Cheese
Prices move independently in the three main trading regions
Europe
Buyside postponed purchasing and now suffers for it
During February the EU cheese market prices trended down gradually until about two weeks ago a turnaround began to occur. All of a sudden, the buyside came back to the table and the real market structure showed itself. It became clear that demand on the whole is quite strong whilst availability is compromised. The main dairy producing regions in the EU are having a slow start of the season and there is no reason to expect that volumes there will pick up or that other – smaller – dairy producing countries are able to compensate. The general consensus is that the buyside did not timely adjust their buying strategies to this new reality and thus postponed purchasing for a little too long. As a result they were forced to pay more. Mozzarella prices, after dipping at EUR 4000, are now around EUR 4300 ex works, with the export market relatively quiet. Gouda prices recovered by EUR 200/t in these two weeks and are now around EUR 4400-4450 ex works. The age of Gouda is generally young, stocks are low and producers are relaxed, also because there are sufficient alternative valorization opportunities in the dairy complex. Cheddar prices recovered equally strongly and are now around EUR 4850-4950 ex works with Eastern EU product at the bottom end of this range and Irish at the top end. And it makes sense to assume that there is further upward potential considering the strength in the butter market. The export market is clearly out of reach at these price levels.
Americas
March starts with price weakness
In the first week of March US cheese prices fell rapidly to the current levels of USD 1.61/lb (3550/t) for blocks and USD 1.71/lb (3770/t) for barrels, both ex works. The block price fell particularly hard since the February Market Watch, when it was still quoted at USD 1.85-1.90/lb. Slow domestic demand is the main reason for the price shift and it turned out that end users have begun to bring product back to the spot market. Supply of cheddar has been flat even though valorization-wise it is becoming more interesting to make cheddar than mozzarella because of very low cream prices. At the current price levels the export potential for cheddar is there, even though the commercial opportunities may at the moment be spoiled to some extent by the perceived unreliability of the US as a trade partner. The main question at the moment is whether the export potential may be able to offset the weakness in the domestic demand. Another factor to consider is the fact that export grade cheddar is usually white blocks, as colored blocks have limited export access. The current price for white cheddar is about USD 1.75/lb (3860/t) ex works and despite this premium over non-export colored cheddar this remains the cheapest cheddar available on the export market by far. In view of the new cheddar plants that are going to come online in Q2 it is clear that the US will need to secure access to the export market in order to prevent local prices from falling even further below the equivalent values in the EU and APAC.
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