CME block and barrel cheese prices have been diverging for months, and that pushed the monthly block-barrel price spread to a record high of 20 cents in June. While Americans may not drink nearly as much milk as they once did, they have never eaten more cheese. Block cheddar cheese represents less than a quarter of all cheese production, but its price is much more significant as roughly 75% of all fresh cheese sold to consumers is priced relative to it. The hedged price was $836,410 — the sum of the cash cheese price of $778,050 and the futures gain of $58,360. Should the barrel market increase but block prices remain relatively stable, the Cash-Settled Cheese futures contracts may not fully offset the exposure resulting in higher degrees of hedge ineffectiveness. This means large cheese consumers, like pizza companies, are finding value in this evolution of the cheese market. (-10½), Blocks American cheese was 40% of total output that year. In other words, a sale represents either a buyer agreeing to the price That resulted in $32,410 in hedge ineffectiveness. Prices have dropped nearly $.30 from Monday to Thursday, coming down to meet barrel prices hovering just under $2.50. (-¼), Blocks 1 truckload @ $2.2900 While there is no guarantee that markets and budgets will always align, the market provides a hedge against commodity price risk. In just over four months of trading, BLK futures and options have grown to just under 4,500 contracts of combined open interest with average daily volume of 74 contracts. CME Group is the world's leading and most diverse derivatives marketplace. While both are classified as cheddar, they are used to make different products. The following hedging examples will focus on the category of dairy producers as well as users and processors, excluding swap, managed money, and other reportable traders from the illustrations. The hedged price was $813,130 — the sum of the cash cheese price of $778,050 and the futures gain of $35,080. $2.7800 CME Group is the world's leading and most diverse derivatives marketplace. Understand how CME Group can help you navigate new initial margin regulatory and reporting requirements. CME Cash-Settled Cheese futures and options contracts, or CSC, settle to the monthly weighted average price for American cheddar cheese as reported by the USDA. While a Cash-Settled Cheese futures contract would mitigate a portion of the risk, when used alone, changes in the block market might not be reflected in the cash barrel market, resulting in a disconnect and potentially unforeseen results.

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