Cheese markets across Europe are defying seasonal expectations in early 2025, maintaining stable pricing around €3,000/mt despite historically high supply levels and a rapidly weakening butterfat complex. This unusual price resilience is reshaping dairy product valorization calculations and creating strategic timing considerations for procurement managers.

The Vesper Price Index shows European Gouda holding at €3,050/mt EXW, while Cheddar stands at €3,220/mt and Mozzarella at €3,000/mt as of January 21. These prices represent only modest declines from recent months, despite January typically bringing price weakness due to lower trade activity and seasonally increasing production.

The stability in cheese markets contrasts sharply with butter prices, which continue falling as European milk supply remains robust. This divergence is making cheese and whey production increasingly profitable relative to butter and milk powder manufacturing. The valorization shift is particularly pronounced when factoring in WPC80, which is currently setting all-time high prices.

Adequate supply fails to pressure prices

European cheese production is expected to peak seasonally during Q1, supported by strong milk supply fundamentals. However, this increased output is not translating into the inventory pressure that would typically drive prices lower.

Stock levels throughout Europe remain well-managed, with cheese aging profiles staying relatively young due to steady consumption offsetting increased production. Manufacturers report feeling minimal stock pressure despite the favorable production environment.

Trade activity has been moderate since the start of the year, with many buyers having already secured volumes and showing limited urgency to lock in additional Q2 supplies. This wait-and-see approach from the buy side has not yet created the pressure needed to push prices materially lower.

Regional market dynamics

The Cheddar market shows a stable but slightly weaker undertone, with the United States expected to bring significant volumes to both domestic and international markets. American producers will likely need to offer competitive pricing to maintain export momentum as domestic production increases.

Emmental prices have stabilized around €3,500/mt EXW, though the market spread has widened to €3,300-4,000/mt. The premium for Emmental compared to other cheese varieties remains elevated but has contracted significantly from December levels. Production capacity constraints continue limiting supply expansion for this specialty variety.

Mozzarella markets reflect more pronounced regional price differences, with US product now trading at a significant discount to European offerings. The Vesper Price Index shows European Mozzarella at €3,000/mt EXW compared to €2,575/mt for US product. The latest GDT auction confirmed this bearish trend with a 2.3% decline in European Mozzarella prices to an average of $3,340/mt.

Large production surpluses in the United States continue pressuring American Mozzarella prices, requiring discounts versus European product to secure necessary export volumes. Exchange rate fluctuations and solid domestic US consumption are preventing steeper declines.

Demand outlook remains key question

The fundamental question facing cheese markets is whether current demand levels can sustain prices through the upcoming milk flush in both Europe and the United States. Consumption has grown in most regions, preventing stock accumulation despite increased supply, but the peak production months of Q1 and Q2 will test this balance.

Demand for cheese remains strong at current €3,000/mt levels, providing underlying support to the market. Domestic European consumption continues at reasonable levels, while global demand has absorbed increased production without requiring significant price concessions.

The outlook for Q1 and Q2 remains relatively stable, though pressure could build quickly on the supply side. Market participants suggest that meaningful price increases are unlikely before Q3, when seasonal production patterns shift and the supply-demand balance may tighten.

This article is part of a more comprehensie cheese market analysis. For the full analysis visit: https://app.vespertool.com/market-analysis/2616