European cheese prices keep moving higher, and for now Europe is the only place it is happening. Liquid milk has become tighter over recent weeks and sentiment across EU dairy has turned firmer with it. Since the Q4 milk supply outlook does nothing to take those concerns away, offers are moving up quickly across every cheese.
That said, the supply outlook has not worsened significantly in the past fortnight. Production capacity is still expected to fill completely because the valorization with whey is high, so there is no strong reason to worry about EU cheese supply in Q4. What there is instead is a complete absence of incentive to sell forward below today’s spot levels, which is a different thing, and it is what the offer side is reacting to.
Cheddar shows it most clearly, with fewer volumes on offer, seasonally falling production and producers who have turned hesitant to commit forward while staying interested at higher levels. A few more buyers have stepped in looking for volume, still finishing off coverage for the end of the year. Gouda has moved up faster still on a combination of stronger Q4 demand and thinner offers, the latter down to the current low age of cheeses alongside the softer milk outlook, and now that prices have risen more offers are appearing again. Emmental has been the quiet one, held flat by steady rather than improving demand and some product still arriving from production earlier in the year, while the discount for grating quality against slicing quality widens. Mozzarella came off slightly but is still trading well above the rest of the complex, and this week’s GDT auction found buyers for November, December and January volumes at those higher levels.
Outside Europe the direction is the opposite. US and New Zealand Cheddar prices have dropped again over recent weeks. Both regions are seeing much stronger supply year-on-year, and stock levels and offers confirm it: US stocks have now surpassed last year’s volumes while exports are not keeping up their pace.
The spread between the two blocs is the thing worth watching. Vesper’s view is that Europe’s moderately bullish tone is likely to stay, and could lead to much higher prices if milk output weakens further, while US and New Zealand prices are likely to stay low and possibly fall a bit more. If the gap widens much further, EU exports get into a tricky position. For now that reads as a Q1 problem rather than a Q3 or Q4 one.
