Cheese prices still in a negative spiral for the time being

The prices of Gouda and Edam fell through the €5.000 tonne mark in mid-October. This means that the era of extremely high prices is over. From week to week the quotations continue to lose ground. Cheese is mixed with butter and milk powder. The liquid flows are also rapidly decreasing in value.

From imbalance to balance
The high cheese prices were due to a classic imbalance between supply and demand. This imbalance is now rapidly decreasing, meaning that cheese stocks are better in line with demand. There are no immediate surpluses, but they may arise as this situation continues. Demand is very weak, driven by high inflation that is putting severe pressure on purchasing power in Europe. In addition to the shift from branded dairy to private label, producers and traders are talking about a drop in demand. Although some are more certain about this than others. (German) producers who had extremely fixed market expectations are also less confident.

Meanwhile, production volumes are growing. Since the summer, the milk supply has shown a serious increase, in September the supply in our country was no less than 3,5% above last year's level. Much of the milk flows into the cheese bin because on paper this gives the best valorisation of milk. More milk is also produced in Germany and Poland and a lot of (bulk) cheese is also produced there. It was thought that dairy farmers would not be tempted by the high payment prices, because concentrates have also become expensive and roughage would be available in limited quantities. However, the statistics contradict this. The levels in the milk are also higher than last year.

Lukewarm question
In the meantime, the seasonal decline in milk supply continues. This will take a few more weeks. From mid-November onwards, supplies to producers will increase again. This means that increased milk supply (year-on-year) only then becomes really noticeable. On the demand side of the market, insiders expect tepid demand for the time being, given the tense economic situation in Europe. No miracles are expected from the Christmas question this year. In addition, producers and traders want to end the year without surpluses, otherwise they would have to write them down.

Cheese prices therefore appear to be in a negative spiral for the time being. Trading for first quarter delivery is concentrated at prices around €4.500 per tonne. Historically still a steep price, but no longer over the top.