Irish producers mainly produce cheddar cheese. Traditionally, cheddar has underpinned the cheese market and maintained a higher average price than many of the other dairy commodities.
The EU market, until recently, was tight on stock. Now it seems this is changing. That has the knock-on impact of putting pressure on price.
In Europe soft cheeses dominate and the price of Gouda and Edam dropped through the €5,000/t threshold in mid-October. There has been a continuous slip for weeks now and the quotes continue to lose ground.
The high cheese prices were due to a classic imbalance between supply and demand. You often hear a high price is the best cure for a high price.
Processors move to get some of the high price. The market supply demand balance is now rapidly changing, which means that the cheese stocks are more in line with demand.
So that’s the supply side. The food price inflation means demand is very weak, which is putting a lot of pressure on purchasing power of consumers in Europe.
In addition, there is a shift from branded cheese purchase to private label, which is ultimately a cheaper version of cheese, which means less money to the processor and hence to the farmer.
The other side of the supply dynamic is the fact that milk supply is growing in some EU countries. This extra milk will go into cheese, given the value of cheese over other commodities. Cheese prices therefore seem to be in a downward twist for the time being. The saving grace is that the price is still high on a historical trend line, but not excessively high.