has grown there. And now I can say just in June when we were in South Korea, the big talk was the first Chick-fil-A was opening in Seoul, and everybody was really excited to try that.

So yeah, there’s just a lot of growth about U.S. brands and U.S. foods overseas that we take for granted here almost. We can get it almost anywhere. We have, I think I have five Chick-fil-A’s within a reasonable driving distance of my house, and they were all very excited in a huge city metropolis that, “Oh, there’s gonna be one.

We can all go.” And so yeah, the growth overseas has been exciting.

Ted Jacoby III: What kind of flavors do they put on pizza in places like Taiwan and Korea?

Jennifer Kuo: Mainly what they call mozzarella, but I can say the last time I was there, so that was over a decade ago, it wasn’t what we consider mozzarella.

It was kinda just a white American cheese blend. Something that would freeze and melt and do everything they needed to do. But yeah, now we’re seeing, the demand for mozzarella, like a true U.S. mozzarella, is really high, almost to the point where we can’t keep up production-wise with the demand overseas.

All the capacity we’re adding in the U.S. is exciting. I think 2027 will be a really good year. Their palate for what they used to consider cheese was very generic, and then now they know there’s many other options they can add on top of what they used to just call cheese.

Ted Jacoby III: It’s just not pepperoni pizza and cheese pizza and sausage pizza. They-

Jennifer Kuo: Not anymore. It was for a long time, but not anymore.

Ted Jacoby III: So what’s an innovative cheese concoction that you’ve heard when you’ve traveled in Taiwan and Korea?

Jennifer Kuo: Something that includes seafood, which I still don’t really see here.

That’s the innovation that they’re trying that we don’t necessarily see as prevalent here in the U.S. I’m not sure a seafood pizza would sell here, they also have access to probably fresher seafood than 50% of the U.S.

Miguel Aragón: In regards to the question of who would be more susceptible to our growth, and Bree said the Europeans, and I have to agree 100%. Because at first we were just replacing, let’s say, Gouda or an Emmental coming from Europe into the Mexico market or the Latin Americans markets.

But now not only have we taken a lot of that market, but we are going in with the varieties that we produce, like a Monterey Jack, that in Mexico it replaces a Manchego, for example, or we’re going with a Pepper Jack. Things that are made for the U.S. market are actually really gaining ground in Mexico, Central America, South America.

There is not much of a chance that unless they start producing things like that, that they will take that market. So, we are not only taking some of the market, but we’re innovating with some of the domestic product that we have that is being accepted in those markets.

Ted Jacoby III: Everybody, we will be right back after these messages.

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Diego Carvallo: I’m Diego Carballo with T.C. Jacoby & Co. T.C. Jacoby & Co. specializes in international dairy markets. For new customers that haven’t done business with Jacoby, I would tell them that we can provide them with many of the powders, dairy products that they consume, not only with the physical product, but we can also help them mitigate their risk.

We know dairy. We know the main players. We know the main providers for the whole value chain. We are one of the strongest players in the U.S. market because we have contact all the way from the farmer moving the liquid milk all the way to the end users that buy the end products. I am Diego Carballo with T.C. Jacoby & Co., and we bring dairy to the world.

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Ted Jacoby III: Bree, Jeff, is the CME price in the let’s call it the, the 130s and 140s right now in September, is it accurate?

Is it an accurate reflection of where the market is today?

Brianne Breed: I think so.

Jeff Daanen: I agree. I think it’s very accurate of where we’re at.

Ted Jacoby III: just because there’s more than enough cheddar out there and we’re having trouble clearing cheddar.

Brianne Breed: Yes. We had a lull, I think, back in August where freight rates had come down a little bit.

A lot of the export deals had already been put together, cheese has already been made. It was still just wrapping up leaving the country. A lot of that business that was executed for first half production. And we just hit this lull and colored cheddar started backing up back in August, and it just has continued into September.

Things have slowed down. I think that everyone’s excited for the holidays to come so that we can clear out some inventory and reload, after the holidays. I’m just a little concerned, with some of the data we’ve been seeing about, restaurant foot traffic being down and retail being down, that we’re not gonna completely clear that inventory that has started to build back in August, and is continuing to build right now.

We’re all thinking good thoughts at the moment, but we’re gonna need this low price. So, it goes back to, are we at the right price? I think so. I think the 1.30s, it’s a very low historical price for cheese, and if we stay down here, I think that’s gonna help get some more promos out there so that the consumer starts seeing lower prices on the shelves and start buying more.

Ted Jacoby III: I can’t disagree with what you’re saying. What about the mozzarella market? If the mozzarella market was a CME market, would it be a higher price, let’s say, than cheddar right now? Is that market a lot tighter?

Jeff Daanen: Mozzarella is extremely tight.

Brianne Breed: Especially in the Midwest.

Jeff Daanen: Yep.

Ted Jacoby III: So, it almost sounds like we’ve added too much cheddar capacity and not enough mozzarella capacity in the last three to four years.

Brianne Breed: Jeff works with a lot of mozzarella manufacturers in the Midwest and I will say all year mozzarella has been balanced and then tight and then balanced, and now we’re tight again.

It’s the Midwest and there’s more competition, I think, for the milk. And given everything that’s going on with GLP-1 use and protein being the focus, a lot of that milk that used to be a surplus for some of those mozzarella manufacturers is no longer there.

And so, we’re not seeing as much mozzarella being produced. But you look out west at some of those mozzarella manufacturers, and they do continue to have some additional product, it’s just the freight to get it to the Midwest is so high that it just doesn’t make the math equation work.

So, mozzarella just continues to be tight. It’s kinda like CME cheddar block. White cheddar may be tight, but colored cheddar’s really long. Mozzarella Midwest, very tight. Mozzarella out west, balanced.

Ted Jacoby III: All right, I’m gonna go around the room as we wrap up. What do you think is the biggest risk to the cheese market, either upside or downside, over the next six to 12 months that you think people are underestimating?

Jeff Daanen: Freight is obviously a major concern. I don’t see a lot of traction of ads via your big box stores. You don’t see a lot of advertising. You see a lot of variety in these stores, I don’t see where cheddar gonna sell at a buck 89. Nobody’s doing the ads.

Mike Brown I think Jeff just hit on it. Having worked in retail, we don’t aggressively promote cheese like we used to.

That really ended during COVID when cheddar got so high and markets got so high. We just aren’t as aggressive in our promotions. Even though the store brands are doing well, even there, the promotions aren’t as strong as they used to be on the retail side. And then the second one is if we don’t keep our world demand for our cheese strong, and that’s not a secret. That’s the thing that I worry about.

Jennifer Kuo: International and domestic, this is the same. Freight has continued to go up this year. Regardless of demand, at some point, freight prices it out of what the end consumer can afford. No matter what promotions we run, when you’re paying three times in freight what we were paying in January of this year, 2026, and there’s no relief in sight at some point, that affects everybody’s budget.

Ted Jacoby III: Makes sense. Miguel, how about you?

Miguel Aragón: Freight is the thing to keep an eye on, and the dollar strength too. If the dollar starts strengthening, and our exports will become more expensive.

If our producers for some reason let the innovation go, or they don’t continue, for some reason, pushing as they are right now, we will suffer.

Ted Jacoby III: Thank you, Miguel. Diego, I’ve been ignoring you ’cause we’ve been talking about cheese.

Diego Carvallo: That’s fine.

Ted Jacoby III: … What are your thoughts?

Diego Carvallo: Good lesson for me though. The main thing that people are probably not expecting, I think it’s gonna happen, is Latin America, and particularly Mexico demand is gonna be pretty strong. And that’s gonna disappear a lot of product in the coming years.

Ted Jacoby III: Bree, we’ll finish with you.

Brianne Breed: I think that we just need to keep our eyes on the international markets. Obviously freight, we’ve talked about that being very high, and it will probably continue to be high domestically and internationally. Everybody’s going to be dealing with that, though. So, I think we need to keep our eyes on just where the cheese is trading in Europe and in Oceania because those are the markets we’re gonna continue to compete with.

So, if we need to focus on getting more cheese out of the U.S., we need to maintain a competitive price.

Ted Jacoby III: Do you think we will continue to have a competitive price?

Brianne Breed: I think so. I don’t think we have a choice anymore.

Ted Jacoby III: Before we close, guys, share with everybody what shows we’re gonna be at. Miguel, are you gonna be at any international shows in the next month or two?

Miguel Aragón: Yes, I will be in FOOD TECH® Mexico on the 29th of September and the 1st of October. Please come visit us. We’ll be talking cheese. We’ll be talking butter. We’ll be talking ingredients. We’ll be talking everything.

Ted Jacoby III: Looking forward to it. I’ll actually be there, too, and so will Diego. How about you, Jen?

What shows are you gonna be at?

Jennifer Kuo: It’s a busy week in the dairy industry. I will be in Santiago, Chile for Espacio. So, also representing cheese, butter, and dairy ingredients, and everything Jacoby can help anybody with.

Ted Jacoby III: Awesome.

All right. Bree, what shows are you gonna be at in the next few weeks?

Brianne Breed: In October, I’ll be attending SIAL Paris Food Show along with Joe, who will be representing our butter and ingredients group.

And then Joe will be attending FI Europe in Germany.

Ted Jacoby III: And I think I’m gonna tag along with Big Joe for that as well.

Brianne Breed: So yeah, lots of travel coming up.

Ted Jacoby III: And it sounds like we’ve got a lot of cheese to sell.

Brianne Breed: Always.

Ted Jacoby III: Excellent. Thanks, guys. Thanks for listening, everybody.

Look forward to seeing everybody soon.

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