Monday, August 9, 2010

An Insight To Cheese As Commodity, Food, Stocks And Futures


It may sound CHEESY but it is really cheesy that cheese being such a widely consumed commodity was not traded on Chicago board compared to Europe where cheese is a key dairy commodity while the US cheese industry is largely focused on 3,4 states alone. May be its got something to do with the fact that some European cheeses are so cheesy and smelly that most common American and Asian consumers would run away never looking behind because of its awful smell. Yet, good and fresh cheese is always consumed more and more also because meat consumption is reducing exponentially across the globe with more people adopting vegetarian diets.

Cheese, a highly nutritious and palatable food, is of significant value in the diet because it contains almost all of the protein and essential minerals, vitamins, and other nutrients of milk. According to ancient records passed down through the centuries, the making of cheese dates back more than 4,000 years. No one really knows who made the first cheese. According to an ancient legend, it was made accidentally by an Arabian merchant who put his supply of milk into a pouch made from a sheep's stomach, as he set out on a day's journey across the desert. The rennet in the lining of the pouch, combined with the heat of the sun, caused the milk to separate into curd and whey. That night he found that the whey satisfied his thirst, and the cheese (curd) had a delightful flavor which satisfied his hunger. Travelers from Asia are believed to have brought the art of cheesemaking to Europe. In fact, cheese was made in many parts of the Roman Empire when it was at its height. To know more about the types of popular cheese consumed worldwide, please check the bottom of the article.


US Cheese Industry: As cheese demand continued to grow and spread rapidly, manufactured and processed cheese production increased dramatically. Total natural cheese production grew from 418 million pounds in 1920 to 2.2 billion pounds by 1970. Rising demand for cheese throughout the 1970s and 1980s brought total natural cheese production to more than 6 billion pounds by the beginning of the 1990s. Processed cheese also experienced a surge in consumer demand with annual production exceeding 2 billion pounds a year by the beginning of the 1990s. Currently, more than one-third of all milk produced each year in the U.S. is used to manufacture cheese. Recent increases in the overall demand for farm milk have in large part been due to the continued growth of the cheese industry. As consumer appetites for all types of cheese continue to expand, so will the industry. From humble beginnings, the U.S. has become the largest cheese-producing country in the world. As global appetites for cheese grow, the U.S. is well prepared to supply the increased demand.

The Inception Of Cheese Futures

After successfully trading milk and dairy futures and options, the Chicago Mercantile Exchange, CME, the world’s leading derivatives marketplace, launched cheese futures and options on futures on June 21. For the first time, cash-settled contracts are now available on CME Globex, the exchange’s electronic trading platform. According to CME, the cheese contracts were requested by customers (manufacturers and processors of cheese) in an attempt to hedge their risk profiles. When this launch was announced, the CME noted that many of its customers were already involved in Class III milk and dry whey futures and options markets and hoped that this new contract would allow these customers, in theory, to lock in prices.

The Cheese contracts are listed monthly with each contract representing the equivalent of 20,000 pounds of cheese and the tick size of $0.001 per pound. Trading hours are Sunday through Thursday, 5:00 p.m. to 4:00 p.m. Central Daylight Time, and Friday until 1:55 p.m., with daily trading halts from 4:00 p.m. to 5:00 p.m.


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