The last few weeks have been some of the strangest for an industry in the midst of its weirdest year in memory.

Listen as Ted, T3 and Anna get to the bottom of why spot cheddar prices maintain a steady hold on improbably high prices and why the Federal Order system appears to be doing the opposite of what it was meant for.

T3: So here's where we're at. It's July 8. Today, cheddar blocks on the CME spot market are trading at $2.7375 a pound, barrels are trading at $2.40 a pound, nonfat is trading at a dollar three and a quarter, butter is trading at $1.68 and three quarters. You have over a $10 difference between where July, Class III milk will probably come in and where July, Class IV milk will probably come in, which is really about as big a disparity as I've ever seen in my 25 years of trading cheese and powder in the United States. It's amazing. Talking a little bit about the markets and what we expect going forward, starting with cheese, there has been for the month of June a genuine tightness in cheese specifically in cheddar blocks and cheddar barrels. We talked about this in the last podcast, you have a unique situation where retail sales continue to be much stronger than normal because of the pandemic. At the same time, the anticipation of the world opening back up, restaurants opening back up was causing food service distributors to order in large quantities to refill their pipelines, and you had the USDA's purchasing program and Food Box Program on top of all of that. And that created kind of a perfect storm of all the usual demand for cheeses across the whole Food Industry, whether it's restaurant-based, whether it's supermarket-based or whether it's government-based were all ordering it levels much higher than they normally do, which caused the shortage on cheddar and drove the market up to, you know, prices at $2.50 or higher.

You know, the question everybody's been asking already for a month is how sustainable are we up here? And the answer that I think I would give everybody is we are not going to be at $2.50 for the rest of the year, but we've been at $2.50 for over a month now and it is not out of the realm of possibility that we stay here for another two to four weeks. Furthermore, if we do drop off these lofty levels, I'm not sure we're dropping, let's say to $1.50 or to $1.75. There is enough underlying demand, that that probably that first place where you drop to is still probably above $2 a pound. And the reason I say that is all of the converters out there, those who buy the cheese and shredded or chunk it or slice it and put it into the packages for retail or restaurant demand, they're telling us that their inventories of cheddar block and cheddar barrel, if you're a processed cheese manufacturer, are on the low end of where they like them to be at this time of the year. Keep in mind that usually right around the end of June beginning of July is when cheese inventories peak. And then as we get through the second half of the year and demand picks up for the holidays, and milk production decreases because of the heat of the summer, you start seeing cheese inventories dropped back down. Well, at least by the tone that I'm hearing from a lot of our customers, you're actually at a place where people are very uncomfortable with how much cheese they have in inventory. And they're inclined to say "We don't have enough and we're concerned about having enough cheese for the remainder of the year."

Now, the flip side of that is they will also say in the same conversation, "We have absolutely no idea what to expect when it comes to demand." We would expect that it's possible the food service distributors have over-ordered in terms of the restaurants opening back up, because everything we're hearing about restaurants is they're running it,