Why are American cheese prices holding steady?

The short answer

• Retail American cheese prices fell from a May 2025 peak of $5.06 to $4.74 per pound by September 2026 as a nationwide expansion in milk production and swelling cheese inventories lowered wholesale dairy costs. [1] [2] [3]
• Strong export demand and elevated retail margins have kept consumer prices near their five-year average of $4.70 despite sharp drops in farm-gate Class III milk prices. [4] [5]

What's driving the price

Political, regulatory and trade factors

• Federal Milk Marketing Order Pricing Reform (Jan 2025 to Jun 2026), USDA Agricultural Marketing Service: Under a final rule published in the Federal Register on January 17, 2025, and implemented in June 2025, the USDA increased processor make allowances to $0.2519 per pound for cheese and eliminated 500-pound cheddar barrels from formula pricing, reducing formula-driven raw milk procurement costs for cheese processors during periods of supply overhang. [pushed prices down] [10]

Macro factors: supply, weather, disease, energy

• Dairy Herd Expansion and Raw Milk Surplus (May 2025 to May 2026): The USDA National Agricultural Statistics Service reported the national dairy herd expanded to over 9.5 million head and annual milk production climbed 2.6% to 232 billion pounds in 2025, which depressed USDA Class III milk prices from above $20 per hundredweight down to $14.59 by early 2026 and sharply cut cheese manufacturing costs. [pushed prices down] [5] [6] [7]
• Accumulation of Cold Storage Cheese Reserves (Jun 2025 to Sep 2026): U.S. cheese factories expanded output by 2.3% year to date, lifting total commercial cheese in USDA cold storage to 1.443 billion pounds by August 2026—including 815.5 million pounds of American cheese—which depressed wholesale CME 40-pound block and 500-pound barrel cheddar prices. [pushed prices down] [3] [8] [9]
• Disease Disruptions and Replacement Heifer Shortages (Dec 2023 to May 2025): Highly Pathogenic Avian Influenza (HPAI H5N1) detections in dairy cows across 19 states monitored by USDA APHIS combined with high beef cull premiums to restrict dairy cow replacement pipelines, temporarily tightening milk supplies and driving retail American cheese to a record $5.06 per pound in May 2025. [pushed prices up] [4] [8]
• Record International Export Clearance (Aug 2025 to Sep 2026): Subdued U.S. wholesale cheese prices improved competitiveness against European and Oceanian suppliers, driving double-digit increases in dairy exports to key markets like Mexico and preventing an even steeper domestic price collapse. [pushed prices up] [4] [11] [12]

Retail, brand and seasonal factors

• Sticky Grocery Pricing and Processing Overhead (May 2026 to Sep 2026): Retailers and packaged-food processors only partially passed along wholesale cheddar cost declines to shoppers, maintaining retail margins while absorbing elevated packaging materials, plant wages, and refrigerated handling costs. [pushed prices up] [1] [8]

Supply chain right now

• Raw materials & farming (stable): Ample milk supplies and an expanded national dairy cow herd continue to maintain low farm-gate milk prices. [1] [13]
• Processing & manufacturing (stable): Cheese plants are operating near peak capacity to absorb raw milk volumes, keeping wholesale supplies of American and cheddar blocks abundant. [2] [8]
• Logistics & freight (moderate): Cold-chain transportation and diesel fuel expenses remain elevated, placing ongoing upward pressure on finished food distribution. [8] [14]
• Retail & distribution (moderate): Grocers and manufacturers have held shelf prices relatively firm near the multi-year average through controlled promotional discounting. [15]

Researched 2026-10-18 with Google Search. Every point links to its sources; unsourced claims were removed.

American cheese prices, last 12 months

Source: U.S. Bureau of Labor Statistics, Average Price Data, series APU0000710211.

Sources

1. Food Price Outlook - Summary Findings | Economic Research Service (ers.usda.gov)
2. US Dairy Herd Growth Reduces Producer Milk Check Revenue - EDairy News English (en.edairynews.com)
3. The Farmer's Exchange Online Butter Inventories Rise While Milk Output Decreases (farmers-exchange.net)
4. Record Milk Production, Shrinking Herd Pipeline (fb.org)
5. ams.usda.gov (ams.usda.gov)
6. ams.usda.gov (ams.usda.gov)
7. nass.usda.gov (nass.usda.gov)
8. The Farmer's Exchange Online USDA Trims Milk Production Estimates for 2026, 2027 (farmers-exchange.net)
9. Luxembourg's Cheese Market Report 2026 - Prices, Size, Forecast, and Companies (indexbox.io)
10. USDA Issues Final Rule on Amendments to Federal Milk Marketing Orders - HighGround Dairy (highgrounddairy.com)
11. ams.usda.gov (ams.usda.gov)
12. CME Dairy Markets (thebullvine.com)
13. dairyherd.com (dairyherd.com)
14. ams.usda.gov (ams.usda.gov)
15. mymarketnews.ams.usda.gov (mymarketnews.ams.usda.gov)

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