Tuesday, 26 July 2016 10:55

Global cheese yield up, prices tumble

Written by  Sudesh Kissun
More cheese being produced around the world sends prices tumbling. More cheese being produced around the world sends prices tumbling.

Cheese prices are falling worldwide and it's all to do with the milk glut.

In New Zealand, retail cheese prices have fallen to the lowest level in nine years; in the US, at the end of April, a record 540 million tonnes of cheese was in storage, up 11% from last year.

Lower prices impact returns for major cheese exporters like Fonterra and Open Country Cheese, adding further downward pressure on payouts.

More milk, especially out of the US and the European Union, has seen prices drop; with lower input costs cheese makers are finding it cheaper to churn out more products.

On Global Dairy Trade (GDT), the cheddar price peaked on October 6 last year at US$3234/tonne; by March 15 this year it had tumbled to US$2441/tonne. It has since risen slightly and at last week's auction the cheddar price reached $US2886/tonne.

But Rabobank dairy analyst Emma Higgins says while cheese prices appear to have dropped in the last GDT event, throughout this negative price cycle the dairy fat complex, including cheese, has largely been getting prices at a premium to powders. This reflects strong demand from consumers in the northern hemisphere, particularly the US, and in Asia for pizza.

Higgins told Dairy News that cheese stocks are higher, and growing, in the US than in Europe. This comes down to US milk production running quite strong for the past two years.

"Also, US processors no longer have the easy option of just producing SMP/butter and selling it to the government through an intervention system in times of weak markets so they need to make commercial production scheduling decisions," Higgins says.

"Exports of cheese have stalled for the US due to the higher US dollar and more EU cheese in markets such as Japan and Korea.

"Given the strength of US demand, inventories at this stage are largely manageable and not a cause for significant concern at this time."

Christchurch boutique cheese maker Barrys Bay Cheese says smaller producers are immune from the global price drop.

"The big exporters Fonterra and Open Country who are selling cheese on the global market will be affected by the falling cheese prices and this reduction in revenue will no doubt impact on the make-up of the payout to their suppliers," Mike Carey, Barrys Bay Cheese told Dairy News.

US dairy farmers are expected to produce 96 billion kg of milk this year, a record. Much of it is being sold to cheesemakers who are socking away their output, waiting for demand and prices to rise.

The US has so big a cheese glut that every citizen there would need to eat an extra 1.3kg this year to work it off.

According to the US Department of Agriculture, at least half this stockpiled cheese is American, 2% is Swiss and the rest is "other."

The reason lies across the Atlantic Ocean. Dairy product exports from Europe have been increasing for two years and cheese prices have been steadily falling. The result is a global oversupply in milk and dairy products.

That means the US has taken advantage of falling prices and the weakening euro to buy up more European-made cheese; imports of EU cheese rose 17% last year and combined with an overproduction of milk by America farmers to combat similarly low prices, has resulted in extra cheese.

More like this

Sacre bleu!

OPINION: This old mutt hears some of the world's favourite cheese could soon disappear off shop shelves unless science can find a way to save the mould that makes them.

'Zero protection for local cheesemakers'

Local cheesemakers are facing competition from subsidised frozen EU imports flooding the NZ market, tariff-free, says Whitestone Cheese managing director Stephen Berry.

Geographical indications open up opportunities

While there was much protest about the EU's insistence in preserving geographical indications for some of its products, especially cheese, EU ambassador to New Zealand Nina Obermaier insists that this protocol opens up opportunities for NZ.

Featured

Vaccinate against new lepto strain

A vet is calling for all animals to be vaccinated against a new strain of leptospirosis (lepto) discovered on New Zealand dairy farms in recent years.

TV series to combat food waste

Rural banker Rabobank is partnering with Food Rescue Kitchen on a new TV series which airs this weekend that aims to shine a light on the real and growing issues of food waste, food poverty and social isolation in New Zealand.

National

Frontline biosecurity 'untouchable'

Biosecurity Minister Andrew Hoggard has reiterated that 'frontline' biosecurity services within Ministry for Primary Industries (MPI) will not be cut…

Machinery & Products

New name, new ideas

KGM New Zealand, is part of the London headquartered Inchcape Group, who increased its NZ presence in August 2023 with…

All-terrain fert spreading mode

Effluent specialists the Samson Group have developed a new double unloading system to help optimise uphill and downhill organic fertiliser…

» Latest Print Issues Online

Milking It

Plant-based bubble bursts

OPINION: Talking about plant-based food: “Chicken-free chicken” start-up Sunfed has had its valuation slashed to zero by major investor Blackbird…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter