Cheese
Upward momentum possibly short lived
Europe
Gouda and mozzarella got caught in a short squeeze
Over the past 10 days the EU cheese market has been quite dynamic as there appeared to be more uncovered demand than was expected and there were supply disruptions because of maintenance in some factories. This created a squeeze in the front end of the market for Gouda and Mozzarella. This change in sentiment is not structural though, as the fundamentals remain the same. The gouda that is delivered product these days has a very young age. Demand in the slicing and grating segment turned out to be relatively resilient. The price level is about EUR 3650-3700 ex works and it is relatively flat for Q1 as well. The mozzarella market benefits from good demand in the front end of the market. Mozzarella now trades at EUR 3750-3800 ex works and not only is this premium over gouda remarkable for the time of the year, but it also even appears to persist going forward. The cheddar market is different, and the prices have been coming down to about EUR 3725 in the UK and Ireland and EUR 3825 in the rest of the EU, both ex works. These prices are still too high to be able to compete on the world market and the US remains competitive to the Middle East for instance.
Americas
Short squeeze lifted cheddar prices
During October the cheddar prices in the US appreciated into the USD 1.70s/lb, but in the last week they settled in the upper USD 1.50s/lb (about 3475/t) ex works for colored cheddar. It was the carry in the futures market that started the rally, but then it received a further boost from a quality issue in a large colored cheddar plant. This triggered a wave of bidding that was mainly sentiment driven as fundamentally the demand did not appear to shift. This effect has probably not yet been fully resolved but it is likely that most of the upward momentum has subsided. The prices for white cheddar were affected as well, as market based procurements became more expensive, but the export market did not show increased purchasing at higher levels. White cheddar prices are now in the higher USD 1.50s to lower USD 1.60s/lb (about 3535/t) ex works. At this level US cheddar is still generally the most competitive in the world market. Unless prices in the EU and on GDT appreciate considerably there is little upward potential for US price levels in the export market.
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