Cheese Price Analysis — July 2026
Summary
- The U.S. average retail price for cheddar cheese (per lb., city average) fell to $5.741 in July 2026, down $0.219 (-3.7%) from June.
- This marks the largest single-month decline since November 2016 (-8.2%) and the steepest 12-month drop (-5.0%, -$0.300) since July 2024.
- Prices have now fallen -4.8% over three months and -4.0% over six months, confirming a decisive break from the 2025 uptrend.
- The retail decline mirrors collapsing wholesale fundamentals: Cheddar blocks in 40-pound form averaged $1.49 per pound for the week ending July 18, 2026, near multi-year lows.
- Root cause is a milk supply glut, not demand strength: HighGround Dairy revised its U.S. milk production forecast up to a 2% increase for 2026, and more milk inevitably means more cheese and butter, placing significant downward pressure on prices over the next 12 months.
Key insight: July 2026's $5.741 print returns retail cheese to roughly its April 2025 level ($5.743), erasing 15 months of accumulated inflation in a single quarter. The correction is supply-driven and, per industry forecasts, likely not yet finished.
Recent Price Trends
| Month | Price ($/lb) | 1-Mo % | 12-Mo % |
|---|---|---|---|
| Jul 2026 | 5.741 | -3.7 | -5.0 |
| Jun 2026 | 5.960 | +4.8 | -0.7 |
| May 2026 | 5.685 | -5.7 | -3.8 |
| Apr 2026 | 6.029 | +1.0 | +5.0 |
| Mar 2026 | 5.970 | -0.3 | +4.1 |
| Feb 2026 | 5.987 | +0.1 | +8.1 |
| Jan 2026 | 5.982 | +3.3 | +5.0 |
| Dec 2025 | 5.789 | +2.7 | +3.0 |
| Sep 2025 | 6.049 | -1.2 | +5.5 |
| Aug 2025 | 6.123 (cycle peak) | +1.4 | +6.2 |
Observations
- Cycle peak and drawdown: The series peaked at $6.123 in August 2025. July 2026's $5.741 is -$0.382 (-6.2%) off that high.
- Extreme month-to-month volatility: May (-5.7%), June (+4.8%), July (-3.7%) — a whipsaw pattern consistent with promotional/discount cycling at retail rather than orderly disinflation.
- The 2026 plateau broke: January through April 2026 held a remarkably tight $5.970–$6.029 band. That floor gave way in May and has not been recovered.
- Data gap: October 2025 is unavailable — BLS flagged it as unavailable due to the 2025 lapse in appropriations — which truncates 1-month and 3-month change calculations around Q4 2025 and makes the November 2025 (-8.0% 3-month) reading less comparable.
Long-Run Context (2016–2026)
- Decade low: $4.748 (May 2017), during a -11.5% year-over-year collapse.
- Decade high: $6.123 (August 2025).
- 2022 inflation shock: December 2022 hit +14.0% YoY at $5.995 — the sharpest annual gain in the series.
- Post-shock normalization: 2023–2024 saw sustained mild deflation (July 2024 at $5.599, -5.3% YoY), before the 2025 rebound.
- July 2026's $5.741 sits almost exactly at the 2024 average — meaning retail cheese has delivered zero net inflation over roughly two years.
Key Factors Driving the Decline
1. U.S. Milk Production Surge (Primary Driver)U.S. and New Zealand milk production remains strong, with U.S. supply up around 2% year-over-year and New Zealand up about 4%. Rabobank's Tom Booijink notes that U.S. manufacturers have invested heavily in adding production capacity, so no shortage of cheddar is expected for the foreseeable future.
The expansion is margin-driven: strong on-farm margins are driving an explosion in milk production, which is poised to drag commodity prices down through the rest of the year — a bearish warning delivered by HighGround Dairy economist Betty Berning. Notably, beef economics are a key part of understanding the milk surge — beef sales are providing a financial safety net for producers, subsidizing herd expansion beyond what milk prices alone would justify.
2. Wholesale Block Cheddar Collapse
The retail decline lags a far steeper wholesale move:
| Week Ending | Cheddar Blocks ($/lb) | Change |
|---|---|---|
| Jul 18, 2026 | 1.49 | -0.4¢ |
| Aug 29, 2026 | 1.61 | -1.1¢ |
| Sep 5, 2026 | 1.61 | -0.1¢ |
3. Weak Demand — Retail and FoodserviceThe U.S. must maintain a price advantage over Europe and New Zealand to keep exports moving and prevent massive domestic stockpiles — but European cheese prices are also falling, and domestic U.S. food service demand has been sluggish. RaboResearch's Mary Ledman notes that weak consumer confidence continues to weigh on discretionary spending, with sluggish demand evident across foodservice channels and grocery-channel dairy demand underwhelming in many countries.
4. Successive USDA Forecast Downgrades
Official forecasts have been revised down repeatedly, tracking the retail decline:
- USDA's December 2025 revision cut the 2026 cheese price forecast by 6.5 cents to $1.6750 per pound, alongside a 60-cent cut to the 2026 Class III price to $17.05/cwt and a 50-cent cut to the all-milk price to $18.75/cwt.
- Most recently, all-milk prices were revised down 15 cents to $19.85/cwt for 2026, with 2026 milk production forecast at 236.6 billion pounds — well above the 234.1 billion projected just months earlier.
- The weighted average statistical uniform price in September 2026 was $19.18 per cwt, $0.82 lower than the prior month and $0.39 lower than a year earlier.
Weather, Geopolitics, and Correlated External Factors
Divergence Between Cheddar and EU-Dominated Cheeses
A genuinely unusual dynamic is splitting the cheese category:EU-dominated cheeses such as mozzarella are seeing price spikes after recent heatwaves drove rapidly declining milk supplies in France and Germany. In the UK, analysis by the Energy and Climate Intelligence Unit found milk supply suffered an "unprecedented decline" during the June heatwave, with a single-day drop of 4.3% and a cumulative shortfall of around 16.5 million pints over the nine-day event.
Correlation note: The BLS series tracks cheddar, which is structurally insulated from the European heat shock because it is made across the US, the EU and Oceania. This explains the apparent paradox of falling U.S. retail cheese prices during a European dairy supply crisis. The market could become increasingly polarised, with EU cheeses like mozzarella growing more expensive while global cheddars get cheaper.
Fertilizer and Middle East Shipping RiskA prolonged Middle East conflict could constrain fertiliser shipping, with around a third of fertiliser trade and its raw materials flowing through the Strait of Hormuz, where cargo traffic remains limited despite a temporary ceasefire. Producers typically buy fertiliser in advance, so most would be seeking fresh volumes in summer and autumn. This is the principal upside risk to the current bearish trend — a feed-cost shock in late 2026 would compress margins and eventually slow the milk expansion.
EU Supply Contraction as a 2027 CounterweightEU milk deliveries in Q4 last year rose about 6% — a mark difficult to surpass with fewer dairy cows — while milk prices are now roughly 30% below a year ago. With diesel and fertiliser costs significantly higher, farm margins have deteriorated to the point that there is little incentive to increase production. Global milk production is forecast to end at just 0.2% year over year, far below the 2.6% increase in 2025.
Outlook
- Near term (Q4 2026): Further softness likely. Wholesale blocks at $1.61 per pound have not yet fully passed through to retail; the retail-to-wholesale spread remains historically wide, implying continued downward pressure on the BLS series into the fourth quarter.
- Expect volatility, not a smooth glide. The May–July whipsaw (-5.7%, +4.8%, -3.7%) suggests retail feature pricing is amplifying swings.
- 2027 inflection: HighGround is bearish on cheese and butter for the next 12 months but expects a return to more historical prices in the second half of 2027. USDA has lowered its 2027 milk production forecast to 238.0 billion pounds on slower growth in milk per cow, with 2027 all-milk prices at $19.80 per cwt.
Bottom line: July 2026's -3.7% monthly and -5.0% annual declines are the clearest retail confirmation to date that the 2025 cheese price cycle has turned. The driver is a domestic and Oceania milk glut colliding with soft foodservice demand — not a demand collapse