America Has a Crippling Cheese Surplus

Would you like some cheese to go with your cheese, sir?

You may be asked this very question at restaurants across this fair nation, from Annapolis to Anchorage. The reason is this: cheese is well on its way to becoming the "it" food of 2016. That's largely because the US has way more of it than we can comfortably handle.

If you'd like to blame someone for this, look across the pond to Europe.

European dairy foods have become a big bargain this year, and the US has become its number-one importer. Butter imports from the EU have doubled, while cheese imports have risen 17 percent.

This is all thanks to a glut of European milk and a weakened euro, both of which have caused the price of European dairy products to plummet. So even though Russia isn't buying EU dairy—Russia banned trade with the West because of sanctions the Western nations imposed after Russia invaded Ukraine—everybody else is, especially the US. And guess what? American dairy sales have fallen as a result—even though production of American dairy is headed for a record high this year.

All of this means that America is full to the brim with cheese, cheese, and more cheese, from sea to shining sea. The surplus of cheese has been building up such that cheese inventories at the end of March were the highest they've been since 1984. Most of this excessive cheese is classified as "American cheese," but 2 percent is Swiss cheese; the rest is classified as "other."

Kevin Bellamy, a global dairy market strategist at Rabobank International in Utrecht, the Netherlands, says: "Where the US has lost out on business, Europe has gained." American farmers are having a hard time exporting dairy products this year; Bellamy says, "It's been difficult for them to export, given the strong dollar."

So you'd think European dairy farmers would be doing great, with all these exports to America.

You'd be wrong.

Although sales have increased, EU dairy farmers are dealing with rock-bottom prices, so they are still at risk—and many have gone out of business. The EU's average raw-milk prices are lower than they have been since 2010. Prices of US dairy have also started falling—cheddar is trading at a five-year low on the Chicago Mercantile Exchange this week.

We're sitting on a mountain of cheese and it's up to all of us to eat our way through it. Cheese is a pretty damn wondrous thing to behold, but it looks like you really can have too much of a good thing.